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SunWater Limited

Statement of Corporate Intent 201415

Commercial in Confidence It is in the public interest to ensure that this document is not disclosed to third parties. This document contains information that the disclosure of which could reasonably be expected to prejudice the commercial, professional or financial affairs of SunWater; the trade secrets or business affairs of SunWater; the commercial activities of SunWater; and the deliberative processes of government (see Schedule 4, Part 3 Right to Information Act 2009). Government Owned Corporation SunWater Limited

Chief Executive Officer

Peter Boettcher

Board Chair

Ross Dunning

Shareholding Ministers

Tim Nicholls - Treasurer and Minister for Trade Mark McArdle - Minister for Energy and Water Supply

Shareholding Departments Queensland Treasury and Trade – Shareholders’

Monitoring Unit

Department of Energy and Water Supply (DEWS)

Period of application 1 July 2014 to 30 June 2015

Context

SunWater’s Statement of Corporate Intent 2014-15 (SCI) has been prepared by the Directors and Management for submission by the SunWater Board to shareholding Ministers. The SCI meets all legislated requirements under Part 8 of the Government Owned Corporations Act 1993.

SunWater’s SCI outlines the actions that have been agreed for implementation in 2014-15, being the first year of SunWater’s five-year corporate plan. The SCI also identifies the measures of success that will be applied in evaluating achievement against identified deliverables and goals.

SunWater Statement of Corporate Intent 2014-15

Commercial in confidence 22 August 2014 Page 2

PERFORMANCE AGREEMENT

In accordance with Chapter 1, Part 3, Section 7 of the GOC Act, the SCI represents a formal performance agreement between the Board of SunWater and its shareholding Ministers - The Treasurer and Minister for Trade and The Minister for Energy and Water Supply - with respect to the financial and non-financial performance targets specified for the financial year. The SCI also represents an acknowledgment of and agreement to major activities, objectives, undertakings, policies, investments and borrowings of SunWater for 2014-15.

This SCI is consistent with SunWater’s 2014-19 Corporate Plan agreed to by shareholding Ministers in accordance with Chapter 3, Part 7 of the GOC Act.

In signing this document, the Board of SunWater undertakes to ensure that the document, and all associated reports to shareholding Ministers, are prepared with accuracy and timeliness and that all reasonable efforts are made to achieve the targets proposed for 2014-15.

Major changes to key assumptions and outcomes detailed in this SCI, and which come to the SunWater Board’s attention during the year, will be brought to the attention of shareholding Ministers. Any modifications to this SCI will be dealt with in accordance with the GOC Act.

This SCI is signed by the Chair on behalf of all the Directors in accordance with a unanimous decision of the Board of SunWater.

TREASURER AND MINISTER FOR TRADE

Date

MINISTER FOR ENERGY AND WATER SUPPLY Date

SUNWATER CHAIR

Date



Contents

Part 1 Objectives 4

Part 2 Undertakings 5

Part 3 Key performance indicators and business drivers 9

1 – Financial performance KPIs

2 – Non-financial performance KPIs

3 – Community service obligations (CSOs)

Part 4 Attachments 12

1 – Policies

2 – Employment and Industrial Relations Plan

3 – Financials (Consolidated, Parent, Subsidiaries)

4 – Capital expenditure program

5 – Planned asset acquisitions and disposals

6 – Other significant expenses

7 – WACC rate calculations

8 – Key 2014-15 business risks

9 – Sponsorship, advertising, corporate entertainment, donations and other arrangements



Part 1 – Objectives 2014-15 will see SunWater continuing to provide high standards of bulk water storage and distribution, facilities management, water accounting and billing and flood management services and functions to and on behalf of its customers and stakeholders. SunWater’s service delivery approach will appropriately balance and target improved cost of living outcomes for Queenslanders and businesses investing in the State against the continued need to deliver sustainable and reliable services.

In 2014-15 SunWater will undertake a significant program of consultation with stakeholder groups, including local government councils to develop a shared understanding of respective roles, functions and business drivers.

SunWater will also continue to support Government’s responses to the recommendations from the Queensland Commission of Audit (QCoA) for regional bulk water, including:

the Department of Energy and Water Supply in its review of the possible transfer of SunWater’s eight irrigation distribution systems to local management entities; and

Government in its investigations into the potential benefits to the State of offering SunWater's dedicated water supply infrastructure servicing commercial and industrial clients for private ownership and/or private operation, depending on which solution provides the best value for money outcome for the Government.

The Queensland Government, in its State Budget on 3 June 2014, released a draft plan proposing a program of asset transactions, which included the divestment of SunWater's Industrial Water Pipelines.

The Government has stated that it remains fully committed to seeking a mandate from the Queensland people before divesting itself of any Government business. However, the Government will commence some preliminary due diligence and preparation activities to ensure that the divestment is able to be completed in a timely manner, should the Government decide to proceed.

SunWater will continue to assist Government throughout this process and will ensure that the business is operating as efficiently and effectively as possible.

SunWater’s Statement of Corporate Intent 2014-15 and Corporate Plan 2014-2019 also appropriately reflect Government’s longer term preference for the organisation to retain ownership and management of existing regional bulk water assets.

While Government considers the potential benefits of divesting existing pipeline assets, SunWater will also continue to target shareholders’ preference for new bulk water supply projects which service the private sector to be advanced only on the basis of the project being underpinned by proponent funding. SunWater will ensure all conceptual studies and early stage business case investigations remain consistent with core business activities and align with shareholders’ strategic expectations.

SunWater’s key objectives and milestones for the 2014-15 year include:

Prudent and efficient management of the company to ensure sustainable and reliable services are delivered to customers and communities in accordance with shareholder expectations;

Supporting Government’s review into the implementation of local management arrangements for SunWater’s eight irrigation distribution systems and preparing for transfer to local management entities should Government make this decision;

Supporting Government’s review into the benefits of offering SunWater’s industrial water pipelines for divestment and preparing for divestiture should Government make this decision;

Strengthening regional bulk water supply, planning and pricing arrangements and services;

Continuing to optimise commercial returns to shareholders reflective of Government policy positions, shareholder expectations and accepted regulatory guidelines;

Achieving and reporting performance against the 2014-15 (and out-year) efficiency improvement targets agreed for delivery;



Agreeing with shareholder representatives and subsequently implementing key dam safety milestones for Paradise and Boondooma Dams;

Achieving agreement with employees and their representatives on SunWater’s Enterprise Agreement 2015-18; and

As key Government decisions are made, working with shareholders and their representatives to consider and agree the longer term direction for SunWater.

In accordance with section 17 of the Government Owned Corporations Act 1993, SunWater continues to retain the key objectives of being commercially successful and efficient in the delivery of agreed community service obligations.

SunWater’s commercial success and efficiency will be measured against the financial and non-financial performance targets as informed by Government’s strategic and wider policy objectives and subsequently negotiated and agreed within SunWater’s annual Statement of Corporate Intent.

Part 2 – Undertakings SunWater’s undertakings have been structured to target the delivery of the 2014-15 strategic objectives (as stated) and to reflect changes of significance required to be made to its ongoing operational activities. SunWater’s 2014-15 undertakings have also been developed to address any gaps in its ongoing risk identification and mitigation processes which have resulted from changes in its business environment and any changed expectations of stakeholders. SunWater’s significant business risks are summarised at Attachment 8; business risks are further detailed in the Corporate Plan 2014-19.

The objectives, undertakings, financial and non-financial targets and financial statements detailed in this document establish the key 2014-15 deliverables contracted between the SunWater Board and shareholding Ministers.

SunWater’s high level strategies and undertakings are grouped and summarised as:

Prudent and efficient management of SunWater

SunWater will:

Operate and maintain existing assets to ensure continued delivery of water to customers and communities in line with shareholder expectations and in accordance with the efficient costs determined by the current irrigation water price path.

Continue to support Government’s wider commitment to reducing cost of living pressures for Queenslanders and the cost of business investment in State development initiatives.

Maintain effective and productive relationships with stakeholders and continue to deliver solutions in response to their needs, feedback and concerns.

This will be achieved by:

Engaging with customers and producing and publishing reports on the annual performance of all irrigation service contracts, including the 8 distribution systems being considered for transitioning to local management arrangements. Final reports to be published on SunWater’s website and customers notified via email and SMS by 30 October 2014. Consultation with customers to occur March to April annually.

Provision of additional reporting within Quarterly Scorecards of SunWater’s performance against the achievement of efficient costs (5 year schedule) for expenditure on operations & maintenance, and refurbishment & enhancement and monitor and report separately – if materially different to budget – costs which are outside of SunWater’s control (i.e. insurance, electricity, rentals) – refer to Attachment 2 Section 11.

Continuing to reinforce the critical importance of safety at all levels of SunWater, including public safety, through the targeting of the “No Harm” safety objective.

Delivering services in line with agreed standards and targeted water distribution system and pump performance efficiencies and report on achievements through Quarterly Scorecards and publicly through Annual Reports (refer Part 3 Section 2 – Non financial KPIs).



Utilising sound value engineering and risk based decision frameworks to ensure continuing serviceability of infrastructure.

Proactively managing SunWater’s insurance program to ensure adequate coverage and value for money, and implement agreed risk management strategies in the event of any coverage gaps in consultation with shareholders.

Optimising SunWater’s capital structure to best position the organisation to access business development opportunities which are consistent with shareholder expectations.

Working closely with shareholder representatives and providing regular updates through Quarterly Scorecards to ensure Government is kept fully informed of significant legal matters including the possible Brisbane floods class-action claim.

Ensuring agreed Community Service Obligation services are delivered efficiently and in line with CSO payments from Government.

Support Government’s Local Management Arrangements Review

SunWater will:

Continue to contribute to Government’s investigations into the transfer of SunWater’s irrigation distribution systems to local management arrangements (LMA).


Continued provision of support to Government’s LMA project team in line with agreed contributions (refer Attachment 6 – Other significant expenses).

Establishing SunWater's follow-on/change management activities required by Government's decisions with respect to LMA and implement in line with agreed schedules, once determined.

Ensuring all regulatory and statutory requirements are effectively managed in the LMA transition process, targeting no customer, staff or media issues of significance, as a result of SunWater activities.

Support Government’s Review of SunWater’s Industrial Water Pipelines

SunWater will:

Ensure the industrial pipeline line of business is operated as efficiently and effectively as possible while it remains under Government ownership.

Continue to contribute to Government’s investigations and preliminary due diligence processes associated with the potential divestment/sale of SunWater’s industrial water pipelines.

Work with shareholder representatives and Government-owned power station clients to agree and resolve all current water supply contract legacy arrangements.


Continuing to meet all service delivery standards and deliver all scheduled asset maintenance programs;

Working closely with industry and development proponents and with shareholder representatives to:

fast track wherever possible Queensland business development opportunities which are supported by Government for implementation; and

promote and advance innovative and cost effective water solutions including the leasing of water rights in support of new development proposals.

In close liaison with shareholder representatives – increasing the value of the industrial pipelines line of business by implementing all existing water infrastructure development and augmentation projects in line with the conditions agreed to within approved business cases and progressing new pipeline augmentation and water infrastructure development projects which align with shareholder expectations and which are supported by approved business cases.

Renegotiating water supply contracts with Government-owned power station clients (Stanwell, Callide and Tarong) to commercial terms and ensuring new contracts clearly delineate each party’s rights, obligations and allocation of risk. The negotiation of new contracts will also consider and subsequently reflect ownership of the water allocations and will be agreed by 30 June 2015.



Direct provision of support to Government’s investigations in line with agreed contributions (refer Attachment 6 – Other significant expenses).

Establish internal positions (within SunWater) which clarify the ownership of the water allocations associated with SunWater’s industrial pipelines by 31 March 2015, in preparation for Government’s preliminary asset divestment activities.

Establishing and implementing SunWater’s follow-on/change management activities required by Government's decisions with respect to divestment of SunWater’s Industrial Pipelines in line with agreed schedules, once determined.

Strengthen Queensland regional bulk water supply, dam safety, planning and pricing arrangements and services

SunWater will:

Liaise with shareholding Minister representatives to support Government’s longer term vision for regional bulk water services following LMA and industrial pipelines divestment activities.

Enhance communications and consultation arrangements with local government councils to develop a shared understanding of respective roles, functions and business drivers (including stakeholder and community needs and concerns).

Assist Government to develop an options analysis for the apportionment of revenues between SunWater’s ongoing regional bulk water supply business and its industrial pipelines line of business (which will be considered by Government for divestment/sale) that reflects the costs expected to be incurred by each business and the impact each option will have on the future value of both lines of business.

Work closely with the Queensland Dam Safety Regulator (QDSR) to develop the SunWater Dam Safety Upgrade Program and seek guidance from shareholders on funding models by 30 April 2015.

Repair the Paradise, Boondooma and Eungella dams in line with Government’s decisions and in accordance with the dam safety upgrade program agreed with the QDSR and other shareholder representatives.


Progressing Government’s decisions around alternative bulk water pricing arrangements for non-irrigation supplies and working with local government councils to implement all 2014-15 actions (once determined) by 30 June 2015.

Assisting Government to develop a draft options analysis for the apportionment of bulk water and water transport revenues for shareholder review by 31 May 2015.

Finalising the Paradise Dam safety review by 31 January 2015 and completing the subsequent business review (comprehensive risk assessment and concept design) to ensure the results of the detailed assessments and findings of the Phase 3 investigations are provided to shareholders by 31 March 2015.

Subsequently identifying and agreeing with Government the remedial works required (if any) to ensure the long term safety of the Paradise Dam and associated funding solutions for the portfolio of upgrades by 30 June 2015.

Finalising the business case and recommendations for the Eungella Dam Safety Upgrade early 2014-15. Undertake consultation with shareholder representatives regarding the need for the upgrade and funding requirements to enable the Queensland Dam Safety Regulator’s requirement for all Tranche 1 dams to be upgraded by 1 October 2015. Indicative costs of $8.64M have been allowed for in SunWater’s 2014-15 budget, offset against grant funding by Government. These arrangements are yet to be finally agreed with DEWS and may need to be adjusted dependent on the outcome of the business case, stakeholder consultation and Government’s decisions.

Finalising a review of any outstanding contingent liabilities and funding arrangements for all current flood repair work and associated litigation matters by 31May 2015.



Undertaking other stakeholder engagement initiatives as necessary to improve understanding of the bulk water business and increase transparency around business performance and risk and opportunity management.

Reflecting all available key Government decisions about the longer term direction for SunWater within the draft 2015-16 Statement of Corporate Intent by 31 March 2015 and the final document by 31 May 2015.

Organisational capacity and workforce capability

SunWater will:

Ensure its organisational capacity and workforce capability continues to closely align with, and adjust to, Government’s expectations for high performance, commercial returns and efficient operations.


Adherence to agreed staffing levels (refer Attachment 2 – E&IR Plan), varied as and if required in line with shareholder approved business cases/further savings initiatives.

Consulting and negotiating with all relevant parties as required to develop and achieve agreement with employees and their representatives on SunWater’s 2015-18 Enterprise Agreement by 30 June 2015.

Implementing appropriate leadership development programs and staff training, induction, communication and consultation programs to ensure continued provision of professional, high quality services to customers and in line with compliance and organisational capability needs and obligations.

Safety & environmental performance

SunWater will:

Ensure organisational safety and environmental performance aligns with Government’s expectations of high performance.


Continuing to target “No Harm” in all operations and business activities.

Ensuring SunWater staff understand and comply with their due diligence obligations under the Queensland Work Health and Safety Act 2011.

Ensuring SunWater’s health, safety, quality and environmental systems reflect contemporary practice and are regularly reviewed to ensure alignment with the organisation’s needs.

Maintaining third party accredited systems for quality management (ISO9001:2008), environmental management (AS/NZS ISO14001:2004), workplace health and safety management (AS/NZS 4801:2011) and project management (PMO accreditation through the Australian Institute of Project Management – AIPM).



Part 3 – Key performance indicators and business drivers

SunWater’s performance in 2014-15 will be assessed against the financial and non-financial performance indicators that have been developed and refined over a number of years, following the Government initiated review of GOC performance metrics and targets undertaken by KPMG in 2009.

SunWater will report its achievements against the following measures and targets through submitted Quarterly Scorecards and directly through quarterly and annual presentations to shareholder representatives. A summary of past and forecast performance for a number of key business metrics is shown at section 5.

1 Financial performance KPIs

Quarterly targets (2014-15)

Jun

Annual target (2014–15)

Financial metrics Sept Dec Mar

Operating revenue $M 66.202 67.513 65.882 75.854 275.451

Total assets $M 1,316.112 1,306.297 1,326.878 1,263.178 1,263.178

EBITDA $M 35.514 35.591 35.215 39.179 145.499

EBIT $M 27.275 26.211 26.001 24.230 103.718

NPAT $M 15.958 15.219 15.078 14.128 60.384

Economic profit (loss) $M - - - - 19.405

Return on operating assets % 6.38 6.09 6.14 5.73 6.08

Return on average contributed equity %

16.79 16.01 15.86 14.86 15.88

Current ratio 0.98 1.05 1.15 0.99 0.99

Market gearing (debt to debt + equity ratio) %

28.21 27.74 27.29 21.67 21.67

EBITDA interest coverage (Multiple)

7.93 7.96 7.89 9.68 8.34

EBIT interest coverage (Multiple) 6.09 5.86 5.83 5.99 5.94

FFO interest coverage (Multiple) 7.93 7.51 7.43 9.18 7.99

Cost efficiency savings $M 0.838 0.838 0.838 1.265 3.779

NPAT, EBIT, EBITDA and Economic profit (loss) all positively impacted by the commissioning / ramping up of water transport volumes associated with recent development pipeline projects (Kenya to Chinchilla, Woleebee Creek to Glebe Weir and Burdekin to Moranbah Pipeline Augmentation) and the recent significant savings achieved through the internal business realignment made in response to the recommendations from the Queensland Commission of Audit. Associated ratios are similarly affected. Further explanation provided at 5.



2 Non-financial performance KPIs Quarterly targets (2014-15)

Jun Annual target

Non-financial metrics Sept Dec Mar (2014–15)

Customer service levels (Number of exceptions)

0 0 0 0 0

Environmental compliance breaches

0 0 0 0 0

Distribution system efficiency % 77 77 77 77 77

Pump Performance – Target Range (kWhr/Ml/m)

3.4 – 4.3 3.4 – 4.3 3.4 – 4.3 3.4 – 4.3 3.4 – 4.3

Total recordable injury frequency rate (TRIFR) – annual target

- - - - 0

Lost time injury frequency rate (LTIFR) – annual target

- - - - 0

Lost time injuries (LTIs) 0 0 0 0 0

Medical treatment injuries (MTIs) 0 0 0 0 0

Total Workforce (No. of Directly Employed, Contractors, Apprentices) (Annual target Aver. Full Time Equiv.)

393 393 393 393 393

Pump performance metric and target established in 2013-14. Forecast performance anticipated to improve following commissioning and increased usage of recent pipeline development projects (Kenya to Chinchilla and Woleebee Creek to Glebe Weir) where variable speed pumps have been utilised.

3 Community service obligations (CSOs)

SunWater’s strategies to reduce reliance on CSO payments by government are detailed under Part 2 Undertakings. SunWater’s forecast schedule of CSO payments in 2014-15 are tabled in Attachment 3 Financials. SunWater’s corresponding CSOs in 2014-15 – that is, services which are to be provided at less than a commercial price or via a price path – include:

Irrigation water – provision of irrigation water across SunWater’s irrigation water supply schemes is consistent with the CSO services and payments determined by the QCA in its 2012-17 price path.

Urban water – provision of urban water to the township of Cloncurry.

4 Market, industry demand and company outlook

SunWater’s predominant focus in 2014-15 will be to provide existing services which meet customer needs and shareholder expectations. SunWater will also continue to support local management entities as they prepare for the transfer of irrigation areas should Government make this decision and support Government’s preparations for the potential divestment of SunWater’s industrial pipelines.

As decisions are implemented SunWater’s focus will adjust to deliver Government’s longer term vision for regional bulk water supply services in Queensland.

The outlook for SunWater’s key customer sectors is expected to continue to remain subdued for all sectors based on SunWater’s ongoing interaction and discussions with customers and industry representative groups. This subdued outlook will have limited impact on SunWater’s operating revenue going forward as the majority of revenue (at around 85%) is fixed by existing contracts and remains unaffected by changes in industry demand.



5 Key performance indicator trends and forecasts (based on the implementation of the 2014-15 SCI and 2014-19 Corporate Plan)

Operating revenue expected to increase over the next 4 years as development pipelines (Kenya to Chinchilla, Woleebee, BMP Augmentation and Moranbah to Lake Vermont) are commissioned. Revenue continues to increase in line with contracted volumes and price resets.

From 2013-14 operating costs reflect significant savings from the internal business realignment made in response to recommendations from the Queensland Commission of Audit in addition to ongoing productivity savings from QCA and Enterprise Agreement. Since 2011-12 costs have been impacted by higher flood related incidents.

NPAT in 2011-12 was impacted by impairment of irrigation assets ($67M) and the pre-construction costs of the Connors River Dam Project ($28.7M). EBITDA and NPAT in 2012-13 were impacted by higher flood repairs. Forecast years show steady growth in EBITDA, NPAT, dividends and tax equivalents, consistent with the delivery of the development pipeline portfolio and realising the cost efficiencies and savings following the business realignment. NPAT in 2016-17 to 2018-2019 impacted by impairment of capitalised costs as a result of flooding to Boondooma Dam.



Return on operating assets and return on average contributed equity affected by impairment of the Connors River Dam pre-construction costs in 2011-12. Funds from Operations (FFO) in 2012-13 affected by delays and cancellation of projects, but increases significantly in the forecast years as debt is paid down. SCI and Corporate Plan forecasts do not reflect the potentially significant impacts of Government decisions around the divestment of SunWater’s industrial pipelines or transitioning SunWater’s channel irrigation schemes to local management arrangements. Part 4 – Attachments

Attachment 1 - Policies

As part of its performance agreement with its shareholding Ministers, SunWater provides the following additional undertakings:

Sponsorship, advertising, corporate entertainment, donations and other arrangements

SunWater’s budgeted spends on Sponsorship, Advertising, Corporate Entertainment, Donations and Other Arrangements are provided in Attachment 3 to the SCI. Planned expenditure is consistent with the Corporate Entertainment and Hospitality Guidelines and SunWater’s Corporate Entertainment and Hospitality Policy.

Prudential financial information

The Board will ensure SunWater takes full responsibility to ensure that prudent financial practices will be applied both within the corporation and within its subsidiaries (whether fully controlled or otherwise). Without limiting the obligations imposed on the Board and the CEO by the GOC Act and, where applicable, the Corporations Act 2001 (Cth), this includes a commitment to:

abide by the Code of Practice for Government Owned Corporations’ Financial Arrangements (Code of Practice), as issued by the Queensland Government; and

establish, maintain and implement appropriate financial risk management practices and policies required and as specified in the above Code of Practice.



Capital structure

SunWater’s overall debt will be managed to ensure as a minimum that a BBB+ credit rating - or other rating as directed by shareholding Ministers - is maintained.

The SunWater Board acknowledges shareholders’ expectation that all new projects for bulk water supply to the private sector are to be underpinned by proponent funding. SunWater will continue to prudently manage the financing of existing and new business developments in conjunction with nominated government agencies.

Weighted average cost of capital (WACC)

The Board will ensure that SunWater reviews its WACC on an annual basis. As part of the SCI negotiation process, SunWater’s beta and optimal capital structure have been determined in consultation with shareholder representatives. Separate WACCs have been calculated for those parts of SunWater’s operations that face differing business risk profiles.

Other than the annual review process, in the event that SunWater encounters a significant change to the risk profile of its business, its WACC will be recalculated in consultation with shareholder representatives.

Details of SunWater’s WACC calculation is provided as Attachment 7 to this SCI.

Dividend policy and payment

SunWater’s dividend process is governed by the Government Owned Corporations Act 1993 and the Corporations Act 2001 (Cth). SunWater’s policy is to recommend and pay a dividend amount equivalent to 80% of SunWater’s adjusted audited consolidated net profit after tax for the 2014-15 year. When determining the actual dividend to be paid based on the audited financial results, the board will ensure shareholding Ministers are consulted through their Departments and that written agreement is received for any material changes to the adjustment items previously identified (by May each year) and for any subsequent new adjustment items identified. This written agreement will be obtained by SunWater prior to payment of the final dividend by the board.

Investment thresholds

SunWater will comply with Government’s Investment Guidelines for GOCs. SunWater will provide early notification to shareholding Ministers of significant expenditure and revenue contracts when their total value equals or exceeds $10M. SunWater will seek approval of shareholding Ministers for expenditure and revenue contracts of $40M and above total value.

SunWater will also notify shareholder representatives (via quarterly Scorecard submissions) of lower value projects which are both proponent funded and consistent with SunWater’s core business activities, prior to committing any funds beyond early stage investigations.

Risk management

The Board of SunWater has ultimate responsibility for the management of all potential internal and external risks for the Corporation. SunWater deploys a comprehensive risk management framework designed to identify, monitor, assess and mitigate all potential business risks. Examples of business risks that are routinely assessed, managed and monitored include environmental, occupational health and safety, quality assurance, financial and asset management related risks. SunWater has restructured its business risks to align with the new lines of business of Bulk Water, Irrigation Systems and Industrial Pipelines.

Enterprise risks are routinely monitored and assessed by SunWater’s management and periodically reviewed by Board or a relevant Board Committee viz. the Audit and Corporate Governance Committee, the Industry Regulation, Safety and Environment Committee or the Remuneration Committee.

As other matters of significance are actioned, updates will be provided to shareholding Ministers through the Quarterly Scorecard process and directly, through written correspondence, as necessary.

Business risks are further detailed in Attachment 8 and within the Corporate Plan 2014-19.

Compliance with Government policies

The Board of SunWater and its subsidiaries will comply with all relevant government policies and guidelines. In particular, SunWater and its subsidiaries will comply with the approval, notification, reporting and other requirements of those policies and guidelines.



SunWater has adopted the recommendations in the Corporate Governance Guidelines for Government Owned Corporations (February 2009). The Board of SunWater also undertakes to continually monitor and review its corporate governance arrangements to reflect good practice, having regard to the guidelines.

Attachment 2 – Employment and industrial relations plan

1. E&IR Philosophy/Direction

SunWater is a bulk water infrastructure developer and manager playing a key role in Australia's water industry, with a proven 80 year history of growth and leadership in delivering world-class bulk water infrastructure solutions. In order to achieve success in business activities, SunWater values and supports its people, encourages innovation and initiative, removes unnecessary process, and ensures accountability for performance.

2. Significant and Emerging Issues

The Queensland Commission of Audit recommendations were accepted by the Government in July 2013. There was also a decline in the market conditions of our current and potential customers, accompanied by constraints on project funding which, in turn, affected SunWater’s traditional business opportunities.

In response to this, a decision was made to undertake a Business Realignment of SunWater’s workforce, with the development of an organisational structure comprising three new business groups of Bulk Water & Irrigation Systems, Industrial Pipelines, and Corporate and Office of the Chief Executive. Part of the realignment activities included the closure of offices in Ayr and Toowoomba, and opening of new offices in Townsville, Goondiwindi and Chinchilla. The process for implementing the new structure included extensive consultation with staff members, the Public Service Commission, relevant unions, the SunWater Board and Executive. Consultation was conducted in accordance with the consultation provisions in the SunWater Enterprise Agreement 2013-2015 (EA), and the new structure was finalised and communicated to staff on 2 December 2013.

In December 2014, preliminary planning will commence for the negotiation of a new SunWater enterprise agreement. Planning will include discussions around potential productivity initiatives and investigations into financial savings that may be made to fund any wage increase. It is expected that the announcement for Commencement of Bargaining will be made in March 2015, following approval by the Government of SunWater’s bargaining framework.

Directors/Senior Executive Remuneration

Non-Executive Directors, including Chairman (2013-2014 Estimated)

Remuneration amounts based on projected Financial Year amounts and assumed formal confirmation of Committee memberships.

Final 2013-14 remuneration amounts (actuals) will be available at end June 2014 and reflected in SunWater’s 2013-14 Annual Report.

Non-executive directors Directors’ fees (Incl Subsidiary Boards)

Committee fees Superannuation Other Total

Ross Dunning (Chair) &* 31,378 7,650 3,610 42,638

Larry Anthony ^# 14,852 3,140 1,664 19,656

Greg Moynihan &#* 28,817 10,203 3,609 42,629

Kirstin Ferguson ^# 28,817 10,203 3,609 42,629

Rachel Fennell &* 14,840 2,354 1,591 18,785

Will Wild ^ 33,430 4,372 3,497 41,299

^ Directors of SunWater Subsidiary Board (Burnett Water Pty Ltd)

& Directors of SunWater Subsidiary Board (Eungella Water Pipeline Ltd)

* Directors of SunWater Subsidiary Board (North West Queensland Water Pipeline Ltd)

# Chair of Board Committee



CEO and Senior Executives (Projected remuneration for 2013-2014) CEO/Senior Executives Base Salary Employer

Superannuation Contributions

Motor Vehicle

Car Park Other Personal Benefits

Total Fixed Remuneration

Other Non-personal Benefits

Performance Payment Made&

Peter Boettcher 471,465 17,775 0 0 0 489,240 0 54,623

Chief Executive

Geoffrey White 280,081 35,710 0 0 0 315,791 0 35,303

GM Corporate

Timothy Donaghy 239,024 30,476 0 0 0 269,500 0 26,950

GM Industrial Pipelines

Thomas Vanderbyl 234,308 27,158 0 0 0 261,466 0 25,217

GM Bulk Water & Irrigation Systems

&SunWater will link senior executive performance payments to the achievement of the targets agreed through the annual SCI. Payments relate to performance in the previous year and are typically paid in August, following the year to which the payments relate. Performance payments shown in the above table relate to the most recent actual payments made in August 2013. These payments relate to performance during the 2012-13 year There are no gain-sharing arrangements in place for SunWater senior executives.



3. Employment Conditions

SunWater is a Government Owned Corporation (GOC), and is covered by federal industrial relations legislation, including the Fair Work Act 2009 (Cwth) [FWA].

SunWater employees (other than those on individual employment contracts) are covered by employment conditions contained in the Agreement. The Agreement contains conditions of employment that are not less than the National Employment Standards (NES).

Relevant industrial instruments are as follows:

Award/Agreement Scope Reference Expiry date

SunWater Enterprise Agreement (2013-2015)

Covers 335 SunWater employees (as at 1 February 2014)

AG 2013/1016 Nominal expiry date 30 June 2015

Individual Employment Contracts Covers 74 SunWater employees (as at 1 February 2014)

N/A N/A

Fair Work Act 2009 (Cwth) All employees N/A N/A

Water Industry Award All employees MA 000113 N/A

Industrial Relations Act 1999 (Qld) All employees N/A N/A

4. Enterprise Bargaining and Productivity Initiatives

SunWater regularly monitors amendments to the FWA, Modern Industry Awards and NES to ensure compliance with the legislation.

The expiry date for the current SunWater Enterprise Agreement 2013-2015 is 30 June 2015. Bargaining for a new SunWater Enterprise Agreement will commence in March 2015, following the development of a Bargaining Framework and approval by the Cabinet Budget Review Committee.

When developing the Bargaining Framework for the replacement enterprise agreement, the provisions in Government Owned Corporations Wages Policy (2012) will be included. All enterprise agreement bargaining will be undertaken ‘In Good Faith’ according to the requirements in the FWA.

5. Redundancy Provisions

Clause 4.11 of the EA contains the SunWater redundancy provisions, which meet legislative requirements. The EA does not have any reference to “no forced redundancies”. The current entitlements for termination due to redundancy include:

Minimum four (4) weeks’ pay or three (3) weeks’ pay per year of service, with a proportionate amount for an incomplete year of service. The maximum redundancy payment will be equivalent to fifty-two (52) weeks’ pay.

An incentive payment of eight (8) weeks’ pay to depart by the date nominated by SunWater; and

Long Service Leave payment of 1.3 weeks at the ordinary time rate for each completed year of service and a proportionate amount for an incomplete year of service, less any Long Service Leave already taken or paid out.

6. Superannuation

SunWater makes superannuation contributions on behalf of eligible employees into an approved fund in accordance with the federal Superannuation Guarantee Charge Amendment Act 2002.



As SunWater subscribes to the government-wide superannuation fund, it does not have access to any surplus or any current exposure to any short fall from the defined benefit fund.

7. Type of Employment (FTEs) and Workforce Planning

30 June 2014 estimate




Employment category:

Permanent full time* 281 281 281 281 Permanent part time 8 6 6 6 Temporary full time 19 19 14 14 Temporary part time 0 0 0 0

Senior executive contract 4 4 4 4

Other contract 70 72 72 72

Apprentices (in-house) 2 2 2 2

Cadets 2 0 2 2

Trainees (in-house) 1 1 1 1

Casual employees 4 3 3 3

Total directly employed workforce

391 388 385 385

Apprentices (group) 3 1 0 0

Trainees (group)

Contractor employees (trade/technical/ops)

8 3 2 2

Contractor employees (professional/administrative/ clerical)

6 1 0 0

Labour hire (trade/technical) 0 0 0 0

Labour hire (professional/ administrative/ clerical)

0 0 0 0

s457 temporary visa 0 0 0 0

Total workforce: 408 393 387 387 Employment figures are based on business as usual for SunWater

Employment figures reflect significant staff and contractor number reductions in 2013-14 made as a result of SunWater’s business realignment in response to the recommendations of the Queensland Commission of Audit. As a comparison figure SunWater’s staffing numbers (directly employed and staff contractors) as at 1 July 2013 equalled 529.

Apprentices, Cadets and Trainees SunWater directly employs two apprentices in Clare, and two cadet technical officers in Brisbane.

8. Workplace Health and Safety

SunWater is committed to providing a safe workplace for employees, contractors, visitors and the general public. Health and safety is core business value for the organisation, and ensuring people finish work safely every day is considered paramount and non-negotiable.

SunWater complies with all relevant health and safety legislation and related standards, codes of practice, Australian standards and industry guidelines. Consistent with the Queensland Government Policy ‘Engaging Trained Safety Advisors to Meet Due Diligence Requirements in Government (Work Health and Safety Act 2011), SunWater has five (5) trained dedicated safety professionals.

SunWater’s workplace health and safety systems and processes are audited each year by external service providers.



SunWater’s most recent external audit was conducted in May 2014, with the formal results expected to be available early June 2014. Indications from the post audit close out meeting are that no major or minor non-conformances were found and the audit will recommend the continuation of SunWater’s certification to AS/NZS 4801:2001.

9. Consultation

The Public Service Commission, Shareholders’ Monitoring Unit (Queensland Treasury and Trade), Department of Energy and Water Supply, staff and unions were consulted during the development of this employment and industrial relations plan, in accordance with section 149 of the Government Owned Corporations Act 1993. Issues raised during these consultations have been given consideration in the preparation of this plan.

10. Reporting

SunWater will provide regular reports on the implementation and progress of the productivity initiatives included in SunWater’s Enterprise Agreement to shareholding Ministers through its quarterly Scorecard Reports. The reports will highlight any significant divergences from the plan and the background / content for the variances.

11. Productivity targets

SunWater’s 2014-15 Statement of Corporate Intent and budget include the continued delivery of savings and efficiencies targeted through the EA 2013-15 and irrigation water pricing review. Targeted savings areas include:

Enterprise Agreement 2013-15 productivity savings/offsets;

Queensland Competition Authority efficiency targets (asset refurbishment and enhancement program savings); and

Additional business initiated savings in service delivery, corporate and operational functions involving reductions in shareholder nominated areas discretionary expenditure (sponsorships, advertising and hospitality) in the asset refurbishment and enhancement program.

Operational Savings Targets (QCA, EA and Business)

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Comments

2014-15 Targeted Savings Area

Enterprise Agreement 2013-15 591 591 591 591 2,365

Irrigation Water Pricing Savings (30 Regulated Service Contracts)

411 411

Additional business initiated savings (Service Delivery, Corporate and Opera ional Functions)

247 247 247 263 1,003

Total Operational Savings 838 838 838 1,265 3,779

Some EA savings also form part of the QCA savings

QCA savings is he amount in excess of he EA savings and excludes all impacts of higher (than budgeted) insurance and electricity

2015 Budget



Attachment 3 – Financials

Consolidated group - Statement of Comprehensive Income

Notes: Irrigation water charges – final Queensland Competition Authority (QCA) prices used. Rate (where applicable include QCA

recommended ramps towards lower bound. No increases (to prices) have been allowed for increases in insurance costs; SunWater will continue to negotiate this matter with the QCA. Prices in the period beyond the current price path involve QCA prices plus CPI.

Industrial water charges – Industrial revenue growth predominantly involves the Woleebee Pipeline project operations from 2015 in addition to BMP Augmentation and Kenya to Chinchilla Pipeline in 2014.

Urban water charges – negotiations with existing urban water customers remain on hold pending Government’s review of SunWater’s non-irrigation bulk water pricing options paper.

Irrigation water CSO payments – CSO payments are in accordance with the agreement with DEWS. Urban water CSO payments – the urban CSO relates to the Cloncurry pipeline and is based on the expected changes to the

Operating and Maintenance cost sharing arrangements with Ernst Henry. These are not yet fully agreed with DEWS. Grants and subsidies – entries relate to Dam Safety Upgrades which are further detailed in Attachment 4 Capital Expenditure

Program. Projects in 2015 include Kinchant Dam (small carry over) and Eungella Dam (business case currently being developed and will facilitate discussions with DEWS around funding).

Water entitlement/trading revenue – growth is a result of increases in BMP contracts either as a result of ramp up on existing contracts and/or the commissioning of the BMP augmentation.

Salaries and wages – reductions in line with 2014 business realignment initiative. Contractor direct, materials direct and capitalised costs other – align with work program and the conclusion of, for example, the

Woleebee project. Disaster recovery provision – the budget allows for $13.3M flood repairs for projects to be undertaken in 2014-15. This amount will be

reviewed before 30 June 2014 for the statutory accounts provision. Asset impairment revaluation – the 2014 forecast impairment includes approximately $18.8M for Kinchant Dam. The 2013-14

impairment estimate is not yet finalised and will be impacted by the determination of an appropriate WACC rate and estimated 30

Budget : 2014-15 SUNWATER LIMITEDQ1 Q2 Q3 Q4 CONSOLIDATED GROUP 2014-15 2012-13 2013-14 2013-14

Sept Dec Mar Jun STATEMENT OF COMPREHENSIVE INCOME Unit Budget Actual Budget Forecast

Operating revenueWater charges

13,251 14,783 13,534 13,718 • Irrigation $000 55,285 47,159 49,212 54,589 41,782 41,916 41,598 41,664 • Industrial $000 166,960 119,019 129,251 129,172 2,455 2,478 2,461 2,467 • Urban $000 9,861 9,224 8,601 9,268

311 311 311 316 Drainage $000 1,247 1,231 1,247 1,264 145 117 96 137 Electricity generation $000 494 489 515 276

Government transactions1,497 1,497 1,497 1,497 • CSO - irrigation $000 5,988 8,997 7,415 7,417 1,358 1,358 1,358 1,358 • CSO - urban $000 5,431 5,036 5,188 5,155

- - - 9,390 • Grants & subsidies $000 9,390 27 18,807 16,974 3,587 3,587 3,587 3,605 Water entitlement / trading $000 14,367 12,323 14,911 14,595

74 74 74 74 Consulting $000 296 6,088 7,819 3,841 1,613 1,263 1,236 1,500 Facilities management $000 5,612 8,528 7,447 7,622

130 130 130 130 Other $000 520 926 494 832 66,202 67,513 65,882 75,854 $000 275,451 219,048 250,907 251,005

Employee costs (8,727) (8,174) (7,845) (8,322) Salaries & wages $000 (33,068) (37,994) (37,287) (42,385) (3,271) (3,272) (3,074) (3,306) Employee related expenses $000 (12,924) (16,068) (31,695) (14,013)

(166) (166) (161) (163) Staff contractors $000 (655) (5,638) (3) (4,519) (12,164) (11,612) (11,079) (11,792) $000 (46,647) (59,700) (68,985) (60,917)

Direct costs (419) (406) (369) (385) Accommodation & travel $000 (1,580) (2,132) (1,768) (1,775)

(22,770) (19,921) (17,363) (16,163) Contractors $000 (76,217) (120,837) (341,164) (253,135) (7,125) (8,265) (8,123) (11,465) Depreciation - infrastructure $000 (34,979) (20,955) (17,750) (22,894) (7,326) (8,822) (7,475) (7,638) Electricity $000 (31,260) (23,459) (28,574) (32,271) (3,402) (3,378) (3,358) (2,971) Materials $000 (13,108) (65,538) (61,424) (44,497) (1,232) (1,218) (1,215) (1,222) Plant, equipment & vehicles $000 (4,888) (10,431) (11,718) (9,830)

(42,274) (42,011) (37,903) (39,844) $000 (162,032) (243,352) (462,399) (364,402) Corporate & administration costs

(5,263) (5,239) (5,241) (5,490) Insurance, legal & administration costs $000 (21,232) (22,710) (19,818) (24,770) (1,114) (1,114) (1,090) (1,107) Depreciation - non infrastructure $000 (4,425) (2,739) (4,920) (3,513) (1,481) (1,472) (1,455) (1,571) Occupancy costs $000 (5,980) (6,074) (23,028) (12,923)

(276) (414) (165) (191) Other asset costs $000 (1,046) (6,026) (4,921) (697) (8,134) (8,239) (7,952) (8,359) $000 (32,684) (37,549) (52,688) (41,904)

18,945 15,827 12,494 10,800 Capitalised costs - other $000 58,066 165,974 371,663 271,831 3,329 3,329 3,329 3,329 Disaster recovery provision $000 13,318 3,195 36,456 36,767

(40,298) (42,705) (41,111) (45,865) Total costs $000 (169,979) (171,432) (175,953) (158,624)

25,905 24,807 24,771 29,989 Operating profit (loss) $000 105,472 47,616 74,954 92,381

- - - (2,377) Asset (impairment) revaluation $000 (2,377) (12,832) (36,770) (30,710) 1,382 1,415 1,242 1,352 Non-operating revenue $000 5,391 11,177 7,613 7,500

(4,488) (4,481) (4,473) (8,781) Financing charges $000 (22,223) (18,452) (16,428) (20,073) - - - - Capitalised costs - financing charges $000 - 0 - -

22,798 21,742 21,540 20,183 Profit (loss) before taxation - PBT $000 86,263 27,510 29,369 49,097 (6,839) (6,523) (6,462) (6,055) Taxation $000 (25,879) (6,602) (8,811) (13,029) 15,958 15,219 15,078 14,128 Profit (loss) after taxation - PAT $000 60,384 20,908 20,558 36,068

- - - (48,000) Dividends $000 (48,000) (12,870) (16,000) (29,000) 15,958 15,219 15,078 (33,872) Retained profit (loss) for the period $000 12,384 8,038 4,558 7,068

Notes1 Taxation

(173) (556) 431 297 Current tax - external $000 - (9,456) - - (11,119) (9,850) (11,554) (10,582) Deferred tax liability - (increase) decrease $000 (43,105) (2,508) 1,396 (36,015)

4,452 3,884 4,661 4,230 Deferred tax asset - increase (decrease) $000 17,227 5,362 (10,207) 22,986 (6,839) (6,523) (6,462) (6,055) Total $000 (25,879) (6,602) (8,811) (13,029)

Financial model version - 1205.00



June asset values by service contract. Impairments in outer years impair capital expenditure which is incurred and impaired in the same year.

Taxation – the budget allows for accelerated depreciation under the Irrigation Water Provider provisions (tax write-off over 3 years) on the Woleebee Pipeline from 1 July 2014. This is similar to the tax write-off granted for the Kenya to Chinchilla Pipeline. Accordingly, SunWater intends to make an application to the ATO shortly after commissioning of the pipeline. As this is a tax timing difference, there is no impact on profitability as a direct result but there are significant cashflow implications which flow on to interest income and expense. There will also be an impact on the balance sheet (current and deferred tax liabilities).

Consolidated group - Statement of Financial Position


Sept Dec Mar Jun STATEMENT OF FINANCIAL POSITION Unit Budget Actual Budget Forecast

Current Assets148,961 127,149 137,756 71,775 Cash $000 71,775 338,818 107,890 149,235 14,958 14,906 14,804 16,161 Receivables $000 16,161 26,865 14,060 13,562 24,179 24,582 24,208 22,726 Accrued revenue $000 22,726 17,633 27,117 23,785 2,216 2,204 2,192 2,186 Inventories $000 2,186 2,273 2,229 2,229 1,926 3,274 5,817 8,177 Other $000 8,177 4,944 11,719 1,876

192,241 172,116 184,777 121,025 $000 121,025 390,532 163,014 190,686 Non Current Assets

64 43 21 - Receivables $000 - - - - 1,002,859 1,009,307 1,012,587 1,005,941 Property, Plant & Equipment $000 1,005,941 778,166 1,068,348 992,153

725 725 725 3,222 Proponent underwritten infrastructure $000 3,222 - 19,754 725 71,873 71,873 71,873 71,866 Intangibles $000 71,866 72,237 71,873 71,873 48,350 52,234 56,895 61,124 Deferred tax assets $000 61,124 20,912 10,705 43,898

1,123,871 1,134,181 1,142,101 1,142,153 $000 1,142,153 871,315 1,170,680 1,108,649

1,316,112 1,306,297 1,326,878 1,263,178 TOTAL ASSETS $000 1,263,178 1,261,846 1,333,694 1,299,335

Current Liabilities50,809 52,187 53,172 54,185 Payables $000 54,185 77,159 68,603 54,193 81,635 81,635 81,635 1,493 Borrowings $000 1,493 189,781 1,440 1,493 29,000 - - 48,000 Provision - dividends $000 48,000 12,870 16,000 29,000 21,676 16,796 11,915 4,739 Provisions - other $000 4,739 47,438 9,341 26,557

173 - - - Provision - taxation $000 - - - - 13,657 13,773 13,943 14,163 Other ( including deferred revenue ) $000 14,163 6,061 15,314 13,540

196,950 164,390 160,665 122,581 $000 122,581 333,309 110,698 124,782 Non Current Liabilities

189,561 189,187 188,814 188,441 Borrowings $000 188,441 238,480 317,280 270,076 4,682 4,682 4,682 4,682 Provisions - other $000 4,682 1,210 4,640 4,682

67,461 77,312 88,866 99,448 Deferred tax liabilities $000 99,448 20,328 18,932 56,342 167,309 165,356 163,404 161,452 Other ( including deferred revenue ) $000 161,452 1,397 210,462 169,261 429,012 436,537 445,766 454,022 $000 454,022 261,414 551,314 500,361

625,962 600,927 606,431 576,602 TOTAL LIABILITIES $000 576,602 594,723 662,012 625,143

690,150 705,369 720,447 686,575 NET ASSETS $000 686,575 667,124 671,682 674,192

Shareholders Equity380,270 380,270 380,270 380,270 Contributed equity $000 380,270 380,270 380,270 380,270 309,880 325,100 340,177 306,305 Retained profits $000 306,305 286,854 291,412 293,922 690,150 705,369 720,447 686,575 TOTAL SHAREHOLDERS EQUITY $000 686,575 667,124 671,682 674,192




Consolidated group - Statement of Cash Flows

CSO, government grant & deferred income receipts - significant changes from 2013-14 to 2014-15 associated with the Woleebee Creek to Glebe Weir project.

Purchase of property, plant and equipment – changes between years reflects alignment with works program.

Consolidated group - Equity Injections / (Withdrawals)

Consolidated group - Dividends, Tax Equivalent Payments (TEPs), Community Service Obligations (CSOs) & Grants


Sept Dec Mar Jun STATEMENT OF CASH FLOWS Unit Budget Actual Budget Forecast

Cash flows from operating activitiesInflows:

60,285 63,242 62,494 62,805 • Receipts from customers $000 248,825 242,638 231,835 239,480 2,855 2,855 2,855 12,245 • CSO, government grant & deferred income receipts $000 20,809 7,280 249,511 204,728

- - - - • Interest received $000 - 1,073 - - Outflows:

(40,847) (37,474) (36,436) (44,837) • Payments to suppliers and employees $000 (159,594) (114,567) (202,568) (182,999) - (2,028) (2,068) (2,014) • Taxation - external $000 (6,109) (21,947) (5,417) 1,706

22,292 26,594 26,845 28,199 $000 103,931 114,476 273,360 262,915 Cash flow from investing activitiesInflows:

- - - - • Proceeds from sale of property, plant & equipment $000 - 708 - - 1,230 1,263 1,090 1,182 • Interest received $000 4,766 8,763 6,826 6,697

Outflows:(18,945) (15,827) (12,494) (10,800) • Purchase of property, plant & equipment $000 (58,066) (142,622) (371,663) (271,831) (17,715) (14,564) (11,404) (9,618) $000 (53,301) (133,151) (364,837) (265,134)

Cash flow from financing activitiesInflows:

- - - - • Proceeds from borrowings $000 - 188,100 110,000 80,142 Outflows:

(4,477) (4,469) (4,462) (4,047) • Interest paid $000 (17,455) (17,243) (17,041) (17,803) (373) (373) (373) (80,515) • Repayment of borrowings $000 (81,635) (1,150) (219,540) (236,834)

- (29,000) - - • Dividends to owners of SunWater Limited $000 (29,000) - (12,870) (12,870) (4,851) (33,843) (4,835) (84,562) $000 (128,090) 169,708 (139,451) (187,364)

(273) (21,812) 10,607 (65,981) Increase (decrease) in cash balance $000 (77,459) 151,033 (230,928) (189,583) 149,234 148,961 127,149 137,756 Cash balance brought forward $000 149,234 187,785 338,817 338,817 148,961 127,149 137,756 71,775 Cash balance carried forward $000 71,775 338,817 107,889 149,234



Sept Dec Mar Jun EQUITY INJECTIONS (WITHDRAWALS) Unit Budget Actual Budget Forecast

674,192 690,150 705,369 720,447 Total equity - opening $000 674,192 659,086 667,124 667,124

15,958 15,219 15,078 14,128 Profit (loss) after taxation $000 60,384 20,908 20,558 36,068

Transactions with equity holders :- - - - - Contributed equity injection $000 - - - - - - - (48,000) Dividends to owners of SunWater Limited $000 (48,000) (12,870) (16,000) (29,000)

690,150 705,369 720,447 686,575 Total equity - closing $000 686,575 667,124 671,682 674,192


SUNWATER LIMITEDQ1 Q2 Q3 Q4 CONSOLIDATED GROUP 2014-15 2012-13 2013-14 2013-14

Sept Dec Mar Jun STATE GOVERNMENT TRANSACTIONS Unit Budget Actual Budget Forecast - - - 48,000 Dividends $000 48,000 12,870 16,000 29,000

173 556 (431) (297) Current tax - external $000 - 9,456 - - (1,497) (1,497) (1,497) (1,497) CSO - irrigation $000 (5,988) (8,997) (7,415) (7,417) (1,358) (1,358) (1,358) (1,358) CSO - urban $000 (5,431) (5,036) (5,188) (5,155)

- - - - CSO - other $000 - - - - - - - (9,390) Grants $000 (9,390) (27) (18,807) (16,974)



Consolidated group – Details of Borrowings

The drawdown in 2014 is for Woleebee against the QTC facility – this represents three forward starting loans that werecommitted in June 2013.

Notes 2014-15 2012-13 2013-14 2013-141 Borrowings Unit Budget Actual Budget Forecast

Brought forward $000 271,569 242,231 428,260 428,260 • Drawdown $000 - 188,100 110,000 80,142 • Repayment $000 (81,635) (2,071) (219,540) (236,834)• Interest added to loan balance $000 - - - -

Carried forward $000 189,934 428,260 318,720 271,569

Debt service• Principal $000 (81,635) - (219,540) (236,834)• Interest $000 (17,455) - (17,041) (15,891)

$000 (99,090) - (236,581) (252,725)

Carried forward• Non-current portion $000 188,441 238,480 317,280 270,076 • Current portion $000 1,493 189,781 1,440 1,493

$000 189,934 428,260 318,720 271,569

Carried forward - by loan

$000 189,934 428,260 318,720 271,569



North West Queensland Water Pipeline P/L - Statement of Financial Position

Budget : 2014-15 North West Queensland Water Pipeline Pty LtdQ1 Q2 Q3 Q4 STATEMENT OF FINANCIAL POSITION 2014-15 2012-13 2013-14 2013-14

Sept Dec Mar Jun Unit Budget Actual Budget ForecastCurrent Assets

Cash $000 Receivables $000 Accrued revenue $000 Other $000 $000

Non Current Assets Property, plant & equipment $000

Intangibles $000 Deferred tax assets $000

$000

TOTAL ASSETS $000

Current Liabilities Payables $000 Provision - taxation $000 Inter-company $000 $000

Non Current Liabilities Deferred tax liabilities $000 Inter-company $000 $000

TOTAL LIABILITIES $000

NET ASSETS $000

Shareholders Equity Contributed equity $000

Retained profits $000

TOTAL SHAREHOLDERS EQUITY $000




North West Queensland Water Pipeline P/L - Statement of Cash Flows

Budget : 2014-15 North West Queensland Water Pipeline Pty LtdQ1 Q2 Q3 Q4 STATEMENT OF CASH FLOWS 2014-15 2012-13 2013-14 2013-14

Sept Dec Mar Jun Unit Budget Actual Budget ForecastCash flows from operating activities

Inflows: • Receipts from customers $000 • CSO, government grant & deferred income receipts $000

Outflows: • Payments to suppliers and employees $000

• Taxation - internal - tax sharing agreement $000 $000

Cash flow from investing activitiesInflows:

• Interest $000 Outflows:

• Purchase of property, plant & equipment $000 $000

Cash flow from financing activitiesOutflows:

• Interest $000 • Repayment of borrowings $000

• Dividends to shareholders $000 $000

Increase (decrease) in cash balance $000 Cash balance brought forward $000 Cash balance carried forward $000




Attachment 4 – Capital expenditure program

Dam Safety Upgrades – DSU Water Supply Scheme – WS Service Contract – SC Industrial Pipelines – IP Eungella Water Pipeline P/L – EWPPL Attachment 5 – Planned asset acquisitions and disposals Nil Attachment 6 – Other significant expenses

SUNWATER LIMITED 2013 - 14 2014-15 2014 - 40 Fiscal PurposeCONSOLIDATED GROUP Unit Forecast Budget Total Year and CAPITAL EXPENDITURE Cum. Project Complete Objective Status

Development projects A 02 - Woleebee - Post commissioning $000 350,364 23,041 383,400 2016 Commercial pipeline Comissioned

Sub total $000 350,364 23,041 383,400

Significant projectsD DSU - Eungella (Bowen Broken WS) $000 - 8,640 13,357 2016 Dam Safety Upgrade PendingD DSU - Kinchant (Boyne WS) $000 16,987 750 17,737 2019 Flood Repair PendingA Kenya to Chinchilla ( P Feasibility Project) $000 56,941 1,523 58,464 2015 Development Project PendingC BMP Augmentation (IP Feasibility Project) $000 31,094 1,406 32,500 2015 Development Project PendingD EWPPL - Moranbah to Lake Vermont (IP Feasibility Project)) $000 1,510 2,497 4,688 2016 Development Project Pending

Sub total $000 106,532 14,816 126,746

Other projectsC 1. Bulk Water - Infrastructure SC $000 Ongoing 3,071 OngoingC 3. Bulk Water - Development Projects - Other $000 Ongoing 1,596 OngoingC 4. Bulk Water - Non-infrastructure $000 Ongoing 1,568 OngoingC 5. Bulk Water - Subsidiaries $000 Ongoing 6,161 OngoingC 6. Corporate - Non-infrastructure $000 Ongoing 394 OngoingC 8. Irrigation - Infrastructure SC $000 Ongoing 1,925 OngoingC 9. Irrigation - Non-infrastructure $000 Ongoing 307 OngoingC 11. Pipelines - Infrastructure SC $000 Ongoing 2,776 OngoingC 14. Pipelines - Non-infrastructure $000 Ongoing 1,608 OngoingC 15. Pipelines - Subsidiaries $000 Ongoing 804 Ongoing

Sub total $000 20,209

Consolidated group total $000 58,066

Project approvalA - Shareholding Minister (SHM) approved $000 24,564 B - Board approved - yet to be approved by SHM $000 - C - Board approved - does not require SHM approval $000 21,615 D - Yet to be Board approved $000 11,887 E - Does not require Board or SHM approval $000 -


Project fundingF - Proponent underwritten infrastructure $000 2,497 G - Wholly or partially SunWater funded $000 55,570



Other significant expenses 2014-15 2015-16 2016-17 2017-18 2018-19Total 5 years

Local Management Arrangements (LMA) $M 0.250 - - - - 0.250

Industrial Pipelines Divestment $M 0.265 - - - - 0.265



Attachment 7 – WACC rate calculations

SUNWATER LIMITED Asset valuation FINANCIAL MODEL - Version 1203.00 Nominal HUB

1 WACC & Hurdle Rates

WACC rate (1) Hurdle rate = Ke / ( 1 - Tc ) * ( E / V ) + Kd * ( D / V )

Applicable cashflow stream Xo

Margin

Hurdle rate

2 Cost of Equity Commonwealth bond yield rate rfe Market risk premium mrp mrp = rfe + ( rm - rfe ) Expected return on the market rm rm = rf + mrp

Asset Beta Ba Debt Beta Bd Equity Beta - calculated using the selected method if input below is blank Be

(1) : Be = Ba * ( 1 + ( 1 - ( Tc * ( 1 - G ))) * D / E )

Equity beta - input

Alpha A

Cost of equity Ke Ke = rfe + ( mrp * Be ) + A

3 Cost of Debt Long term debt • 10 year Commonwealth bond yield rate rfd • Long term margin LTm

Short term debt Nominal short term bank base rate ST Short term margin STm

Weighted cost of debt Kd Kd = ( rfd + LTm ) * ( LTD / D ) + ( ST + STm ) * ( STD / D )

4 Debt / Equity structure Long Term Debt LTD Short Term Debt STD Market value of debt D D = LTD + STD Market value of equity E E = V - D Market value of assets V V = E + D

5 Taxation Corporate tax rate - % Tc

Portion of franking credits that can be used by shareholders to offset personal tax. G G = ( f * w ) • Fraction of imputation credits distributed to shareholders f • Value of the imputation credit as a % of the credit's face value when received by shareholders w Effective corporate tax rate under imputation - % Tic Tic = Tc ( 1 - G )

6 Inflation rate Implied from 10 year Commonwealth bond rates - % Utilised for Real WACC % calculation

7 Data validation lists

WACC rate formula Tax Debt Imputation Description Cash flow streamNominal

rate % (1) Hurdle rate = Ke / ( 1 - Tc ) * ( E / V ) + Kd * ( D / V ) Pre Pre No Xo (2) Hurdle rate = Ke / ( 1 - Tc ) * ( E / V ) Pre Post No Xo + Xd (3) Hurdle rate = Ke * ( E / V ) + Kd * ( 1 - Tc ) * ( D / V ) Post Pre No Xo * ( 1 - Tc ) (4) Hurdle rate = Ke * ( E / V ) Post Post No Xo + Xd + Xtc (5) Hurdle rate = Ke * ( E / V ) + Kd * ( D / V ) Post Pre No Vanilla Xo + Xtc (6) Hurdle rate = Ke * ( E / V ) + Kd * ( 1 - Tic ) * ( D / V ) Post Pre Yes Xo * ( 1 - Tic ) (7) Hurdle rate = Ke * (( 1 - Tc ) / (1 - Tic )) * ( E / V ) + Kd * ( 1 - Tc ) * ( D / V ) Post Pre Yes Classical Xo * ( 1 - Tc ) (8) Hurdle rate = Ke * ( E / V ) + Kd * ( D / V ) Post Pre Yes Xo + Xtc + Xtic

Equity beta calculation

(1) Equity beta - Monkhouse (International) (1) : Be = Ba * ( 1 + ( 1 - ( Tc * ( 1 - G ))) * D / E )

(2) Equity beta - Brealey Myers (2) : Be = Ba * ( D + E ) / E - (( Kd - rfd ) / ( rm - rfe )) * D / ( D + E )

(3) Equity beta - Conine (3) : Be = Ba + ( Ba - Bd ) * (1 - Tic) * D / E

8 Cashflow definition terms Operating cash flows ( pre-tax and pre-financing ) Xo Cash flows to the providers of debt capital Xd Cash flows to tax at corporate tax rate Xtc Adjustment to cash flows to tax as a result of imputation Xtic



Attachment 8 – Key 2014-15 Business Risks

SunWater routinely identifies, monitors, assesses and mitigates all potential corporate, local (worksite) and individual project risks. Risks and opportunities which impact the 12 month planning horizon are addressed and mitigated through the objectives and undertakings detailed in SunWater’s annual Statements of Corporate Intent and through the more detailed group and work plans implemented by business groups.

The key risks inherent to SunWater’s business operations which have the potential to impact company performance are detailed below. Business risks and mitigations are further detailed in SunWater’s Corporate Plan.

SunWater’s key risks are summarised as:

Inherent Risks Mitigations

Failure of a dam, weir or other major infrastructure due to inadequate maintenance.

Comprehensive dam safety program in place (which includes external assurance).

Well developed management and maintenance program and supporting asset management systems, policies and processes operationalised.

Workplace health and safety incident that results in the permanent incapacitation or death of an employee or contractor.

SunWater has a mature safety management system and business culture focussed on achieving “No Harm”.

Loss of supply/damage to third party property as a consequence of poor decision making or improper operation of infrastructure.

Mitigated through SunWater’s training programs established for operators and other regionally based personnel with oversight from central office service delivery teams.

Significant financial loss and/or reputation damage resulting from poor commercial decision making.

SunWater’s current pricing and contracting processes managed through a contracting framework that includes engagement with customers.

Significant financial loss and/or reputation damage resulting from cost overruns and schedule blow outs due to inadequate or poor project management of projects.

SunWater has strong project management systems and holds PMO accreditation.

Breach of operational or environmental licence condition as a consequence of poor decision making or improper operation of infrastructure.

Currently managed through training of central office and regional personnel with oversight from central office service delivery teams.

Failure of financial controls results in financial loss due to fraud, errors or mismanagement.

SunWater has strong financial management procedures and systems, supported by internal and external audit.

Failure to comply with statutory reporting or other government policy requirement due to mismanagement.

SunWater has established processes that ensure that statutory and GOC policy requirements are met.

Inability to function due to loss of access, or failure of critical corporate information systems.

SunWater ICT group manage SunWater systems and ensure functionality, security, disaster recovery and business continuity are maintained.



Attachment 9 – Sponsorships, advertising, corporate entertainment, donations and other arrangements

Table 1 - Sponsorship, advertising, corporate entertainment, donations and other activities – details of individual expenditure items

Activity 2013-14 Budget 2013-14 2014–15 Quarter 2014-15 2014-15 Per Head Budget

Forecast Budget ($)

($) ($) ($) Sept Dec Mar Jun ($)

Sponsorship

Regional Achievement & Community Awards1 c 15,000 - - - - - - NA

ANCOLD Conference b 10,000 10,000 10,000 10,000 NA

Total over $5,000 25,000 10,000 10,000 - - 10,000 -

Other (total) below $5,000 30,000 40,000 45,000 12,000 12,000 10,000 11,000

TOTAL (1) 55,000 50,000 55,000 12,000 12,000 20,000 11,000

Advertising

Water safety advertising campaign d 220,000 220,000 220,000 40,000 131,500 40,000 8,500 NA

School Safety Program e 30,000 30,000 30,000 7,500 7,500 7,500 7,500 NA

Total over $5,000 250,000 250,000 250,000 47,500 139,000 47,500 16,000

Other (total) below $5,000 - - - - - - - NA

TOTAL (2) 250,000 250,000 250,000 47,500 139,000 47,500 16,000

Corporate entertainment

Staff awards ceremony f 13,000 13,000 13,000 - - - 13,000 115

Brisbane Office Christmas Celebration2 g 16,000 - 16,000 - 16,000 - - 115

Total over $5,000 29,000 13,000 29,000 - 16,000 - 13,000

Other (total) below $5,000 31,500 52,500 31,500 5,000 16,500 5,500 4,500

TOTAL (3) 60,500 65,500 60,500 5,000 32,500 5,500 17,500

Donations TOTAL (4) - - - - - - - NA

Strategic community and stakeholder engagement activities c

- - - - - - -

Total over $5,000 - - - - - - -

Other (total) below $5,000 30,000 30,000 30,000 - 10,000 15,000 5,000 NA

TOTAL (5) 30,000 30,000 30,000 - 10,000 15,000 5,000

Total (1)+(2)+(3)+(4)+(5) 395,500 395,500 395,500 64,500 193,500 88,000 49,500



a. To provide opportunities for regional school children to develop and enhance their music ability.

b. Water Industry conference to stay in touch with new developments and best practice.

c. Promote the corporation and gain valuable feedback from industry and the public.

d To promote safe public behaviour on and around SunWater assets, especially dams.

e. To encourage and promote public safety around channels, weirs and dams.

f. To recognise and reward staff who go over and above their duties to maximise benefits to SunWater and the State.

g. Opportunities for the CEO and executive managers to convey their thanks to all staff direction for their contribution during the year and to reflect on achievements and challenges.

Table 2 – Corporate Entertainment: Details of Total Forecast Expenditure under $5,000 per event

Activity 2013-14 2013-14 2014–15 2014–15 Quarter 2014-15

Budget Forecast No. of Budget ($)

($) ($) activities ($) Sept Dec Mar Jun

Corporate entertainment Total

Staff functions2 c 20,000 46,000 32 20,000 2,500 12,500 2,500 2,500

Stakeholder and Community Engagement c 11,500 6,500 6 11,500 2,500 4,000 3,000 2,000

Total under $5,000 31,500 52,500 38 31,500 5,000 16,500 5,500 4,500

Note 1 – The single sponsorship planned in 2013-14 for Regional achievements and community awards was replaced by a number of smaller (below $5,000) sponsorships. Note 2 – The Brisbane Office Christmas celebration did not proceed due to the timing of the business realignment and associated staff departures. Instead a number of smaller events (below $5,000) were held, combining staff send offs with Christmas celebrations.

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