Water Secure Annual Report 2011 layout final...Key Objectives 2010-2011 10 2010-2011 Highlights 11 Cumulative water supplied in 2010-2011 12 Key performance areas 13 Strategic Asset

annualreport

2010-11

6 October 2011

The Honourable Stephen Robertson MP

Minister for Energy and Water Utilities

PO Box 15216

City East Qld 4002

The Honourable Rachel Nolan MP

Minister for Finance, Natural Resources and the Arts

GPO Box 611

Brisbane Qld 4001

Dear Ministers

I am pleased to present the Annual Report 2010-2011 for WaterSecure.

I certify that this annual report complies with:

• the prescribed requirements of the Financial Accountability Act 2009 and

the Financial and Performance Management Standard 2009;

• the detailed requirements set out in the Annual Reporting Guidelines for

Queensland Government Agencies; and

• the annual report requirements as set out in the Corporate Governance

Guidelines for State Water Authorities.

A checklist outlining the annual reporting requirements can be accessed on

the WaterSecure website.

Yours sincerely

Sam Romano

Acting Chief Executive Officer

WaterSecure

ContentsAbout WaterSecure

Legislative basis 4

Role and functions 4

Our vision 4

Our mission 4

Our values 4

Strategic choices and key priorities 5

Aligning WaterSecure’s objectives and strategies

with the Toward Q2 Ambitions 5

CEO and Chair Report 6

Organisational Structure 7

Our Board 7

Our Executive Management Team 8

Our performance – what we delivered 10

Key Objectives 2010-2011 10

2010-2011 Highlights 11

Cumulative water supplied in 2010-2011 12

Key performance areas 13

Strategic Asset Management Plan 14

Environment 14

Water quality plans 14

Community 15

Industry and research 16

Our People 17

Corporate Governance 20

Summary of Financial Position and Performance

Statement of Comprehensive Income 25

Statement of Financial Position 26

Statement of Cash Flows 27

Financial Report 29

Glossary 78

How to comment on this annual report

We value your comments on our annual report and any other matters relating to

WaterSecure. Please contact us on:

PO Box 16146, City East Qld 4002

1800 997 464

[email protected]

www.watersecure.com.au

Copies of this annual report

You can obtain printed copies of this annual report by contacting WaterSecure or

by downloading the report from the publications section of our website

www.watersecure.com.au.

ISSN 1837-0446 (Print)

ISSN 1837-0454 (Online)

Interpreter service

The Queensland Government is committed to providing accessible services to

Queenslanders from all culturally and linguistically diverse backgrounds. If you have

difficulty understanding this annual report, you can contact us on 1800 997 464 and

we will arrange an interpreter to effectively communicate the report to you.

© State of Queensland (WaterSecure) 2011

Contents

s

e and f

About WaterSec

gislative

4 | WaterSecure Annual Report 2010-11

Legislative basis

WaterSecure is the trading name of the Queensland

Manufactured Water Authority, a Queensland Government

statutory authority established on 2 May 2008 under the

South East Queensland Water (Restructuring) Act 2007.

The purpose of this legislation was to restructure the water

industry in South East Queensland to deliver:

• improved regional coordination and management of

water supply

• more efficient delivery of water services

• enhanced customer service for water consumers

• a clearer accountability framework for water supply

security.

On 5 December 2010 the Queensland Government

announced that from 1 July 2011 WaterSecure would merge

with Seqwater.

Until 30 June 2011, WaterSecure’s head office was located at

Level 2, 95 North Quay, Brisbane QLD 4000. From 1 July 2011,

head office is located at 240 Margaret Street, Brisbane QLD

4000. A second office is on the Gold Coast, next to the Gold

Coast Desalination Plant.

Role and functions

WaterSecure is responsible for producing and supplying

purified water and desalinated water to the South East

Queensland Water Grid.

WaterSecure’s water supply system includes more than 200

kilometres of large-diameter underground pipeline, three

advanced water treatment plants located at Bundamba,

Luggage Point and Gibson Island and a sea water reverse

osmosis desalination plant at Tugun on the Gold Coast.

The combined production capacity of WaterSecure’s

assets is up to 365 megalitres a day; the Western Corridor

Recycled Water Scheme has the capacity to supply up to 232

megalitres of water a day and the Gold Coast Desalination

Plant’s capacity is up to 133 megalitres of water a day.

Purified water is supplied to Swanbank and Tarong power

stations and there is the potential to also supply to future

industrial and agricultural customers. When the region’s

principal dam levels fall below a combined 40 per cent and

the necessary Queensland Government approvals are in

place, purified water from the Western Corridor Recycled

Water Scheme will supplement drinking water supplies in

Wivenhoe Dam.

Desalinated water of drinking water quality is supplied

directly into the SEQ Water Grid to blend with other drinking

water sourced from dams and piped to customers in parts of

the Gold Coast and Brisbane.

Our vision

We are a customer-focused world leader in sustainable,

large-scale water supplies.

Our mission

WaterSecure’s mission is:

• to substantially enhance the security of water supplies

• to manage and improve the environmental footprint and

environmental benefits of our business

• to inform, influence and participate in the ongoing

development of associated water industries.

Our values

WaterSecure works together as one team, guided by our

SPIRIT values:

Safety is broader than workplace health and safety.

WaterSecure is committed to providing water supplies that

always meet and aim to exceed the water quality, safety

and environmental regulatory requirements through the

provision of safe work places and the effective management

of water supply infrastructure.

WaterSecure Annual Report 2010-11 | 5

People – WaterSecure is committed to supporting and

developing our people and encouraging them to show

leadership and initiative.

Integrity – WaterSecure is open and honest to earn and

maintain the support and trust of all stakeholders. We will

always endeavour to understand and comply with our

obligations (including legislation, contracts, standards,

policies and procedures) and contribute to a culture of

compliance.

Respect – WaterSecure staff respect each other, the

community and the environment in which we operate. We

will always protect and seek to enhance our environment.

Innovation – We seek continuous improvement by

challenging our thinking and that of others, encouraging

our team to think innovatively. We will take decisive action

to achieve best outcomes whilst applying risk-based

decision making.

Teamwork – We understand that the power of the team

exceeds the power of any individual and will partner for the

benefit of stakeholders. We understand that knowledge

is a valuable resource and we are committed to building

corporate capability through the capture, retention and

sharing of corporate knowledge with our colleagues.

Strategic choices and key priorities

WaterSecure’s work in 2010-11 has been guided by four key

priorities:

1. Focusing on the needs of customers and stakeholders

2. Optimising operational performance, including

managing costs with tight controls

3. Being a key part of the water industry – staying relevant

4. Building and retaining corporate capability.

Aligning WaterSecure’s objectives and strategies

with the Toward Q2 Ambitions

WaterSecure’s objectives and strategies in 2010-2011 were

aligned with the Queensland Government’s Toward Q2

Ambitions.

STRONG – WaterSecure strives to provide security and

quality in the provision of new water sources.

GREEN – WaterSecure is committed to improving its

environmental performance and minimising its carbon

footprint. During 2010-2011, processes at the Bundamba

Advanced Water Treatment Plant were modified to further

reduce the level of nutrients discharged into the Brisbane

River and the Gold Coast Desalination plant purchased

Renewable Energy Certificates to offset carbon emissions.

SMART – WaterSecure’s advanced water treatment plants

use world-class advanced water treatment technology

incorporating microfiltration, reverse osmosis, advanced

oxidation and disinfection to purify water.

HEALTHY – The Water Supply (Safety and Reliability) Act 2008

was introduced to establish regulations to ensure the safe

supply of recycled water and drinking water in Queensland.

WaterSecure’s purified and desalinated water undergoes a

rigorous testing program supervised by Queensland Health

and regulated by the Office of the Water Supply Regulator.

FAIR – WaterSecure promotes a fair and equitable

workplace and in 2010-2011 tailored operations to optimise

costs for the benefit of the community.


As this is our final annual report as WaterSecure, there are

a number of people to thank. Firstly, we must pay tribute

to the outgoing Executive Management Team for their

dedication to WaterSecure and wish them well as they

take on new challenges. We would also like to express our

gratitude to the WaterSecure Board for the support and

leadership they have provided over the past three years and

thanks must also go to all staff at WaterSecure who worked

tirelessly to ensure our organisation was ready to merge

with Seqwater on 1 July 2011.

A special mention must be made of WaterSecure’s Program

Delivery and Completions Team, who did an excellent

job in bringing alliances to practical completion, ensuring

we delivered infrastructure on time in preparation for

the merger.

The merger with Seqwater on 1 July will begin a new

chapter for WaterSecure. For the SEQ community the

merger means more streamlined and efficient bulk water

management; for staff at the new entity the merger means

opportunity for professional growth and the chance to gain

new knowledge.

In looking back over the past financial year we are pleased to

report our assets continued to produce high-quality water

meeting all water quality standards and the total supply to

the SEQ Water Grid and power stations was more than

19.3 billion litres.

The Western Corridor Recycled Water Scheme continued to

shine, winning three International Water Association (IWA)

awards, including the industry’s highest accolade – the 2010

IWA Superior Achievement Award and we continued to host

the Australian Water Recycling Centre of Excellence.

On a more sombre note, it would be remiss of us if we didn’t

mention Queensland’s devastating floods and their effect

on WaterSecure and the people of Queensland during 2011.

At the beginning of January the Brisbane region

experienced the biggest flood since 1974.

WaterSecure’s North Quay office and the Luggage Point

and Gibson Island Advanced Water Treatment Plants were

evacuated during this time. Oxley, Goodna and Bundamba

pumping stations were inundated with floodwater and

we sustained damage to several WaterSecure pipeline

easements with landslips occurring on Esk-Kilcoy Road and

near the Goodna pumping station. Rectification works were

undertaken and supply has since resumed.

Aside from our damage, many thousands of homes were

flooded, businesses were lost and regretfully so were lives.

During the floods, WaterSecure enacted its incident

management processes and teams worked together to

minimise damage to our assets. The Gold Coast Desalination

Plant actually increased its output of water during the floods

to ensure continued supply of high-quality drinking water

for South East Queensland. The Western Corridor Recycled

Water Scheme supplied water for the massive clean-up

effort in parts of Brisbane, Ipswich and towns further west.

The flow-on effects of this flood persist months later, as the

region continues efforts to get back on its feet.

However, South East Queensland currently has full dams and

our world-class plants that were born in drought and proved

themselves in flood now form part of a truly integrated

bulk water supply system. A system that will not only

ensure greater efficiency and value for money for the SEQ

community but will also ensure future water security for our

region – rain, hail or shine.

Sam Romano David Gray

Acting Chief Executive Officer Chair

CEO and Chair Report

David Gray

Chair

Sam Romano

Acting Chief Executive Officer


WaterSecure’s organisational structure has been designed to

incorporate the following four areas of responsibility:

• Operations

• Technical Services

• Corporate

• Business Services

Our Board

The WaterSecure Board of Directors:

David Gray (Chair)

David has significant commercial expertise, having held

a number of senior management positions including

Managing Director at Boeing Australia, Chief Executive

Officer of GEC Heavy Engineering and General Manager of

telecommunications company Exicom. Recognised with

the Centenary Medal for services to the Aviation Industry,

David has also been awarded an Honorary Doctorate from

Queensland University of Technology.

Mark Pascoe

Mark has more than 35 years experience in the water

industry, including his current role as CEO of the

International WaterCentre, the business centre for building

international capacity in integrated water management.

Mark’s career history also includes working for Brisbane

City Council, environmental engineering consultancy

Woodward-Clyde and the International Water Association

in London. He is a former President of the Australian Water

Association, a Director of Healthy Waterways Ltd and

is currently involved as an advisory board member of a

number of water research groups, reflecting his renowned

water industry expertise.

Scott Standen

Scott is a partner at Hynes Lawyers, specialising in corporate

law. He has extensive experience in corporate advisory,

corporate governance, capital markets transactions and

mergers and acquisitions. With a Masters of Business

Administration and a Master of Laws, Scott brings a unique

legal and commercial perspective to business issues. Scott

has been admitted as a solicitor in the Supreme Courts of

Victoria and Queensland and the Australian High Court.

Scott is also a member of the Queensland Law Society and

the Australian Institute of Company Directors.

Organisational Structure

Board

Audit, Risk, Remuneration & Compliance

Committee

ChiefExecutive

Officer

ChiefCorporate

Officer

ChiefFinancial

Officer

ChiefOperating

Officer

ChiefTechnology

Officer

Water Quality, Asset

Management, Research &

DevelopmentCommittee

Minister for Energy and Water Utilities, Minister for Finance, Natural Resources and the Arts


Stephen Golding

Stephen’s extensive career at the Department of Main Roads

included joining as an engineer in 1967 and retiring as

Director-General in 2005. Paralleling this career, Stephen also

enlisted as a private soldier in the Army Reserve in 1963 and

retired in 1998 as a major general. He has received a number

of awards for his outstanding service to the Army including a

Member of the Order of Australia, the Queen’s Silver Jubilee

Medal, the Centenary Medal, the Reserve Forces Decoration,

the National Medal and the Australian Defence Medal.

Stephen is a Fellow of four professional associations and a

Graduate Member of the Australian Institute of Company

Directors. Stephen’s current responsibilities include being

a Director of North Queensland Bulk Ports Corporation

Ltd and the independent Chair of Transport Certification

Australia Ltd. He has Bachelor degrees in Engineering and

Economics, a Master’s degree in Engineering Science and is

a Chartered Professional Engineer.

David McDougall

David has more than 30 years experience in project

and structured finance, mergers and acquisitions,

valuations, capital raising and providing strategic advice to

governments and corporations. David’s work as a Partner

of KPMG, a Director of KPMG Corporate Finance and a

Director of a major Australian investment bank, has assisted

in skilling him in the areas of domestic and international

corporate finance, strategy and structure. With a Masters

of Business Administration, David has experience across a

range of industries, including natural resources, transport,

utilities, telecommunications, property, tourism and leisure.

David’s significant experience in the natural resources sector

includes work for SA Water, CS Energy, Tarong Energy and

Singapore Power.

Our Executive Management Team

The WaterSecure Executive Management Team:

Keith Davies

Chief Executive Officer (July 2010 – Jan 2011)

Keith has more than 35 years experience in the energy

and utilities industry in the United Kingdom and

Australia, working for South Wales Electricity and

PricewaterhouseCoopers, then Tarong Energy prior to

joining WaterSecure. He began his career as an engineer

and has held senior executive positions in retail operations,

strategic development, energy trading and change

management. Keith resigned as Chief Executive Officer in

January 2011 to take on the role of Queensland Coordinator-

General.

Sam Romano

Chief Financial Officer (July 2010 – February 2011)

Acting Chief Executive Officer (February 2011 – June 2011)

After the resignation of Keith Davies, Sam Romano was

appointed as Acting Chief Executive Officer of WaterSecure

until the merger with Seqwater on 1 July 2011. Prior to this,

Sam was WaterSecure’s Chief Financial Officer. Having over

over 20 years experience in the finance and accounting

sector, Sam has worked in large private and public

organisations, introducing a range of innovative finance

policies and procedures resulting in cost savings, improved

reporting and profit increases. His skills and experience

include strategic planning, budgeting, staff management,

economic regulation, financial management and accounting

frameworks.


Paul Visser

Acting Chief Financial Officer (February 2011 – June 2011)

Paul Visser was appointed Acting Chief Financial Officer

of WaterSecure upon the appointment of Sam Romano as

Acting Chief Executive Officer. Paul has 24 years experience

in the finance and accounting sector. He has worked in

large private organisations in both financial and commercial

roles. Prior to joining WaterSecure, he worked in the mining

industry for eight years, supporting various mining activities

throughout Queensland, the Hunter Valley in NSW, Tasmania

and Western Australia. Paul draws on his knowledge

and experience to manage the accounting, commercial,

procurement and IT functions, as well as developing the

strategic and operational planning, budgeting, product cost

analysis and short-term marginal costing reviews of water

delivery.

David Fullerton

Chief Operating Officer (July 2010 – April 2011)

David joined WaterSecure as Senior Operations Manager

in November 2008 and became Chief Operating Officer in

November 2009. David has over 35 years experience in the

engineering industry in New Zealand, the United Kingdom,

Lesotho, Hong Kong, Singapore, USA, Thailand and Australia,

the last 30 years of which have been in the water industry.

David has a successful track record in management and

implementation of large-scale water infrastructure projects.

David resigned as Chief Operating Officer in April 2011.

Cedric Robillot

Chief Technology Officer (July 2010 – June 2011)

Acting Chief Operating Officer (April 2011 – June 2011)

Cedric has extensive experience in water research,

intellectual property and technology. Prior to joining

WaterSecure, he worked for 10 years in the biomedical

field, co-founding a biotechnology company, Cleveland

Biosensors, where he provided technology leadership in the

development of new diagnostic platforms and managed

the intellectual property portfolio. Cedric assumed the

role of Chief Operating Officer following David Fullerton’s

departure.

Ron Wilson

Chief Corporate Officer (July 2010 – June 2011)

Ron draws on extensive and varied commercial experience,

including facilities management, commercial negotiations

and contracts, corporate governance and compliance

systems, and board and corporate secretarial practices.

Ron also has more than 10 years of valuable public sector

experience.


During the year, the Western Corridor Recycled Water

Scheme and the Gold Coast Desalination Plant supplied

more than 19.3 billion litres of water to the South East

Queensland Water Grid, taking the total water supplied

from these assets to the Grid to 82.3 billion litres. We have

consistently produced high-quality water which meets both

the water quality standards and the requirements of the SEQ

Water Grid Manager. The global significance of the Western

Corridor Scheme was recognised by the International Water

Association, with the Scheme winning the IWA Asia Pacific

Honour Award for Design, the 2010 IWA Global Grand Prize

for Design and the industry’s highest accolade, the 2010 IWA

Superior Achievement Award.

Born out of drought and now proven in flood, the Water

Grid was constructed in response to population growth,

drought and climate change and will ensure the region’s

water supply for now and the future. The Gold Coast

Desalination Plant and Western Corridor Recycled Water

Scheme are crucial in providing water security to South

East Queensland, as set out in the Queensland Water

Commission’s South East Queensland Water Strategy.

WaterSecure’s assets provide climate-resilient and climate-

independent sources of water, making Queensland a leader

in this area.

Our operations were designed to provide flexibility to

supply water according to changing demand and the

requirements of the SEQ Water Grid Manager. While the

region is enjoying high dam levels, WaterSecure has focused

operations on the needs of our customers and stakeholders.

Our assets moved to efficiency mode (tailoring production

to reduced demand through measures such as placing the

Gold Coast Desalination Plant on “hot standby”) towards

the end of the financial year while we have had the good

fortune of plenty of water in the dams.

2010-2011 saw Veolia Water Australia take over operations

of all of our assets apart from Gibson Island Advanced Water

Treatment Plant (AWTP). Veolia Water is also managing

the operational side of environment, land and asset

management, as well as the safety of personnel.

Rectification works and a reliability trial at the Gold Coast

Desalination Plant were successfully completed and

practical completion awarded in September 2010. Upgrade

works at Luggage Point AWTP were completed in June 2011.

All WaterSecure assets, with the exception of Gibson Island

AWTP, had achieved practical completion by the end of

the financial year, with Gibson Island expected to achieve

practical completion in the second half of 2011. Final

completion was achieved by the Eastern Pipeline Alliance,

Bundamba Alliance and Southern Regional Water Pipeline

Alliance, and is imminent for the Western Pipeline Alliance.

Our performance - what we delivered

Key Objectives 2010-2011

1. Focus on the needs of customers and

stakeholders

2. Optimise operational performance, including

managing costs with tight controls

3. Be a key part of the water industry – stay relevant

4. Build and retain corporate capability


2010-2011 highlights

• The Gold Coast Desalination Plant supplied almost

13.5 billion litres of desalinated water to the South East

Queensland Water Grid

• The Western Corridor Recycled Water Scheme supplied

more than 5.8 billion litres of purified water to power

stations, as well as water for the flood clean-up

• Total water supply for the 2010-2011 financial year was more

than 19.3 billion litres

• We achieved practical completion for the Gold Coast

Desalination Plant, Eastern Pipeline and Luggage Point

AWTP, meaning all bar one portion of the Western Corridor

Recycled Water Scheme have now achieved practical

completion

• The Recycled Water Management Plan was approved by the

Regulator

• Our assets continued to produce high-quality water,

meeting all water quality standards

• The Western Corridor Recycled Water Scheme won three

awards, including the IWA Asia Pacific Honour Award for

Design, the 2010 IWA Global Grand Prize for Design and

the international industry’s highest accolade, the 2010 IWA

Superior Achievement Award

• Successful preparations undertaken for merger with

Seqwater on 1 July 2011


Cumulative water supplied in 2010-11

Jul10

25,000

20,000

10,000

15,000

5,000

0

Aug10

Sep10

Oct10

Nov10

Dec10

Jan11

Feb11

Mar11

Apr11

May11

June11

Me

ga

litr

es

Desalinated waterPurified water

Supplied more than

5.8 billion litresof purified water to

power stationssupplied to the

13.5 billion litresof desalinated water

SEQ Water Grid

Awarded the

2010 IWA SuperiorAchievement Award

Western CorridorRecycled Water Scheme

for the


Key performance

area or objectiveTarget Achieved

Focus on the needs

of customers and

stakeholders

Supply high-quality, safe and reliable water that complies with relevant

health regulations.

Continue to build customer and stakeholder relationships and manage

those interfaces.

Ensure WaterSecure has the flexibility and reliability to meet water grid

requirements.

Support the Queensland Water Commission SEQ Water Strategy.

Optimise

operational

performance

including

managing costs

with tight controls

Ensure the plants are ready to produce quality water to provide water

security in times of need.

Ensure all environmental obligations are met.

A high level of environmental

compliance was achieved.

The most significant of non-

compliances were classified as

moderate – these non-compliances

were adequately managed by

internal organisational resources and

processes.

Establish and implement optimal operating framework and protocols

with operators.

Ensure WaterSecure operates in accordance with the System Operating

Plan.

Be a key part of the

water industry –

stay relevant

Implement the research and development program.

Be a key player in national and international research networks.

Enhance and protect WaterSecure’s intellectual property assets.

Support the Australian Water Recycling Centre of Excellence.

Build and retain

corporate

capability

Develop and maintain a strong team culture supported by effective

policies and processes.

Prepare for relocation under the Queensland Government’s

decentralisation policy.

WaterSecure participated in

preliminary work until the State

Government concluded water

entities would not be relocated.

Develop a learning organisation through staff development and

knowledge sharing.

Develop, implement and maintain systems and processes that support

the organisation.

Key performance areas


Strategic Asset Management Plan

A Strategic Asset Management Plan (SAMP) was submitted

and approved by the Department of Environment and

Resource Management (DERM) for the Desalination Plant

and the Western Corridor Scheme in 2008. As per the Water

Supply (Safety & Reliability) Act 2008, an annual report for

both SAMPs was submitted in December 2010. These plans

will be reviewed and integrated within the Seqwater SAMP

in 2012 to align the regulatory obligations of the merged

entity.

Environment

WaterSecure is committed to improving its environmental

performance and during the 2010-2011 financial year a

number of positive projects were undertaken.

The development and implementation of WaterSecure’s

Environmental Management System during 2010-2011 has

led to a substantial decrease in the number and severity of

non-compliances in this area.

WaterSecure substantially completed the Western Corridor

Recycled Water Scheme (WCRWS) revegetation program

during the reporting year and has now moved into a

12-month establishment and maintenance period for this

project.

In early 2011 the first of two fauna crossings was built on

the Karawatha Forest section of the WCRWS easement.

Construction of the second crossing is scheduled to begin

in the second half of 2011.

WaterSecure assessed the performance of the marine

structures that form part of the Gold Coast Desalination

Plant (both the water intake and outlet diffuser structures)

located within the Kirra-Tugun embayment. The assessment

indicated that the structures are performing well and have

provided an enhanced habitat for the settlement of mobile

organisms and fish communities, effectively forming an

artificial reef.

Water quality plans

The Recycled Water Management Plan for the Western

Corridor Recycled Water Scheme was a major piece of work

in 2010-2011 and is the first plan of its kind in Australia.

The plan is required by the Office of the Water Supply

Regulator (OWSR). Before this plan could be submitted the

WCRW Scheme Validation Program needed to be approved

by the Regulator. The Validation Program was submitted in

March 2010 and approved by the OWSR in early September

2010. The Recycled Water Management Plan itself was

submitted in October 2010 and final approval was granted

on 30 June 2011.

Under the Water Supply (Safety and Reliability) Act 2008, a

Drinking Water Quality Management Plan approved by the

Regulator was required for the Gold Coast Desalination Plant

by 30 June 2011. WaterSecure had submitted the plan in

early April and it was approved by the OWSR on 1 July 2011.

This plan was reviewed by the SEQ Water Grid Manager

and developed in collaboration with Seqwater to ensure

alignment with other SEQ Water Grid drinking water quality

management plans also being reviewed by the Regulator.

Results from our second Water Quality Report for the

Bundamba Advanced Water Treatment Plant released

in 2010 found that the water supplied from Bundamba

conforms to the standards prescribed by Queensland

Health in the Public Health Regulation 2005. The Chair of

the Queensland Water Commission’s Independent Expert

Advisory Panel, Professor Paul Greenfield, stated that the

results show the treatment process barriers are effective in

controlling water quality hazards and reliably producing

water suitable for release into Wivenhoe Dam. These

consistent water quality results have continued over the past

year. The water produced by our schemes complies with all

regulatory requirements and the organisation remains up-

to-date with any changing requirements.


WaterSecure is proud of the benefits its operations bring

to the South East Queensland community. Part of our role

is to educate the community about the significant roles

desalination and water recycling play as climate-resilient

sources of water, and to support a small range of worthwhile

community activities.

Last year saw the continuation of WaterSecure’s

Community Partnership Program, which formalises our

commitment to engaging and supporting communities in

the areas we operate.

A partnership with Brisbane-based not-for-profit

organisation the Bulimba Creek Catchment Coordinating

Committee (B4C) saw WaterSecure working in conjunction

with our operator, Veolia, to support the group in working

to protect and regenerate the natural environment in the

Bulimba Creek Catchment, an area traversed by our Eastern

Pipeline.

B4C has enjoyed a long history with the WCRW Scheme,

conducting environmental projects which deliver tangible

benefits for the catchments in which WaterSecure

operates. The group works with an influential network of

government and industry partners to regenerate bushland

and waterways, including a number of WaterSecure’s co-use

partners such as Energex and Powerlink. It reaches a broad

network of volunteers through its commercial nursery,

community small holding and revegetation work.

In 2010-2011, we have also been proud to sponsor two

significant environmental events. As an established

member of the South East Queensland Healthy Waterways

Partnership, WaterSecure was proud to sponsor the

Research category in 11th Annual Health Waterways Awards.

In a second environmental initiative, WaterSecure, together

with Gold Coast Catchment Association, provided funding

to support the PlatypusWatch Program in 2011.

WaterSecure also supported a small number of community

sporting organisations located near the Gold Coast

Desalination Plant, including the Tugun Jets Soccer Club,

Tugun Seahawks Rugby League Football Club and the

Tugun and Bilinga Surf Life Saving Clubs.

Our education programs and site tours have grown in

popularity and expanded to be even more comprehensive,

with the launch of our virtual tours, resources and

workshops for teachers.

We have continued to showcase both schemes to a range of

groups, including local, national and international industry,

government, high school students, Probus and Rotary clubs,

media and general interest groups.

Community


Over the past financial year, WaterSecure has continued

to further its involvement in research and development in

water recycling through various strategic partnerships.

This work is directly relevant to Toward Q2: Tomorrow’s

Queensland ambitions and in particular Target 2: 50 per

cent increase in proportion of Queensland businesses that

undertake research and development or innovation.

Queensland has established itself as a leader in water

recycling and desalination technologies. In order to

maintain this lead, WaterSecure continues to facilitate

ground-breaking research in all forms of water recycling

through its hosting of the Australian Water Recycling

Centre of Excellence. This national centre is investing in

a portfolio of industry-relevant research projects across

the full water recycling spectrum, developing practical

solutions to secure Australia’s future water supply, while at

the same time building awareness and understanding in

the community about this precious resource. WaterSecure

is also engaging with the National Centre of Excellence in

Desalination in Perth.

Along with its main partners, the University of Queensland

(UQ) and Veolia Water Australia, WaterSecure has continued

its commitment with the Water Recycling Research

Group at UQ’s Advanced Water Management Centre. This

collaboration now fully or partially supports the work of four

research staff and several PhD, Masters and undergraduate

students with a specific focus on WaterSecure’s advanced

water treatment plants. Projects conducted within this

collaboration primarily aim at:

• providing a better understanding and minimising the

formation of disinfection by-products

• improving water quality monitoring by developing

alternative or complementary water sampling techniques

and water quality analyses

• further minimising environmental impacts by using tools

such as life cycle analysis or improving the quality of

liquid discharges to the waterways

• reducing operations and maintenance costs by improving

membrane operations.

In addition to the direct collaboration with UQ, specific

research projects have been developed and conducted

in partnership with other universities or research centres,

including the Urban Water Security Research Alliance,

Commonwealth Scientific and Industrial Research

Organisation (CSIRO), the University of New South Wales,

the University of Wollongong, the Colorado School of Mines

(USA), and the University of Poitiers (France).

WaterSecure’s commitment to research and development

was reflected in the design and implementation of a

long-term intellectual property (IP) management strategy

and plan that incorporates strong relationships with key

providers and provides training for staff and operators in

best practice IP management. WaterSecure now has an

in-house innovation disclosure register and an internal IP

education program has also been rolled out.

Industry and research


WaterSecure prides itself on its people, their enthusiasm and

contribution to the organisation and its goals. A culture of

collaboration and innovation is encouraged and fostered at

the workplace, and the company’s culture is based on strong

leadership and teamwork.

During the current financial year, the People and

Organisational Development (POD) team has been

focused on developing and refining workplace policies

and strategies in response to organisational requirements.

There has been significant effort to develop policies and

procedures which ensure organisational compliance with

necessary legislation and governance requirements.

A five-year strategic plan and an annual operational plan

have been developed and in line with these requirements

an Employee and Industrial Relations Plan has also been

developed. The 2010-2011 Employment and Industrial

Relations Plan was approved by our Responsible Ministers

and has guided activities for the 2010-2011 financial year.

WaterSecure maintains a strong commitment to the

proactive management of workplace health and safety

and this forms an integral part of our business activities.

As part of our ongoing safety strategy, WaterSecure has

committed to having a formalised Safety Committee with

representation from management and staff that meets on

a monthly basis. There are also opportunities provided for

training in health and safety.

WaterSecure is committed to offering its employees

flexible workplace options and has implemented a number

of policies in support of this goal. In addition, several

policy frameworks have been developed concerning leave

entitlements and employee learning and development,

along with a number of initiatives that promote work/life

balance. These policies and guidelines are easily accessible

to staff on the WaterSecure intranet. In addition to

our statutory obligations WaterSecure offers the

following benefits:

• Parental leave

WaterSecure has leave provisions and other entitlements

for staff who are, are about to become, or are planning to

become, parents. Pre-natal leave and pre-adoption leave

are offered to employees to attend medical appointments

or adoption related interviews prior to birth. WaterSecure

also offers flexible working options to accommodate

appointments which are made during business hours.

• Carer’s leave

WaterSecure respects the role that carers play in our

community and, in recognition of the Queensland Carers

Charter, WaterSecure staff are entitled to carer’s leave. The

flexible arrangements in relation to carer’s leave enable staff

to care for a member of their immediate family or household

in the event of illness or an emergency.

Our obligations under the Carers Leave and the Carers

(Recognition) Act 2008 include:

• Informing and educating staff about the carer’s charter:

WaterSecure’s employee induction program educates

employees about the Carer’s Charter

• Ensuring staff actively consider and provide for carers

when developing policy programs and services and in the

way programs and services are delivered: WaterSecure

has not had to deliver services or make strategic policy or

planning decisions requiring it to consider the needs of

carers during the financial year

• Having human resource policies which take into account

the needs of employees who might be carers: Changes to

the Carers Leave and Carers (Recognition) Act 2008 came

into effect in December 2010. Following updates to the

Act, WaterSecure ensured that human resource policies

were updated where appropriate

• Seeking the views of carers: WaterSecure has not had

to deliver services or make strategic policy or planning

decisions requiring it to consider the needs of carers

during the financial year.

Our people


• Employee learning and development

WaterSecure is committed to optimising opportunities for

all staff to enhance their level of skills and knowledge to

improve the quality of workplace productivity and staff

satisfaction. Individual staff members are encouraged to

seek appropriate developmental opportunities both within

WaterSecure and externally. Formal performance reviews

are undertaken on an annual basis to enable both the

employee and management to discuss their performance.

This is in addition to ongoing, informal dialogue that is

encouraged between staff members and their manager.

• Equal opportunity

WaterSecure promotes equal opportunity for all employees

and ensures its workplaces are free from direct or indirect

discrimination in line with relevant legislation.

Workforce profile

Workforce profile as at 30 June 2011.

Full-time equivalent (FTE) 45

Permanent retention rate 89%

Permanent separation rate 47%

2010-2011 Consultancies

Consultancy Type $

Asset Consultancy 224,603.42

Communication 107,061.75

Financial Accounting 262,213.50

Human Resources 8715.00

Legal 510,970.56

Professional/Technical 2,586,224.88

Total cost of consultancies 3,699,789.11


Overseas travel

Purpose Destination Employee/Position Cost *($)

Attend and present a paper at Weftec 10, the 83rd Annual

Water Environment Federation Technical Exhibition and

Conference.

New Orleans, USAAnnalie Roux / Water

Quality Manager$3704.00

To attend, deliver presentation and accept WaterSecure

award at the IWA conference.Montreal, Canada

Paul Rees /

Communications and

External Relations

Manager

$5688.00

Attendance at the 2nd Osmosis Summit and the 10th

Annual AMTA ConferenceSan Diego, USA

Barry Spencer / IP

Specialist$5100.00

Visit Orange Country Water Reclamation Plant, Yuma

Desalting Facility and City of North Las Vegas MBR Plant

Orange Country,

California USA,

Yuma, Arizona USA

Las Vegas, Nevada

USA

Rory Morgan / Project

Manager$3656.00

Attend Industrial Control System Advanced Cybersecurity

Training under the arrangements of CERT Australia and

the Attorney General’s office.

Idaho Falls, Idaho,

USA

Luke Hellowell / Senior

Control Systems Engineer

$4007.00 (Funded

by the Federal

Government.

Therefore $0 cost to

WaterSecure)

Total cost of overseas travel $18,148.00


WaterSecure recognises the important role good corporate

governance plays in an organisation, not only providing

high levels of accountability and risk management but also

encouraging performance, innovation and value.

The development of a compliance framework aligned to

the Australian Standard AS3806:2006-Compliance Programs

has progressed well over the last year. All key elements have

been developed and implemented and will continue to

evolve under the merged entity, Seqwater.

The Compliance Manager has regularly reported to an

internal Executive Compliance Committee and to the Audit,

Risk, Remuneration and Compliance Committee of the

Board. A Board-endorsed compliance policy and a CEO-

endorsed compliance charter and compliance program

were developed and issued in 2010-2011. A comprehensive

legal obligations register and an external reporting register

were developed and maintained by the Compliance

Manager. These have assisted WaterSecure in meeting its

compliance obligations.

Leadership and governance structure

The Queensland Government, through the Minister for

Energy and Water Utilities and the Minister for Finance,

Natural Resources and the Arts, has overall responsibility for

WaterSecure.

The Board of WaterSecure sets the strategic direction for

WaterSecure and ensures that WaterSecure achieves and

acts in accordance with its strategic and operational plans.

Details of the board members’ skills and experience appear

on pages 7 and 8.

To assist in fulfilling its duties, the Board has two

committees, the Audit, Risk, Remuneration and Compliance

Committee (ARRCC) and the Water Quality, Asset

Management, Research and Development Committee

(WQAMRDC).

WaterSecure’s CEO is supported by the Executive

Management Team (EMT). The EMT provides business focus

to each of the key areas of contract and asset management,

corporate governance including regulatory requirements,

finance and support services, operations, communications

and stakeholder engagement, and research and

development.

Performance reviews for the EMT for the 2010-2011

performance review period were conducted by the CEO. In

line with the WaterSecure Rewarding Employee Performance

Policy and the State Water Authorities Governance

Framework, the ARRCC endorsed and recommended

the assessments of the EMT to the Board. The CEO’s

performance is assessed by the Chairman and approved

by the Board. The CEO and members of the EMT have

formal performance agreements and are assessed against

corporate and individual key performance indicators.

The scheme operator, Veolia Water Australia, interacts with

head office primarily through senior operations staff and

with each of the project alliances. Veolia has taken over

operations and maintenance for Bundamba and Luggage

Point Advanced Water Treatment Plants, the Eastern

Pipeline, Western Pipeline and Gold Coast Desalination

Plant, with the Gibson Island plant to follow in the second

half of 2011.

Board administration

The WaterSecure Board was formed on 1 August 2008. This

was the start date of each of the current Directors.

All Directors are independent and WaterSecure is satisfied

that any actual or potential conflict of interest between

the personal or business affairs of any director has been

declared. A process for declaration of interests and guidance

for determining materiality has been developed and is

incorporated in WaterSecure’s Board Charter, which is

available on our website.

Corporate Governance


A formal board performance assessment was undertaken in

late 2009. The assessment was facilitated by the Chairman

and used the KMPG Board Advisory Services Board

Effectiveness Survey tool. This allowed WaterSecure’s

board performance to be rated and benchmarked against

other company boards. Board members and executive

management responded to a number of best practice

statements and provided comments and suggestions via

the online survey.

The results were extremely positive and open discussions

with the Board and executive management identified

areas for improvement. With the announced merger of

WaterSecure and Seqwater and planned abolition of the

WaterSecure Board on 30 June 2011, it was deemed not

necessary to undertake a further Board review in the past

year.

The Board has in place an agreed procedure for Directors to

follow when obtaining independent advice at WaterSecure’s

expense, in relation to the discharge of their responsibilities

as a Director of WaterSecure.

Audit, Risk, Remuneration and

Compliance Committee

The Audit, Risk, Remuneration and Compliance Committee

(ARRCC) has been established to assist the Board in fulfilling

its corporate governance and oversight responsibilities for

the organisation’s financial reporting process, audit process,

internal control system, risk management, compliance,

insurance, employee remuneration and retention strategies.

The current Committee members are David McDougall

(Chair), David Gray and Scott Standen.

During the year the ARRCC fulfilled all of its expected duties

as set out in the Committee Charter. Achievements of

particular significance include the following:

• With the continued move from asset construction and

delivery phase to operations, the ARRCC provided

guidance and oversight for the refocus of WaterSecure’s

governance and business systems, including:

- Significantly enhancing the compliance program

during the year to align with the Australian

Compliance Standard AS3806. An independent

review of WaterSecure’s environmental

compliance program was undertaken and actions

progressed to enhance the program including the

implementation of an environmental management

system. An independent AS3806 health check was

undertaken which has confirmed WaterSecure’s

corporate compliance program is consistent with

the requirements of AS3806

- Reviewing and updating the corporate

Occupational, Health and Safety Management Plan

- Revising the risk management framework to align

with the operating focus of the business and a

proactive approach taken to identify, resolve and

mitigate risks

- Introducing a new corporate-wide information

and records management system with legacy files

converted and captured in the new system. The

system also provides automated work flows to assist

with tracking progress on matters being actioned

and to ensure they are properly closed out

- Introducing automated systems to assist with the

management and reporting of incidents

• With the move to a regulated pricing regime in 2011-2012,

the ARRCC provided input for and oversaw submissions

to the Queensland Competition Authority for the 2011-

2012 SEQ Grid Service Charges

• The ARRCC worked with management to consider

future operating scenarios for the Western Corridor

Recycled Water Scheme in light of the changed

environmental conditions whereby the dam catchments


were replenished to near capacity. This work resulted

in a submission to the Responsible Ministers providing

options for operating the Scheme in the post-drought

environment. As a result of this submission the State

Government elected to only run the Luggage Point and

half of Bundamba and to decommission and preserve the

Gibson Island AWTP and half of Bundamba AWTP.

Water Quality, Asset Management, Research and

Development Committee

This Committee has been established to assist the Board

in fulfilling its corporate governance and management

responsibilities for water quality, asset management and

research and development. This includes management of

compliance with regulatory requirements in these areas of

responsibility.

The current Committee members are Mark Pascoe (Chair),

Stephen Golding and David Gray.

Both committees have formal charters that set out

committee roles, responsibilities and authority. Minutes of

all meetings are provided at Board meetings and the Chair

of the committee reports to the Board on the committee

meetings held.

Remuneration policies

Remuneration levels for the executive management team

are consistent with the State Water Authorities Governance

Arrangements for Chief and Senior Executives, which is to

remunerate fairly and responsibly by ensuring that the

level and composition of remuneration is sufficient and

reasonable and that its relationship to performance is clear.

The Board obtains independent advice on the

appropriateness of WaterSecure compensation packages,

given trends in comparative companies both locally and

internationally. Information on Board member and executive

management benefits are included in the financial

statements.

The compensation structures are designed to attract

suitably qualified candidates, reward the achievement of

strategic objectives and achieve the broader outcome of

creation of value for the public.

Attendance at Committee Meetings 2010-11

BoardAudit, Risk, Remuneration and

Compliance Committee

Water Quality, Asset Management,

Research and Development

Committee

Director Meetings heldMeetings

attendedMeetings held

Meetings

attendedMeetings held

Meetings

attended

David Gray 11 11 7 6 3 3

Stephen Golding 11 10 N/A N/A 3 3

Mark Pascoe 11 8 N/A N/A 3 2

David McDougall 11 10 7 7 N/A N/A

Scott Standen 11 10 7 7 N/A N/A


Independent remuneration consultants provide analysis

and advice to ensure employee remuneration is competitive

in the marketplace. In addition, compensation levels for

employee performance are reviewed annually by the Board

through a process that considers individual, segment and

overall organisational performance of WaterSecure.

WaterSecure’s remuneration policies are approved by

the Board and are in accordance with all Queensland

Government requirements including the State Water

Authorities Governance Framework.

Risk management

WaterSecure has implemented a Risk Management Policy

and Framework and has established a Risk Management

Committee. Our risk management approach is to identify,

prioritise and manage all our risks, including strategic,

operational and project risks. WaterSecure’s definition of

risk and its approach to risk management is aligned with

the Risk Management Standard Australia/New Zealand Risk

Management Standard (AS/NZ ISO 31000:2009).

The Risk Management Committee regularly reports to the

Audit, Risk, Remuneration and Compliance Committee.

Information systems and record keeping

WaterSecure has made significant progress towards

its information systems and recordkeeping objectives

over the past year. A records management framework

has been developed and an electronic document and

records management system implemented in November

2010. These achievements support efficient and effective

knowledge management and ensure that information

compliance and accountability requirements are met.

Access to information

The Right to Information Act 2009 allows members of

the community access to government information and

documents under certain circumstances. WaterSecure is an

‘agency’ under the Act. In 2010-2011, WaterSecure received

no applications under the Right to Information Act 2009.

Whistleblowers Protection Act 1994

There were no public interest disclosures received or

referred to WaterSecure during the period 1 July 2010 to

30 December 2010.

With the repeal of the Whistleblowers Protection Act 1994

and the introduction of the Public Interest Disclosure Act 2010

(PID Act) on 1 January 2011, the way in which public interest

disclosures are to be publically reported has changed. From

1 January 2011 agencies are no longer required to report

public interest disclosures in annual reports.

Under section 61 of the PID Act, the Public Service

Commission (PSC) is now responsible for the oversight

of public interest disclosures and preparing an annual

report on the operation of the PID Act. From 1 January

2011, agencies are required to report information about

public interest disclosures to the PSC. The PSC will prepare

an annual report on the operations of the PID Act and the

information provided by agencies. The annual report will be

made publicly available after the end of each financial year.

South East Queensland Water (Restructuring) Act

WaterSecure has not received any directions under section

43 of the South East Queensland Water (Restructuring) Act

2007 in 2010-2011.

Public Sector Ethics Act 1994

On 1 November 2010 amendments were made to the Public

Sector Ethics Act 1994. The Act requires public entities to

have approval for their Code of Conduct from Responsible

Ministers by 1 July 2011. As WaterSecure would longer exist

from 1 July 2011 due to the merger with Seqwater, it was

not necessary to seek approval for the WaterSecure Code

of Conduct. Transferring WaterSecure employees will be

covered by the Seqwater Code of Conduct.


Publications scheme

WaterSecure has a publications scheme which provides the

public with information and documents that are routinely

available from our organisation. This scheme can be

accessed on our website and is regularly reviewed.

Internal audit

WaterSecure’s internal audit function is designed to

add value and improve the organisation’s operations by

providing independent and objective assurance and advice

for continuous improvement. It assists the organisation in

meeting its objectives through a systematic and disciplined

approach to evaluating and improving the effectiveness of

risk management, control and governance processes.

An Internal Audit Charter has been developed to define

objectives and set out the purpose of the internal audit

function including authority, responsibilities and objectives.

The charter is approved by the WaterSecure Board and

the ARRCC and has been prepared in accordance with the

requirements of the Financial Accountability Act 2009.

The scope of work under the Internal Audit Charter includes

ensuring risks are appropriately identified and managed

and that resources are acquired economically, used

efficiently and adequately protected. Responsibilities

of the internal audit function include developing

and implementing a flexible annual audit plan using

appropriate risk-based methodology, establishing a quality

assurance program and reporting on the organisation’s

performance against agreed key performance indicators.

The scope of work is aligned with the organisation’s

strategic plan and takes into consideration Queensland

Treasury’s Audit Committee Guidelines.

Internal audit is an advisory function, having an

independent status within WaterSecure. Internal audit

derives its independence from the ARRCC to which it has

unrestricted access. To provide for the independence of

internal auditing, it administratively reports to the Chief

Financial Officer and functionally to the Board and the

ARRCC.

Review and examination of internal audit outcomes are

undertaken to identify opportunities for improvement

and to be kept informed of future requirements. The

size and frequency of the audits depend on factors such

as effectiveness of controls, organisational need and

allocated budget.

Achievements during 2010-2011 include audits completed

on risk management, IT security and procurement.

Systems for obtaining financial and

non-financial information

Financial information

WaterSecure has established a process whereby cost

elements are forecast, captured, analysed and reported

monthly to the Board and in detail to the ARRCC every

two months.

Revenue and operational costs are captured using

financial software underpinned by documented policies

and procedures. Finances are regularly audited by

the Queensland Audit Office. Each of the alliances is

independently financially audited to ensure that costs

incurred are in accordance with contract provisions.

Non-financial information

Personnel numbers across the scheme were collated from

the project alliances and reported to the Department of

Infrastructure and Planning. Schedule performance is

managed by the Program Director (Program Delivery and

Completions) through alliance reporting protocols. The

organisation’s reputation is monitored by WaterSecure’s

Communications and External Relations team through

media monitoring and stakeholder engagement activities.


Consolidated Parent

2011 2010 2011 2010

Note $ $ $ $

Income from continuing operations

Water services - WGM 271,377,150 153,455,010 271,377,150 15,150,835

Grants and contributions 4 7,324,029 3,325,509 7,324,029 227,126

Interest income 3,176,771 4,713,871 3,176,771 4,598,572

Other income 5 247,033 3,099,494 247,033 13,250,338

Total income from continuing operations 282,124,983 164,593,884 282,124,983 33,226,871

Expenses from continuing operations

Cost of sales 6 54,021,273 47,405,488 54,021,273 4,329,509

Employee expenses 7 9,058,036 8,164,674 9,058,036 7,823,816

Supplies and services 8 9,162,269 7,662,68 9,162,269 6,637,362

Depreciation 9 92,948,806 61,560,082 92,948,806 5,634,804

Emissions expenses 15 2,531,005 3,134,228 2,531,00 196,673

Impairment losses (reversal) - (13,262,238) - 110,866,157

Loss on asset transfer - - - - 49,627,062

Finance/borrowing costs 10 141,406,804 119,798,142 141,406,804 14,193,294

Other expenses 11 11,960,971 3,005,766 11,960,971 1,673,443

Total expenses from continuing operations 321,089,164 237,468,825 321,089,164 200,982,120

Operating result from continuing operations

before income tax

(38,964,181) (72,874,941) (38,964,181) (167,755,249)

Income tax benefit 12(a) 9,682,154 28,549,319 9,682,154 2,173,936

Operating result from continuing operations (29,282,027) (44,325,622) (29,282,027) (165,581,313)

Other comprehensive income - - - -

Total comprehensive income (29,282,027) (44,325,622) (29,282,027) (165,581,313)

Summary of Financial Position and Performance

Statement of Comprehensive Income

for the year ended 30 June 2011

Queensland Manufactured Water Authority


Statement of Financial Position

Consolidated Parent

2011 2010 2011 2010

Note $ $ $ $

Current assets

Cash and cash equivalents 13 97,395,328 48,032,266 97,395,328 48,032,266

Trade and other receivables 14 36,573,374 19,887,155 36,573,374 19,887,155

Inventory 15 2,234,764 4,765,769 2,234,764 4,765,769

Other assets 16 634,072 2,141,928 634,072 2,141,928

Total current assets 136,837,538 74,827,118 136,837,538 74,827,118

Non current assets

Property, plant and equipment 17 3,108,705,764 3,123,552,921 3,108,705,764 3,123,552,921

Deferred tax assets 12(b) 233,988,945 206,142,530 233,988,945 206,142,530

Total non current assets 3,342,694,709 3,329,695,451 3,342,694,709 3,329,695,451

TOTAL ASSETS 3,479,532,247 3,404,522,569 3,479,532,247 3,404,522,569

Current liabilities 15 2,531,005 3,134,228 2,531,00 196,673

Trade and other payables 19 75,052,002 61,874,672 75,052,002 61,874,672

Interest bearing liabilities 20 1,645,038 - 11,645,038 -

Employee benefits 21 395,998 922,498 395,998 922,498

Other liabilities 22 56,963,775 6,631,788 56,963,775 6,631,788

Total current liabilities 144,056,813 69,428,958 144,056,813 69,428,958

Non current liabilities

Interest bearing liabilities 20 2,543,855,342 2,516,974,988 2,543,855,342 2,516,974,988

Deferred tax liabilities 12(c) 122,628,096 104,463,836 122,628,096 104,463,836

Other liabilities 22 384,586,385 399,967,149 384,586,385 399,967,149

Total non current liabilities 3,051,069,823 3,021,405,973 3,051,069,823 3,021,405,973

TOTAL LIABILITIES 3,195,126,636 3,090,834,931 3,195,126,636 3,090,834,931

NET ASSETS 284,405,611 313,687,638 284,405,610 313,687,638

EQUITY

Contributed Equity 3(l) 509,624,196 509,624,196 486,967,107 486,967,107

Accumulated losses (225,218,585) (195,936,558) (202,561,496) (173,279,469)

TOTAL EQUITY 284,405,611 313,687,638 284,405,611 313,687,638

As At 30 June 2011


Statement of Cash Flows

Consolidated Parent

2011 2010 2011 2010

Note $ $ $ $

Cash flows from operating activities

Inflows:

Receipts from water services 305,887,725 224,965,970 305,887,725 30,006,251

Interest received 3,154,943 161,083 3,154,943 2,596,290

Other revenue 247,033 3,099,494 247,033 13,250,338

GST collected 17,797,088 24,875,636 17,931,419 1,572,152

Outflows:

Payments to suppliers and employees (108,452,735) (234,143,436) (108,452,735) (23,695,936)

Finance and borrowing costs (141,406,804) - (141,406,804) -

GST paid (15,293,982) (17,225,931) (15,428,313) (1,572,152)

Income tax paid - (92,265) - 21,897

Net cash provided by/(used in) operating

activities

23 61,933,268 1,640,551 61,933,268 22,178,840

Cash flows from investing activities:

Outflows:

Payment for property plant and

equipment

(51,095,598) (171,775,620) (51,095,598) (25,171,932)

Net cash provided by/(used in) investing

activities

(51,095,598) (171,775,620) (51,095,598) (25,171,932)

Cash flows from financing activities:

Inflows:

Contributed equity - 150,000,000 - 150,000,000

Borrowings 38,525,392 257,696,411 38,525,392 27,491,207

Outflows:

Borrowings redemptions - (385,878,373) - (310,182,746)

Net cash provided by/(used in) financing

activities

38,525,392 21,818,038 38,525,392 (132,691,539)

Net increase (decrease) in cash and cash

equivalents

49,363,062 (148,317,031) 49,363,062 (135,684,631)

Cash and cash equivalents at beginning of

financial year

48,032,266 196,349,297 48,032,266 162,923,683

Cash and cash equivalents transferred

from WCRW

- - - 15,121,833

Cash and cash equivalents transferred

from DESAL

- - - 5,671,381

Cash and cash equivalents at the end of

financial year

13 97,395,328 48,032,266 97,395,328 48,032,266




Statement of Comprehensive Income ...................................................................................................................................30

Statement of Financial Position ................................................................................................................................................31

Statement of Changes in Equity...............................................................................................................................................32

Statement of Cash Flows .............................................................................................................................................................33

Notes to the Financial Statements ..........................................................................................................................................35

Management Certificate .............................................................................................................................................................74

Independent Auditor’s Report ..................................................................................................................................................75


Financial Report



ABN 299 396 279 65

Statement of Comprehensive Income

For the Year Ended 30 June 2011

Consolidated Parent

Note 2011

$ 2010

$ 2011

$ 2010

$

Income from continuing operations Water services - WGM 271,377,150 153,455,010 271,377,150 15,150,835 Grants and contributions 4 7,324,029 3,325,509 7,324,029 227,126 Interest income 3,176,771 4,713,871 3,176,771 4,598,572 Other income 5 247,033 3,099,494 247,033 13,250,338

Total income from continuing operations 282,124,983 164,593,884 282,124,983 33,226,871

Expenses from continuing operations

Cost of sales 6 54,021,273 47,405,488 54,021,273 4,329,509 Employee expenses 7 9,058,036 8,164,674 9,058,036 7,823,816 Supplies and services 8 9,162,269 7,662,683 9,162,269 6,637,362 Depreciation 9 92,948,806 61,560,082 92,948,806 5,634,804 Emissions expenses 15 2,531,005 3,134,228 2,531,005 196,673 Impairment losses (reversal) - (13,262,238) - 110,866,157 Loss on asset transfer - - - 49,627,062 Finance/borrowing costs 10 141,406,804 119,798,142 141,406,804 14,193,294 Other expenses 11 11,960,971 3,005,766 11,960,971 1,673,443

Total expenses from continuing operations 321,089,164 237,468,825 321,089,164 200,982,120

Operating result from continuing operations before income tax (38,964,181) (72,874,941) (38,964,181) (167,755,249)

Income tax benefit 12(a) 9,682,154 28,549,319 9,682,154 2,173,936

Operating result from continuing operations (29,282,027) (44,325,622) (29,282,027) (165,581,313)

Other comprehensive income - - - -

Total comprehensive income (29,282,027) (44,325,622) (29,282,027) (165,581,313) The accompanying notes form part of these statements.



ABN 299 396 279 65

Statement of Financial Position

As At 30 June 2011

Consolidated Parent

Note 2011

$ 2010

$ 2011

$ 2010

$

Current assets Cash and cash equivalents 13 97,395,328 48,032,266 97,395,328 48,032,266 Trade and other receivables 14 36,573,374 19,887,155 36,573,374 19,887,155 Inventory 15 2,234,764 4,765,769 2,234,764 4,765,769 Other assets 16 634,072 2,141,928 634,072 2,141,928

Total current assets 136,837,538 74,827,118 136,837,538 74,827,118

Non current assets Property, plant and equipment 17 3,108,705,764 3,123,552,921 3,108,705,764 3,123,552,921 Deferred tax assets 12(b) 233,988,945 206,142,530 233,988,945 206,142,530

Total non current assets 3,342,694,709 3,329,695,451 3,342,694,709 3,329,695,451

TOTAL ASSETS 3,479,532,247 3,404,522,569 3,479,532,247 3,404,522,569

Current liabilities Trade and other payables 19 75,052,002 61,874,672 75,052,002 61,874,672 Interest bearing liabilities 20 11,645,038 - 11,645,038 - Employee benefits 21 395,998 922,498 395,998 922,498 Other liabilities 22 56,963,775 6,631,788 56,963,775 6,631,788

Total current liabilities 144,056,813 69,428,958 144,056,813 69,428,958

Non current liabilities Interest bearing liabilities 20 2,543,855,342 2,516,974,988 2,543,855,342 2,516,974,988 Deferred tax liabilities 12(c) 122,628,096 104,463,836 122,628,096 104,463,836 Other liabilities 22 384,586,385 399,967,149 384,586,385 399,967,149

Total non- current liabilities 3,051,069,823 3,021,405,973 3,051,069,823 3,021,405,973

TOTAL LIABILITIES 3,195,126,636 3,090,834,931 3,195,126,636 3,090,834,931

NET ASSETS 284,405,611 313,687,638 284,405,610 313,687,638

EQUITY Contributed Equity 3(l) 509,624,196 509,624,196 486,967,107 486,967,107 Accumulated losses (225,218,585) (195,936,558) (202,561,496) (173,279,469)

TOTAL EQUITY 284,405,611 313,687,638 284,405,611 313,687,638

The accompanying notes form part of these statements.



ABN 299 396 279 65

Statement of Changes in Equity


Consolidated

Note

Contributed Equity

$

Accumulated Losses

$ Total

$

Balance as at 1 July 2009 359,624,196 (151,610,936) 208,013,260 Contributed equity 3(l) 150,000,000 - 150,000,000 Operating result from continuing operations - (44,325,622) (44,325,622)

Balance at 30 June 2010 509,624,196 (195,936,558) 313,687,638

Balance as at 1 July 2010 509,624,196 (195,936,558) 313,687,638 Operating result from continuing operations - (29,282,027) (29,282,027)

Balance at 30 June 2011 509,624,196 (225,218,585) 284,405,611

Parent

Balance as at 1 July 2009 359,624,196 (7,698,156) 351,926,040 Contributed equity 3(l) 150,000,000 - 150,000,000 Contributed equity as a result of asset transfers (22,657,089) - (22,657,089) Operating result from continuing operations - (165,581,313) (165,581,313)

Balance at 30 June 2010 486,967,107 (173,279,469) 313,687,638

Balance as at 1 July 2010 486,967,107 (173,279,469) 313,687,638 Operating result from continuing operations - (29,282,027) (29,282,027)

Balance at 30 June 2011 486,967,107 (202,561,496) 284,405,611 The accompanying notes form part of these statements.



ABN 299 396 279 65


For the Year Ended 30 June 2011 Consolidated Parent

Note 2011

$ 2010

$ 2011

$ 2010

$

Cash flows from operating activities Inflows: Receipts from water services 305,887,725 224,965,970 305,887,725 30,006,251 Interest received 3,154,943 161,083 3,154,943 2,596,290 Other revenue 247,033 3,099,494 247,033 13,250,338 GST collected 17,797,088 24,875,636 17,931,419 1,572,152 Outflows: Payments to suppliers and employees (108,452,735) (234,143,436) (108,452,735) (23,695,936) Finance and borrowing costs (141,406,804) - (141,406,804) - GST paid (15,293,982) (17,225,931) (15,428,313) (1,572,152) Income tax paid - (92,265) - 21,897

Net cash provided by/(used in) operating activities 23 61,933,268 1,640,551 61,933,268 22,178,840

Cash flows from investing activities: Outflows: Payment for property plant and equipment (51,095,598) (171,775,620) (51,095,598) (25,171,932)

Net cash provided by/(used in) investing activities (51,095,598) (171,775,620 (51,095,598) (25,171,932)

Cash flows from financing activities: Inflows: Contributed equity - 150,000,000 - 150,000,000 Borrowings 38,525,392 257,696,411 38,525,392 27,491,207 Outflows: Borrowings redemptions - (385,878,373) - (310,182,746)

Net cash provided by/(used in) financing activities 38,525,392 21,818,038 38,525,392 (132,691,539)

Net increase (decrease) in cash and cash equivalents 49,363,062 (148,317,031) 49,363,062 (135,684,631)

Cash and cash equivalents at beginning of financial year 48,032,266 196,349,297 48,032,266 162,923,683

Cash and cash equivalents transferred from WCRW - - - 15,121,833

Cash and cash equivalents transferred from DESAL - - - 5,671,381

Cash and cash equivalents at the end of financial year 13 97,395,328 48,032,266 97,395,328 48,032,266

The accompanying notes from part of these statements.



ABN 299 396 279 65



Index to Notes to the Financial Statements 1. Objectives and principal activities of the Group..............................................................................................62. Basis of preparation..........................................................................................................................................63. Significant accounting policies .........................................................................................................................94. Grant and contributions ..................................................................................................................................185. Other income...................................................................................................................................................186. Cost of sales....................................................................................................................................................187. Employee expenses .......................................................................................................................................188. Supplies and services.....................................................................................................................................199. Depreciation expense .....................................................................................................................................1910. Finance /borrowing costs ...............................................................................................................................1911. Other expenses...............................................................................................................................................2012. Income Tax......................................................................................................................................................2013. Cash and cash equivalents ............................................................................................................................2414. Trade and other receivables ..........................................................................................................................2415. Inventory ..........................................................................................................................................................2416. Other assets ....................................................................................................................................................2417. Property, plant and equipment.......................................................................................................................2518. Impairment testing for cash generating units ................................................................................................2819. Trade and other payables ..............................................................................................................................3120. Interest bearing liabilities ................................................................................................................................3121. Employee benefits ..........................................................................................................................................3122. Other liabilities.................................................................................................................................................3223. Reconciliation of cash flows from operating activities ..................................................................................3224. Controlled entities ...........................................................................................................................................3325. Auditor's remuneration....................................................................................................................................3326. Key executive management personnel and remuneration ..........................................................................3327. Related party transactions..............................................................................................................................3728. Economic dependence ...................................................................................................................................3829. Financial instruments......................................................................................................................................3830. Capital and other commitments .....................................................................................................................4331. Contingent liabilities and assets ....................................................................................................................4432. Subsequent events .........................................................................................................................................45

3535384747474748484849495353535354576060606161626262666767727373



ABN 299 396 279 65

Notes to the Financial Statements


1. Objectives and principal activities of the Group

The Queensland Manufactured Water Authority (the “Group") is a for profit Queensland Statutory Body established under the South East Queensland Water (Restructuring) Act 2007.

The Group is primarily involved in providing services relating to operating and maintaining infrastructure associated with the supply of manufactured recycled water and manufactured desalinated water to the Queensland Water Grid.

2. Basis of preparation

(a) Reporting entity

The consolidated financial statements include the value of all revenues, expenses, assets, liabilities and equity of the Queensland Manufactured Water Authority and its subsidiaries South East Queensland (Gold Coast) Desalination Company Pty Ltd (DESAL) and Western Corridor Recycled Water Pty Ltd (WCRW) (together referred to as "the Group"). On 31 May 2010, all the assets and liabilities of the subsidiaries were transferred to the Parent entity as set out in the gazetted Transfer Notices issued by the Queensland Government dated 26 May 2010. DESAL and WCRW ceased operations on 31 May 2010.

The Group has acted in a custodian arrangement for the Australian Water Recycling Centre of Excellence Limited (AWRCoE) since its creation on 4 December 2009. Transactions of AWRCoE were not considered material and therefore not included in the financial statements.

(b) Statement of compliance

The financial statements are general purpose financial statements that have been prepared in accordance with:

• applicable Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB);

• the Financial and Performance Management Standard 2009;

• Queensland Treasury's Financial Reporting Requirements for Queensland Government agencies; and

• other authoritative pronouncements.

The financial statements were approved and authorised for issue by the Chief Financial Officer on 20 September 2011.

(c) Basis of measurement

The financial statements have been prepared on an accrual basis and are based on the historical costs except for the following:

• financial instruments at fair value through profit or loss are measured at fair value; and

• land and infrastructure assets are measured at fair value.

(d) Presentation currency and comparatives

The financial statements are presented in Australian dollars, which is the Group’s functional currency. Comparative information has been restated where necessary to be consistent with disclosures in the current reporting period.



ABN 299 396 279 65



2. Basis of preparation (continued)

(e) Principles of consolidation

A controlled entity is any entity over which Queensland Manufactured Water Authority (the parent) has the power to govern the financial and operating policies so as to obtain benefits from its activities. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered. Details relating to controlled entities are contained in Note 24.

As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered the consolidated Group during the year, their operating results have been included from the date control was obtained.

All inter-group balances and transactions between entities in the consolidated Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries are consistent with those adopted by the parent entity. Subsidiaries are entities controlled by the parent. Control exists when the parent has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of the subsidiary are included in the consolidated financial statements from the date that control commences until the date that control ceases.

(f) Going concern

In December 2010, the Queensland Government announced that the Group and the Queensland Bulk Water Authority trading as Seqwater would be merged, creating a single bulk water supply authority for the South East Queensland region. Seqwater is primarily involved in the supply of water services and carrying out water activities.

The assets and liabilities of the Group were transferred to the Seqwater on 1 July 2011, via the South East Queensland Water (Restructuring) Regulation 2011). The value of the transfer of the net assets of the Group to the Seqwater was $284 million. The Group is transferring to Seqwater at book value and any costs attributable to the wind up of the Group are included in these financial statements.

From the 2011-12 year the Grid Service Charge applicable to the Group will be paid to the Seqwater as the single bulk water supply authority, under a single integrated Grid Contract.

Financial modelling of the revenues and expenses of the single bulk water supply authority indicate that it will be loss making in the initial years following the transfer however it is likely to become profitable within a 5 to 10 year timeframe. Modelling of the cash flows of the single bulk water supply authority has also been undertaken and shows that as at 1 July 2011, no impairment of the assets of the single bulk water supply authority is required.

The financial statements have been prepared on a going concern basis. The preparation of the financial statements on a going concern basis is appropriate on the basis that there is a reasonable expectation that the transferred Group debts will be paid by Seqwater as and when they fall due for at least the next twelve months from the date of signing these financial statements.



ABN 299 396 279 65



2. Basis of preparation (continued)

(g) Critical accounting estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.

Where circumstances change, management have the discretion to adjust their estimates and judgements accordingly in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following:

(i) Impairment

The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key assumptions and estimates (refer to Note 18 and Note 3(e)).

(ii) Income tax and utilisation of tax losses

The Group is subject to the National Tax Equivalent Regime (NTER). As at 30 June 2011, a Deferred Tax Asset (DTA) has been recognised in relation to carried forward tax losses as it is considered probable that future taxable profits will be generated against which the tax losses could be utilised (refer to Note 3(b)(i) and Note 12).



ABN 299 396 279 65



3. Significant accounting policies

(a) Revenue

(i) Water services

Revenue receivable from the South East Queensland Water Grid Manager (WGM) prior to the completion of infrastructure assets is allocated to the Statement of Comprehensive Income except for the component that relates to fixed and variable operating costs during testing. This component is offset against work in progress.

Following completion of Infrastructure assets, all revenue receivable from the WGM is allocated to the Statement of Comprehensive Income.

(ii) Government grants

Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis after the asset is ready and available for its intended purpose.

(iii) Interest revenue

Interest received from temporary investment of borrowings for qualifying assets is offset with interest costs prior to being capitalised as part of the construction costs of qualifying assets.

Interest received on funds invested is treated as revenue when receivable.

(iv) Pipeline construction contract revenue

Pipeline construction contract revenue is recognised on the basis detailed in the terms of the Pipeline Construction Agreement between the State of Queensland and DESAL.

(b) Taxation

(i) Income tax

The Group has been a participant in the NTER from the date of establishment. As a result an “equivalent” or “notional income tax” liability is payable to Queensland Treasury for payment into the consolidated fund. Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in the Statement of Financial Position.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years.



ABN 299 396 279 65



3. Significant accounting policies (continued)

(b) Taxation (continued)

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A DTA is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. DTA are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. When there is a history if recent losses, the Group has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilised by the Group.

The Group and its wholly owned subsidiaries have not elected to form a tax consolidation group for income tax purposes.

Recoverability of DTA

DTA have been recognised in respect of the following items:

2011 2010

$ $

Deductible temporary differences 121,884,376 125,470,341

Tax losses 112,104,569 80,672,189

233,988,945 206,142,530

The recoverability of the DTA was assessed by forecasting the estimate of operating and taxable results for a period of 40 years. The Group is subject to predetermined pricing methodology within its regulatory environment. This enables forecasts to be estimated by the Group for a period of 40 years using the regulatory building blocks approach.

The cash flow forecasts are translated into expected future taxable profits and adjusted for the inherent risk that the actual taxable profits could be lower or the price path is changed.

Management believes the recorded DTA is fully recoverable based on the Group’s projected price path and current forecasts for taxable income for the periods through which losses may be carried forward that are sufficient to realise the DTA.



ABN 299 396 279 65


For the Year Ended 30 June 2011 3. Significant accounting policies (continued)

(b) Taxation (continued)

The Group consider the following to further support this:

• It is typically expected for tax losses to arise during the initial period of investment in long-term infrastructure and for the corresponding DTA to be retained for extended periods. A significant proportion of the Group’s assets have an effective useful life of 25 to 100 years and are depreciated accordingly;

• In addition to the reversal of taxable temporary differences, the Group is forecast to earn sufficient taxable profits, arising primarily from accounting profits, over the life of the relevant infrastructure assets which the unused tax losses can be utilised against; and

• Queensland Competition Authority (QCA) has been directed by the Government to ensure that the Group has a financially sustainable revenue stream going forward and therefore, the Board believes profit is more achievable to recoup the carrying value of the DTA.

(ii) Goods and Services Tax (GST)

Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the ATO. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.

Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(c) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within short-term financial liabilities in current liabilities on the Statement of Financial Position.

(d) Trade and other receivables

Trade receivables are recognised at the amounts due at the time of sale or service delivery. Settlement of these amounts is required within 30 days from invoice date. The Group considers trade receivables to be fully collectible and therefore no allowance for doubtful accounts is required.

Other receivables generally arise from transactions outside the usual operating activities of the Group and are recognised at their actual values.



ABN 299 396 279 65




(e) Impairment of assets

(i) Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the present future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the effective interest rate.

Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in the Statement of Comprehensive Income.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.

(ii) Non-Financial assets

The carrying amount of the Group's non-financial assets, other than DTA , are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit (CGU) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or group of assets.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are recognised in the Statement of Comprehensive Income, unless the asset is carried at a revalued amount. When the asset is measured at a revalued amount, the impairment loss is offset against the asset revaluation reserve of the relevant asset to the extent available.

Impairment losses recognised in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.



ABN 299 396 279 65


For the Year Ended 30 June 2011 3. Significant accounting policies (continued)

(f) Property, plant and equipment

(i) Acquisition of assets

Each class of property, plant and equipment is initially recognised at cost plus incidental costs directly attributable to the acquisition. The cost of self constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.

The asset recognition thresholds adopted are as follows:

Land $1

Plant and equipment $5,000

Infrastructure assets $10,000

Items with a lesser value are expensed in the year of acquisition.

Expenditure is only recognised as an asset when it is probable that future economic benefits will flow to the Group from it, and the costs incurred can be measured reliably. Any post acquisition expenditure which increases such future economic benefits is also capitalised.

(ii) Construction work in progress and infrastructure assets

All direct costs and, where reliably attributable, indirect costs relating to the constructed infrastructure, are recorded as work in progress. Construction work in progress is valued at cost and will not be depreciated or revalued until the completed asset is ready and available for use as intended by management. This point is defined as practical completion or commissioning completion.

Practical completion or commissioning completion is defined as the stage of construction when work is completed except for minor omissions and minor defects; when documents and other information essential for the use, operation and maintenance have been supplied; and when all commissioning and acceptance tests have been carried out successfully, taking into account the requirements of the Scheme Operator.

Corporate overhead costs are charged to the Statement of Comprehensive Income as required by AASB 116 Property, Plant and Equipment.



ABN 299 396 279 65




(f) Property, plant and equipment (continued)

(iii) Depreciation

Land is not depreciated as it has an unlimited useful life.

Property, plant and equipment is depreciated on a straight-line basis so as to allocated the net cost or revalued amount of each asset, less its estimated residual value, progressively over its estimated useful life.

Where assets have separately identifiable components that are subject to regular replacement, these components are assigned useful lives distinct from the asset to which they relate and are depreciated accordingly.

Any expenditure that increases the originally assessed capacity or service potential of an asset is capitalised and the new depreciable amount is depreciated over the remaining useful life of the asset.

Major spares purchased specifically for particular assets are capitalised and depreciated on the same basis as the asset to which they relate.

The depreciation rates used for each class of depreciable assets are:

Plant and equipment 10.00% - 33.33%

Infrastructure assets 1.00% - 15.00%

Depreciation methods, useful live and residual values are reviewed at each reporting date.

(iv) Revaluation of non-current assets

Infrastructure assets are measured at fair value in accordance with AASB 116 Property, Plant and Equipment and Queensland Treasury’s Non-Current Asset Policies for the Queensland Public Sector.

Plant and equipment is measured at cost.

Non-current assets measured at fair value are comprehensively revalued at least once every five years with interim valuations, using appropriate indices, being otherwise performed on an annual basis where there has been a material variation in the index. Where an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which the asset belongs is to be revalued.

Net revaluation increments in respect of each non-current asset are credited to the asset revaluation reserve, except to the extent it reverses a previous decrement recognised as an expense for that asset in the Statement of Comprehensive Income. In this instance, the reversal portion of the increment is recognised as revenue in the Statement of Comprehensive Income.

Net revaluation decrements in respect of each non-current asset are recognised as an expense in the Statement of Comprehensive Income, except to the extent they reverse a previous increment for that asset and a positive balance exists in the asset revaluation reserve for that asset. In this instance, the reversal portion of the decrement is charged directly to the reserve, but so as not to exceed the balance of the reserve for that asset.



ABN 299 396 279 65




(g) Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(h) Financial instruments

(i) Recognition and initial measurement

Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group becomes a party to the contractual provisions of the financial instruments.

(ii) Classification

Financial instruments are classified and measured as follows:

Financial assets Category

Cash and cash equivalents Held at fair value through profit or loss

Trade and other receivables Held at amortised costs

Financial liabilities

Trade and other payables Held at amortised costs

Interest bearing liabilities Held at amortised costs

The Group does not enter into transactions for speculative purposes, nor for hedging. Apart from cash and cash equivalents, the Group holds no financial assets classified at fair value through profit or loss.



ABN 299 396 279 65




(i) Employee benefits

Employer superannuation contributions and annual leave (included in wages and salaries total) are regarded as employee benefits.

Worker’s compensation insurance and payroll tax are a consequence of employing employees, but are not counted in employees' total remuneration package. They are not employee benefits, but rather employee related expenses

Employee benefits are capitalised and included in work in progress, to the extent they are directly related to the construction of the infrastructure assets. Those benefits not directly attributable are charged to the Statement of Comprehensive Income.

(i) Wages, salaries and leave

Liabilities for wages and salaries, including non-monetary benefits, bonuses and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

Non-vesting sick leave is recognised as expenses as it is taken.

(ii) Superannuation

Employer superannuation contributions are made to various superannuation funds including QSuper (the superannuation plan for Queensland Government employees). Contributions to superannuation funds are recorded as they become payable and the Group's legal or constructive obligation is limited to these contributions.

(iii) Queensland Government's Annual Leave and Long Service Leave Schemes

The Group is not a member of either the Queensland Government's Annual Leave Central Scheme or Queensland Government's Long Service Leave Scheme.

(iv) Key Management Personnel and Remuneration

Key management personnel disclosures are made in accordance with section 5 Addendum (issued May 2011) to the Financial Reporting Requirements for Queensland Government Agencies issued by Queensland Treasury (refer to Note 26).

(j) Interest bearing liabilities

Financial liabilities are initially recognised at fair value, net of transaction costs incurred. Financial liabilities are subsequently measured at amortised cost. Fees paid on the establishment of loan facilities, which are not incremental costs, are recognised as transaction costs for inclusion in the amortised cost and amortised on a straight line basis over the term of the facility to the Statement of Comprehensive Income or capitalised as part of the construction costs of qualifying assets.



ABN 299 396 279 65




(k) Finance/borrowing costs

Finance/borrowing costs include:

• interest expenses on bank overdrafts and short-term and long-term borrowings; and

• ancillary administration charges.

Finance/borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other finance/borrowing costs are expensed.

(l) Contributed equity

Contributed equity is recognised as the amount the transferor has recognised for assets in any non-reciprocal transfers of assets and liabilities between wholly owned Queensland State Public Sector entities for transfers under Accounting Policy Guideline 13 – Accounting for Non-Reciprocal Transfers by Owners or transfers under Interpretation 1038 Contributions by Owners Made to Wholly Owned Public Sector Entities. If a formal designation is not provided, any difference is recognised in the Statement of Comprehensive Income.

(m) Renewable energy certificates

Renewable energy certificates purchased under a cap and trade scheme give rise to an asset for allowances held (inventory). Emission expenses are raised for the obligation to surrender allowances equal to emissions that have been made for each period. As allowances are surrendered the provision is extinguished and the allowances held asset reduced.

(n) New and revised accounting standards

The Group did not change any of its accounting policies during 2010-11. Only one amendment to an Australian accounting standard applicable for the first time for 2010-11 was relevant to the Group, as explained below.

AASB 2009 – 5 Amendments to Australian Accounting Standards arising from the annual improvements project includes certain amendments to AASB Leases 117 that revised the criteria for classification of the land elements of all unexpired leases the Group has entered into as at 1 July 2010, on the basis of information existing at the inception of the relevant leases. The outcome of the Group reassessment was that no reclassification from an operating lease to a finance lease was necessary.

The Group has not applied any Australian Accounting Standards and Interpretations that have been issued by are not yet effective.



ABN 299 396 279 65



Consolidated Parent

2011

$ 2010

$2011

$ 2010

$

4. Grant and contributions

Grants - Commonwealth 7,324,029 3,325,509 7,324,029 227,126

Total 7,324,029 3,325,509 7,324,029 227,126 Government grants revenue relates to amortised deferred income from a Commonwealth Government grant and other government grants.

5. Other income

Other sales – pipeline construction - 2,985,766 - 13,183,264

Other 247,033 113,728 247,033 67,074

Total 247,033 3,099,494 247,033 13,250,338

6. Cost of sales

Cost of sales - WGM 54,021,273 44,419,722 54,021,273 4,329,509

Cost of sales - pipeline construction - 2,985,766 - -

Total 54,021,273 47,405,488 54,021,273 4,329,509 7. Employee expenses

Employee benefits

Wages and salaries 7,518,311 6,586,200 7,518,311 6,535,995

Superannuation contributions 734,737 610,593 734,737 608,360

Employee related expenses

Workers' compensation premium 60,977 63,442 60,977 63,442

Payroll tax 417,358 295,349 417,358 295,258

Other employee related expenses 326,653 609,090 326,653 320,761

Total 9,058,036 8,164,674 9,058,036 7,823,816

Average number of employees 42 51 42 46



ABN 299 396 279 65



Consolidated Parent

2011

$ 2010

$ 2011

$ 2010

$8. Supplies and services

Consultants and contractors 3,834,952 3,004,136 3,834,952 1,936,493 Information technology and communications 2,070,430 2,007,512 2,070,430 1,766,658

Legal fees 550,463 414,380 550,463 458,309

Marketing 209,221 137,099 209,221 137,099

Rental and related expenses 309,879 1,203,537 309,879 1,073,496

Subscriptions and memberships 332,456 114,569 332,456 112,097

Fleet and travel 152,657 89,673 152,657 88,830

Flood damage 1,639,690 - 1,639,690 -

Corporate support charges - - - 1,053,303

Other supplies and consumables 62,521 691,777 62,521 11,077

Total 9,162,269 7,662,683 9,162,269 6,637,362

9. Depreciation expense

Infrastructure assets 92,486,359 61,301,560 92,486,359 5,607,181

Plant and equipment 462,447 258,522 462,447 27,623

Total 92,948,806 61,560,082 92,948,806 5,634,804 10. Finance /borrowing costs

Interest - QTC 141,405,427 119,794,040 141,405,427 14,191,781

Other financial costs 1,377 4,102 1,377 1,513

Total 141,406,804 119,798,142 141,406,804 14,193,294



ABN 299 396 279 65



Consolidated Parent

Note 2011

$ 2010

$ 2011

$ 2010

$11. Other expenses

Insurance 1,540,047 847,610 1,540,047 193,495

Audit fees 25 1,143,194 780,044 1,143,194 409,333

Grants 669,344 410,000 669,344 410,000

QWC and QCA levies 7,977,668 - 7,977,668 -

Rates and taxes (295,265) 659,507 (295,265) 390,243

Donations and contributions 250,783 - 250,783 -

Other 675,200 308,605 675,200 270,372

Total 11,960,971 3,005,766 11,960,971 1,673,443

12. Income Tax (a) Income tax expense/(benefit)

Profit /(loss) before income tax (38,964,181) (72,874,941) (38,964,181) (167,755,249)

Prima facie thereon at 30% (11,689,254) (21,862,481) (11,689,254) (50,326,575)

Add/(less):

Impairment - (3,978,672) - 33,259,847

Loss on asset transfer - - - 14,888,119

Non-deductible expenses 9,292 5,004 9,292 -

(Under)/over provision in prior years 134,956 (2,713,170) 134,956 -

Derecognised tax losses 3,835,434 - 3,835,434 -Research and Development tax

incentive (1,972,582) - (1,972,582) 4,673

Total (9,682,154) (28,549,319) (9,682,154) (2,173,936)

Attributable to profit is made up of: Current income tax expense/(benefit) - - - -

Deferred tax asset utilised/(recognised) (27,858,538) (62,671,611) (27,858,538) (3,765,284)

Deferred tax liabilities (utilised)/recognised 18,176,384 34,122,292 18,176,384 1,591,348

Total (9,682,154) (28,549,319) (9,682,154) (2,173,936)



ABN 299 396 279 65



12. Income tax (continued) (b) Recognised deferred tax asset

Consolidated Opening balance

Recognised in profit and

loss Acquired in

asset transfer Closing balance

$ $ $ $ 2011

Accrued expense 1,300,420 (1,210,359) - 90,061

Capitalised expenses 19,607 (12,123) -

7,484

Capitalised income 1,925,593 - -

1,925,593

Capitalised interest 1,115,975 - -

1,115,975

Carried forward tax losses 80,672,189 31,432,380 -

112,104,569

Deferred income 121,154,073 (2,363,483) -

118,790,590

Property, plant and equipment (45,327) - -

(45,327)

Total 206,142,530 27,846,415 - 233,988,945

2010

Accrued expense 250,557 1,049,863 -

1,300,420

Capitalised expenses 29,024 (9,417) -

19,607

Capitalised income 957,606 967,987 -

1,925,593

Capitalised interest 1,086,835 29,140 -

1,115,975

Carried forward tax losses 19,224,786 61,447,403 -

80,672,189

Deferred income 121,985,450 (831,377) -

121,154,073

Property, plant and equipment 28,570 (73,897) -

(45,327)

Total 143,562,828 62,579,702 -

206,142,530



ABN 299 396 279 65



12. Income tax (continued) (b) Recognised deferred tax asset (continued)

Parent Opening balance


loss Acquired in


$ $ $ $ 2011

Accrued expense 1,300,420 (1,210,359) - 90,061

Capitalised expenses 19,607 (12,123) - 7,484

Capitalised income 1,925,593 - - 1,925,593

Capitalised interest 1,115,975 - - 1,115,975

Carried forward tax losses 80,672,189 31,432,380 - 112,104,569

Deferred income 121,154,073 (2,363,483) - 118,790,590

Property, plant and equipment (45,327) - - (45,327)

Total 206,142,530 27,846,415 - 233,988,945

2010

Accrued expense 214,758 1,065,950 19,712 1,300,420

Carried forward tax losses 3,084,458 2,534,657 75,053,074 80,672,189

Property, plant and equipment (6) 5,336 (50,657) (45,327)

Capitalised expenses - 932 18,675 19,607

Capitalised income - 70,934 1,854,659 1,925,593

Capitalised interest - 4,337 1,111,638 1,115,975

Deferred income - 83,139 121,070,934 121,154,073

Total 3,299,210 3,765,285 199,078,035 206,142,530



ABN 299 396 279 65



12. Income tax (continued) (c) Recognised deferred tax liabilities

Consolidated Opening balance


loss Acquired in


$ $ $ $ 2011

Capitalised interest 55,225,848 8,248,740 - 63,474,588

Capitalised expenses 1,854,659 - - 1,854,659

Research and development expenditure 41,065,215 7,890,328 - 48,955,543

Capitalised loss on recycled water 160,216 - - 160,216

Property, plant and equipment 6,157,898 2,025,192 - 8,183,090

Total 104,463,836 18,164,260 - 122,628,096

2010


Capitalised expenses - 1,854,659 - 1,854,659



Property, plant and equipment - 6,157,898 - 6,157,898

Total 70,341,543 34,122,293 - 104,463,836

Parent

2011


Capitalised expenses 1,854,659 - - 1,854,659



Property, plant and equipment 6,157,898 2,025,192 - 8,183,090

Total 104,463,836 18,164,260 - 122,628,096

2010

Capitalised interest - 1,591,348 53,634,500 55,225,848

Capitalised expenses - - 1,854,659 1,854,659

Research and development expenditure - - 41,065,215 41,065,215

Capitalised loss on recycled water - - 160,216 160,216

Property, plant and equipment - - 6,157,898 6,157,898

Total - 1,591,348 102,872,488 104,463,836



ABN 299 396 279 65



Consolidated Parent

2011 $

2010 $

2011 $

2010$

13. Cash and cash equivalents Cash on hand - 1,000 - 1,000 Cash at bank 20,981,709 22,502,657 20,981,709 22,502,657 QTC Cash Fund 76,413,619 18,413,310 76,413,619 18,413,310 Term Deposit - 7,115,299 - 7,115,299

Total 97,395,328 48,032,266 97,395,328 48,032,266

14. Trade and other receivables Trade receivables 26,506,447 15,435,492 26,506,447 15,435,492 GST receivable 378,550 2,386,198 378,550 2,386,198 Other receivables 9,688,377 2,065,465 9,688,377 2,065,465

Total 36,573,374 19,887,155 36,573,374 19,887,155

15. Inventory Renewable energy certificates Balance at beginning of the year 4,765,769 7,899,997 4,765,769 4,962,442 Voluntary surrender – emissions expenses (2,531,005) (3,134,228) (2,531,005) (196,673) Balance at end of the year 2,234,764 4,765,769 2,234,764 4,765,769

16. Other assets Prepayments 627,172 2,139,228 627,172 2,139,228 Other 6,900 2,700 6,900 2,700

Total 634,072 2,141,928 634,072 2,141,928



ABN 299 396 279 65



Consolidated Parent

2011 $

2010 $

2011 $

2010$

17. Property, plant and equipment

Land At fair value 46,683,082 10,933,298 46,683,082 10,933,298 Accumulated impairment loss (429,800) (429,800) (429,800) (429,800)

Total land 46,253,282 10,503,498 46,253,282 10,503,498

Construction work in progress At cost 426,753,344 911,302,309 426,753,344 911,302,309 Accumulated impairment loss (27,450,915) (27,450,915) (27,450,915) (27,450,915)

Total construction work in progress 399,302,429 883,851,394 399,302,429 883,851,394

Plant and equipment At cost 3,367,620 1,778,155 3,367,620 1,778,155 Accumulated depreciation (823,550) (714,741) (823,550) (714,741) Accumulated impairment loss (39,034) (39,034) (39,034) (39,034)

Total plant and equipment 2,505,036 1,024,380 2,505,036 1,024,380

Infrastructure assets At independent valuation on capitalisation 2,920,787,801 2,395,830,074 2,920,787,801 2,395,830,074

Accumulated depreciation (177,196,376) (84,710,017) (177,196,376) (84,710,017) Accumulated impairment loss (82,946,408) (82,946,408) (82,946,408) (82,946,408)

Total infrastructure assets 2,660,645,017 2,228,173,649 2,660,645,017 2,228,173,649

Total 3,108,705,764 3,123,552,921 3,108,705,764 3,123,552,921



ABN 299 396 279 65



17. Property, plant and equipment (continued) (a) Movements in carrying amounts

Consolidated

Construction Work in

Progress Land Plant and

Equipment Infrastructure

Assets Total

$ $ $ $ $

2011 Balance at beginning of the year 883,851,394 10,503,498 1,024,380 2,228,173,649 3,123,552,921

Additions 50,867,966 - 72,503 - 50,940,469 Capitalised interest expense 27,458,192 - - - 27,458,192

Capitalised interest income - - - - -

Capitalised other revenue - - - - -

Depreciation - - (462,447) (92,486,359) (92,948,806)

Disposals - - (297,012) - (297,012)

Impairment loss - - - - - Transfer to new asset class (562,875,123) 35,749,784 2,167,612 524,957,727 - Balance at end of the year 399,302,429 46,253,282 2,505,036 2,660,645,017 3,108,705,764

2010 Balance at beginning of the year 1,572,104,358 10,503,498 1,288,305 1,464,056,572 3,047,952,733

Additions 87,367,411 - - - 87,367,411 Capitalised interest expense 40,016,884 - - - 40,016,884

Capitalised interest income (490,686) - - - (490,686)

Capitalised other revenue (2,990,175) - - - (2,990,175)

Depreciation - - (258,522) (61,301,559) (61,560,081)

Disposals - - (5,403) - (5,403)

Impairment loss 56,085,678 - - (42,823,440) 13,262,238 Transfer to new asset class (868,242,076) - - 868,242,076 - Balance at end of the year 883,851,394 10,503,498 1,024,380 2,228,173,649 3,123,552,921



ABN 299 396 279 65



17. Property, plant and equipment (continued) (a) Movements in carrying amounts (continued)

Parent

Construction Work in

Progress LandPlant and

Equipment Infrastructure

Assets Total

$ $ $ $ $ 2011 Balance at beginning of the year 883,851,394 10,503,498 1,024,380 2,228,173,649 3,123,552,921

Additions 50,867,966 - 72,503 - 50,940,469 Capitalised interest expense 27,458,192 - - - 27,458,192

Depreciation - - (462,447) (92,486,359) (92,948,806)

Disposal - - (297,012) - (297,012) Transfer to new asset class (562,875,123) 35,749,784 2,167,612 524,957,727 -

Balance at end of the year 399,302,429 46,253,282 2,505,036 2,660,645,017 3,108,705,764

2010 Balance at beginning of the year - - 35,277 - 35,277 Acquired through asset transfer - WCRW 763,131,951 7,592,641 965,113 1,502,209,361 2,273,899,066 Acquired through asset transfer - DESAL 123,026,877 3,340,657 69,947 814,517,877 940,955,358

Additions 25,143,481 - 20,700 - 25,164,181 Capitalised interest expense - - - - -

Depreciation - - (27,623) (5,607,181) (5,634,804)

Impairment loss (27,450,915) (429,800) (39,034) (82,946,408) (110,866,157) Transfers to new asset class - - - - -

Balance at end of the year 883,851,394 10,503,498 1,024,380 2,228,173,649 3,123,552,921



ABN 299 396 279 65



Consolidated Parent

2011 $

2010 $

2011 $

2010$

17. Property, plant and equipment (continued)

(b) Historical Cost of Property, Plant and Equipment Recognised at Valuation The historical cost of property, plant and equipment that has been accounted for at fair value is:

Infrastructure assets 2,920,318,965 2,395,830,074 2,920,318,965 2,395,830,074

Total 2,920,318,965 2,395,830,074 2,920,318,965 2,395,830,074 18. Impairment testing for cash generating units (a) Impairment of cash generating units

The cash generating units are set out below:

DESAL Carrying amount 899,053,029 937,544,754 899,053,029 937,544,754 Recoverable amount 911,790,126 896,149,875 911,790,126 896,149,875

Surplus /(impairment) 12,737,097 (41,394,879) 12,737,097 (41,394,879)

WCRW Carrying amount 2,209,652,735 2,265,373,251 2,209,652,735 2,265,373,251Remaining deferred government grant income offset (395,968,629) (403,569,784) (395,968,629) (403,569,784)

1,813,684,106 1,861,803,467 1,813,684,106 1,861,803,467 Recoverable amount 1,859,887,541 1,792,332,189 1,859,887,541 1,792,332,189

Surplus /(impairment) 46,203,435 (69,471,278) 46,203,435 (69,471,278)

Total surplus/(impairment) 58,940,532 (110,866,157) 58,940,532 (110,866,157)

The recoverable amount of the two cash generating units was estimated based on their respective values in use and was determined with the assistance of independent experts. The recoverable amount of WCRW has been adjusted by the remaining amount of deferred government grant income (refer Note 22). AASB 136 Impairment, implies that the assumptions used in determining the recoverable amount are consistent with determining the carrying amount in relation to the calculation of impairment (‘like for like’ basis). The government grant was received for the purpose of reducing the cost of constructing WCRW’s assets. There is no impairment recorded in the 2011 financial year.



ABN 299 396 279 65



18. Impairment testing for cash generating units (continued) For DESAL and WCRW, impairment movement during the year as follows: 2011 Consolidated

Assets WCRW

$ DESAL

$ Total

$ Balance at beginning of the year 69,471,278 41,394,879 110,866,157 Land - - - Infrastructure assets - - - Plant and equipment - - - Construction work in progress - - -

Balance at end of the year 69,471,278 41,394,879 110,866,157 2010 Consolidated

Assets WCRW

$ DESAL

$ Total

$ Land 202,529 227,271 429,800 Infrastructure assets 46,983,465 35,962,943 82,946,408 Plant and equipment 31,518 7,516 39,034 Construction work in progress 22,253,766 5,197,149 27,450,915

Balance at end of the year 69,471,278 41,394,879 110,866,157

2011 Parent

Assets WCRW

$ DESAL

$ Total

$ Balance at beginning of the year 69,471,278 41,394,879 110,866,157 Land - - - Infrastructure assets - - - Plant and equipment - - - Construction work in progress - - -

Balance at end of the year 69,471,278 41,394,879 110,866,157 2010 Parent

Assets WCRW

$ DESAL

$ Total

$ Land 202,529 227,271 429,800 Infrastructure assets 46,983,465 35,962,943 82,946,408 Plant and equipment 31,518 7,516 39,034 Construction work in progress 22,253,766 5,197,149 27,450,915

Balance at end of the year 69,471,278 41,394,879 110,866,157



ABN 299 396 279 65



18. Impairment testing for cash generating units (continued) (b) Key assumptions

To following methodology, key assumptions and approach has been used to determine the recoverable amount for the purpose of impairment testing for the two CGUs, DESAL and WCRW:

• the recoverable amount of the CGUs was estimated based on the value in use and was determined with the assistance of independent experts; the discount rate has been calculated by an independent expert using the WACC and CAPM framework. The rates were adjusted to reflect the borrowing capacity of the Group, optimal gearing levels and refinancing risk;

• cash flows are projected utilising the building blocks methodology recommended by the QCA, to the Price Regulator and applied to the RAB. The prices used to determine revenues are based on a rate of return set by the QCA and adjusted for inflation. No growth or decline in these rates has been factored in over the lives of the assets;

• the model makes provision each year for receipt of a return on working capital in line with normal regulatory practice as part of the revenues received by the Group;

• The period of the cash flows is greater than 5 years in order to align more closely the calculation of cash flows with the useful lives of the assets;

• The capital cost for Western Corridor Recycled Water Pty Ltd included in the regulatory model is net of a Commonwealth Government subsidy of $408,000,000;

• The recoverable amount for WCRW includes the Commonwealth Government subsidy of $408,000,000, amortised to $395,968,629, considered to be already recovered; and

• Expenditure necessary to maintain or sustain the performance of the assets has been taken into account when estimating the net future cash flows as it is deemed maintenance in nature.

The values assigned to the key assumptions represent management's assessment of future trends in the water industry and are based on both external sources and internal sources (historical data).

(c) Inherent uncertainty

The above estimates are particularly sensitive to changes in the price set by the Price Regulator on water assets. The bulk of the Group’s revenues are determined annually by the Price Regulator under the provisions of the Market Rules. The current methodology includes provision to:

• retain the treatment of capital returns via a cost of debt return for drought assets;

• set a maximum allowable revenue for operating expenditure, including overheads, non-variable costs and allowable costs;

• recover budgeted variable operating costs on a $ per ML basis, reflecting plant production costs for chemicals and electricity; and

• include capital expenditure into the RAB.

Budget forecasts have been used as the basis for the modelling of cash flows for impairment testing purposes as they are the most reasonable assumptions available at this time.

It is anticipated that the Grid Service Charge methodology applying from 1 July 2011 will be applicable until 30 June 2013. Responsibility for recommending charges for the forthcoming two years (2011-12 and 2012-13) rests with the QCA.

The QCA has been instructed to recommend a new regulatory regime to apply to Grid Service Providers. The long term economic regulatory framework is likely to commence from 1 July 2013, and may provide incentives appropriate for commercially operated, mature regulated entities. Therefore, there is significant uncertainty with what form the pricing mechanism may take post 30 June 2013.



ABN 299 396 279 65



Consolidated Parent

2011 $

2010 $

2011 $

2010 $

19. Trade and other payables

Current

Trade payables 12,108,395 26,915,862 12,108,395 26,915,862

GST payable 407,769 (87,688) 407,769 (87,688)

Accrued capital expenditure 55,951,714 28,945,662 55,951,714 28,945,662

Accrued other expenditure 6,584,124 6,100,836 6,584,124 6,100,836

Total 75,052,002 61,874,672 75,052,002 61,874,672 20. Interest bearing liabilities

Current

QTC - Construction debt facility 11,645,038 - 11,645,038 -

Total 11,645,038 - 1,1645,038 -

Non Current

QTC - Construction debt facility 2,543,855,342 2,516,974,988 2,543,855,342 2,516,974,988

Total 2,543,855,342 2,516,974,988 2,543,855,342 2,516,974,988 The weighted average interest rate on the Group's Construction Debt Facilities for the year was 6.52% (2010 interest rate range: 6.55% to 6.65%).

No assets have been pledged as security for any liabilities.

All borrowings include interest capitalised during the reporting period. There have been no defaults or breaches of the loan agreement during the period.

21. Employee benefits

Salaries and wages accrued 171,165 668,212 171,165 668,212

Annual Leave 224,833 254,286 224,833 254,286

Total 395,998 922,498 395,998 922,498



ABN 299 396 279 65



Consolidated Parent

2011 $

2010 $

2011 $

2010 $

22. Other liabilities

Current

Unearned revenue - WGM 45,581,531 - 45,581,531 - Unearned revenue - Government

grant 11,382,244 3,325,509 11,382,244 3,325,509

Other - 3,306,279 - 3,306,279

Total 56,963,775 6,631,788 56,963,775 6,631,788

Non Current Unearned revenue - Government

grant 384,586,385 399,967,149 384,586,385 399,967,149

Total 384,586,385 399,967,149 384,586,385 399,967,149 23. Reconciliation of cash flows from operating activities

Profit / (loss) for the year (29,282,027) (44,325,622) (29,282,027) (165,581,313)

Add/(Less): Depreciation 92,948,806 61,560,082 92,948,806 5,634,804 Impairment loss - (13,262,238) - 110,866,157 Loss on asset transfer - - - 49,627,062 Income tax (9,682,154) 28,549,319 (9,682,154) 2,173,936

Changes in assets and liabilities: Change in trade and other

receivables (18,703,072) (25,269,476) (18,703,072) 16,491,021 Change in prepayments 1,517,061 (455,017) 1,517,061 2,098,804 Change in inventory 2,531,005 3,134,228 2,531,005 196,673 Change in trade other payables (14,324,181) (7,087,580) (14,324,181) 2,602,662 Change in employee benefits (526,500) 891,941 (526,500) 899,758 Change in unearned revenue 34,951,224 (3,325,509) 34,951,224 (277,125) Change in GST receivable 2,007,649 1,318,111 2,007,649 (2,376,834) Change in GST payable 495,457 (87,688) 495,457 (176,765)

Cashflow from operating activities 61,933,268 1,640,551 61,933,268 22,178,840



ABN 299 396 279 65


For the Year Ended 30 June 2011 24. Controlled entities

Parent and ultimate controlling party Country of

incorporation Ownership

interest Ownership

interest 2011 2010 Entity Queensland Manufactured Water Authority Australia - - Subsidiary Western Corridor Recycled Water Pty Ltd Australia 100% 100% South East Queensland (Gold Coast) Desalination

Company Pty Ltd Australia 100% 100%

The Queensland Manufactured Water Authority is controlled by the Queensland Government which is the ultimate parent.

Consolidated Parent

2011

$2010

$ 2011

$ 2010

$25. Auditor's remuneration

Auditing services - Queensland Audit Office 155,170 143,060 155,170 143,060

Auditing services - internal audit 302,798 503,576 302,798 266,273 Auditing services - projects 685,226 133,408 685,226 -

Total 1,143,194 780,044 1,143,194 409,333

There are no non-audit services included within this balance. 26. Key executive management personnel and remuneration

The following details for key executive management personnel include those positions that had authority and responsibility for the planning, directing and controlling the activities of the Group during 2010-11. Further information on these positions can be found in the body of the Annual Report under the section relating to Executive Management.

(a) Board Members and remuneration The Board members who were paid, or were due to be paid directly or indirectly from the Group were:

2011 2010 Salary and

Fees Superannuation

Contribution Salary and

Fees Superannuation

Contribution $ $ $ $ David Gray 80,405 7,236 81,562 7,346

Stephen Golding 42,567 3,974 42,932 3,727

David McDougall 42,567 3,831 42,932 3,870

Mark Pascoe 42,567 3,831 42,932 3,996

Scott Standen 42,567 3,831 42,932 3,870

Total 250,673 22,703 253,290 22,809

As a result of the merger of Seqwater and the Group, all Board members resigned on 30 June 2011 (refer to note 32). Mr McDougall and Mr Standen were appointed to the Board of Seqwater on 1 July 2011.



ABN 299 396 279 65



26. Key executive management personnel and remuneration (continued) (b) Key executive management personnel

Position Responsibilities

Incumbents Date appointed (Date resigned)

Keith Davies - Chief Executive Officer (CEO) Sam Romano – Acting CEO

The CEO is responsible to the Board for the management, administration, viability and reputation of the organisation by ensuring that the outcomes of the Strategic Plan are achieved in a professional and efficient manner.

Mr Davies appointed 1 September 2008 and resigned 28 January 201. Mr Romano commenced acting CEO 28 January 2011.

Sam Romano - Chief Financial Officer (CFO) Paul Visser – Acting CFO

Provide strategic advice, governance and leadership in relation to the delivery of business services, including financial management and reporting, commercial arrangements, risk management, information technology and corporate and people development, to ensure WaterSecure achieves its vision, mission and objectives.

Mr Romano appointed 22 September 2008. Mr Visser commenced acting CFO 28 January 2011.

Ron Wilson - Chief Corporate Officer (CCO)

Providing strategic leadership and advice in relation to the delivery of corporate services including stakeholder engagement, compliance, legal services, communications and policy and document control. The role also acts as the Board Secretary and provides high level advice to the Board on governance issues.

Appointed 24 August 2009, resigned 23 June 2011.

Cedric Robillot - Chief Technology Officer (CTO)

Develop and implement strategic and operational activities associated with Research and Development, Intellectual Property, and Water Quality Management.

Appointed 19 January 2009

David Fullerton - Chief Operating Officer (COO)

Lead the development and implementation of strategic and operational activities and targets in regard to water resources, recycled and desalination water infrastructure, as well as the commercial and regulatory operation of the organisation. This position has a direct and controlling impact on the results of the organisation.

Appointed 30 November 2009, resigned 8 April 2011.

(c) Remuneration

Remuneration policy for the Group’s key executive management is set by the Responsible Ministers as provided for under the State Water Authorities – Governance Arrangements for Chief and Senior Executive. The remuneration and other terms of employment for the key executive management personnel are specified in employment contracts. The contracts provide for the provision of performance related cash bonuses and other benefits including motor vehicles.

For the 2010-11 year, remuneration of key executive management personnel increased in accordance with State Water Authorities – Governance Arrangements for Chief and Senior Executives.



ABN 299 396 279 65


For the Year Ended 30 June 2011 26. Key executive management personnel and remuneration (continued) (b) Remuneration (continued)

Remuneration packages for key executive management personnel comprise the following components:

• short term employee benefits which include: o Base - consisting of base salary, allowances and leave entitlements paid and provided for the

entire year or for that part of the year during which the employee occupied the specified position. Amounts disclosed equal the amount expensed in the Statement of Comprehensive Income; and

o Non-monetary benefits - consisting of provision of non-monetary benefit together with fringe benefits tax applicable to the benefit.

• long term employee benefits include long service leave accrued; • post employment benefits include superannuation contributions; and • redundancy payments are not provided for within individual contracts of employment. Contract of

employment provide only for notice periods or payments in lieu of notice on termination, regardless of the reason for termination

Total fixed remuneration is calculated on a 'total cost' basis and includes the base and non-monetary benefits, long term employee benefits and post employment benefits, redundancy payments and performance payments.

1 July 2010 – 30 June 2011

Short term employee benefits

Position Base

Non-MonetaryBenefits

Long termemployee

benefits

Postemployment

benefitsTermination

benefitsTotal

remuneration $ $ $ $ $ $ Keith Davies (CEO) 259,396 - - 27,001 - 286,397 Sam Romano (CFO,

acting CEO) 311,138 - - 34,643 - 345,781 Paul Visser (acting

CFO) 115,216 10,787 30,926 156,929 Ron Wilson (CCO) 273,607 - - 33,535 68,152 375,294 Cedric Robillot (CTO) 208,781 - - 33,444 - 242,225 David Fullerton (COO) 174,759 - - 27,181 145,855 347,795 Total remuneration 1,342,897 - - 166,591 244,933 1,754,421

1 July 2009 – 30 June 2010

Short term employee benefits

Position Base

Non- Monetary Benefits

Long term employee

benefits

Post employment

benefits Termination

benefits Total

remuneration $ $ $ $ $ $ Keith Davies (CEO) 441,980 5,010 - 40,925 - 487,915 Sam Romano (CFO) 246,319 - - 25,757 - 272,076 Ron Wilson (CCO) 172,102 - - 21,943 - 194,045 Cedric Robillot (CTO) 197,256 3,745 - 25,220 - 226,221 David Fullerton (COO) 126,132 3,745 - 17,955 - 147,832 Total remuneration 1,183,789 12,500 - 131,800 - 1,328,089



ABN 299 396 279 65


For the Year Ended 30 June 2011 26. Key executive management personnel and remuneration (continued) (c) Performance payments

Performance bonuses may be paid or payable annually depending upon satisfaction of key criteria. The amounts payable are tied to the achievement of pre-determined Group and individual performance targets as approved by the Board. The performance bonus for the 2009-10 and 2010-2011 financial year was calculated based on the individual’s and the Group’s overall contribution to the delivery of agreed upon Key Performance Indicators. The performance bonus was prorated based on the number of days of eligible services.

The payment of the performance bonuses for 2010-11 and 2009-10 financial years is set out below:

Position Date paid Basis for Payment

Keith Davies (CEO) 1 July 2011 The bonus paid equated to 10.99% (2010:10.97%) as compared to the maximum 15% of total fixed remuneration payable.

Sam Romano (CFO, acting CEO) 1 July 2011

The bonus paid equated to 12.21% (2010:14.53%) as compared to the maximum 15% of total fixed remuneration payable.

Paul Visser (acting CFO) 1 July 2011

The bonus paid equated to 9.99% as compared to the maximum 15% of total fixed remuneration payable.

Ron Wilson (CCO) 1 July 2011 The bonus paid equated to 10.34% (2010:14.08%) compared to the maximum 15% of total fixed remuneration payable.

Cedric Robillot (CTO) 1 July 2011

The bonus paid equated to 12.74% (2010:13.66%) compared to the maximum 15% of total fixed remuneration payable.

David Fullerton (COO) 1 July 2011

The bonus paid equated to 9.74% (2010:13.25%) as compared to the maximum 15% of total fixed remuneration payable.

The aggregate performance bonuses paid to all key executive management personnel are as follows:

2011

$ 2010

$ Key Executive Management Personnel 149,912 162,176



ABN 299 396 279 65



27. Related party transactions (a) Board members’ transaction

A director, David McDougall is a director of KPMG Queensland. KPMG provide the Alliance financial auditor services of each of the project alliances, providing limited and detailed procedures audits of the alliances progress claims. Mr McDougall has had no involvement in these audit services.

A director, Mark Pascoe is Chief Executive Officer of the International Water Centre (IWC). The IWC is a partner in the South-East Queensland Healthy Waterways partnership and is a party to the IWC Joint Venture. During the 2010-11 financial year the Group paid $218K to assist the partnership with waterways monitoring and ongoing scientific programs. The decision to contribute was made by the subsidiaries management within the delegated approval limit and as a courtesy the Board was informed of the contribution which was supported and approved.

(b) Queensland government transactions The Group is controlled by the Queensland Government and as a result there are a significant number of interactions with other entities controlled by the same parent (refer to Note 24 and 26). The Group procures services from a number of Queensland Government departments on normal commercial terms.

QTC, a Queensland Government owned corporation, provided loan debt funding to the Group under normal commercial terms and conditions.

The following entities have the same controlling entity as the Group and therefore are considered to be related parties. Transactions with these entities during the year are:

• WGM – revenue of $271,377,150 (2010:$153,455,010), receivable of $26,502,232 (2010: $15,433,293) and unearned revenue of $45,581,530 (2010:$0);

• Seqwater – transfer of assets from the Group to Seqwater on 1 July 2011 (via the South East Queensland Water (Restructuring) Regulation 2011) (refer to Note 32);

• CS Energy and Tarong – provision of operating protocols for the supply of purified recycled water;

• Queensland Water Commission (QWC) – determination of revenue;

• Queensland Competition Authority (QCA) – economic regulator;

• Department of Infrastructure and Planning (now Department of Employment, Economic Development and Innovation) – management of acquisition of land and easements along the pipeline corridor; and

• Department of Transport and Main Roads – acquisition of land and easements along the pipeline corridor.



ABN 299 396 279 65



28. Economic dependence

In December 2010, the Queensland Government announced that the Group and the South East Queensland Bulk Water Supply Authority would be merged on 1 July 2011 (together trading as Seqwater), creating a single bulk water supply authority for the South East Queensland region.

There is a contract with the WGM up to 30 June 2020 to pay Grid Service Charges to Seqwater. These charges are to be based on a return on and of assets and allowances for operating expenses initially under the South East Queensland Water Market Rules and then by the QCA. From the 2011-12 year the Grid Service Charge applicable to the Group will be paid to Seqwater as the single bulk water supply authority, under a single integrated Grid Contract.

The Queensland Government remains committed to providing ongoing support to Seqwater. This commitment was recently reaffirmed in a letter from the Hon. Andrew Fraser MP, Treasurer and Minister for State Development and Trade, issued to the Seqwater dated 2 August 2011. In which the Treasurer reaffirmed that the Government remains committed to “ensuring the Authority remains solvent at all times and able to deliver essential services in a sustainable and cost effective way”. The Government’s support includes facilitating access to funding facilities at QTC supported by a Queensland Government guarantee under the Statutory Bodies Financial Arrangements Act 1982.

29. Financial instruments (a) Categorisation of financial instruments

The Group has the following categories of financial assets and financial liabilities: Note Consolidated Parent Category Financial assets

2011 $

2010$

2011 $

2010 $

Cash and cash equivalents 13 97,395,328 48,032,266 97,395,328 48,032,266 Receivables 14 36,573,374 19,887,155 36,573,374 19,887,155

Total 133,968,702 67,919,421 133,968,702 67,919,421


Payables 19 75,052,002 61,874,672 75,052,002 61,874,672

Interest bearing liabilities - QTC 20 2,555,500,380 2,516,974,988 2,555,500,380 2,516,974,988

Total 2,630,552,382 2,578,849,660 2,630,552,382 2,578,849,660



ABN 299 396 279 65



29. Financial instruments (continued)

(b) Credit risk

The maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the gross carrying amount of those assets inclusive of any provisions for impairment. No collateral is held as security relating to the financial assets held by the Group.

The following table represents the company's maximum exposure to credit risk:

Consolidated Parent

2011

$ 2010

$ 2011

$ 2010

$ Cash and cash equivalents 97,395,328 48,032,266 97,395,328 48,032,266 Trade and other receivables 36,573,374 19,887,155 36,573,374 19,887,155

Total 133,968,702 67,919,421 133,968,702 67,919,421

Past due but not impaired receivables:

No financial assets have had their terms renegotiated so as to prevent them from being past due or impaired, and are stated at the carrying amounts indicated. 2011 Consolidated Parent

Current year Gross

$ Impairment

$ Gross

$ Impairment

$ Not past due 36,573,374 - 36,573,374 - Past due 31 - 120 days - - - - More than 121 days - - - -

Total 36,573,374 - 36,573,374 -

2010 Consolidated Parent

Current year Gross

$ Impairment

$ Gross

$ Impairment

$ Not past due 19,887,155 - 19,887,155 - Past due 31 - 120 days - - - - More than 121 days - - - -

Total 19,887,155 - 19,887,155 -



ABN 299 396 279 65




(b) Market Risk

The Group does not trade in foreign currency and is not materially exposed to commodity price changes. The Group is exposed to interest rate risk through its borrowings from QTC and cash deposited in interest bearing accounts. In accordance with the QTC Facility Letter, management of interest rate risk or variation in the market value of the debt is the sole responsibility of QTC and Treasury.

Sensitivity Analysis

The following sensitivity analysis depicts the outcome to profit and loss of interest rates would change by +/- 1% from the year end rates applicable to the Group’s financial assets and liabilities. It assumes that the rate would be held constant over the financial period, with the change occurring at the beginning of the financial year.

Consolidated - 1% + 1% Net carrying

amounts Profit Equity Profit Equity 2011 $ $ $ $ $

Cash and cash equivalents 97,395,328 (97,395) (97,395) 97,395 97,395 Interest bearing loans - QTC 2,555,500,380 1,947,642 1,947,642 (1,947,642) (1947,642) Overall effect on profit and equity 1,850,247 1,850,247 (1,850,247) (1,850,247)

Consolidated - 1% + 1%

Net carrying amounts Profit Equity Profit Equity

2010 $ $ $ $ $ Cash and cash equivalents 48,032,266 (48,032) (48,032) 48,032 48,032 Interest bearing loans - QTC 2,516,974,988 1,918,281 1,918,281 (1,918,281) (1,918,281) Overall effect on profit and equity 1,870,249 1,870,249 (1,870,249) (1,870,249)

Parent - 1% + 1% Net carrying

amounts Profit Equity Profit Equity 2011 $ $ $ $ $

Cash and cash equivalents 97,395,328 (97,395) (97,395) 97,395 97,395 Interest bearing loans - QTC 2,555,500,380 1,947,642 1,947,642 (1,947,642) (1947,642) Overall effect on profit and equity 1,850,247 1,850,247 (1,850,247) (1,850,247)

Parent - 1% + 1%

Net carrying amounts Profit Equity Profit Equity

2010 $ $ $ $ $ Cash and cash equivalents 48,032,266 (48,032) (48,032) 48,032 48,032 Interest bearing loans - QTC 2,516,974,988 1,918,281 1,918,281 (1,918,281) (1,918,281) Overall effect on profit and equity 1,870,249 1,870,249 (1,870,249) (1,870,249)



ABN 299 396 279 65




(c) Liquidity Risk

The Group is exposed to liquidity risk through its borrowings from QTC for capital works.

The Group reduces the exposure to liquidity risk by ensuring the Group has sufficient funds available to meet employee and supplier obligations at all times. This is achieved by ensuring that minimum levels of cash are held within the various bank accounts so as to match the expected duration of the various employee and supplier liabilities.

The following table sets out liquidity risk of the financial liabilities held by the Group. The maturity amounts relate to the actual contractual payments before net present value calculations.

Consolidated

0 to 1 year $

1-5 years $

Over 5 years $

Total $

2011

Financial liabilities Payables 75,052,002 - - 75,052,002 Interest bearing loans - QTC 142,484,427 568,767,055 2,675,376,861 3,386,628,343

Total 217,536,429 568,767,055 2,675,376,861 3,461,680,345

2010

Financial liabilities Payables 61,874,672 - - 61,874,672 Interest bearing loans - QTC - - 2,516,974,988 2,516,974,988

Total 6,1874,672 - 2,516,974,988 2,578,849,660

Parent

0 to 1 year $

1-5 years $

Over 5 years $

Total $

2011

Financial liabilities Payables 75,052,002 - - 75,052,002 Interest bearing loans - QTC 142,484,427 568,767,055 2,675,376,861 3,386,628,343

Total 217,536,429 568,767,055 2,675,376,861 3,461,680,345

2010

Financial liabilities Payables 61,874,672 - - 61,874,672 Interest bearing loans - QTC - - 2,516,974,988 2,516,974,988

Total 61,874,672 - 2,516,974,988 2,578,849,660

All asset and liabilities of the Group were transferred to Seqwater on 1 July 2011, via the South East Queensland Water (Restructuring) Regulation 2011 (refer to Note 32).



ABN 299 396 279 65


For the Year Ended 30 June 2011 29. Financial instruments (continued) (d) Fair Values

The recognised fair values of financial assets and liabilities are classified according to the following fair value hierarchy that reflects the significance of the inputs used in making these measurements:

• Level 1 – fair values that reflect unadjusted quoted price in active markets for identical assets/liabilities;

• Level 2 – fair values that are based on inputs that are directly or indirectly observable for the asset/liabilities (other than unadjusted quoted prices); and

• Level 3 – fair values that are derived from data not observable in a market.

Class Classification according to fair value

hierarchy Level 1 Level 2 Level 3

2011 Total carrying amount

Consolidated $ $ $ $ Financial assets

Cash and cash equivalents 97,395,328 - - 97,395,328

Receivables 36,573,374 - - 36,573,374

Total 133,968,702 - - 133,968,702


Payables 75,052,002 - - 75,052,002

Interest bearing loans - QTC 2,665,259,664 - - 2,555,500,380

Total 2,740,311,666 - - 2,630,552,382

Parent

Financial assets

Cash and cash equivalents 97,395,328 - - 97,395,328

Receivables 36,573,374 - - 36,573,374

Total 133,968,702 - - 133,968,702


Payables 75,052,002 - - 75,052,002

Interest bearing loans - QTC 2,665,259,664 - - 2,555,500,380

Total 2,740,311,666 - - 2,630,552,382



ABN 299 396 279 65




The carrying amount of all financial assets and financial liabilities, except the borrowings from the QTC are representative of their fair value. The fair value of interest bearing loans is notified by QTC. It is calculated using discounted cash flow analysis and the effective interest rate and is disclosed below:

Consolidated Parent

Carrying amount

$ Fair value

$

Carrying amount

$ Fair value

$

2011

Financial liabilities Interest bearing loans - QTC 2,555,500,380 2,665,259,664 2,555,500,380 2,665,259,664

Balance at 30 June 2011 2,555,500,380 2,665,259,664 2,555,500,380 2,665,259,664

2010

Financial liabilities Interest bearing loans - QTC 2,516,974,988 2,638,785,026 2,516,974,988 2,638,785,026

Balance at 30 June 2010 2,516,974,988 2,638,785,026 2,516,974,988 2,638,785,026

Consolidated Parent

2011

$ 2010

$ 2011

$ 2010

$30. Capital and other commitments

(a) Capital Expenditure Commitments Capital expenditure commitments contracted for but not brought to account in the financial statements. Payable not later than one year 48,531,456 56,831,638 48,531,456 56,831,638

Total 48,531,456 56,831,638 48,531,456 56,831,638

(b) Operating Expenditure Commitments Operating expenditure commitments contracted for but not brought to account in the financial statements. Payable not later than one year 57,437,177 68,944,000 57,437,177 68,944,000

Total 57,437,177 68,944,000 57,437,177 68,944,000

(c) Lease Commitments Lease commitments contracted for but not brought to account in the financial statements. Payable not later than one year 536,654 560,870 536,654 560,870

Total 536,654 560,870 536,654 560,870



ABN 299 396 279 65



31. Contingent liabilities and assets

(a) Contingent liabilities

A claim has been made against the Group by a sub-contractor for damages to the amount of $9 million by reason of the wrongful repudiation of the sub-contractor's Sub Alliance Agreement. This amount has not changed since 30 June 2010. The Group believes it has a valid defence to the claim and as such, the claim has not been recognised.

The Group is aware of a further contingent liability existing at reporting date in respect of a potential gain share payment resulting from the terms of the Project Alliance Agreement. Management believe the final value of this payment (if any) cannot be reliably measured at the balance date.

(b) Contingent assets

There were four insurance claims totalling $21.61 million in respect of the DESAL at balance date. These claims are in respect of rectification work and are yet to be finalised.

In July 2011, $9.61 million was received in relation to one of these claims, with $3 million remaining to be finalised. An additional insurance claim for corrosion on pumps and flanges at the DESAL is not able to be reliably quantified at balance date as the claim is too far into the future.

Insurance claims totalling $25 million have been submitted in respect of WCRW-Gibson Island. These claims are in relation to professional indemnity for $20 million and material damages for $5 million.

Insurance claims have also been submitted for the WCRW-Eastern Pipeline for $8.5 million and for flood damages to the Group for $2.9 million.

32. Subsequent events

In December 2010, the Queensland Government announced that the Group and Seqwater would be merged, creating a single bulk water supply authority for the South East Queensland region.

On 1 July 2011 all assets and liabilities of the Group were transferred to Seqwater via the South East Queensland Water (Restructuring) Regulation 2011.

From the 2011-12 year the Grid Service Charge applicable to the Group will be paid to the Seqwater as the single bulk water supply authority, under a single integrated Grid Contract.

Financial modelling of the revenues and expenses of the single bulk water supply authority indicate that it will be loss making in the initial years following the transfer however it is likely to become profitable within a 5 to 10 year timeframe. Modelling of the cash flows of the single bulk water supply authority, based on the same assumptions as set out in Note 18, has also been undertaken and shows that as at 1 July 2011, no impairment of the assets of the single bulk water supply authority is required.

At the date of transfer, the Group was in the process of finalising the commercial settlement arrangements in respect of the construction of a number of its recently completed advanced waste water treatment plants and pipeline networks. The commercial settlement arrangements will be completed by the Seqwater.

The Group transacted with and provided in kind support in the form of labour and expense payments to the Australian Water Recycling Centre of Excellence which Seqwater will continue to provide.

It is management's intention that the Group has ceased trading and will be wound up as soon as practicable.






Advanced water treatment plant

An advanced water treatment plant (AWTP) is a plant

where water from a wastewater treatment plant that would

otherwise be discharged into a river is purified through

a multi-barrier process so that it meets the Australian

Guidelines for Water Recycling. There are three AWTPs in

the Western Corridor Recycled Water Scheme, located at

Bundamba, Luggage Point and Gibson Island.

Australian Drinking Water Guidelines

The Australian Drinking Water Guidelines are the key

Australian reference to drinking water quality published by

the National Health and Medical Research Council and the

Agriculture and Resource Management Council of Australia

and New Zealand.

Australian Guidelines for Water Recycling

The Australian Guidelines for Water Recycling are based

on the framework developed for the Australian Drinking

Water Guidelines (see above) with adaptations to manage

risks to human health and the environment. It outlines not

only the technical issues of recycled water supply but also

aspects such as corporate commitment, communication,

training and relationships with other stakeholders and with

consumers with which WaterSecure must comply.

Desalination

Desalination is the process of creating drinking water from

seawater. The Gold Coast Desalination Plant uses reverse

osmosis to desalinate seawater.

Megalitre

One million litres.

Project alliance

A project alliance is a commercial legal framework between

a government agency as ‘owner-participant’ and one or

more private sector parties as the ‘alliance contractor’ or

‘non-owner participant’ in a capital works project.

Purified water

Purified water is water that has been produced at an

advanced water treatment plant to a standard suitable

for augmenting drinking supplies. It is also known as

purified recycled water. For more information visit

www.qwc.qld.gov.au.

Queensland Water Commission

The Queensland Water Commission (QWC) is the

Queensland Government authority responsible for water

security, managing water demand, providing advice to

government and reforming the water industry to provide a

sustainable water supply for South East Queensland.

Reverse osmosis

Reverse osmosis, the fourth barrier in the seven-barrier

water treatment system and the second step in the

advanced water treatment process, involves forcing filtered

water through a specially engineered membrane at high

pressure to remove impurities such as dissolved salts,

viruses, pesticides and most organic compounds.

Scheme operator

Veolia Water Australia is the scheme operator selected to

manage the operation of the Western Corridor Recycled

Water Scheme. Veolia Water also operates the Gold Coast

Desalination Plant on behalf of the GCD Alliance.

South East Queensland Water Grid

The SEQ Water Grid is a network of water storages, water

purification plants and two-way pipes used to transport

water from areas of water surplus to areas facing a shortfall.

The Water Grid features more than 400km of pipeline, a

new dam, a desalination plant and three advanced water

treatment plants.

Glossary

WaterSecure Annual Report 2010/11 | 79

WaterSecure

240 Margaret Street

Brisbane QLD 4000

Phone: 1800 997 464

Fax: 07 3229 7926

www.watersecure.com.auPrinted on environmentally friendly paper.

Documents

Water Secure Annual Report 2011 layout final...Key Objectives 2010-2011 10 2010-2011 Highlights 11 Cumulative water supplied in 2010-2011 12 Key performance areas 13 Strategic Asset