2002-03 Annual Report

M ELBOURNE WATER
Annual Report 2002/ 03

Who we are 1
What we do 2
Who we work wi t h 3
Why we produced t hi s repor t 3
Our goal s 4
Chai rman and Managi ng Di rect ors repor t 5
Our preci ous wat er 6
Managing our protected catchments 8
Providing safe, high quality drinking water 9
Managing drought 10
Investing in a sustainable future 11
Conserving a scarce resource 12
Recycling water towards a greener future 13
Prot ect i ng t he envi ronment 16
The Western Treatment Plant 18
The Eastern Treatment Plant 18
Sustainable management of biosolids 20
Reducing greenhouse emissions 20
Our no-odour objective 21
Protecting our waterways and bays 21
Improving the health of Port Phillip Bay 25
Improving the health of Westernport 26
Education the key to behavioural change 26
Focusi ng on good resul t s 28
A major benchmark managing built assets 30
Managing risk and maintaining high security 31
A safe workplace 32
Meeting our commitment to service delivery 32
Our people 35
Financial results 38
Key peformance indicators 40
Corporate governance 42
Fi nanci al st at ement s 44
Compl i ance i ndex 72
St at ement of Corporat e Int ent 74
St at ut or y i nformat i on 77
Publications 77
Consultants 77
Government grants 78
National competition policy 78
Freedom of Information 78
Pricing changes 79
Privacy legislation 79
Energy and Water Ombudsman 79
Whistleblowers protection and procedures 79
Information available on request 79
CONTENTS
M e lb o u rn e Wa te r An n u a l R e p o rt 2 0 0 2 /0 3
Melbourne Water ANNUAL REPORT 2002/ 03 1
Melbourne Water is owned by the Victorian Government.
Our operating area extends from Melbournes water
supply catchments high up in the Yarra Ranges, to
the Mornington Peninsula and Western Port, north
to Yan Yean and west to Werribee.
We are a significant business, managing $7.1 billion
of natural and built assets. Our annual operating revenue
of more than $510 million is earned from water supply,
sewage treatment and drainage rates. This is to fund our
operations and capital program, to pay off debt and return
dividends and equivalent taxes to the Government.
We plan to invest more than $145 million a year over the
next three years on our infrastructure including reservoirs,
sewage treatment plants, pumping stations, sewers and
drains to help ensure we meet our objectives. We are
committed to decision-making based on economic, social
and environmental considerations.
An independent Board of Directors is responsible for the
governance of Melbourne Water. The responsible Minister
is the Minister for Water.
Our people have diverse skills and expertise, and range
from environmental scientists to engineers and research
and technology specialists, and we place a high priority
on building strong partnerships and relationships in the
government, industry and community sectors.
WHO WE ARE
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We protect bays and
oceans by building
wetlands to reduce
stormwater pollution,
improving the quality
of effluent discharged,
and reducing flows into
the sewage treatment
plants through water
conservation programs
We t reat sewage and
i ndust ri al wast e
collected by our retail
customers from homes
and businesses
We protect and improve
wat erways by managing
irrigators, stabilising beds
and banks, preventing
flooding, fencing off stream
frontages, removing willows
and other weeds, planting
native species and releasing
water from reservoirs to
ensure environmental flows
We harvest high quality
water from uninhabited
cat chment s and store
water in reser voi rs, often
for years at a time, to
help purification
We manage an
extensive network
of pipes, pumping
stations and water
treatment plants
and suppl y wat er
to our retail
customers
We supply
recycl ed wat er
for agricultural,
horticultural
and other
businesses and
to irrigate open
spaces such as
golf courses
We bui l d wet l ands
and ot her wat er-
sensi t i ve feat ures
to treat or remove
stormwater pollution
litter, engine oil
and other urban
runoff before it
washes into drains,
waterways and bays
2
We manage Melbournes water resources in a way that
aims to ensure that future generations enjoy one of the
best urban environments in the world. This involves a
major role in the total water cycle.
Our Vi si on
At Melbourne Water, we understand that engaging our
stakeholders is the key to achieving our vision of
Maki ng Mel bourne t he worl ds most wat er-sensi t i ve ci t y .
WHAT WE DO
Who we work wi t h
EPA Victoria, the Department of Human Services and the
Essential Services Commission regulate the environmental,
public health and economic aspects of our business.
We work across several arms of the State Government,
including the Department of Sustainability and Environment,
and the Department of Treasury and Finance.
Our main customers are the retail water companies
City West Water, South East Water and Yarra Valley Water.
We also provide services to other water authorities, local
councils, land developers, businesses that divert river
water, and recycled water users.
Industry partners include AGL Ltd, which generates
electricity from biogas to help power the Western
Treatment Plant at Werribee, research organisations
such as the CSIRO and Co-operative Research Centres,
engineering consultants, and contractors who carry out
tasks ranging from inspecting and maintaining assets
to catchment surveillance and litter removal.
We work closely with a wide range of community
stakeholders including Friends of, Landcare, resident
and environment groups, advisory bodies, rural
landowners, and the education sector.
Our val ues
We have developed values that guide our decision-making
and enable the organisation to operate in a professional
manner, and in the best interests of our customers,
employees, shareholder, suppliers and stakeholders.
We are people who:
recognise we achieve more by working with others
feel privileged to be custodians of our water resources
behave with integrity
attain excellence through creativity and innovation
celebrate our achievements and learn from our

experiences.
Why we produced t hi s repor t
Melbourne Waters Annual Repor t outlines how we have
performed in meeting our key responsibilities in 2002/ 03.
It explains how we provide a safe and reliable supply
of water, protect the environment, deliver business
improvements and help the Victorian Government
achieve its policy objectives.
We have a goal of ensuring that the community is well
educated and informed on water issues. This publication,
our Wat er Resources and t he Environment 2002/ 03 and
our Social Repor t 2002/ 03 are important steps towards
achieving this goal. Wat er Resources and t he Environment ,
and the Social Repor t will be available on Melbourne
Waters website www.m e lb o u rn ewa te r.co m .a u .
All of our reports are available on request by e-mailing
in q u iry@ m e lb o u rn ewa te r.co m .a u or ringing 131 722 within
Victoria or (03) 9235 7100 from elsewhere in Australia.
A feedback form is provided at the back of this report,
and we welcome your comments.
OUR GOALS
Our strategic plan outlines our goals under
the following priority areas:
Managi ng Mel bournes Wat er
Resources and t he Envi ronment
Conserve Melbournes high quality,

affordable drinking water for present and
future generations without the need for
further dams.
Operate in a manner that improves

the environment.
Prot ect i ng our Wat erways and Bays
Improve the health and amenity of Port

Phillip and Western Port bays for the
prosperity and enjoyment of present and
future populations.
Ensure that Melbournes natural waterways

are healthy with increased numbers of
native fish, platypus and plant life.
Managi ng our Bui l t Asset s
Ensure that the integrity of our water,

sewerage and drainage infrastructure is
well maintained and protected now and
into the future.
Responsi bl e Fi nanci al Management
Remain Australias most efficient water

authority and provide ongoing financial
returns to our owner, the Victorian
Government.
Worki ng wi t h our Cust omers and
t he Communi t y
Provide excellent service.
The community is well educated

and informed on water issues.
A motivated and skilled workforce that

generates new ideas and is aligned with
the latest technologies and innovations.
4
S ilva n D a m
Melbourne Water continued to focus on sustainable
water resource management as Melbourne experienced
its seventh consecutive year of drought.
The Victorian Governments Wat er f or t he Fut ure provided
the policy framework for the further development of water
recycling and water conservation programs. Melbourne
Water is committed to helping the Victorian Government
meet its key targets of reducing per capita water
consumption by 15 per cent, and increasing water
recycling to 20 per cent, both by 2010.
We have played a leading role in the past few years in
the development of the Victorian Governments Water
Resources Strategy for Melbourne. This strategy sets
a solid framework for the future. Building on the
knowledge gained from the strategy, Melbourne Water
developed a water conservation plan that will save
13,000 million litres of drinking water a year by 2010.
The plan aims to broaden initiatives that are already
delivering water savings, including reducing leakage
from our operations, producing sustainable water use
plans with councils, building industry partnerships,
educating and engaging the community, and initiating
water recycling schemes. A consolidated sustainable
water plan is now being developed with Melbournes
retail water companies.
Water recycling increased by about 80 per cent this year
to 31,165 million litres, up from 18,439 million litres for
2001/ 02, with supply beginning to our first recycling
customers west of Melbourne. We also made significant
progress in examining future opportunities presented by
the Victorian Governments Wer ribee Plains Vision for
major recycling schemes to service a variety of industries
and revitalise dryland areas from the Maribyrnong River
west to Geelong, Bacchus Marsh and Sunbury.
While drought, water conservation and water recycling
were priority issues, we also continued to ensure that our
management of water, sewerage and drainage infrastructure
was paramount for our business. We implemented a
$118 million program in infrastructure this year.
Melbourne Water is in the final stages of a major upgrade
of our Western Treatment Plant and further developed
plans for a major upgrade of our Eastern Treatment Plant.
Investments in these upgrades will protect the marine
environment, deliver tertiary-treated water from our
sewage treatment plants, open up new recycling
opportunities, create economic growth and help us
meet community expectations.
Effective long-term planning is essential for Melbourne
Water and our new strategic plan was completed in March
2003. The plan was developed to provide a clear summary
of our business objectives, goals and actions to support
the achievement of our vision of Making Melbourne t he
Worlds most wat er-sensit ive cit y . Importance is also
given in the plan to responsible financial management
and to our management of major water, sewerage and
drainage infrastructure.
Research is a critical element in planning for the future.
Our people work with expert external organisations such
as the Co-operative Research Centres, the CSIRO and
universities in collaborative projects that maximise the
impact of research funds. We invested $2.5 million
in research and development programs this year. Key
research areas were treatment technology, waterways
environment, drinking water and water recycling.
Studies were commissioned to investigate the impact of
climate change in greater Melbourne, and on how we can
maximise the use of Melbournes total water resources
including stormwater, treated effluent, as well as drinking
water. The latter study is being undertaken by Professor
Peter Cullen, a former Chief Executive of the Co-operative
Research Centre for Freshwater Ecology, and Professor
Russell Mein, a leading figure in urban hydrology,
catchment yield, flood estimation and salinity.
Fi nanci al resul t s
Responsible financial management is a major priority
and we generated strong returns this year. Net cash
from ordinary activities of $324.7 million enabled us
to invest $117.9 million in assets for the future, reduce
our debt by $21.3 million and pay taxes and dividends
of $123.1 million to the Victorian Government. Net
profit after tax was $150 million, which was $18.4 million
better than our plan.
Looki ng ahead
We acknowledge the expertise and willingness of
our people to take on new challenges and to commit
to continuous improvement. An area of particular
importance is to improve our occupational health
and safety performance.
In the coming year we look forward to working with the
Victorian Government and other key stakeholders to
achieve the targets established in our strategic plan.
Our investment in education will continue as will our
commitment to providing safe, high quality drinking
water and to protecting and improving Melbournes
bays and waterways.
Graeme W Bowker Bri an R Bayl ey
Chairman Managing Direct or
CHAI RM AN AND M ANAGI NG DI RECTORS REPORT
6
OUR PRECI OUS WATER
Managing Melbournes Water Resources and the Environment
Goal : We cont i nue t o conser ve Mel bournes hi gh qual i t y, affordabl e
dri nki ng wat er for present and fut ure generat i ons wi t hout t he
need for fur t her dams
Achi evement s
Key Chal l enges
Di sappoi nt ment s
> Maintaining the communitys enthusiasm for water conservation even during periods of high rainfall.
> Implementing recommendations of the Water Resources Strategy as agreed by the Victorian
Government.
> Developing contingency plans to counter the impact of climate change on our water resources.
> Developing a more integrated approach to managing available water resources, including the
use of groundwater, stormwater and treated effluent.
Unchlorinated water entered the system after a power failure at the Silvan treatment plant.
However, timely action avoided any impact on customers.
Dirty water complaints were received when we were required to lower water levels at Silvan
Reservoir to carry out works on a water main.
Further delays to upgrading drinking water for Mornington Peninsula residents because
obtaining permits for reservoir covering and replacement at Dromana, Frankston and
Mornington has taken longer than expected.
We provided our customers with 483,000 million litres of drinking water that enabled the retail
water companies to meet consistently high levels of service.
A major study of catchments in southern Australia found that Melbournes protected
catchments provide the same or better water quality as that from an unprotected catchment
with a water filtration plant.
Our drinking water experts were invited to present to the worlds first water safety and risk
management conference held in Berlin on Melbournes unique water quality management system.
Played a key role in helping the Victorian Government to complete a Water Resources Strategy
for greater Melbourne. We committed $50,000 this year for the preparation of the final
strategy, making a total commitment of $850,000.
Completed a water conservation action plan that outlines initiatives to save 13,000 million
litres of water a year to help achieve the Victorian Governments target of 15 per cent
reduction in water consumption by 2010.
Piloted a sustainable water management strategy with the City of Melbourne to cut its water
consumption by 15 per cent. This will now be used as a template for other councils who can
apply for grants of $10,000 each.
Prepared drought contingency plans that will supply a further 170,000 million litres of water
to Melbourne should extreme conditions persist.
A market research study found 97 per cent of people surveyed were able to estimate the level
of Melbournes water storages.
Increased water recycling from our sewage treatment plants by about 80 per cent, recycling
more than 11 per cent of treated effluent.
Invested $1.4 million on a range of industry and community education programs including
training workshops to accredit plumbers and gardeners in sustainable water practice.
There are now 350 plumbers with Green Plumber accreditation in Melbourne.
Invested $200,000, in a partnership with the Victorian Governments Office of Housing,
to reduce water usage in public housing estates by recycling stormwater to irrigate gardens.
Began supplying recycled water to the Werribee Tourist Precinct after completing a $2.5 million,
six-kilometre pipeline from the Western Treatment Plant.
Wat er Updat e
G e o rge K a lo ge rin is
Yel l ow Cab Taxi Ser vi ce
Ye llo w C a b ta xi d rive r G e o rge K a lo ge rin is
is o n e o f M e lb o u rn e s in fo rm e d ta xi
d rive rs wh o h a s o u r la te st wa te r sto ra ge
re p o rt a t h is fin ge rtip s to p a ss o n to
h is p a sse n ge rs. S to ra ge in fo rm a tio n
a n d wa te r-savin g m e ssa ge s a re se n t
to Ye llo w C a b s e a ch d ay a n d d istrib u te d
to th e co m p a ny s ta xis via th e ir in te rn a l
co m m u n ica tio n n e two rk .
Managi ng our prot ect ed cat chment s
Most of our water comes from 140,000 hectares of
uninhabited, forested catchments high up in the Yarra
Ranges that have been closed to the public for more than
100 years. Melbourne is one of only about five cities in
the world that has protected water supply catchments.
Melbourne Water manages these catchments to ensure
the purity of the source of our drinking water. We believe
it is better to start with the highest quality source water
than having to filter it to reach required standards.
The forests act like a vast natural sponge, catching,
holding, filtering and slowly releasing rainwater into
streams and then reservoirs. About half of Melbournes
catchments are covered in mountain ash, which are
among the worlds largest hardwood trees.
Safeguarding these catchments to ensure the highest
quality source water is a major priority for Melbourne
Water. Bushfires, erosion and unauthorised public entry
are the main risks we manage.
Melbourne Water spends about $1.3 million a year to
manage these risks as part of our work to ensure the
highest possible quality source water.
Roads that run through the catchments have been built
to provide good access for firefighters. Drainage and
maintenance works on these roads are carried out
to minimise sediment run-off into streams and
eventually reservoirs.
In recent years, Melbourne Water has upgraded signage
and security systems in the catchments. Security officers
employed to minimise public access apprehended 40
people in the catchments this year.
Revi ewi ng t he ri sk of bushfi res
Melbournes forested catchments are at risk from fire
each year. A burned forest will wash soot, ash and debris
into reservoirs, affecting short-term water quality, as
experienced this year in Canberra and Victorias north-east.
However, fire also affects the quantity of water that runs
off into streams and reservoirs. Forests of mountain
ash need large quantities of water for many years
after a bushfire.
Given the serious wildfire threat this year, Melbourne
Water worked closely with other statutory authorities, and
our catchment operations people ensured all equipment,
tanks, bulldozers, pumps and auxiliary equipment were
fully operational.
Melbourne Water attended 15 fires that could have
threatened our assets. Only one of these, at Frankston
Reservoir, developed into a significant blaze, burning
40 hectares of land around the reservoir in J anuary 2003.
We took preventative action by diverting and filtering any
run-off from subsequent rainfall, avoiding water
contamination from ash, soil and debris.
Following this years extreme fire season, Melbourne
Water is undertaking a strategic review of our approach
to fire protection and suppression, and reviewing the
vulnerability, risks and liabilities to wildfire of our water
catchments and water supply assets.
Following the devastating bushfires of early 2003, North
East Water, based in Wodonga, and ActewAGL, the ACT
water authority, sought expert advice from Melbourne
Water as part of their catchment rehabilitation planning.
Melbourne Water intends, where appropriate, to include
these findings in our bushfire planning.
Provi ng t he val ue of our cat chment s
A key research and development project completed during
the year was a three-year study investigating dry and wet
weather run-off quality, and the incidence of pathogens in
catchments with different land uses in southern Australia.
The study showed that our protected catchments supply
the same or better water quality as that from an
8
OUR PRECI OUS WATER
Meet i ng t he fi re t hreat
Jim Tite
Sect i on Leader, Headworks Mai nt enance
N o t m a ny p e o p le re a lise M e lb o u rn e Wa te r is
re sp o n sib le fo r fo u r cru cia l fire to we r lo o ko u ts
d u rin g th e su m m e r fire se a so n in p ristin e
fo re st e a st o f M e lb o u rn e .
Th ey a lso d o n t rea lise th a t a b o u t 5 0 M elb o u rn e
Wa te r fire figh te rs a ssiste d th e C o u n try F ire
Au th o rity a n d th e D e p a rtm e n t o f S u sta in a b ility
a n d E n viro n m e n t with th e b a ttle la st su m m e r
to co n ta in o n e o f Victo ria s wo rst b u sh fire s.
A d e cisio n m a d e la st ye a r to re fo rm o u r fu ll-
tim e fire figh tin g u n it co u ld n t h ave co m e a t
a m o re cru cia l tim e .
Th o se 2 0 M e lb o u rn e Wa te r fire figh te rs,
to ge th e r with a n o th e r 3 0 su m m e r ca su a l
fire figh te rs, n o t o n ly lo o ke d a fte r M e lb o u rn e
Wa te rs ca tch m e n ts, b u t we re a lso in th e th ick
o f it in th e n o rth -e a st o f th e sta te wh e re th e
wo rst fire s ca m e th ro u gh . Th ey we re ava ila b le
in sh ifts a ro u n d th e clo ck p rovid in g im p o rta n t
e q u ip m e n t, ve h icle s a n d ju st p la in m a n p o we r.
unprotected catchment with a water filtration plant. This
means that there would be no public health benefit to be
gained from filtering our water.
Project Co-ordinator Dr David Roser said: The protected
catchments seem to produce far better water quality than
the impacted catchments, including what can be expected
by conventional water treatment.
Provi di ng safe, hi gh qual i t y
dri nki ng wat er
Our water is safe and pleasant to drink, and undergoes
minimal treatment. A range of risk management systems
provides barriers to contamination.
Melburnians place a high value on our drinking water,
which has a reputation for being among the most
pleasant and safe in the world.
In recent years, about 10 per cent of Melbournes water
has come from Sugarloaf Reservoir, which is mainly filled
by pumping from the Yarra River, and a further five per
cent from Yan Yean Reservoir in the Plenty River valley,
Melbournes oldest and shallowest water storage. Water
from these reservoirs requires full filtration and disinfection.
Ensuri ng wat er qual i t y
The water we supply must be safe, pleasant to drink and
meet the requirements of:
National Health and Medical Research Council drinking

water guidelines
Victorian Government Health (Quality of Drinking Water)

Regulations 2002
Healt h (Fluoridat ion) Act 1973
Food Act 1984.

Our ri sk management syst em
Melbourne Water treats and supplies drinking water
using a risk management system that assures its
quality and safety.
The system, Hazard Analysis and Critical Control Point
(HACCP), was originally adopted by the food industry.
It focuses on quality management from the catchment to
the tap, rather than end-point testing, by identifying risks
and establishing control points. Melbourne Water was one
of the first water authorities to apply the HACCP system
to drinking water.
Our quality and safety management systems are formally
certified and audited by Lloyds Register Quality
Assurance. This includes HACCP and international
standard ISO 9001 for drinking water quality, and ISO
14001 for environmental management.
Lloyds undertakes a recertification process every three
years and a surveillance audit every six months. Lloyds
visited Melbourne Water for a surveillance audit in J uly
2002 and for a recertification audit in February 2003.
These audits covered both drinking water and
environmental management systems.
French
Island
Phillip
Island
Port Phillip
Bay
YARRA
R
I
V
E
R
MELBOURNE
City West
WINNEKE TP
YERING GORGE
PUMPING STATION
PRESTON St ALBANS
BROADMEADOWS
COWIESHILL
GARFIELD PAKENHAM
TYABB
DROMANA
Mt VIEW
LILYDALE
OLINDA
HALLAMNORTH
DANDENONG
MONBULK
PLENTY
YARRAGLEN
CRANBOURNE
MORNINGTON
N
20 10
Kilometres
0 LEGEND
City West
Water
Yarra Valley
Water
South East
Water
TARAGO
RESERVOIR
UPPER YARRA
RESERVOIR
THOMSON
RESERVOIR
MAROONDAH
RESERVOIR
RUNNING CREEK
RESERVOIR
TOOROURRONG
RESERVOIR
YAN YEAN
RESERVOIR
GREENVALE
RESERVOIR
FRANKSTON
RESERVOIR
SILVAN
RESERVOIR
CARDINA
RESERVOIR
BEACONSFIELD
RESERVOIR
DEVIL BEND/ BITTERN
RESERVOIR
(DECOMMISSIONED)
SUGARLOAF
RESERVOIR
Water SupplyCatchment
Water Storage Reservoirs
Water Service Reservoirs
Water Pumping Stations
Water Treatment Plant
Water Pipelines, Aqueducts
Retail Water Company
OSHANNASSY
RESERVOIR
Mel bourne Wat er Wat er Suppl y Syst em
Framework for wat er qual i t y
Two of our Research and Technology managers helped
revise the Australian Drinking Water Guidelines,
administered by the National Health and Medical
Research Council. The revised guidelines, due for
publication in late 2003, will include the Framework for
the Management of Drinking Water Quality, incorporating
the principles of HACCP.
The National Health and Medical Research Council has
removed the use of total coliforms as a measure of faecal
contamination from the new draft guidelines, leaving
E. coli as the primary compliance indicator, consistent
with Melbourne Waters approach.
Managi ng drought
At 30 J une 2003, we were in the seventh year of the most
severe drought on record. Melbournes water storages had
fallen to 40.4 per cent of capacity. And the period from
J une 2002 to J une 2003 was the driest since records
began in 1855.
The community responded positively to the introduction in
November 2002 of water restrictions the first in 20 years.
We estimated that approximately 29,000 million litres of
Rai nfal l and run-off for Mel bourne cat chment s
water more than enough to fill Maroondah Reservoir
was saved between November 2002 and J une 2003
through restrictions and increased community awareness.
Bal anci ng t he needs of t he envi ronment and i rri gat ors
Melbourne Water is responsible for managing the amount
of water taken from waterways in the Yarra, Stony, Kororoit,
Laverton, Skeleton and lower Maribyrnong catchments.
We issue licences to customers, which enable them to
take water for their homes, farms, market gardens,
vineyards and other businesses.
We work with diverters to develop plans that balance the
needs of all stream users and the environment. These
plans help diverters understand their security of water
supply and plan for the future, and provide greater
certainty during drought.
This year, Melbourne Water introduced restrictions and
bans in the Yarra and Maribyrnong catchments as several
waterways reached minimum flow levels or stopped
flowing altogether.
These bans included businesses licensed to divert water
in the Diamond Creek, Plenty River, Watts River, Hoddles
Creek, Stringybark Creek, Wandin Yallock Creek, Pauls
Creek, Steels Creek and Dixons Creek catchments.
Many of these bans remained in place at 30 J une 2003.
In the Maribyrnong catchment, bans were introduced on
diverters in J anuary 2003 as a result of extremely low
river flows and depletion of Melbourne Waters share of
water in Rosslynne Reservoir. The ban was eased in April
2003, and diverters were allowed to take the balance of
their 15 per cent allocation over the following months.
Across the Yarra catchment, Level One restrictions were
introduced in November 2002. These were upgraded to
Level Two in December 2002 and Level Three in J anuary
2003. Restrictions were eased to Level Two in May 2003.
Exemptions included water required for private vegetable
gardens and essential domestic and stock use, and
emergency fire protection.
10
OUR PRECI OUS WATER
Leadi ng t he worl d i n dri nki ng
wat er safet y
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C a tch m e n t R u n -o ff m m )
C a tch m e n t R a in fa ll m m )
In April 2003, two Melbourne Water drinking water
experts addressed the worlds first water safety and
risk management conference held in Berlin. The
Hazard Analysis and Critical Control Point (HACCP) risk
management system that we use to ensure drinking
water quality was a key focus of the conference.
Microbiologist Melita Stevens, Manager of Drinking
Water Research, presented the World Health
Organizations approach to HACCP water safety plans.
The text for these plans, developed by Dr Stevens and
several other scientists, contains guidance for the
third edition of the WHO Guidelines f or Drinking Wat er
Qualit y, due for release late in 2003.
Water Quality Engineer Kevin Hellier spoke about
Melbourne Waters experience with developing and
implementing a HACCP plan for drinking water supply.
Dr Stevens organised and moderated the first HACCP
workshop for drinking water in the United States.
The workshop was held in Seattle in November 2002.
She is principal investigator in a project to develop a
model plan for the supply of safe drinking water in the
United States, based on HACCP. The two-year project
won US$150,000 of funding from the American Water
Works Association Research Foundation.
This year Dr Stevens also ran a HACCP workshop for
Victorian regional water authorities.
Invest i ng i n a sust ai nabl e fut ure
Our wat er chal l enge
A fundamental challenge for present and future
generations of Melburnians is to live within our water
means. The citys population will continue to grow,
increasing demands on water. Melbournes current water
supply and storages are limited, and we recognise that
the environmental and social costs of new dams are
unacceptably high.
Pl anni ng for t he l ong t erm
A Water Resources Strategy for greater Melbourne, led
and principally funded by Melbourne Water, was presented
to the Victorian Government in October 2002. Melbourne
Water has contributed a total of $850,000 to the long-
term strategy.
The strategy proposed a blueprint for maintaining a safe,
reliable, and financially and environmentally affordable
water supply, which will cope with the predicted growth in
Melbournes population of 32 per cent over the next 50 years.
In its initial response, the Victorian Government adopted
10 of the initiatives proposed in the strategy, including
leading the development of national water efficiency
labelling standards, encouraging the use of water-efficient
appliances, education campaigns, research, and the
development of water management plans for large
industrial users. The Government is considering further
recommendations regarding environmental management,
water pricing and regulation of water-efficient appliances.
The planning committee comprised representatives from
government and non-government organisations, the
farming sector, and scientific and academic institutions.
St udyi ng cl i mat e change
During October 2002, Melbourne Water sent two senior
managers to Britain, Spain and the United States to
study water resources planning for climate change. The
visit allowed us to benchmark Melbourne Waters water
resource management planning, and revealed it to be
world class. The high variability of our streamflow means
that we are relatively experienced in considering
climate uncertainty in our planning.
Following the overseas visit, we commissioned an
investigation of the impact of climate change on
Melbournes water supply. The study, being conducted
by the CSIRO and due to be completed in 2003/ 04,
is examining climate change projections for Melbournes
catchment and service areas, including possible changes
in rainfall, temperature, evaporation and humidity.
The study will assess the implications of climate change
on catchment fire risks, sea level changes, flooding, water
quality and water recycling. It will also identify likely future
developments that could affect the demand for water and
opportunities to enhance the reliability of our water
supplies. Melbourne Water will use the study results
in its contingency planning.
Opt i mi si ng our wat er resources
At the end of the year, we commissioned a study by eminent
environmentalist Professor Peter Cullen and noted hydrologist
Professor Russell Mein that will examine ways of optimising
the use of water resources in greater Melbourne.
The study will consider the most appropriate ways of
using an abundant supply of high quality effluent that
will become available as a result of major upgrades of
Melbournes two major sewage treatment plants. It aims
to guide integrated water resource management
throughout Melbourne in the next 20 years.
Pl aci ng a hi gh val ue on our wat er
This year, a positive community response to water
conservation messages, the understanding of water
storage levels and the introduction of water restrictions
helped curb Melbournes water consumption, despite a dry
summer. Peak daily consumption of 2212 million litres
well below the maximum historic daily peak levels of more
than 3000 million litres was recorded on 25 J anuary
2003 when the temperature reached 44.1 degrees.
Melbourne Water continued working to increase
community understanding and awareness of drought.
These education programs aim to ensure the community
values and appreciates our water, leading to long-term
behavioural change.
In our annual tracking study, held in October 2002, 97
per cent of Melbournians surveyed were able to estimate
the level of Melbournes water storages. And 60 per cent
of people said the water storages were between 50
and 59 per cent full, which was correct at the time
of the survey.
A Newspoll market research study conducted in mid-J une
2003, found that more than six in 10 respondents knew
the storage level within two percentage points, and 44
per cent of respondents knew the exact storage level.
D a sa ra th Jaya sriya , m a n a ge r in o u r R e so u rce s a n d E n viro n m e n t
gro u p , h a s d eve lo p e d a M e m o ra n d u m o f U n d e rsta n d in g with th e
M u n icip a l Asso cia tio n o f Victo ria to a ssist co u n cils im p le m e n t
su sta in a b le wa te r u se p la n s.
12
OUR PRECI OUS WATER
The study found that this result was due to television
weather bulletins, our newspaper and radio advertisements,
and strategically located billboards featuring electronic
displays of our water storage levels.
Information on Melbournes water supply system was
translated into 10 languages for ethnic press and radio
advertisements throughout the year.
Melbourne Water also participated in the planning of a
major behavioural change campaign undertaken by the
Victorian Government.
Conser vi ng a scarce resource
Melbourne Water is developing and implementing water
conservation programs that minimise wastage in our
system, reduce demand through more efficient use, and
substitute drinking water with recycled water for purposes
such as garden watering to meet the Victorian
Governments policy objective to reduce water
consumption by 15 per cent by 2010.
The context of this challenge is increasing demands
on the resource, driven by population growth and
development, and climate change, which has the
potential to impact on our water resources.
Our act i on pl an
During the year, in consultation with CSIRO Urban Water,
we developed a Water Conservation Action Plan that
proposes initiatives to achieve water savings of 13,000
million litres a year by 2010.
The plan proposes industry partnerships, community
education and engagement, management efficiency
and water recycling to deliver the savings by increasing
sustainable water use in the community, improving
understanding of our water resources, and changing
patterns of behaviour among young people.
Innovat i ve par t nershi ps wi t h i ndust r y
This year we invested $1.4 million on a range of
industry and community education programs including
training workshops to accredit plumbers and gardeners
in sustainable water practice.
The landmark GreenPlumber s Caring f or our Wat er
program was expanded, with a further 150 plumbers
achieving accreditation. There are now 350 plumbers
with GreenPlumber accreditation in Melbourne.
The program, run by Melbourne Water and the Master
Plumbers and Mechanical Services Association of
Australia, teaches plumbers and plumbing apprentices
about water conservation, stormwater pollution and waste
disposal methods so that they can provide better advice
to the community.
The Senate Environment, Communications, Information
Technology and the Arts Reference Committee said
in its report The Value of Wat er : An Inquir y int o Aust ralias
Urban Wat er Management , that the program should
provide the model for similar accreditation programs
targeting all professions with a role in
water management.
This year we developed the GreenGardeners accredited
training program with partners Sustainable Gardening
Australia, Landscape Industries Association of Victoria,
Holmesglen Institute of TAFE and Environs Australia.
Landscape gardeners and nursery staff across
Melbourne can attend workshops on sustainable
gardening presented by qualified trainers. The training
workshops, which began in J une 2003, provide
information on issues such as stormwater run-off,
use of chemicals and fertilisers, non-invasive plants
and water conservation.
We also provided funding for a pilot project in 12 garden
centres and nursery businesses to increase community
awareness of the environmental impact of gardening
and landscaping.
Melbourne Water is extending our commitment to training
industry professionals in water management by developing
programs for builders and architects.
St ormwat er recycl i ng at publ i c housi ng est at es
Melbourne Water is investing $200,000 during 2003
to roll out a water conservation program in Melbournes
high-rise public housing estates. The program,
a partnership with the Victorian Governments Office
of Housing, will reduce water usage in public housing
estates by recycling stormwater to irrigate gardens.
A pilot program at Prahrans King Street housing estate
will save more than 150,000 litres of drinking water a
year. A stormwater and greywater recycling project planned
for the Atherton Gardens estate in Fitzroy is designed
to save six million litres of drinking water a year.
Par t ners i n sust ai nabi l i t y
Melbourne Water is working with councils to develop
customised sustainable water use plans. This follows a
pilot project in late 2002 with the City of Melbourne that
developed a sustainable water management strategy and
created a template for other councils.
S u e B ro o ke r, o n e o f th e first gra d u a te s o f th e M e lb o u rn e Wa te r
GreenG a rd e n e rs tra in in g p ro gra m , is p a ssio n a te a b o u t ch a n gin g
a ttitu d e s to ga rd e n m a in te n a n ce a n d d e sign .
In J une 2003, in a joint project with the Municipal
Association of Victoria, we made $300,000 available
to other metropolitan councils over two years for the
development of sustainable water use plans. Each
council is invited to apply for a grant of $10,000 to
fund a tailored plan.
Municipal Association of Victoria President Brad Matheson
said the program demonstrated local governments
long-term commitment to working in partnership with
communities and other stakeholders to address
water conservation.
This is a practical example of how state and local
government agencies are working together to deliver
tangible water savings while encouraging all people to
be responsible for conserving their water use, he said.
Other practical examples, also involving energy use, will
be demonstrated as part of a partnership between the
Sustainable Energy Authority of Victoria and Melbourne
Water. Under the partnership, established in April 2003,
projects will be developed to showcase sustainable water
and energy management.
Mi ni mi si ng l eakage from our syst em
Melbourne Water delivers drinking water via 1000
kilometres of distribution mains and more than 200
kilometres of aqueducts and tunnels.
We invest about $100,000 a year rehabilitating and
reducing leakage from our aqueducts, most of which
were built in the 1880s. The aqueducts transfer water
from Melbournes reservoirs to our seasonal storages.
Work during the year included rehabilitation of the Wallaby
Aqueduct in Kinglake and Maroondah Aqueduct near Yarra
Glen. We estimate this program saved 1070 million litres
of water during the year.
Recycl i ng wat er t owards
a greener fut ure
A val uabl e wat er resource
Water recycling is a key part of creating a sustainable
water supply for Melbourne. Water recycling reduces
the discharge of treated effluent to bays and the ocean,
creates economic growth, and conserves supplies of our
precious drinking water, which in turn can defer the need
to build further water storages.
Melbourne Water believes that treated effluent should
be regarded as an important and valuable water resource.
People in and around our city use almost 500,000 million
litres of water a year for a variety of industrial, commercial,
farming and household purposes. Many of these uses do
not require drinking quality water.
Melbourne Water is investigating a range of water
recycling schemes using treated effluent, from our Eastern
Treatment Plant at Bangholme and our Western Treatment
Plant at Werribee, in agriculture, horticulture and
vineyards, or to irrigate golf courses and sporting fields.
The challenge is to ensure these schemes achieve
sustainable, economic and social outcomes.
This year we supplied 1979 million litres of recycled water
to 34 customers and used another 31,186 million litres
within our sewage treatment plants more than 11 per
cent of the total discharge from these plants and a
significant increase from the previous year.
The Victorian Government, in its Wat er Recycling Act ion
Plan announced in October 2002, set a target to increase
water recycling in Melbourne to 20 per cent by 2010.
Devel opi ng oppor t uni t i es west of Mel bourne
Low rainfall, concentrated land ownership and large areas
of land that could be improved by irrigation present major
opportunities to expand water recycling schemes in
Melbournes west, using an abundant supply of high
quality recycled water from the Western Treatment Plant.
Sei zi ng new oppor t uni t i es
R o ss Yo u n g
Group Manager, Syst em Pl anni ng
Ab o u t 2 0 p e r ce n t o f o u r h igh q u a lity d rin k in g
wa te r ge ts flu sh e d d o wn th e to ile ts, a n d
a n o th e r 3 0 p e r ce n t go e s d ire ctly o n to
ga rd e n s. Victo ria s p ro lo n ge d d ro u gh t h a s h it
h o m e to eve ryo n e th a t th is p ra ctice is sim p ly
n o t su sta in a b le .
Th e d ile m m a sp e n d b illio n s o n a n ew d a m
o r a fra ctio n o f th a t im p le m e n tin g b e tte r
wa te r p ra ctice s. Th e n ew fro n tie r in wa te r
th a t M e lb o u rn e Wa te r h a s e m b ra ce d is b e tte r
in te gra tio n o f d rin k in g wa te r, sto rm wa te r a n d
re cycle d wa te r. Th e b e st way we ca n se e th a t
a p p lie d is in n ew h o u sin g e sta te s.
E ve ry d ay a b o u t 2 0 n ew h o m e s a re co m p le te d
in M e lb o u rn e , so we re a lly n e e d to se ize th e
o p p o rtu n ity to m a ke su re th a t th e se
in te gra te d wa te r a p p lica tio n s a re in p la ce
a s so o n a s p o ssib le .
14
OUR PRECI OUS WATER
Werribee Tourist Precinct
Supply of recycled water to the Werribee Tourist Precinct
began this year after the completion of a six-kilometre
pipeline from the Western Treatment Plant. Some 84
million litres was used by 30 J une 2003.
This project, our first offsite recycling scheme in the
Western region, will supply about 160 million litres of
recycled water a year to the Werribee Park Golf Course
and the National Equestrian Centre. The pipeline is
designed to accommodate the future requirements
of other potential customers in the precinct, including
Victorias Open Range Zoo and Parks Victoria (which
runs the Werribee Mansion).
Balliang dist rict
The Balliang district, north-west of the Western Treatment
Plant, contains 70,000 hectares of land in a low rainfall
area, readily accessible to the transport and infrastructure
of Melbourne and Geelong. A Melbourne Water-led
engineering study completed in December 2002 explored
the potential of a trunk pipeline to supply recycled water
from the Western Treatment Plant to the district.
The pipeline could irrigate up to 10,000 hectares of dry
cropping land, significantly increasing agricultural and
horticultural production. Major issues to be addressed
are the salt content in the effluent and environmental
issues associated with large scale dryland irrigation.
Devel opi ng oppor t uni t i es east of Mel bourne
The Eastern Treatment Plant has sold recycled water to
customers south-east of Melbourne to irrigate agriculture
and open spaces since the 1970s. The planned $170
million upgrade of the plant should open up new
opportunities by improving the quality of recycled water
(from Class C to Class A) through tertiary filtration,
enhanced disinfection and reduced ammonia.
This year, Melbourne Water commissioned a study to
investigate water recycling opportunities for agricultural,
industrial, recreational and urban uses in the eastern region.
The first phase of the study, costing $100,000 and jointly
funded by Mornington Shire Council and Frankston City
Council, evaluated opportunities along the 56-kilometre
pipeline from the Eastern Treatment Plant to Boags Rocks,
where treated effluent is discharged to Bass Strait. The
study looked at current and future market demand, land
capability, water quality and the costs of using recycled
water to irrigate council recreational reserves, golf
courses, orchards, vineyards and vegetable crops.
The second phase, jointly funded by South East Water,
incorporated the results of phase one into a broader
investigation of opportunities including potential urban
demand in greenfield developments and existing
residential areas. A draft report on the comprehensive
study, including assessment of anticipated volumes and a
ranking of potential schemes, was delivered in J une 2003.
East ern Irrigat ion Scheme
A 1999 Melbourne Water study identified a potential
demand of 8000 million litres of recycled water in a
corridor from Carrum to Cranbourne and Koo Wee Rup.
That study initiated the development of the Eastern
Irrigation Scheme to deliver recycled water from the
Eastern Treatment Plant for horticultural, agricultural,
urban and recreational irrigation. The aim of the scheme
is to deliver 5000 million litres of Class A recycled water
to the Fiveways district.
In J anuary 2003, a pipeline between the Eastern
Treatment Plant and the Sandhurst Club development in
Carrum was completed, enabling the irrigation of a new
golf course with Class C recycled water for much of
summer. When fully developed, Sandhurst will comprise
1850 homes and two golf courses, and use 600 million
litres of recycled water a year.
Onsit e recycling
Melbourne Water continued to pilot and demonstrate
recycling through onsite water recycling (also known as
water or sewer mining). A portable water recycling plant
used to irrigate Kings Domain gardens during a trial
last year was upgraded and installed at Albert Park.
During May and J une 2003, the plant extracted and
treated sewage from the Albert Road main sewer to
supply recycled water for park irrigation and for use in
Albert Park Lake. The trial demonstrated the potential
HOW EXI STI NG EASTERN TREATMENT PLANT CUSTOMERS USE RECYCLED WATER
Type of scheme Product t ype Vol ume used 2002/ 03 Percent age
( mi l l i on l i t res)
Horticultural Nursery/ turf farm/ flowers/ vineyard/ orchard 500 29.8
Agricultural Hydroponics/ market garden 426.6 25.5
Silviculture Foliage 20 1.2
Dust control Biosolids dust control 58.6 3.5
Municipal Golf courses/ recreational reserves 666 39.8
Aquacultural/ ornamental Wetlands 3.8 0.2
Tot al 1675 100
for membrane technology to remove nitrogen and
phosphorus from effluent before it was discharged
into the lake.
Aquifer st orage and recovery
In a study concluded in November 2002, Melbourne Water
assessed the feasibility of using depleted or degraded
aquifers to store recycled water from the Eastern and
Western Treatment Plants.
Excessive withdrawal from underground supplies has
depleted aquifers in some areas of Victoria and, in some
cases, allowed salt to degrade the reserves. Recharging
the wells with recycled water may provide a suitable
alternative to on-farm storage, reducing evaporation
and improving water quality.
The study identified an aquifer near Werribee as a
viable site for a storage and recovery trial.
Smar t Wat er Fund
The Victorian Government launched the Smart Water
Fund in November 2002 to promote water recycling,
water conservation and biosolids use. We will contribute
$1 million over the next two years for innovative
water schemes.
A selection of 27 projects won the first round of funding
in May 2003. They range from onsite recycling in
commercial buildings, racecourses and parklands,
to enabling nurseries to recycle water using
peat-based biofilters.
Invest i gat i ng wat er recycl i ng
P e ta M a d d y
Wat er Recycl i ng
(Proj ect Manager, West ern Proj ect s)
Th e cu rre n t e xte n d e d d ry p e rio d h a s re a lly
fo cu se d eve ryo n e s a tte n tio n o n m a xim isin g
wa te r re cyclin g o p p o rtu n itie s.
We n o w h ave fo u r m a jo r p ro je cts u sin g
re cycle d wa te r fro m th e We ste rn Tre a tm e n t
P la n t th a t a re p ro ce e d in g we ll.
Th e se in clu d e th e B a llia n g P ro je ct, wh ich is
d e sign e d to cre a te a n ew irriga tio n a re a in a
tra d ition a lly low ra in fa ll a rea west of M elb ou rn e.
We a re wo rk in g to e n a b le We rrib e e S o u th
m a rke t ga rd e n e rs to a cce ss re cycle d wa te r fo r
irriga tio n . Th is will a llo w n a tu ra l e n viro n m e n ta l
flo ws to re tu rn to th e We rrib e e R ive r.
Th e Wyn d h a m wa ter-sen sitive resid en tia l
p roject sh ou ld see n ew u rb a n d evelop m en t on
th e ou tskirts o f We rrib e e u sin g re cycle d wa te r
fo r ga rd e n s a n d o p e n sp a ce , a n d p o te n tia lly,
to ile t flu sh in g .
Th e We rrib e e To u rist P re cin ct sh o u ld se e
re cycle d wa te r fo r go lf co u rse s a n d th e
N a tio n a l E q u e stria n C e n tre .
PROTECTI NG THE ENVI RONM ENT
Protecting our Waterways and Bays
Goal s:
Operat e i n a manner t o i mprove t he envi ronment
Improve t he healt h and amenit y of Port Phillip and West ern Port bays
for t he prosperit y and enjoyment of present and fut ure populat ions
Ensure t hat Mel bournes nat ural wat erways are heal t hy wi t h
i ncreased numbers of nat i ve fi sh, pl at ypus and pl ant l i fe
Ensure t he communit y is well educat ed and informed on wat er issues

Achi evement s
Key Chal l enges
Disappoint ment s
> Achieving our greenhouse reduction and renewable energy targets by 2005/ 06.
> Finding cost effective ways to remediate biosolids at the Western Treatment Plant to enable
them to be recycled.
> Achieving our goal of eliminating offensive odours from any Melbourne Water asset by 2007.
> Meeting our target that all natural waterways in greater Melbourne will be in good condition
by 2025.
> Reducing nitrogen entering Port Phillip Bay from the stormwater system by 100 tonnes by 2010.
The planned major upgrade of the Eastern Treatment Plant was delayed by a legal challenge
to the EPA Victoria works approval.
Delays to the Eastern Green Energy Project, which was designed to provide about half the power
needed to run the Eastern Treatment Plant, meant Melbourne Water produced 2000 tonnes of
carbon dioxide equivalent above target for the plant.
Failed one odour limit from our odour control facility at the Eastern Treatment Plant.
Received 22 odour complaints from our sewage treatment plants and transfer system. While this
was about one-third less than last year, our goal is zero complaints.
Failed to maintain environmental flows in the Yarra in April 2003 by allowing pumping from the
river to continue for several hours after the flow dropped below the required level.
Invested $14.4 million on new treatment facilities at the Western Treatment Plants lagoons
to reduce nitrogen flowing to Port Phillip Bay by 500 tonnes a year.
Completed four wetlands that will reduce nutrients entering waterways and Port Phillip Bay by
a further 14 tonnes a year.
Sourced substantial markets for biosolids generated at the Eastern Treatment Plant as a major
step towards achieving our target to recycle all of the biosolids we produce.
Opened the $2.5 million Water Discovery Centre at the Western Treatment Plant in Werribee
to showcase water issues and increase community knowledge of water resources.
About 850,000 trees, shrubs and grasses were planted to improve the long-term health of
waterways.
The Melbourne Water website, www.m e lb o u rn ewa te r.co m .a u , was further improved and received
more than 360,000 visits during the year.
Bought the first seven of a planned 25 hybrid electric and petrol-powered vehicles as part of
our commitment to environmentally sound operations.
Completed the CSIRO sediment study to increase our understanding of factors that affect the
environmental health of Western Port as part of a $686,000 waterways environment research
program.
Submitted Victorias first two Streamflow Management Plans to the Minister for Water that will
balance the needs of users while protecting the waterways environmental flows.
Minimised the effects of the unprecedented drought conditions on the environmental health
of the Yarra River.
16
Melbourne Water ANNUAL REPORT 2002/ 03
Lio n e l S h aw
Bunni ngs Nor t hl and Empl oyee
Lio n e l sh o ws o ff th e wa te r sto ra ge
p o ste rs th a t M e lb o u rn e Wa te r
d eve lo p e d with B u n n in gs a n d N yle x.
Th e p o ste rs fea tu re in ea ch B u n n in gs
sto re th ro u gh o u t gre a te r M e lb o u rn e
a n d a re u p d a te d we e k ly with th e la te st
wa te r sto ra ge leve l. Th is p ro gra m a lso
su p p o rts o u r p a rtn e rsh ip with B u n n in gs
to p ro m o te sm a rt p a in t d isp o sa l in th e
in terests of p rotectin g storm wa ter q u a lity.
17
18
Our sewerage syst em
Our sewerage system includes Melbournes two main
sewage treatment plants and 400 kilometres of major
sewers. We also operate three major and several minor
sewage pump stations.
Retail water companies collect sewage and trade waste
from households and businesses and send it to Melbourne
Water for treatment. The retail water companies manage
the concentration and quantities of pollutants in industrial
sewage through Trade Waste Agreements with industry.
This year we treated 302,897 million litres of sewage and
trade waste collected by the retail water companies.
The West ern Treat ment Pl ant
The Western Treatment Plant at Werribee is the largest
sewage treatment facility in Australia, covering 10,850
hectares (about the size of Phillip Island). It was designed
and built more than 100 years ago to treat Melbournes
sewage. The plant treats more than 500 million litres of
sewage a day from about half of Melbournes population
and a large proportion of the citys industry. Treated
effluent is discharged into Port Phillip Bay.
The Western Treatment Plant holds an accredited licence
from EPA Victoria to discharge to the environment. The
accredited licence reflects trust in Melbourne Water to
display high levels of responsibility in its operations of the
plant. It was granted because the plant has an Environmental
Management System, an audit program, an Environment
Improvement Plan and a history of clean operation.
Reduci ng ni t rogen fl ows t o Por t Phi l l i p Bay
The $124 million upgrade of the Western Treatment Plant,
due to be completed in 2005, will reduce nitrogen flowing
to Port Phillip Bay by 500 tonnes a year. This reduction is
being achieved byinstalling new treatment facilities at lagoons.
The upgrade will improve effluent quality, significantly
increase opportunities for water recycling, reduce greenhouse
gas emissions and improve air quality. It also includes a
conservation management plan.
The first half of the upgrade, the enhancement of the 55
East lagoon, was commissioned at the end of 2001. The 25
West lagoon, due to be upgraded by December 2004, will
deliver the second half of the plants nitrogen reduction.
This year, we completed detailed design work for the
upgrade of this lagoon and began works to install an
activated sludge plant to improve nitrogen removal and
expand biogas capture and handling. Biogas, a byproduct
of the sewage treatment process (mainly methane), is
used to help power the plant (see Reducing greenhouse
gas emissions, page 20).
The environmental upgrade is a key feature of the
Western Treatment Plants Environment Improvement Plan.
We worked with the Community Liaison Committee to
revise this plan, which will guide further environmental
improvements over the next three years. It covers
renewable energy generation, water recycling, biosolids
use, agricultural practice, conservation management, and
environmental objectives and actions.
Prot ect i ng bi odi versi t y
The Western Treatment Plant has been listed as a wetland
of international importance under the Ramsar Convention,
and is an area of ecological significance because of its
size, location on Port Phillip Bay, and the presence of
several threatened species.
The environmental upgrade is subject to monitoring and
research to assess its impact on the plants conservation
values. Melbourne Waters conservation management
program involves wildlife monitoring, studies and
investigations, and habitat maintenance activities.
The Arthur Rylah Institute, on behalf of Melbourne Water,
is monitoring migratory birds, waterfowl, wading birds, and
cormorants at the plant. This extensive program, which
builds on similar work undertaken from 2000 to 2002,
began in February 2003 and will continue for three years.
During Summer, the Victorian Wader Study Group trapped
and tagged migratory shorebirds at several sites within
the plant as part of a worldwide effort to monitor migration,
survival and reproduction rates of these species.
Fauna and flora studies completed this year confirmed
that the Western Treatment Plant supports a range of
environmentally significant species requiring careful
management. Detailed studies were conducted on the
rare Growling Grass Frog, Fat-tailed Dunnart, Swamp
Harrier and Spiny Rice Flower.
Our extensive weed and vermin control programs included
an ecological burn of 100 hectares of the Lake Borrie Spit
grassland in May 2003. It was the first time that Melbourne
Water has used fire for weed control and regeneration of
native grassland species. The burn, conducted with the
Country Fire Authority, was intended to especially benefit
a population of the nationally significant Spiny Rice Flower.
EPA Vi ct ori a l i cence compl i ance
Melbourne Water complied fully with our obligations for
effluent discharge parameters under EPA Victoria's
licence. Detailed tables appear in our Wat er Resources
and t he Environment Repor t 2002/ 03.
The East ern Treat ment Pl ant
Every day the Eastern Treatment Plant at Bangholme
processes 370 million litres of sewage from Melbournes
eastern and south-eastern suburbs. This is about 42 per
cent of Melbournes sewage.
The 1000-hectare plant, which opened in 1975, uses an
activated sludge process to treat sewage. A small amount
of treated effluent is recycled and most is discharged
under EPA Victoria licence via a 56-kilometre pipeline into
Bass Strait at Boags Rocks. Three smaller treatment
plants operated by South East Water also discharge
treated effluent into the pipeline.
the quality of effluent leaving the plant through tertiary
filtration, enhanced disinfection and ammonia reduction.
Flows into and out of the plant would also be reduced
through water conservation and recycling programs.
The upgrade was based on a sustainable water resource
maintenance plan that had the support of the community.
An extension to the outfall was not recommended.
As part of the works approval process, EPA Victoria
appointed an independent panel to review our proposal.
The panel approved the works plan and recommended
the shoreline outfall at Boags Rocks be extended by two
kilometres into Bass Strait. EPA Victoria approved the
works plan in J uly 2002, and the Clean Ocean Foundation
appealed against the decision. The Victorian Civil and
Administrative Tribunal dismissed this appeal in March
2003, but the Clean Ocean Foundation has sought leave
to appeal the decision in the Supreme Court. Works are
on hold pending a court ruling.
St udyi ng t he quant i t y and qual i t y of fl ows t o t he pl ant
When EPA Victoria approved Melbourne Waters proposed
major upgrade to the Eastern Treatment Plant, it requested
that we undertake:
A study of the potential to achieve a 12 per cent

reduction in sewage inflows into the plant by 2012
An audit of the trade waste component of the inflow.

In April 2003, we engaged consultants to undertake these
studies. The inflow reduction study will examine water
recycling opportunities and potential measures to reduce
water demand. The audit will identify strategies to reduce
trade waste pollutants and flows, and ensure that trade
waste does not compromise water and biosolids recycling.
Reduci ng ammoni a i n t reat ed effl uent
An important element of the upgrade is a $47 million
project to reduce ammonia levels in treated effluent by
more than 75 per cent. The project began in August 2002
after a successful $5 million six-month pilot in one of the
plants six aeration tanks. Ammonia reduction is achieved
by the incorporation of a treatment process, called
nitrification-denitrification, into the existing system.
Moni t ori ng t he mari ne envi ronment
Melbourne Water continues to monitor closely the treated
effluent discharged from the Eastern Treatment Plant and
its impacts on the marine environment.
In April 2003, the second phase began of a wide-ranging
study of the marine environment, managed by the CSIRO.
The study is examining effluent toxicity, its dilution and
dispersion into the environment at Boags Rocks, and its
effects on marine flora and fauna.
The survey will provide a baseline against which future
monitoring results may be compared. The interpretation
and assessment of this studys results will be presented
in August 2003.
A sanct uar y for wi l dl i fe
Will S te e le
Wi l dl i f e and Wet l ands Sci ent i st
While the plant operated well under its discharge licence
from EPA Victoria, a two-year environmental study
completed in 1999 by the CSIRO showed that the
effluent, which contains freshwater and ammonia, was
affecting the marine environment.
Envi ronment al upgrade
As a result of the environmental study, EPA Victoria
required us to upgrade the plant and reduce these impacts.
Melbourne Water proposed a $170 million upgrade to the
Eastern Treatment Plant, which would significantly improve
M e lb o u rn e Wa te rs we e d a n d ve rm in co n tro l
p ro gra m a t th e We ste rn Tre a tm e n t P la n t is
h e lp in g to m a ke th e a re a a n eve n b e tte r
sa n ctu a ry fo r n a tive wild life .
It is a n en orm ou s job to tra n sform a com p letely
m a n -m a d e site o f th is size in to a wild life -
frie n d ly zo n e . B u t th e d e sire is th e re to p ro te ct
re m n a n t ve ge ta tio n , to ke e p o u t ve rm in a n d
ever-devouring noxious weeds, to provide a haven
fo r a b o u t o n e -th ird o f Au stra lia s b ird sp e cie s.
I t is th e b ro a d ra n ge o f b ird life th a t th e h u ge
a re a o f p e rm a n e n t wa te r a ttra cts th a t m a ke s
th e We rrib e e p la n t a u n iq u e sa n ctu a ry. Th e
co a sta l, we tla n d , a n d wa d in g b ird s a ll m a ke
a h o m e th e re . With th e in tro d u ctio n o f
stra te gica lly p la n te d tre e s, ra p to rs a re a lso
a b le to u se th e a re a a s a h u n tin g gro u n d .
An d it is n o t ju st th e b ird s th a t b e n e fit.
B e ca u se th e re is re la tive ly little h u m a n
d istu rb a n ce, oth er wild life su ch a s th e n a tion a lly
e n d a n ge re d G ro wlin g G ra ss Fro g h a s a h o m e
th e re a s we ll.
20
Assuri ng safet y and qual i t y of effl uent and bi osol i ds
Melbourne Water used the drinking water quality system
principles of the Hazard Analysis and Critical Control Point
system and the ISO 9001 standard as the basis of a draft
quality plan for the Eastern Treatment Plant.
The plan covers the risks to safety and aesthetic quality
associated with recycled water and biosolids provided
from the plant.
The plan, a requirement of the works approval for the
upgrade of the treatment plant, will be submitted to EPA
Victoria when it is completed. We intend to pursue
certification of the treatment process to an international
quality standard.
Pl anni ng t o i mprove t he envi ronment
A condition of the EPA Victoria licence for the Eastern
Treatment Plant is that it has an Environment Improvement
Plan. The plan details how Melbourne Water will achieve
the required environmental standards, and describes how
we will improve on that performance.
This year, we worked with the Community Liaison Committee
to revise the existing plan published in September 1999.
The updated plan will incorporate all key environmental
initiatives at the plant included in the proposed major
upgrade. We aim to finalise the plan in 2004.
EPA Vi ct ori a l i cence compl i ance
Melbourne Water complied with all but one obligation
under EPA Victorias discharge licence for the Eastern
Treatment Plant an air emission licence parameter when
an odour control facility exceeded its stack odour limits.
Detailed tables appear in our Wat er Resources and t he
Environment Repor t 2002/ 03.
El i mi nat i ng sewage spi l l s
Melbourne Water must manage our sewerage system so
that we experience no spills under normal rainfall conditions.
Under very heavy rain, which would occur once in every
five years, some stormwater can infiltrate sewers leading
to overflows when capacity is exceeded. Such overflows
are directed through emergency relief structures to
prevent impacts on private property and public health.
We have a rigorous program to contain these spills even
in a one-in-five-year rainfall event. This standard is among
the highest in the world and we are upgrading our
infrastructure to eliminate sewage spills due to overflows.
No sewage spills to the environment occurred this year.
This was contributed by low sewage flows due to the drought.
Sust ai nabl e management of bi osol i ds
Biosolids are the treated and stabilised solids in sewage.
In the past, Melbourne Water has stored biosolids at our
sewage treatment plants. Despite the vast amount of
space at these plants, storing biosolids is not a sustainable
approach and we accept our responsibility to put by-products
from our operations to beneficial use. Our target is to
recycle all the biosolids we produce by 2010.
The quantity of stored biosolids at the Western Treatment
Plant is significantly greater than at the Eastern Treatment
Plant because of the age of the plants. The Western
Treatment Plant was opened in 1897 and the Eastern
Treatment Plant in 1975.
The biosolids stored at our Eastern Treatment Plant are
of a higher quality, due largely to Trade Waste Agreements
that have improved the quality of industrial waste flowing
to our treatment plants in recent years.
EPA Victoria requires biosolids to be stored for three years
before allowing recycling.
Est abl i shi ng market s for bi osol i ds
This year Melbourne Water recycled 28,342 tonnes of
biosolids (equivalent to one years production plus some
stored biosolids), all from the Eastern Treatment Plant.
These biosolids were used in blended soils and to fill
a disused clay pit at the Woodlands Industrial Estate in
Braeside. A one-metre thick clay liner and cap will seal
in the biosolids and mitigate seepage, in accordance with
an EPA Victoria works approval and licence.
In February 2003, we called for expressions of interest
from companies with potential uses for biosolids from the
Eastern Treatment Plant. At 30 June 2003, Melbourne Water
had agreements with three companies to use biosolids in
the blended soil market.
Devel opi ng new oppor t uni t i es
There is potential to use a range of technologies to exploit
the energy value of biosolids, which has been compared
with brown coal. Thermal processes have been developed
that extract energy and generate power from sludges.
Energy recovery is becoming more feasible with the
introduction of the Federal Governments Renewable Energy
Certificates program, in which organisations that produce
renewable energy receive certificates for each megawatt-
hour they produce, enabling them to sell surplus certificates.
Melbourne Water is registered in this program as a
generator of renewable energy through our hydro-electricity
and biogas plants.
Reduci ng greenhouse emi ssi ons
As community expectations and regulatory requirements
become increasingly rigorous, so too are our requirements
to minimise our impact on the environment. These higher
environmental standards (together with population growth)
require increased energy usage, generally for pumping
water and sewage, and operating the most modern and
effective sewage treatment processes.
2002/ 03
2001/ 02
2000/ 01
1999/ 00
1998/ 99
1997/ 98
1996/ 97
Number of spills
36
31
3
0
0
8
6
Electricity consumption and methane emissions from
sewage treatment are the largest contributors to Melbourne
Waters greenhouse gas emissions.
We have established targets to reduce our emissions and
their impact on climate. By 2005/ 06, we aim to reduce
our greenhouse gas emissions by 35 per cent compared
with 2000/ 01 levels, and we will cut our use of electricity
from the grid by 10 per cent over the same period. We
will achieve this by using renewable energy created in our
own treatment processes, conserving energy and reducing
direct emissions. This will also minimise our impact on
the environment and reduce costs.
Greenhouse gas emi ssi ons
Capt uri ng bi ogas at t he West ern Treat ment Pl ant
The major upgrade of the Western Treatment Plant
includes significant energy initiatives.
Treatment lagoons are being covered to capture biogas
a by-product of our sewage treatment process to help
power the plant.
In October 2002, Melbourne Water completed an upgrade
of the gas extraction system at the treatment plant. This
year, the power generation plant operated by AGL Ltd
used captured biogas to generate 18.1 gigawatt hours of
electricity that would otherwise have been imported from
the grid, saving about 26,500 tonnes of carbon dioxide
equivalent. These figures will increase to 24 gigawatt hours
and 32,200 tonnes when the plant runs at full capacity.
One gigawatt hour is enough energy to run an average
Melbourne household for 100 years.
East ern Green Energy Proj ect
Melbourne Waters major upgrade of the power station
and outfall pumping station at the Eastern Treatment
Plant, originally planned for completion by September
2003, has been delayed by an industrial dispute.
The delayed works meant Melbourne Water produced
2000 tonnes of carbon dioxide equivalent above target
this year therefore increasing our 2003/ 04 emissions
above target levels.
Generat i ng green energy from our wat er suppl y syst em
As part of our renewable energy program, Melbourne Water
continued to plan for the construction of 14 hydro-electric
power plants in our water supply system. When completed,
these plants will generate 66 gigawatt hours of renewable
energy a year. This year we finalised plans and next year
2000/ 01
2001/ 02
2002/ 03
2003/ 04
2004/ 05
2005/ 06
2006/ 07
Actual Forecast
559,986
476,098
461,524
475,569
343,656
305,620
305,021
we will establish contracts with the successful tenderers
to build and operate the plants.
Envi ronment al l y fri endl y fl eet
Melbourne Water has a commitment to environmentally
friendly fleet vehicles and, in J une 2003, we bought the
first seven of a planned 25 hybrid electric and petrol-
powered vehicles to replace existing fleet cars. The rest
will be incorporated into the fleet by the end of 2004.
The Toyota Prius hybrid vehicles use about 50 per cent
less fuel compared with similar-sized vehicles and
produce 46 per cent of the emissions. Each is expected
to achieve a saving of 4.5 tonnes of carbon dioxide
equivalent a year.
Our no-odour obj ect i ve
Melbourne Water aims to minimise our impact on the
community. We have an objective that there will be no
offensive odour from Melbourne Waters assets by 2007.
Community expectations of acceptable odour levels from
sewage treatment have risen in recent years. Melbourne
Water received 22 complaints from the public about odour
emanating from our treatment plants and transfer system.
This is half the number received in 2000/ 01. Each odour
complaint is investigated to reduce the source of odours.
Our EPA Victoria licence does not permit offensive odours
beyond the boundary of the Eastern Treatment Plant. By
2005/ 06, the licence for the Western Treatment will also
disallow odour beyond the boundaries.
Achi evi ng our obj ect i ve
This year Melbourne Water completed a strategy to
achieve our no-odour objective. The odour management
strategy details several odour mitigation projects.
We are also working to reduce odour from our sewerage
system and at the same time manage the impact of
odorous gases from sewers. Appropriate odour
management can be achieved through, for example,
installing a treatment facility, chemically dosing sewage,
or blocking offending vents. Melbourne Water operates
four odour control facilities throughout the sewerage system.
Prot ect i ng our wat erways and bays
The people of Melbourne place a high value on our
waterways and bays, which provide habitat for native
species and recreational amenities for people. Port Phillip
and Western Port bays are essential environmental,
economic and recreational assets for Victorians.
Community expectations of our waterways and bays have
increased considerably, especially in recent decades.
Considerably more stringent environmental standards
and regulations now reflect the value we place on these
natural assets.
Measuri ng t he envi ronment al heal t h of our wat erways
The health of many waterways has been damaged by land
clearing, loss of native vegetation, urbanisation, water
harvesting, infestation by weeds and introduced species,
and polluted by run-off.
22
0 10 20
k ilo m e tre s
WE S TE R N P O R T
B AS S S TR AI T
P O R T P H I LLI P B AY
Not rated
Excellent
Good
Moderate
Poor
Verypoor
Urban
Rural
Forest
Only 28 per cent of the streams we manage are in
excellent or good condition, with 25 per cent in moderate
condition, and 47 per cent in poor or very poor condition.
Waterways are rated against the Index of Stream Condition
a measure developed by a scientific panel for the
Department of Sustainability and Environment. Ratings
are calculated by bringing together information on flow
regime, water quality, and condition of the channel,
streamside areas and aquatic life within the stream.
Most of the waterways in excellent or good condition are
in our water supply catchments or forested areas. Densely
populated urban catchments are mostly in poor or very
poor condition.
Pl anni ng heal t hy cat chment s
Environmental scientists and planners from Melbourne
Water are working with the Port Phillip and Westernport
Catchment Management Authority to manage waterways
through a regional approach. Our work is aligned with the
Victorian Governments River Healt h St rat egy for managing
Victorias rivers and catchments over the next 20 years.
This strategy was released in August 2002.
Improvi ng wat erway habi t at
Melbourne Water invested $23.3 million this year to improve
the long-term health of our waterways. We planted about
850,000 trees, shrubs and grasses along streamsides,
stabilised banks, removed invasive non-indigenous trees,
removed instream barriers for fish, and investigated and
planned new works. Community and volunteer groups
made an important contribution to revegetation.
Condi t i on rat i ngs for wat erways i n t he great er
Mel bourne area % of Tot al Wat erway Lengt h
Condi t i on of Mel bournes wat erways 2002 2003
Excellent
Good
Moderate
Poor
Very Poor
12
35
25
12
16
Worki ng wi t h t he communi t y t o revi t al i se our wat erways
Through the stream frontage management program,
Melbourne Water is enabling landholders to revitalise their
waterways damaged by erosion and loss of natural
vegetation. We fund weed removal, planting of indigenous
species along banks, and fence out livestock. Property
owners, Landcare and volunteer groups undertake the work.
This year, some 348 properties benefited from the
$900,000 program. A total of 122,680 trees, shrubs,
grasses and sedges were planted, and more than 78
kilometres of fencing erected.
Since the programs inception in 1996/ 97, more than
$3.3 million has been provided to 1230 landholders to
improve and protect almost 370 kilometres of waterways.
In addition, 12 councils received funding for 27 waterway
sites in the fourth round of Melbourne Water Corridors
of Green funding. The program provided $193,500 for
streamside revegetation works along 22 waterways, with
almost 64,000 plants established.
Melbourne Water is committed to supporting and working
with community members who give up their time to
protect and enhance the environment, especially through
revegetation and weed control along waterways. This year,
we provided a range of community, Landcare, Friends of
and other volunteer groups with almost $100,000 to
support 42 waterway improvement projects.
We contribute about $100,000 a year to Melbourne
Waterwatch, an environmental education program that
helps schools, community and environment groups
monitor their local waterways for stream life, habitat and
water quality. Melbourne Water is the regional co-ordinator
of the program in the Port Phillip and Western Port region
and this year more than 9300 people in 295 groups
monitored 566 sites.
Research i nt o wat erway heal t h and aquat i c l i fe
We invested $640,000 in research into waterway health
and aquatic life this year including a comprehensive
study of aquatic invertebrates in the Moonee Ponds
and Yuroke creeks.
In J une 2003, the Water Studies Centre at Monash
University completed a three-year research program
for Melbourne Water into the effects of urbanisation
on stream ecology. It found that the efficiency of urban
drainage systems is the most important factor in the
degradation of aquatic life in urban streams. Slowing the
flow of stormwater, for example, using grasses or reeds,
improves water quality.
We also commissioned the Keith Turnbull Research
Institute, a partner in the Co-operative Research Centre
for Australian Weed Management, to assess risks of
new and emerging weeds in our waterways, recommend
herbicides suitable for riparian environments, and develop
methods to selectively kill weeds.
In early 2003, Melbourne Water and the Centre for
Environmental Stress and Adaptation Research investigated
the movement of the introduced mosquito fish in urban
streams and artificial wetlands. The research will help
Melbourne Water prevent mosquito fish from entering into
new wetlands.
Bri ngi ng fi sh back t o our wat erways
Barriers to fish passage in waterways can be created
by structures such as dams, weirs and road crossings.
These structures hamper access to habitat and limit
migration of some species, especially native fish, which
affects breeding cycles. We provide a continuous passage
for fish and other aquatic animals in major waterways by
building fishways or fish ladders.
This year we built a fishway on Cardinia Creek to enable
native fish to pass a structure built to stabilise the banks.
Surveys carried out in Bunyip River in the Westernport
catchment following the construction of a fishway found
that there has been a significant increase upstream in the
range and numbers of native migratory species, including
Australian Grayling, Spotted Galaxias, Pouched Lampreys
and Common Galaxias. We have also built fishways in
Maribyrnong River and Darebin Creek.
Par t ners i n wat erway i mprovement s
G re g B a in
Nat ural resource pl anner
H u n d re d s o f co m m u n ity o rga n isa tio n s a re o u t
th e re eve ry we e ke n d p la n tin g tre e s. We a lso
in vo lve la n d o wn e rs a n d co u n cils.
We ve co m e a lo n g way with o u r ru ra l stre a m s.
We h ave seen th is with p la typ u s a n d en d a n gered
fish sp e cie s co m in g b a ck to th o se stre a m s.
Th e co m m u n ity is fa r m o re awa re th e se d ays
o f th e b ig p ictu re issu e with wa te r, a n d wh a t
M elb ou rn e Wa ter is tryin g a ch ieve, a n d th a t s why
p eop le wa n t to b e involved in wa terway p rojects.
24
St udyi ng pl at ypus popul at i ons
Melbourne Water continued to fund platypus research
in Melbournes waterways. The research, part of a
partnership with the Australian Platypus Conservancy,
found evidence of expanding platypus populations in the
Yarra River at Heidelberg, Diamond Creek upstream of
Eltham, Mullum Mullum Creek on the outskirts of Donvale,
and Olinda Creek just outside Lilydale.
Surveys of populations throughout greater Melbourne
indicated that fewer juvenile platypus were present during
summer than in previous years.
A study of Running Creek in the Arthurs Creek catchment
highlighted the benefits of removing willow and replacing
them with indigenous trees and shrubs. The rehabilitation
of the creek restored the habitat for macro invertebrates,
a food source for platypus. Despite the drought-induced
lack of flow, platypus remain in the creeks pools.
Mel bourne Wat er Frog Census
Community volunteers undertook the Melbourne Water
Frog Census across Melbournes waterways, providing us
with a good indicator of stream health. The program is run
with the Amphibian Research Centre.
The spring census found the rare Growling Grass Frog in
five locations, including two new sites in Nar Nar Goon.
The Perons Tree Frog was found for the first time in
Belgrave and Pearcedale. Volunteers also reported two
occurrences of the Eastern Dwarf Tree Frog, a native of
coastal New South Wales and Queensland believed to
have been transported south in fruit boxes.
Managi ng al gal bl ooms
Low waterway flows and hot days combined over summer
to provide ideal conditions for algal blooms in waterways.
The most significant was in the Maribyrnong River between
North Keilor to Avondale Heights during March 2003, and
was the first recorded blue-green algal bloom in that river.
Melbourne Water placed warning signs, and notified
diverters, the Department of Sustainability and Environment,
the Department of Human Services, EPA Victoria, and
local councils. No public health issues arose from the
bloom, which caused no damage to the ecosystem.
Mai nt ai ni ng envi ronment al fl ows
Environmental flow refers to the amount of water required
to ensure waterway health. We are committed to providing
environmental flows through releases from reservoirs into
waterways and by controlling the extraction of water by
licensed diverters.
Melbourne Water is bringing together working groups of
water users, including diverters, to develop streamflow
management plans, which balance the needs of all
stream users with the environment.
This year we submitted Victorias first two streamflow
management plans created under the revised Water Act
for Hoddles Creek and Diamond Creek to the Minister for
Water for sign-off. We progressed plans for the Plenty
River, Olinda Creek, Stringybark Creek, and the Pauls,
Steels and Dixon Creeks catchment.
We also continued a program to progressively meter all
major irrigation licences to help us in the sustainable
management of our water resources. All our 47
Maribyrnong diverters are metered. Installation of meters
in the Yarra catchment is continuing and at 30 J une
2003, some 30 per cent of about 700 major Yarra
diverters were metered. This year, we installed 92 meters
and our target is to have 40 per cent of major licensed
Yarra diverters metered by 30 J une 2004.
Th e M in iste r fo r Wa te r, Jo h n Th wa ite s a n d frie n d a t th e la u n ch o f
th e a n n u a l M e lb o u rn e Wa te r Fro g C e n su s h e ld a t th e Am p h ib ia n
R e se a rch C e n tre .
Frankston
Lilydale
Yarra
Glen
Cranbourne
Dandenong
Whittlesea
Healesville
Koo Wee Rup
Boneo
Mornington
Hastings
Drouin
Gembrook
Warburton
St Albans
Oakleigh
Bundoora
Port Phillip Bay
MELBOURNE
Not surveyed
Absent but expected
Absent (not present naturally)
Present and likely to breed
Present but not likely to breed
Forested
Managi ng Yarra fl ows i n a ver y dr y year
While the drought reduced flows in the Yarra River, its
environmental health was preserved during the year.
The minimum flow in the Yarra River is set under State
Environment Protection Policy to ensure its environmental
health is balanced with the requirements of diverters.
Melbourne Water is required to ensure, to the extent that
it is practicable, that the Yarra River flows at a rate of
245 million litres a day, measured at Warrandyte. When
flows at Warrandyte fall below this level, Melbourne Water
applies progressively tighter restrictions on diverters.
During the unprecedented drought conditions of J anuary
to March 2003, EPA Victoria agreed that Melbourne Water
could temporarily allow a minimum flow of 120 million
litres a day under a risk-based management approach.
We were required to release short flushes of water from
the Upper Yarra and OShannassy Reservoirs when flows
fell below 150 million litres a day. The lowest river flow
of 138 million litres a day was reached on 16 February
2003. We contributed to the flow by releasing 240 million
litres during February and March 2003.
Flow in the Yarra River again dropped below the required
245 million litres a day on 19 April 2003 when Melbourne
Water failed to cease pumping water to Sugarloaf
Reservoir. This breach of our obligations under the State
Environment Protection Policy resulted from low-flow
alarms remaining out of operation after a system upgrade.
The low-flow alarm has since been reinstated and we
installed a new gauge immediately downstream from the
Yering pumping station.
More information about environmental flows is contained in
our Wat er Resources and t he Environment Repor t 2002/ 03.
Improving t he healt h of Port Phillip Bay
The environmental values of Port Phillip Bay have been
significantly altered since European settlement. Urbanisation,
farming and population growth have placed considerable
pressure on the bay.
A four-year CSIRO study sponsored by Melbourne Water
and completed in 1996 recommended a reduction in
nitrogen entering the bay of 1000 tonnes a year. The Port
Phillip Bay Environmental Management Plan, completed in
early 2002 by the Department of Sustainability and
Environment with contributions from Melbourne Water and
EPA Victoria, aims to achieve the recommended 1000-tonne
per year reduction.
Under the plan, Melbourne Water will achieve a 500-tonne
per year reduction from the Western Treatment Plant by
2006 (see The Western Treatment Plant, page 18) and
another 100-tonne reduction from the stormwater system
by 2010.
Tackl i ng st ormwat er qual i t y
Melbourne Water is taking action to control and treat
stormwater before it reaches our waterways and bays.
This year, we invested $6.3 million on stormwater quality
improvements including completing four wetlands ready
for planting, at the Police Road retarding basin in Rowville,
the J acana wetlands near Tullamarine, the Golf Links Road
wetland in Narre Warren, and the Narre Warren township
drain wetland. These wetlands will remove a total of 14
tonnes of nitrogen a year.
We aim to reduce nitrogen flowing to Port Phillip Bay from
the stormwater system by constructing wetlands that
capture and treat stormwater. We manage 18 constructed
wetlands. Aquatic plants established at these wetlands
trap and filter contaminants before discharging
stormwater to waterways and bays.
In October 2002, Melbourne Water and the Co-operative
Research Centre for Catchment Hydrology began one of
the most comprehensive wetland monitoring programs
undertaken in Australia. Two established wetlands will be
Headi ng i n t he ri ght di rect i on
Vin P e ttigrove
Wat erways Research
Th e re is wo n d e rfu l p ro o f th a t we a re h e a d in g
in th e righ t d ire ctio n wh e n yo u h ave p la typ u s
re tu rn in g to a re a s o n th e frin ge o f M e lb o u rn e
a n d in n e r su b u rb s like H e id e lb e rg Ya rra
R ive r . Th is give s a ve ry go o d in d ica tio n th a t
th e wo rk b e in g d o n e to im p rove h a b ita t is
sta rtin g to p ay b ig d ivid e n d s.
M e lb o u rn e Wa te r sta b ilise s b a n k s, cre a te s
p o o ls in stre a m s a n d riffle s to p rovid e m o re
fo o d fo r fish a n d a n im a l life su ch a s p la typ u s.
I n H e id e lb e rg , a fe m a le p la typ u s wa s
d iscove re d in th e lo we r rid ge s o f th e Ya rra
la st ye a r. I t s th e first tim e sin ce th e 1 9 4 0 s
th a t p la typ u s h ave b e e n sigh te d in th a t a re a .
Also in that region, is the endangered Macquarie
P e rch fish ) , wh ich a re re tu rn in g to th e Ya rra .
B y re a lisin g th e n e e d s o f p la typ u s, fish a n d
o th e r a n im a ls th a t live in o u r stre a m s we re
a b le to a d ju st th e im p rove m e n ts we m a ke so
th a t th e co m m u n ity ge ts a lo t m o re va lu e o u t
o f th e wo rk s we d o .
26
studied during six significant storms to monitor their
effectiveness in removing nitrogen and sediment. The results
of the program will be used in the design of future wetlands.
Trappi ng l i t t er before i t ent ers t he bay
Stormwater carries litter from Melbournes streets and,
without intervention, much of it would be washed into Port
Phillip Bay. There it poses hazards for marine life and is
generally not biodegradable.
Melbourne Water operates 23 litter traps, which are an
essential part of our stormwater management. A litter trap
installed in Moonee Ponds Creek at Kensington in J une
2003 will catch an estimated 60 tonnes of litter a year.
The innovative design includes a weir to divert flows into
the trap for easy collection. Nets allow water to pass
through while retaining the litter and debris. The $320,000
project was part of the Moonee Ponds Creek Keep it
Clean project, co-funded by Environment Australia.
Wat er-sensi t i ve devel opment
Melbourne Water worked closely with VicRoads to improve
the long-term quality of run-off from major new road projects.
The Hallam bypass, opened in J uly 2003, was the first
major VicRoads construction project to incorporate new
design principles that replace traditional roadside concrete
channels with innovative water treatment. Grass filtration
in swales or biofiltration trenches provides water treatment
for some heavy metals, oils and sediments carried in
run-off. Water is then directed through sedimentation
ponds into purpose-built wetlands before being discharged
into waterways.
We are also working co-operatively with developers to
incorporate water-sensitive design principles into urban
housing projects. These include the Point Cook Gardens
Estate, where a retarding basin and wetland are being
built on Cheetham Creek as part of Melbourne Waters
Cheetham Creek drainage scheme to remove pollutants
and nutrients before the water reaches Sanctuary Lakes.
We were also part of an expert panel advising the
Victorian Urban Land Development Authority on the
Aurora development, 20 kilometres north of Melbourne.
Aurora seeks to achieve the highest possible level of
sustainability for urban development, especially water use.
Wetlands will provide water treatment and recycling at the
development, which will eventually host 8000 homes.
Improvi ng t he heal t h of West ern Por t
The environmental health of Western Port depends to
a large extent on the flows into it from surrounding
waterways managed by Melbourne Water. We aim to
improve our understanding of sediments and other inputs
on the ecology of Western Port so that we can minimise
the environmental impact of the flows, particularly on
sensitive seagrass beds.
A three-year study by CSIRO for Melbourne Water into the
major historical and contemporary sources of sediment
and sediment-bound nutrients in Western Port was
completed this year. It found that large-scale clearing and
draining of the Koo Wee Rup swamp since European
settlement caused the catchment to erode into the bay.
Presently, the major sources of fine sediment are erosion
of the Bunyip and Lang Lang River systems, and erosion
of clay banks near the Lang Lang jetty.
Tides, winds and waves transport sediment around the
bay, and maintain the suspension of fine particles in
the waters. Sediment flushed into the northern part of
the bay is transported to the east and south, where it
may affect water quality and seagrass habitat. The study
recommends addressing the problems through stabilizing
and rehabilitating waterways.
Melbourne Water also contributed to a $100,000
environmental study of Western Port. The study will be
co-ordinated by a team of representatives from the
Department of Sustainability and Environment, EPA
Victoria and Melbourne Water.
It aims to improve understanding of the biological, chemical
and physical processes in Western Port and to develop
sustainable management practices in the surrounding
catchments and Western Port.
Educat i on t he key t o behavi oural change
We believe that our education programs are the key
to achieving an awareness of, and respect for, the
environment. They also help to change patterns of
behaviour among young people and increase sustainable
water use in the community.
Wat er Di scover y Cent re
Melbourne Water opened an innovative education resource
at the Western Treatment Plant this year to help students
and the broader community understand more about water.
The $2.5 million Melbourne Water Discovery Centre takes
visitors on a stimulating and interactive journey through
the water cycle from the clouds to the bay.
S ch o o l gro u p s a re e n th u sia stic a b o u t o u r n ew $ 2 .5 m illio n
M e lb o u rn e Wa te r D iscove ry C e n tre .
The centre covers our protected catchments, water supply,
sewage treatment, water recycling, stormwater, waterways,
bays and oceans. It includes practical examples of
sustainable water use, including rainwater tanks and
environmentally friendly toilets.
It is also home to our virtual tours the West ern
Treat ment Plant Explorer and Raincheck 3000 which
won international multimedia awards this year. These
interactive educational tools were developed from our
concepts and help increase community knowledge of our
sewerage and water supply systems.
Increasi ng communi t y knowl edge
Our community education program aims to increase
knowledge of water issues and plays a pivotal role in
helping to achieve our long-term plans, especially for
water conservation.
Melbourne Water has major exhibits at the Melbourne
Museum, Scienceworks and Melbourne Aquarium. We
supported the Blue Zoo Education Service at Melbourne
Aquarium, which developed three new interactive online
educational games released for the 2003 school year.
The Melbourne Water Young Watercare Grants Program,
which provides funding for schools and youth organisations
to address water quality and sustainable water use issues,
was launched in May 2003. Under the program, developed
with Landcare Australia, schools or youth organisations
are invited to apply for funding of up to $2000 for
activities such as developing and maintaining wetlands,
surveying water quality and habitat, and planting trees.
We sponsored LaTrobe Universitys Melbourne Wildlife
Sanctuarys development of a wetlands tours program,
which was promoted at the Science Teachers Association
of Victoria conference in November 2002, and a teacher
and student education kit with links to the Victorian
curriculum standards framework outcomes. Student tours
will begin in 2003/ 04.
Melbourne Water produced curriculum materials such as
our new Drains t o our Wat erways kit. The kit, developed
with the Gould League, provides teachers with a learning
program on the impact on our waterways of litter and
stormwater pollution.
More than 1200 people visited the Western Treatment
Plant at Werribee during a community weekend in J une
2003. We also conducted educational tours of the
Western Treatment Plant (attracting 3633 visitors); the
Eastern Treatment Plant at Bangholme (1140 visitors);
an urban development that incorporates water-sensitive
urban design principles, Lynbrook Estate (216 visitors);
the decommissioned Devilbend Reservoir at Moorooduc
(four VCE geography groups); and the Winneke Water
Treatment Plant (608 visitors).
We introduced an education website,
www.m e lb o u rn ewa te r.co m .a u /e d u ca tio n , in August 2002
based on research and testing with students and teachers.
This site provides comprehensive information and links for
students about the water cycle, including games and
quizzes. The site also provides resources for teachers
including case studies, interactive tools and information
on our tours program for which an online booking system
will be available from August 2003.
The Melbourne Water website, www.m elb ou rn ewa ter.com .a u ,
was further improved during the year to provide ready
access to information on all aspects of our activities and
performance. Enhancements included a new front page
that features the daily water storage figure, an upgraded
menu system and immediate access to media releases.
Separate websites for water recycling and water-sensitive
design were added during the year. The site received a
total of 362,684 visits for the year.
Further links are also being established with professional
educational organisations to develop and promote
Melbourne Waters education programs. For example, we
are working with the Victorian Curriculum and Assessment
Authority to include stormwater management in the new
VCE Environmental Science curriculum.
Fi l l i ng t he i nformat i on gaps
E m m a C a m p b e ll
Educat i ons and t our s
Wa te r fits in to th e sch o o l cu rricu lu m a cro ss
a ll leve ls. We re wo rk in g to fill in in fo rm a tio n
ga p s th a t te a ch e rs h ave o n wa te r. We a re
p rovid in g m a te ria l a n d in fo rm a tio n to stu d e n ts
to b e tte r u n d e rsta n d wa te r a n d , p a rticu la rly,
wa ter stra tegies u sed d u rin g th ese d ry p erio d s.
Th e re is a b ig d e m a n d fo r a ll so rts o f
e d u ca tio n a l m a te ria l. P e o p le wa n t to le a rn
m o re a b o u t wa te r, n o t ju st ra in wa te r o r
re se rvo irs, b u t a nyth in g to d o with wa te r.
With o u r to u rs, we b e lieve th a t se e in g th in gs
first h a n d h e lp s p e o p le re ta in th e wa te r
co n se rva tio n m e ssa ge s.
FOCUSI NG ON GOOD RESULTS
Managing our Built Assets
Goal s:
Remai n Aust ral i as most effi ci ent wat er aut hori t y
Provi de ongoi ng fi nanci al ret urns t o our owner, t he Vi ct ori a

Government
Ensure t hat t he i nt egri t y of our wat er, sewerage and drai nage
i nfrast ruct ure i s wel l mai nt ai ned and prot ect ed now and i nt o
t he fut ure
Provi de excel l ent ser vi ce
A mot i vat ed and ski l l ed workforce t hat generat es new i deas

and i s al i gned wi t h t he l at est t echnol ogi es and i nnovat i ons
Achi evement s
Key Chal l enges
Disappoint ment s
> Ensuring the security of our built assets.
> Managing algal blooms in Yan Yean and Greenvale reservoirs especially in times of low
storage levels.
> Achieving zero lost-time injuries for our people and contractors.
> Establish water recycling projects on a sustainable financial basis.
The rapid decrease in some river flows due to the drought, meant that we were not able to
provide a lot of warning to diverters before introducing bans on taking water from waterways.
Several diverters were found not complying with restrictions despite substantial
communication. Legal action is being taken in several cases.
Our people and contractors had an unacceptable nine lost-time injuries well above our
target of zero.
The number of WorkCover claims increased from nine to thirteen.
Completed a $600,000 project to help all metropolitan councils manage the impacts of
stormwater.
Improved service delivery to councils through providing a single Melbourne Water contact for
all metropolitan councils.
Recycled water standpipes were set up at the Eastern and Western treatment plants for
authorised users including councils.
Worked with councils to complete the inclusion of flood information in local council planning
schemes providing the community and development industry with clear and up-to-date
information.
Implemented a $118 million program to upgrade and improve water, sewerage and drainage
infrastructure while giving the highest priority to environmental and community outcomes.
Continued to give the highest priority to risk and emergency management with the Victorian
Auditor-General acknowledging our work in this area in his March 2003 Report.
The Eastern Treatment Plant at Bangholme became the second Melbourne Water facility to
gain an operating licence under major hazard regulations.
Saved about $200,000 through improved contract management.
Helped Victorian farmers affected by the drought by harvesting more than 500 bales of hay
from Melbourne Water land in a joint initiative with the Victorian Farmers Federation.
28
Melbourne Water ANNUAL REPORT 2002/ 03
Devel opi ng smar t sol ut i ons
G ra n t Wilso n
Group Manager Inf rast ruct ure
Th e a m m o n ia re d u ctio n p ro je ct a t th e E a ste rn
Tre a tm e n t P la n t is a gre a t e xa m p le o f h o w M e lb o u rn e
Wa te r d e live rs ca p ita l p ro gra m s u sin g b ro a d e r, sm a rte r
so lu tio n s th a t h ave a lo we r im p a ct o n th e e n viro n m e n t.
Th e re d u ctio n te ch n o lo g y we a re u sin g a t th e p la n t
re q u ire s le ss a ir to b e p u m p e d in to th e a e ra tio n ta n k s,
wh ich m e a n s lo we r gre e n h o u se co n su m p tio n . Th e
re m ova l o f 7 5 p e r ce n t o f a m m o n ia in th e tre a te d
e fflu e n t by th is p ro ce ss is a lso gre a t n ews fo r th e
m a rin e e n viro n m e n t a ro u n d th e d isch a rge p o in t a t
B o a gs R o ck s.
We p rid e o u rse lve s o n d eve lo p in g th e righ t so lu tio n s by
ca n va ssin g th e wid e st ch o ice o f ava ila b le te ch n o lo g y.
We th e n h ave stra te gie s in p la ce to e n su re we ge t th e
b e st va lu e o u t o f th e se rvice p rovid e rs.
29
30
A maj or benchmark
managi ng bui l t asset s
Melbourne Water manages about $3 billion in water
supply, sewerage and drainage assets that service an
area of more than 7,800 square kilometres. These
include natural and built assets. Most of the built assets
were constructed between 1920 and 1980, but some
date from the 1850s, including elements of the Yan Yean
water supply system to Melbournes north.
We take into account environmental, economic and social
factors in our decision-making. This often requires
extensive research as well as stakeholder consultation.
Impacts on the total water cycle are considered as part
of our integrated capital works program. For example,
in a project such as a sewage treatment plant upgrade,
we consider how to reduce flows into the plant as well as
how to reduce the impact of the discharge from the plant
on the marine environment.
Melbourne Water operates an efficient information
management system to co-ordinate asset management
and to collect asset data. The system combines
information on asset locations and maintenance
management. We continued to implement a $1.4 million
electronic document management system to improve
access to our 160,000 asset plans and drawings.
Some 3000 plans were added to the system.
We completed an investment of $4.8 million on the
implementation of a new Supervisory Control and Data
Acquisition (SCADA) system. This system, which was
fully implemented in September 2002, enhances the
standard of service to our customers, delivers operational
efficiencies and helps integrate our monitoring systems.
Melbourne Water manages a significant number of
contracts and we are continuously seeking ways to
improve our approach. Our contract management was
reviewed and five-year performance-based agreements
were implemented. These agreements align with
commercial objectives, provide performance incentives,
improve knowledge and reduce contractual risks.
Keepi ng Mel bournes wat er, sewerage and
drai nage asset s i n sound condi t i on
Every year we undertake a comprehensive review of the
condition of our assets. They are assessed against a
range of factors for the likelihood and consequence of
failure. This assessment enables us to prioritise our
works program efficiently.
In planning our capital works program, financial, environmental
and social impacts are considered. We aim to ensure that
our water, sewerage and drainage infrastructure is well
maintained and protected now and into the future, and
that our asset management and investment programs are
efficient and effective.
Melbourne Waters sophisticated asset management
information systems contain data on all our assets, and
are used to manage about 40,000 maintenance tasks
a year and develop asset replacement programs. We
analyse the impacts on reliability, with the aim of
minimising costs over the life cycle of our assets. Our
asset management process performed well in a national
benchmarking project.
Major projects undertaken included a $21 million
investment in improving green energy production and
treatment processes at the Eastern Treatment Plant and
$17.4 million on the Western Treatment Plant upgrade,
including works to reduce nitrogen entering Port Phillip Bay.
Some $22 million was invested on works to protect and
improve our waterways and bays such as litter traps,
wetlands and drainage infrastructure in new residential
developments. New drainage projects are funded through
contributions made by the development industry.
Capi t al expendi t ure ($m)
Works to upgrade ageing water supply infrastructure
included a $1.9 million project began to replace sections
of an original 20-kilometre cast iron water main from
Morang to Preston, dating to the 1850s and 1880s. A
$1.1 million project established outlet screens at Cardinia
and Silvan Reservoirs to keep fish out of the water supply
system and improve water quality.
We also continued developing projects that will help meet
the demands of population growth and ensure a
sustainable water supply system. These include a $14
million augmentation of the Winneke Water Treatment
Plant to increase the capacity and reliability of the water
supply. This project includes construction of a $2 million
pump station at Plenty. Works are expected to be
completed by April 2005.
Our most significant water supply project involves
replacing a water main running under Punt Road, one of
43.4
50.0
9.9 13.9
Water ($)
Sewerage ($)
Waterways and drainage ($)
Business Improvements ($)
the citys main thoroughfares. This $6.9 million project is
necessary to maintain water pressure and water supply
during times of peak demand.
The project involved extensive consultation with a wide
range of stakeholders. The final route was determined
with sporting bodies, Friends of the Elms, the East
Melbourne Residents Association and Melbourne City
Council. Timing was planned with sports organisations
to minimise disruption to traffic and car parking during
events. We also consulted with emergency services,
CityLink, local hospitals, Heritage Victoria and the
Department of Aboriginal Affairs. Works are expected
to be completed by December 2003.
Priority drainage infrastructure projects included investing
$1.4 million in replacing and relining a section of a main
drain and pumping station at Port Melbourne. $1.3 million
was invested in upgrading the Tooronga Road Main Drain
and a further $3.7 million in flood protection projects. All
these projects involved extensive community consultation
to ensure their successful completion.
Informi ng and i nvol vi ng t he communi t y
key t o successful proj ect s
Community consultation was also a feature of the earliest
stages of the Northern Diversion Sewer project, which will
connect Yarra Valley Waters sewerage system near the
Merri Creek at Coburg to Melbourne Waters North
Western Sewer in Essendon. Melbourne Water began
informing the community and carrying out technical
investigations in late 2002 to help develop a concept
design and final route for the new sewer by mid-2004.
Workshops with key stakeholders to discuss the possible
route and any impacts were held in May 2003. Construction
is expected to take place between 2006 and 2008.
The community responded positively to many projects this
year, but in a small number of cases insufficient or late
information led to community dissatisfaction with our
proposals. We should have engaged the community in
the planning of removing mature elms and other trees along
the Yarra River at Pridmore Park, Hawthorn, and subsequently
organised four meetings for residents and other groups
to reach agreement on rehabilitation of riverbanks.
We acknowledge that we need to improve our community
engagement and we are continuing to revise our
procedures and ensure that as many of our people as
possible receive community consultation training (see
Our People, page 35).
Managi ng ri sk and
mai nt ai ni ng hi gh securi t y
The Victorian Auditor-Generals performance audit, presented
to Parliament in March 2003, highlighted that Melbourne
Water was as an organisation that performed very well in
risk management, including emergency management.
Security continued to be a major priority for us this year,
and we upgraded security systems using the latest
technology to control and monitor access to our sites, and
completed much of the design work to upgrade security at
our reservoirs.
We worked closely with the Victoria Police and our retail
water customers on security protocols, developed risk
assessment guidelines for water and sewerage assets and
recommended minimum-security levels for water authorities.
Melbourne Water attended an emergency response
workshop in December 2002 to reach a common
understanding of emergency response practices for the
Victorian water industry. The workshop highlighted
industry concerns regarding security and the need for
a co-ordinated approach to risk assessments and
emergency response.
Melbourne Water is undertaking a $100,000 strategic
review of our approach to fire protection and suppression
to ensure our risk and liability from wildfire is minimised
(see Reviewing the risk of bushfires, page 8).
We treat and supply drinking water using a risk
management system, Hazard Analysis and Critical Control
Point, that assures its quality and safety (see Providing
safe, high quality drinking water, page 9).
I n a m a jo r in fra stru ctu re u p gra d e , th e n ew P u n t R o a d wa te r m a in
go e s in to th e gro u n d in fro n t o f th e M e lb o u rn e C ricke t G ro u n d .
S e cu rity syste m s we re u p gra d e d a t o u r site s in clu d in g th e
B ro a d m e a d o ws S e rvice R e se rvo ir.
32
expenditure of more than $500,000 over the next three
years on site improvements.
Melbourne Waters Winneke Water Treatment Plant became
the first facility in Victoria to receive an operating licence
under the regulations in May 2002. Our third and final
safety case for a major hazard facility, Silvan Reservoir, is
due for submission to WorkSafe Victoria in October 2003.
Safet y and WorkCover audi t s
An audit by Lloyds Register Quality Assurance (Lloyds)
found that our safety management system continues to
comply with the criteria required by SafetyMAP. The audit,
conducted in March 2003, included a visit to our
maintenance systems team at Healesville.
The Lloyds auditor noted the risk assessments, health and
safety checks and contract management work undertaken
by the team, and praised actions taken to improve our
management focus on safety, and work being done to
identify and control hazards across the organisation.
PriceWaterhouseCoopers reviewed Melbourne Waters
processes and controls for WorkCover Claims Management
in August and September 2002 and found that Melbourne
Water people had a sound knowledge of legislative
requirements, and the case-by-case decisions made in
respect of WorkCover were reasonable.
Meet i ng our commi t ment t o
ser vi ce del i ver y
Our customers include retail water companies, the
development industry, councils, river diverters and
water recyclers.
Cit y West Wat er, Sout h East Wat er and Yarra Valley Wat er
We understand the imperative of providing a reliable supply
of safe high quality drinking water to our retail customers,
City West Water, South East Water and Yarra Valley Water.
The performance of these companies is dependent on the
services we provide them in this crucial area.
Based on the most recent Essential Services Commission
performance report (J uly 2001 J une 2002 Melbournes
retail water and sewerage companies - performance
report), Melbourne Water assisted the metropolitan retail
companies to achieve the following results:
A safe workpl ace
It is our responsibility to provide a safe and healthy
workplace for anyone who enters Melbourne Waters work
areas. This involves achieving our target of zero injuries
for our people and contractors, and ensuring the health
and safety of the people, property and environment that
are potentially impacted by our operations.
We have a WorkCover self-insurance licence, SafetyMAP
Level 1 certification, and are working to improve our
occupational health and safety systems and culture.
About $300,000 was committed to improving our health
and safety performance including risk assessments,
employee assistance, training, compliance, medical
consultancy, fitness testing and vaccinations.
There were nine lost-time injuries, seven of which were
due to strains, sprains and minor cuts, with two fractures.
This performance was unacceptable and comprehensive
individual action plans were developed to address this
poor result.
Maj or hazard faci l i t i es
Victorias Occupational Health and Safety (Major Hazard
Facilities) regulations, administered by WorkSafe Victoria,
aim to improve health and safety and reduce the likelihood
and consequence of incidents.
This year the Eastern Treatment Plant at Bangholme
became the second Melbourne Water facility to receive an
operating licence under these regulations. The site stores
and uses liquid chlorine, diesel and natural gas, and
creates and uses biogas as part of its sewage treatment
process. The operating licence was received following the
preparation of a 650-page safety case.
The case, which was commended by WorkSafe Victoria,
took about 18 months to develop and will involve
Infrastructure &
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We are also examining the potential impacts on the
Hobsons Bay Sewer of the Victorian Channels Authoritys
project to deepen the shipping channel in Port Phillip Bay.
This sewer runs under the Yarra River and takes 21 per
cent of Melbournes flow. Options include lowering the
three-metre sewer to minimise operational risk or
protecting its present location.
R isk M a n a ge m e n t
Microbiological water quality
Retailers surpassed their licence standard that 95 per

cent of samples be free of E. coli bacteria. Overall
99.9 per cent of samples were free of E. coli.
Retailers surpassed their licence standard that 90 per

cent of samples have no more than 20 total coliforms.
Overall 96.3 per cent of samples had no more than
20 total coliforms.
Aesthetic qualities
Tests demonstrate that Melbourne's water supply is

relatively free of problems relating to physical and
chemical parameters.
The retail water companies were also able to provide a
reliable water supply during Melbournes worst drought on
record. This outcome was due to the close co-operation
on major projects such as drought response and
contingency plans, as well as the phasing in of water
restrictions. We also worked with them on community
education and awareness programs to ensure that there
was a high awareness of the impact of drought on our
storage levels. Projects included developing a Home
Water Investigator with City West Water and EPA Victoria,
and contributing to a sustainable water plan for
Melbourne City Council with South East Water.
With City West Water we signed a Memorandum of
Understanding and contributed $70,000 to identify and
compare the indicators impacting on our water resources.
M anaging salt in sewage inflows
Salt is a common byproduct of industrial processes and
an ingredient in domestic detergents. Lowering salt levels
in recycled water will increase demand and potential
uses. In J une 2003, Melbourne Water and City West
Water began an investigation into methods of reducing
salt concentrations in sewage flowing to the Western
Treatment Plant. The study will assess several options
including reducing industry salt output, treating salt
before it enters the sewerage system, and treating it
onsite at water recycling projects.
We also worked closely with our retail customers on
emergency response and communications plans, a water
recycling action plan for Melbourne, the implementation of
the Water Resources Strategy and on the Smart Water Fund.
The fund was set up by Melbourne's water businesses,
City West Water, South East Water, Yarra Valley Water
and Melbourne Water, with the support of the
Victorian Government.
The funds main aim is to encourage and support the
development of innovative water saving, water recycling
and biosolids reduction or use, and their application
within the community.
In congratulating one of the funds recipients, Food
Science Australia, City West Waters Managing Director,
Ms Anne Barker said that the metropolitan water industry
was dedicated to supporting companies and community
groups that take a fresh approach to water conservation.
Our Managing Director Brian Bayley said Food Science
Australia would investigate the use of new technology
in the waste treatment process.
Details of major infrastructure projects to assist the retail
water companies meet their customer services
obligations are outlined on page 30.
Counci l s
Melbourne Water provides a range of information to
councils and the development industry to help them
understand drainage, flood protection and water resource
requirements before works begin, and progresses town
planning and subdivision referrals from councils.
We have worked with the development industry and councils
to review about 150 drainage schemes and six projects
to incorporate drainage schemes into development
corridor areas.
About 2am on Good Friday (18 April 2003), damage
to an air valve in the Silvan-Preston water main
created a 60-metre column of water, and emergency
services were called in to manage the incident.
Some 25 million litres of water were lost in the burst,
which caused flooding in several houses nearby. One
house was severely affected and the residents given
alternative accommodation.
Melbourne Water, in close consultation with Yarra
Valley Water, shut down a six-kilometre section of the
main and provided an alternative supply to
customers. The damaged valve was repaired and the
main restored by midnight that day.
No customer complaints were received on water
pressure or quality. Nearby residents were provided
with information by doorknocking and delivery of an
community bulletin.
Act i ng qui ckl y t o repai r damage
Jo e l S p e rlin g , o n e o f o u r wa te r su p p ly o p e ra to rs a n d Fu ry D e p e tro
fro m Ya rra Va lley Wa te r d e live r co m m u n ity in fo rm a tio n b u lle tin s
o n re p a irs to th e M a ro o n d a h a q u e d u ct.
34
Hel pi ng out farmers
More than 500 bales of hay was harvested from Melbourne
Water land and sent to drought-affected areas in Victorias
north and north-west. The initiative was a result of a
meeting between Melbourne Water and the Victorian
Farmers Federation. The amount of hay was enough to
feed 1500 cattle for one month. Needy farmers entered
a ballot for the supply of hay that was offered at a heavily
reduced price to cover labour and transport costs.
Provi di ng i nformat i on onl i ne
This year Melbourne Water introduced a range of online
business tools. We provided diverters with updated
streamflow information and new application forms for
drought assistance from the Victorian Government.
An electronic tendering system, developed with the
Victorian Government Purchasing Board, is designed
to simplify the tendering process for organisations. This
will enable commercial submissions for works, goods or
services together with core business information to be
lodged with Melbourne Water using web-based technology.
The system will be implemented by the end of 2003.
Melbourne Water is now providing free access, via our
website, to our land development manual which provides
information on policies, processes and design
requirements (see www.m elbournewater.com .au/ldm ).
Work also began during the year to develop a water-
sensitive urban design technical manual, which is funded
by the State Governments Victorian Stormwater Action
Program and is due to be completed by April 2004. A
water-sensitive design website, www.m elbourne.com .au/wsud
was also provided.
Pl anni ng Informat i on
Melbourne water has been working with councils
to incorporate information on the impact of flooding into
local planning schemes. The special building overlay has
been a substantial undertaking involving 31 planningscheme
amendments requiring the individual notification of about
105,000 affected landowners and occupiers.
The collection and public release of flood data on such
a large scale has been unprecedented anywhere in
Australia. The availability of accurate, consistent flooding
information will make a major contribution to land
development decision-making and the planning process,
as well as to community safety.
Improvi ng st ormwat er qual i t y
Under a $600,000 project, we continued to provide
technical advice to the development industry and councils
on stormwater quality initiatives. All but one of the 32
metropolitan councils now have developed stormwater
management plans with initiatives to improve stormwater
quality including planning, regulation, enforcement,
operations, infrastructure and education. The final plan
is being prepared independently by the council.
Counci l co-ordi nat i on
All 32 councils now have an initial point of contact with
Melbourne Water through a council co-ordinator. The
project, piloted in 2001/ 02 with Port Phillip, Maribyrnong
and Darebin, was extended this year to ensure effective
dialogue and consultation, co-operative management of
assets, and development of a shared vision and responsibility
for sustainable management of our water resources.
Drought rel i ef
Recycled water standpipes were set up at the Eastern
and Western treatment plants for authorised users
including councils. Several councils are using the recycled
water to maintain sports ovals and median strips.
Severe drought affect s our di ver t er cust omers
Melbourne Water is responsible for managing the volume
of water that users take from waterways in the Yarra,
Stony, Kororoit, Laverton, Skeleton and lower Maribyrnong
catchments. The prolonged drought presented continuing
difficulties for those reliant on this water resource.
Drought updates were mailed to all diverters, peak bodies
and other stakeholders, and meetings held with grower
associations and key industry groups.
As part of our increased service commitment to recycled
water customers, we established a water recycling section
of our website (www.m e lb o u rn ewa te r.co m .a u /re cyclin g),
published a water recycling handbook and established a
recycled water customer advisory committee. Expression
of interest forms for prospective water recyclers were
published in newspapers and on our website, and we
provided councils and farmers with recycled water from
our sewage treatment plants in a drought relief initiative
developed with EPA Victoria.
P a rt o f th e sto ck p ile o f h ay h a rve ste d fro m M e lb o u rn e Wa te r la n d ,
in clu d in g th e C a rd in ia R e se rvo ir, h e lp e d fa rm e rs a ffe cte d by th e
co n tin u in g d ro u gh t.
Our Peopl e
Melbourne Water provides a safe and stimulating work
environment where people can learn and perform to their
full potential and are committed to achieving our goals.
We acknowledge that our success depends on the skills
and efforts of our people, and we support them through
performance management systems, leadership and
development programs together with reward and
recognition. We also acknowledge that success is very much
dependent on our peoples ability to establish positive
relations with the community and other key stakeholders.
Melbourne Water is an equal opportunity employer. Our
objective is to have a workforce representative of the
community we serve. Women make up less than one third
of our people and this needs to be addressed. At 30 J une
2003, we had 114 female employees, an increase from
103 last year.
To continue to improve our approach to recruitment and
selection, our procedures were revised to have a better
focus on recruiting people who would be best equipped to
contribute to the achievement of our business objectives.
Melbourne Water continued supporting the Apprenticeships
Victoria scheme in the water operations area to help with
succession planning and to bring younger people into the
organisation. The success of this program is highlighted
by the fact that six people have now been appointed to
permanent positions at Melbourne Water.
Our people are encouraged to take annual leave regularly
to support individual and organisational health. We have
a target for our people to have an annual leave balance of
30 days or less at 30 J une each year. At 30 J une 2003,
93 per cent of our people met this target, this compares
with 91 per cent who met the target last year. Initiatives
such as flexible working arrangements and free flu injections
helped reduce the level of absenteeism to 2.6 days per
person against a target of three. This compares with 2.7
days per person for 2001/ 2002 against a target of 3.5 days.
During the year, our policies on parental leave were
enhanced to incorporate three months paid maternity leave
and up to 12 months total leave. We now provide the same
benefits to adopting parents who are primary carers.
Our annual employee turnover target is between five and
10 per cent of our people. During the year, the turnover
rate was seven per cent compared with eight per cent the
previous year.
Learni ng and devel opment
We recognise that learning and development training
for our people will help to achieve our vision, as well
as enhance their skills in line with career aspirations.
Development programs undertaken include leadership
and interpersonal skills training, recruitment and selection
training, strategic negotiation, project and contract
management and risk management awareness training.
Recogni si ng excel l ence and achi evement
We operate an employee recognition program so that
outstanding achievements by our people are recognised.
Ninety-six of our people were acknowledged under the
employee recognition program.
The majority of our people are covered by an Enterprise
Agreement. As part of the agreement with our people,
we have established a set of key performance indicators
linked to remuneration. Related to our objectives, these
targets have been established to reflect Melbourne
Waters commitment to continuous improvement and the
need to meet its statutory obligations. During the year,
11 of the 12 key performance targets were met.
Our health and safety performance during the year was
disappointing with nine lost time injuries - six for
Melbourne Water employees and three contractor injuries.
It is unacceptable that people are being injured while
working for us and we are addressing this issue.
This year, we initiated a program to help our people
improve their health and fitness. A total of 175 people,
or 35 per cent of the organisation, participated voluntarily
in the program that analyses cholesterol, blood pressure
and general fitness levels. Depending on the results,
people were advised on appropriate exercise patterns,
nutrition and any need for further medical investigations.
A total of 230 of our people had influenza vaccinations, and
we also helped smokers through Quit programs and seminars.
Support ing our graduat es
The Melbourne Water speakers program continued this
year, with 54 presentations on water resource management,
20 of them given by our graduates. Audiences included
teacher, school, university and community groups, and
GreenPlumber s and GreenGardeners training workshops.
The program, which reached 2980 people, enabled the
graduates to improve their presentation skills, share the
knowledge they have obtained, and increase their expertise
in community engagement. School groups were especially
receptive to our graduates.
Melbourne Water also supports engineering graduates who
become members of the Institution of Engineers Australia
to gain the Chartered Professional Engineer status.
Applied Science graduates can also participate in the
M e lb o u rn e Wa te rs Am b e r P e rry e n te rta in s a n d e d u ca te s ch ild re n
a b o u t we tla n d s a t th is ye a rs M o o m b a ce le b ra tio n s.
36
program and achieve recognition from the Institution of
Engineers Australia.
Mentors with technical expertise and leadership
experience are available to help graduates with technical,
business process and leadership development issues.
Graduates are encouraged to manage their own careers
an important skill for their longer-term development
and retention.
Increasing the knowledge and understanding of our business
A survey rated the level of knowledge and understanding
of the organisations business objectives by our people
at 61 per cent, and our aim is to significantly improve
on this result. A comprehensive communications program
accompanied the release of Melbourne Waters strategic
plan and we will be evaluating the success of this
program through an independent employee survey.
Current initiatives include the In Touch news bulletin,
an Intranet site, information bulletins, employee forums,
fortnightly team meetings, presentations by the Managing
Director and/ or project managers on major works, and our
Employee Representative Committee. This committee is
one of several consultative mechanisms that works with
management and provides feedback on policy. This year
no time was lost by Melbourne Water people due to
industrial disputes.
Each year, Melbourne Water holds a series of employee
forums. These forums bring together our people to share
information and consider future opportunities for the
organisation and our stakeholders. This years forum
was held over three days and attended by 410 people,
representing 80 per cent of our people. In addition to
presentations from speakers, interactive workshops were
held to provide information on key business improvements.
Ser vice awards
Melbourne Water recognised people who had achieved
25 years or more of service. Ten of our people achieved
25 years service, 16 reached their 30-year milestone,
four achieved 35 years and Barry Cartledge received a
40-year award. Barry joined Melbourne Water as a
17-year-old apprentice diesel mechanic. He stayed with
the organisation becoming engineering reconditioning
workshop manager, was in charge of the plant and
equipment workshops up on the Thomson Reservoir site
for 10 years, came back to Melbourne as the mechanical
workshop manager, and now works in the waterways and
catchment team.
B a rry C a rtle d ge co n tin u e s to fin d wo rk a t M e lb o u rn e Wa te r
stim u la tin g a fte r a ch ievin g 4 0 ye a rs with th e o rga n isa tio n .
Maki ng a di fference
K e ira n C ro ke r
Wat erways Pl anner
Fo r M e lb o u rn e Wa te rs K e ira n C ro ke r, h e lp in g
a n d e n ga gin g o th e r p e o p le is p a rt o f th e jo b .
As a wa te rway m a n a ge r, h e is a ccu sto m e d
to liste n in g to p e o p le a n d wo rk in g with th e
co m m u n ity to re a ch m u tu a lly sa tisfyin g
co n clu sio n s.
B u t h e is a lso a ctive in d eve lo p in g co m m u n ity-
b a se d p ro je cts in h is vo lu n ta ry wo rk with
O xfa m C o m m u n ity Aid Ab ro a d .
K e ira n lin k s sk ille d vo lu n te e rs with lo ca l
o rga n isa tio n s th a t n e e d p ro fe ssio n a l
a ssista n ce . Fo r e xa m p le , th e sk ills-sh a rin g
sch e m e o f wh ich h e is co n ve n o r h a s
p rovid e d in fo rm a tio n te ch n o lo g y a n d stra te gic
p la n n in g sp e cia lists to co m m u n ity
o rga n isa tio n s to h e lp th e m d eve lo p m o re
co h e re n t, wo rk a b le syste m s a n d le a rn h o w
to h e lp th e m se lve s.
H e says th e wo rk h a s h e lp e d h im d eve lo p h is
fa cilita tin g , in te rviewin g a n d n e two rk in g sk ills,
a ll o f wh ich h ave b een u sefu l in th e wo rk p la ce.
As p ro fe ssio n a ls, we h ave sk ills to o ffe r a n d
th e se give u s a n o p p o rtu n ity to h e lp in a
p ra ctica l way, a n d p e rh a p s m a ke so m e sm a ll
d iffe re n ce in o th e r p e o p le s live s, h e says.
Responsible for improving customer relationships and working with our people
to influence excellent customer service.
Responsible for financial and supply arrangements, information technology,
pricing and regulation, board support, risk management and legal services and
general business support.
Responsible for developing and implementing communication programs including
community consultation, media relations, education, community support,
advertising, displays, the website and publications.
Responsible for developing, implementing and maintaining human resources
strategies, policies and procedures that help us achieve our business objectives.
Responsible for strategic management and maintenance of water supply, sewerage,
drainage and waterway assets, and managing our capital delivery program.
Responsible for streamflow and land management, water recycling, energy and
greenhouse management, waterway health planning, water resource management
and conservation and the upgrade of Eastern Treatment Plant.
Responsible for long term planning of stormwater, wholesale water supply and
sewerage systems.
Responsible for improving our productivity through scientific excellence and new
and improved technology, and managing the national and state interface with
regulators particularly in relation to water quality, public health and the environment.
Responsible for operating water, sewerage and drainage hydraulic systems in
accordance with public health, environmental, safety and regulatory obligations.
M
a
n
a
g
i
n
g

D
i
r
e
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t
o
r
B
r
i
a
n

B
a
y
l
e
y
Cust omer Rel at i onshi ps
Greg McGann
Busi ness Ser vi ces
Malcolm Haynes
Communi cat i ons
Christine Gibbs
Human Resources
Ian Morrison
Infrast ruct ure
Grant Wilson
Resources and
Environment
Bill Forrester
Syst em Pl anni ng
Ross Young
Research and Technology
Peter Scott
Ser vi ce Del i ver y
Tony Antoniou
This year Melbourne Water consulted with, and received
advice from, a wide range of professional committees,
organisations and boards including:
Land devel opment
Urban Development Institute of Australia Liaison Committee
Commonwealth Games Village Environmental Design
Review Group
Sustainability for the Built Environment Reference Group
Sustainability and the Building Code Reference Group
Melbourne Water/ VicRoads Liaison Committee
Di versi ons/ fl ow management
Victorian Streamflow Management Plans Working Group
Wat erway management
Port Phillip and Western Port Regional River Health
Strategy Steering Committee and Working Group
State/ national policy/ advisory committees or boards
Trade Waste Acceptance Advisory Committee
Farm Dams Project Steering Group
State Fishway Implementation Committee
State Flood Policy Committee
Victorian Flood Warning Consultative Committee
Victorian Stormwater Advisory Committee
Board of Water Services Association of Australia
Water Efficient Appliance Group
Australian Water Association
International Water Association
Victorian Water Industry Association
Water Environment Federation
Co-operative Research Centre for Water Quality and Treatment
Co-operative Research Centre for Catchment Hydrology
Co-operative Research Centre for Freshwater Ecology
Cat chment and l and prot ect i on
State Waterway Managers Forum
Waterway Rehabilitation Working Group
Board of Port Phillip and Westernport Catchment
Management Authority
Professi onal organi sat i ons
Stormwater Industry Association (Victorian Committee)
Emergency response and fi re prevent i on
Victorian State Emergency Service/ Melbourne Water/
Municipal Association Victoria Emergency Issues Committee
Bureau of Meteorology/ Victorian State Emergency
Service, Melbourne Water Steering Group
O rga n isa tio n a l C h a rt
38
Fi nanci al resul t s
Achi evement s
Net cash flow from ordinary activities of $324.7 million

enabled:
>a reduction in debt of $21.3 million
>investment of $117.9 million on capital works to
improve and upgrade infrastructure
>payments to the Victorian Government of $123.1
million, comprising a dividend of $99.4 million and
income tax payments of $23.7 million.
Consolidation and restructuring of mechanical,

electrical and civil maintenance contracts will provide
estimated future savings of up to $0.3 million a year.
Renegotiation of electricity supply contracts will provide

estimated future savings of $1.5 million a year.
Applying value engineering to drive innovation and

efficiencies in the delivery of capital projects.
Key Chal l enges
Generating on-going operating efficiencies through

innovation and the application of learnings from
benchmarking studies.
Ensuring our financial systems and processes can

support changing reporting requirements with a move
to economic regulation.
Responsi bl e Fi nanci al Management
Our goal is to remain Australias most efficient water
authority and provide ongoing financial returns to our
owner, the Victorian Government. We continually seek
business improvements through operating efficiencies,
and participate in benchmarking studies to learn from
others and assess our performance.
Fi ve-year summar y
St at ement of fi nanci al performance for t he year ended 30 June 2003
$ million unless ot herwise indicat ed 1999 2000 2001 2002 2003
Revenue from ordinary activities 450 478 461 480 511
Profit from ordinary activities before income tax expense 167 204 176 186 218
Income tax expense relating to ordinary activities 54 7 47 56 68
Net profit 113 197 129 130 150
Dividends paid 106 126 58 99 99
St at ement of fi nanci al posi t i on as at 30 June 2003
$ million unless ot herwise indicat ed 1999 2000 2001 2002 2003
Current assets 28 36 39 50 53
Non-current assets 2728 2816 2914 2945 2999
Total assets 2756 2852 2954 2995 3051
Current liabilities 326 348 235 264 318
Non-current liabilities 1363 1337 1422 1402 1352
Total liabilities 1689 1685 1657 1667 1670
Net assets 1066 1167 1297 1328 1381
Total equity 1066 1167 1297 1328 1381
Operat i ng revenue
Operating revenue was $510.7 million, an increase of
$30.5 million from last year and $16.5 million better than
our plan. The result was driven by higher bulk water
prices, higher than expected levels of development activity
and an increase in the number of properties subject to
drainage rates.
Operat i ng revenue ($m)
164.5
166.0
111.6
44.7
9.5
6.1
8.3
Water sales ($)
Sewerage disposal charges ($)
Drainage rates ($)
Developer charges and contributions ($)
Werribee agriculture sales revenue ($)
Other revenue ($)
Proceeds (Asset sales) ($)
Operat i ng expendi t ure
Operating expenditure was $218.1 million (before interest
and tax), $10.9 million below plan.
Operat i ng expendi t ure ($m)
Net profi t
Net profit after tax was $150.0 million compared with
$130.3 million the previous year, which exceeded our plan
by $18.4 million. This result equates to an after-tax rate
of return on total shareholder equity of 11.1 per cent
compared with 9.9 per cent in our plan.
Debt reduct i on
We repaid $21.3 million of debt compared with $47.5
million the previous year. We had planned to repay
$17.0 million.
Li abi l i t i es
At 30 J une 2003, the total book value of our interest-
bearing liabilities was $1.1 billion. Our gearing ratio (debt
to total assets) was 37.7 per cent, compared with 39.2
per cent for the previous year.
69.3
25.7
36.0
26.2
74.2
37.4
23.5
Depreciation ($)
Operations ($)
Labour ($)
Maintenance ($)
Administration ($)
Borrowing costs ($)
Other ($)
Profit after income tax ($m)
1997/ 98
50 100 150 200 250
1998/ 99
1999/ 00
2000/ 01
2002/ 03
2001/ 02
1998/ 99
Debt (as at 30 J une) ($m)
500 1000 1500
1999/ 00
2000/ 01
2001/ 02
2002/ 03
40
KEY PERFORM ANCE I NDI CATORS
Measuring Melbourne Waters performance
OUR PRECI OUS WATER
Key performance i ndi cat or 2002/ 03 2002/ 03
Plan Act ual
Drinking wat er
R e lia b le su p p ly o f wa te r
(compliance with system pressure requirements) 99.5% 99.7%
Ae sth e tica lly p le a sin g wa te r
(number of breaches of compliance with water colour and turbidity requirements) 0 1
S a fe d rin k in g wa te r
(percentage of water samples at wholesale/ retail interface with no E. coli present) 98% 100%
Wat er conser vat ion
(percentage reduction in demand from retail water companies) 1.5% 2.1%
Wat er recycling
(percentage of water recycled from the total volume discharged from sewage treatment plants) 8.5% 11%
Communit y knowledge and under st anding
(percentage of community with an understanding of priority water resource issues) 65% 67.5%
PROTECTI NG THE ENVI RONMENT
Key performance indicat or 2002/ 03 2002/ 03
Plan Act ual
R e n e wa b le e n e rg y g e n e ra tio n
(percentage of renewable energy generated as a percentage of total energy use) 41% 37%
R e d u ctio n in g re e n h o u se g a s e m issio n s
(greenhouse gas emitted as a percentage compared with 2000/ 01) 7.5% 7.6%
S e wa g e sp ills
wet weather 4 0
dry weather 0 0
C o m p lia n ce with E P A Victo ria lice n ce re q u ire m e n ts a t E a ste rn Tre a tm e n t P la n t
a n d We ste rn Tre a tm e n t P la n t
(number of breaches) 0 1
Wa te r h a rve stin g p o in ts m e e tin g e n viro n m e n ta l flo w re q u ire m e n ts to rive rs
(number of breaches of compliance with catchment obligations) 0 1
U se o f b io so lid s in su sta in a b le a p p lica tio n s
(percentage of biosolids used beneficially from each treatment plant)
Eastern Treatment Plant 33% 104%*
Western Treatment Plant n/ a n/ a
N itro g e n d isch a rg e re d u ctio n
(tonnes per annum of nitrogen discharge savings through the construction of wetlands) 20 22.3
* Equivalent of one years product ion plus some st ored biosolids
BUSI NESS PERFORMANCE
Key performance indicat or 2002/ 03 2002/ 03
Plan Act ual
Commercial
Fre e ca sh flo w
(operating cash flows less capital cash flows before interest, tax and dividend payments) $213.6m $218.2m
D e b t to a sse ts ra tio 37.2% 37.1%
I n te re st cove ra g e ra tio (times) 3.6 4.2
C re d it ra tin g AA- AA-
C a p ita l p ro je cts d e live ry
(percentage of capital projects completed)
on time 80% 81.3%
within budget 95% 96.9%
Social
S ta ke h o ld e r sa tisfa ctio n
(percentage score from annual survey) 70% 76%
Le ve l o f k n o wle d g e a n d u n d e rsta n d in g o f th e o rg a n isa tio n s b u sin e ss o b je ctive s b y o u r p e o p le
(determined by survey) 90% 61%
S ta ff tu rn o ve r
(Melbourne Water people ceasing employment/ total staff) 5%- 10% 7%
Risk and Saf et y Management
Lo st-tim e in ju rie s
(number of injuries resulting in the loss of one or more full working day/ shift)
employees 0 6
major contractors 0 3
R e d u ctio n in flo o d -p ro n e p ro p e rtie s
(cumulative number of properties no longer at risk of 1 in 100-year flood) 320 125
42
B ria n R B ayley
Managi ng Di rect or
Brian Bayley was appointed Managing Director on 28 J uly
1998. Mr Bayley, formerly head of the corporations Water
Group, has extensive water industry experience in a broad
range of senior management positions. He is also Chair
of the Victorian Water Industry Association and the Water
Services Association of Australia.
M e rra n H K e lsa ll, B .C o m H o n s) , M B A, FC A
Di rect or
Merran Kelsall was appointed to the board on 1 J anuary
2001. Ms Kelsall, an independent company director and
consultant, has considerable experience in financial
services, health and utilities. She is a former partner
in a chartered accounting firm.
C a ro lyn J S ch u ltz, B S c H o n s) , P h D
Di rect or
Carolyn Schultz was appointed to the board on 1 J anuary
2000. Dr Schultz is a lecturer at the University of
Adelaide, School of Agriculture and Wine, and is a
graduate of the Australian Institute of Company Directors.
Jo h n S o , B S c, D ip E d
Di rect or
J ohn So was appointed to the board on 1 J anuary 2001.
Mr So, a councillor of the City of Melbourne since 1991,
became Lord Mayor in July 2001. He is also a businessman
with extensive commercial and community interests.
M a ry An n e H a rtley, B A H o n s) , LLB H o n s)
Di rect or
Mary Anne Hartley was appointed to the board on 1 J uly
2002. Ms Hartley, a practising barrister, is a director of
the Port of Melbourne Corporation and a director of
Gascor Ltd. She was a partner in a national law firm
where she advised public hospitals and practised
insurance law before joining the Victorian Bar.
R o b e rt S q u ire , B E H o n s) , FI E Au st
Di rect or
Robert Squire was appointed to the board on 1 J uly 2002.
He was appointed Chief Executive of Connell Wagner in
J uly 2000 and has extensive engineering experience in
Sydney, Melbourne, Singapore and Malaysia.
Corporat e governance
Our val ues
We have developed values that guide our decision-making
and enable the organisation to operate in a professional
manner, and in the best interests of our customers,
employees, shareholder, suppliers and stakeholders.
Board of Di rect ors
Melbourne Water has been declared a reorganising body
under the State Owned Enterprises Act since 1992. The
Governor-in-Council appoints directors and the Victorian
Government sets their remuneration. Directors are eligible
for reappointment for subsequent terms up to a maximum
of nine consecutive years.
The board has adopted a process for a formal annual
review of its performance and that of individual members.
Professional development opportunities are made
available for board members. In making new appointments
to the board, the Government ensures the board has the
necessary blend of skills and experience.
Performance of the board is also reviewed using external
expertise. Through governance arrangements, the Portfolio
and Shareholding Ministers are kept informed of the
direction, plans and performance of Melbourne Water.
The Board of Directors currently comprises a non-executive
chairman, five non-executive directors and the Managing
Director.
G ra e m e W B o wke r, B .C o m , AC A
Chai rman
Graeme Bowker has been Chairman of the Board since
1 J anuary 2000. Mr Bowker has extensive corporate
governance experience. He is an independent director
on a number of boards including the National Stroke
Foundation and Research Institute, Civic Nexus Holdings
Ltd (responsible for the Spencer Street station
redevelopment) and Tourism Holdings Ltd. Mr Bowker was
previously Victorian office managing partner of Deloitte
Touche Tohmatsu.
M e lb o u rn e Wa te rs b o a rd o f d ire cto rs:
L to R ) Jo h n S o , M e rra n K e lsa ll,
M a ry An n e H a rtley, R o b e rt S q u ire ,
G ra e m e B o wke r ch a irm a n ) ,
C a ro lyn S ch u ltz, B ria n B ayley
Powers
Melbourne Waters Board of Directors has an operational
charter that defines its role and management
responsibilities. Two committees, Audit and Corporate
Risk, and Remuneration and Human Resources, help
ensure the board carries out its functions effectively.
The board operates under the provisions of the Melbourne
Wat er Corporat ion Act 1992 (Vic.). Additionally, its
operational powers derive primarily from the Melbourne
and Met ropolit an Board of Works Act 1958 (Vic.). This Act
enables Melbourne Water to make by-laws in relation to
its functions. The two current by-laws are Wat er Supply
Prot ect ion (1997 No 1) and Wat erways and Drainage
Prot ect ion (1998 No 2) respectively. Under an agreement
with the relevant Minister, effective as of 1 J anuary 1995,
the Ministers functions and powers as a Floodplain
Management Authority under the Wat er Act 1989 (Vic.)
have been delegated to Melbourne Water. Pursuant to this
delegation, Melbourne Water, as an agent of the Minister,
provides floodplain management services over the area
for which Melbourne Water has drainage responsibilities.
The Minister has also delegated powers of management
under the Water Act relating to licensed private water
diversions from waterways to Melbourne Water, effective
from 1 J uly 1999. These acts and by-laws can be
purchased from the Information Victoria bookshop, 356
Collins Street, Melbourne (telephone 1300 366 356).
The Minister responsible for Melbourne Water is the
Honourable J ohn Thwaites, Minister for Environment and
Water. We work with officials in the Department of
Sustainability and Environment, together with those in
the Department of Treasury and Finance. They receive
statutory and other reports covering performance against
objectives and performance indicators in the business plan.
Pri mar y responsi bi l i t i es
The board plans to achieve specific objectives. These
include:
the establishment of long term outcomes based on

a triple bottom line approach
the approval of budgets together with key performance

indicators linked to objectives
the approval of annual financial statements and the

monitoring of performance against objectives and risks.
Key features of the boards activities are that:
it meets 11 times a year, undertakes site visits and

participates in business strategy workshops with
Melbourne Waters Leadership Team
board papers are available to all directors seven days

before meetings
conflicts of interest are declared and a director does

not participate in discussion or decisions where such
a conflict exists
directors have the right to seek independent

professional advice, at Melbourne Waters expense,
in connection with their duties and responsibilities
declarations of pecuniary interest by directors are

made annually, with procedures for updating that
information between declarations.
It has two committes, each comprising three non-executive
directors, who meet at least twice a year to focus on audit
and corporate risk and remuneration and human resources
issues respectively. The managing director attends
meetings of both committees by invitation.
Audi t and Corporat e Ri sk commi t t ee
Key responsibilities include review of key risk focus areas
and adequacy of controls, review of audit plans, and
oversight of the performance of internal and external
auditors. In carrying out its functions for the year, the
audit and corporate risk committee has had unrestricted
access to appropriate internal and external expert advice.
This year, Merran Kelsall (chairman), Carolyn Schultz and
Robert Squire were on this committee.
Management has developed a risk management framework,
which focuses on 10 areas. This helps management, as
part of its day-to-day responsibilities, deal with the critical
risks that face our business. There are defined
delegations of authority from the board to the Managing
Director who in turn devolves authority to his management
team members.
Two areas given specific attention are financial risk
management, and occupational safety.
Remunerat i on and Human Resources commi t t ee
This committee recommends to the board the terms of
employment and remuneration of the leadership team
including the Managing Director, taking into account
performance against objectives set out in plans. For
details of directors and executives remuneration, refer
to notes 24 and 25 of the Financial Statements. This year
members comprised Graeme Bowker (chairman), Mary
Anne Hartley and J ohn So. The Managing Director attends
the meetings of both committees by invitation.
Board access t o management
Members of the leadership team regularly present papers
on their areas of responsibility to the board. Individual
board members have regular contact with management
through committees.
Et hi cs and val ues
All directors, managers and employees are expected to
perform their duties with integrity and honesty. This
expectation extends to dealing with each other,
customers, suppliers and the community.
In maintaining a safe and fair working environment, the
board has approved various behavioural and workplace
policies for specific purposes, such as occupational
health and safety, discrimination and harassment, and
equal opportunity. These policies, which include a Code
of Conduct, are distributed and widely publicised to our
people for their information and assistance.
St at ement of fi nanci al performance 1999 2000 2001 2002 2003
for t he year ended 30 June 2003 $M $M $M $M $M
Revenue from ordinary activities 449.6 477.8 460.8 480.2 510.7
Profi t from ordi nar y act i vi t i es before i ncome t ax expense 166.9 204.2 176.3 185.8 218.4
Income tax expense relating to ordinary activities 54.1 7.3 47.2 55.6 68.5
Net profi t 112.8 196.9 129.0 130.3 150.0
Dividends paid 106.2 126.2 58.3 98.9 99.4
St at ement of fi nanci al posi t i on 1999 2000 2001 2002 2003
as at 30 June 2003 $M $M $M $M $M
Current assets 27.6 35.7 39.2 50.3 52.9
Non-current assets 2,728.1 2,816.4 2,914.4 2,944.5 2,998.5
Tot al asset s 2,755.6 2,852.1 2,953.6 2,994.8 3,051.4
Current liabilities 326.2 348.2 235.0 264.3 318.0
Non-current liabilities 1,363.1 1,336.9 1,421.8 1,402.4 1,352.0
Tot al l i abi l i t i es 1,689.3 1,685.1 1,656.8 1,666.7 1,670.0
Net asset s 1,066.3 1,167.0 1,296.8 1,328.1 1,381.4
Tot al equi t y 1,066.3 1,167.0 1,296.8 1,328.1 1,381.4
The following should be considered when reviewing the five-year financial summary:
Legislation reducing the company tax rate received Royal Assent on 10 December 1999.
Accounting and Finance Bulletin Issue 36 detailing changes to the recognition of proposed dividends was released
in respect of the 2001 year. Accordingly, no provision for dividend is taken to account until formally declared.
FI VE-YEAR FI NANCI AL SUM M ARY
44
Di rect or s repor t 46
St at ement of f i nanci al perf or mance f or year ended 30 June 2003 48
St at ement of f i nanci al posi t i on as at 30 June 2003 49
St at ement of cash f l ows f or year ended 30 June 2003 50
Not es t o t he account s
1. Summary of significant accounting policies 51
Fi nanci al perf or mance
2. Revenue 55
3. Profit from ordinary activities before income tax expense 55
4. Income tax 56
Fi nanci al posi t i on
5. Segment reporting 56
6. Current assets cash 58
7. Current assets receivables 58
8. Current assets other 58
9. Non-current assets property, plant and equipment 58
10. Non-current assets deferred tax assets 60
11. Current liabilities payables 60
12. Current liabilities interest-bearing liabilities 60
13. Current liabilities current tax liabilities 60
14. Current liabilities provisions 60
15. Non-current liabilities payables 60
16. Non-current liabilities interest-bearing liabilities 60
17. Non-current liabilities deferred tax liabilities 60
18. Non-current liabilities provisions 61
19. Contributed equity 61
20. Reserves 61
21. Retained profits 61
22. Equity 61
Ot her
23. Remuneration of auditors 61
24. Remuneration of directors 62
25. Remuneration of executives 62
26. Commitments 63
27. Contingent liabilities 64
28. Dividend 64
29. Contractual arrangements for supply of electricity by the private sector 64
30. Employee benefits 65
31. Reconciliation of net cash provided by operating activities to net profit 66
32. Related parties disclosure 67
33. Economic dependency 67
34. Events occurring after balance date 67
35. Financial instruments 67
St at ement by Di rect or s and Chi ef Fi nance Of f i cer 70
Audi t or-General s repor t 71
FI NANCI AL STATEM ENTS
Table of contents
45 Melbourne Water ANNUAL REPORT 2002/ 03
Di rect or s
The directors of Melbourne Water Corporation in office at the date of this report are:
Graeme W Bowker (Chairman) Brian R Bayley (Managing Director)
Carolyn J Schultz J ohn So
Mary Anne Hartley (appointed 1 J uly 2002) Merran H Kelsall
Robert Squire (appointed 1 J uly 2002)
Particulars of the directors qualifications, experience and special responsibilities are set out on pages 42-43 of this report.
Di rect or s meet i ngs
During the financial period the Corporation held 11 meetings of directors.
Attendance at meetings of the board and its committees were:
Principal Audit & Corporate Remuneration
board Risk Committee Committee
Attended Maximum Attended Maximum Attended Maximum
possible possible possible
Graeme Bowker 11 11 2 2
Brian Bayley 11 11 4* 4 2* 2
Carolyn Schultz 11 11 4 4 1 1
J ohn So 7 11 1 2
Mary Anne Hartley 11 11 1 1
Merran Kelsall 11 11 4 4
Robert Squire 9 11 4 4
* At t ended by invit at ion
Pri nci pal act i vi t i es
The Corporations principal activities during the financial year were to provide water and sewerage services,
on a wholesale basis, to three retail companies: Yarra Valley Water Ltd, South East Water Ltd and City West Water Ltd.
The Corporation also managed the main drainage network and waterways, providing flood protection and waterways
quality improvement services for greater Melbourne.
Operat i ng resul t s and di vi dend
Melbourne Waters net profit, after providing for income tax, was $150.0 million.
The proposed dividend for 2002/ 03 is $103.3 million. This comprises $51.6 million paid as an interim dividend
during 2002/ 03 and a proposed final dividend of $51.7 million. The proposed final dividend, which is subject to
final determination by the Treasurer of Victoria, after consultation with Melbourne Waters board of directors and
the Minister for Sustainability and Environment, has not been booked as a provision as at 30 J une 2003.
Revi ew of operat i ons
The directors review of Corporation operations during the financial period ended 30 J une 2003, and the results
of those operations, are set out in the managing directors overview on page 5 of this report.
St at e of af f ai r s
There were no significant changes in the state of affairs of the Corporation during the financial period ended
30 J une 2003 not otherwise disclosed in this report.
Envi ronment al regul at i on
Melbourne Water is subject to significant environmental regulation in respect of managing sewage treatment plants
and maintaining environmental flows requirements. Information on these topics is included in Melbourne Waters
annual water resources and environment reviews.
Sewage t reat ment pl ant s
Melbourne Waters compliance with EPA Victoria discharge parameters was 100 per cent at the Eastern Treatment
Plant and 100 per cent at the Western Treatment Plant. Other licence requirements were met during the year to the
EPAs satisfaction.
During 2001/ 02, Melbourne Water submitted a works proposal to improve treatment at the Eastern Treatment Plant.
In J uly 2002, EPA Victoria responded with a works approval to improve treatment to a tertiary standard and to
construct an extended ocean outfall at Boags rocks. This approval is being appealed by a community group.
Once the appeals process is completed, Melbourne Water will implement actions required to comply with the approval.
DI RECTORS REPORT
46
Ramsar si t e at West er n Treat ment Pl ant
The Western Treatment Plant is broadly managed within parameters of the Ramsar International Conventions wise use
test, which aims to protect significant wetlands. Melbourne Water submitted a draft management plan as part of its
application to improve sewage treatment at the Western Treatment Plant. Environment Australia approved these works
on the condition that Melbourne Water finalise the draft plan and develop a strategic action plan for the site. Work on
the management plan was finalised during the year. The strategic action plan is required to be completed by December
2003. These actions are consistent with the Parks Victoria management plan for the Port Phillip Bay (Western Shoreline)
and Bellarine Peninsula Ramsar site that includes the Western Treatment Plant.
Ramsar si t e at Edi t hval e Seaf ord Wet l ands
During 2001, Melbourne Water was successful in having the Edithvale-Seaford wetlands included in the Australian
register of significant wetlands. The Edithvale-Seaford wetlands Ramsar management plan has been developed to
ensure that site activities are broadly managed within parameters of the Ramsar International Conventions wise use
test. This plan is reviewed annually. Activities such as monitoring bird numbers are implemented to ensure site activities
do not adversely affect significant bird populations.
Dandenong Treat ment Pl ant
The disused Dandenong Treatment Plant is subject to an EPA Pollution Abatement Notice. The notice is being redrafted
by EPA Victoria following additional data obtained from site investigations completed during the year. Melbourne Water
and the Urban and Regional Land Corporation have signed a memorandum of understanding with a view to developing
a joint rehabilitation and development plan. Specific site remediation works are waiting for an approval of remediation
techniques from EPA Victoria and agreement by the Boards of both organisations.
Envi ronment al f l ow requi rement Yar ra Ri ver
Flow in the Yarra has to be managed so that to the extent practicable it does not drop below 245 million litres per
day at Warrandyte. During the year, drought conditions caused flows to fall below this level with the lowest flow recorded
at 138 million litres per day. During these times, Melbourne Water met its obligations by ceasing pumping from the
Yarra River at Yerring Gorge, restricting diversions from the river and not harvesting from minor tributaries of the Yarra.
Envi ronment al f l ow requi rement bul k ent i t l ement s
Melbourne Water has bulk entitlements to water for the Thomson and Maribyrnong Rivers. During the year the
environmental flow requirements established by these bulk entitlements were met.
Event s subsequent t o bal ance dat e
Since the end of the financial year the directors are not aware of any matter or circumstance not otherwise dealt with
in this report that, in the opinion of the directors has significantly affected or may significantly affect the operations of
the Corporation, the results of those operations, or the state of affairs of the Corporation in future years.
Di rect or benef i t s
No director has received or become entitled to receive a benefit (other than a benefit included in notes 24 and 32 to
the financial statements) because of a contract that the director, a firm of which the director is a member, or an entity
in which the director has a substantial financial interest, has made (during the period ended 30 J une 2003 or at any
other time) with:
(a) the Corporation; or
(b) an entity that the Corporation controlled, or a body corporate that was related to the Corporation,
when the contract was made or when the director received, or became entitled to receive, the benefit.
Di rect or and of f i cer l i abi l i t y i nsurance
During the financial year the Corporation paid insurance premiums in respect of director and officer liability insurance.
The policies do not specify the premium for individual directors and officers.
The director and officer liability insurance provides cover against all costs and expenses involved in defending legal
actions and any resulting payments arising from a liability to persons (other than the Corporation) incurred in their
position as director or officer unless the conduct involves a wilful breach of duty or an improper use of information
or position to gain advantage.
I nt erest i n cont ract s
No contracts involving directors interests were entered into since the end of the previous financial year, or existed
at the end of the financial year, other than the transactions detailed in note 32 to the financial statements.
Graeme W Bowker Bri an R Bayl ey
Chairman Managing Direct or
Note 2003 2002
$000 $000
Revenue from ordi nar y act i vi t i es 2 510,730 480,150
Depreciation and amortisation expense 3 (69,325) (64,790)
Operational expense (36,005) (48,000)
Employee benefits expense (37,366) (33,705)
Repairs and maintenance expense (25,746) (26,111)
Administrative expense (23,468) (21,204)
Borrowing costs expense 3 (74,225) (76,142)
Other expenses from ordinary activities (26,170) (24,387)
Profi t from ordi nar y act i vi t i es before i ncome t ax expense 218,425 185,811
Income tax expense 4 (68,472) (55,555)
Tot al changes i n equi t y ot her t han t hose resul t i ng from
t ransact i ons wi t h owners as owners 22 149,953 130,256
The above statement of financial performance should be read in conjunction with the accompanying notes.
STATEM ENT OF FI NANCI AL PERFORM ANCE
for the year ended 30 J une 2003
48
Note 2003 2002
$000 $000
Cur rent asset s
Cash assets 6, 35 212 271
Receivables 7, 35 34,984 35,033
Other assets 8 17,697 15,005
Tot al current asset s 52,893 50,309
Non-cur rent asset s
Property, plant and equipment 9 2,992,641 2,933,277
Deferred tax assets 10 5,901 11,273
Tot al non-current asset s 2,998,542 2,944,550
Tot al asset s 3,051,435 2,994,859
Cur rent liabilit ies
Payables 11, 35 102,938 100,058
Interest-bearing liabilities 12, 26, 35 185,051 141,174
Current tax liabilities 13 21,975 15,629
Provisions 14 8,026 7,446
Tot al current l i abi l i t i es 317,990 264,307
Non-cur rent liabilit ies
Payables 15, 35 2,039 294
Interest-bearing liabilities 16, 26, 35 964,592 1,031,543
Deferred tax liabilities 17 371,243 338,178
Provisions 18 14,129 32,408
Tot al non-current l i abi l i t i es 1,352,003 1,402,423
Tot al l i abi l i t i es 1,669,993 1,666,730
Net asset s 1,381,442 1,328,129
Equit y
Contributed equity 19 665,239 662,692
Reserves 20 32,579 32,366
Retained profits 21 683,624 633,071
Tot al equi t y 22 1,381,442 1,328,129
The above statement of financial position should be read in conjunction with the accompanying notes.
STATEM ENT OF FI NANCI AL POSI TI ON
as at 30 J une 2003
Note 2003 2002
$000 $000
Cash f lows f rom operat ing act ivit ies
Receipts from customers (inclusive of goods and services tax) 461,366 436,872
Payments to suppliers and employees (inclusive of goods and services tax) (186,403) (180,696)
Income tax paid (23,689) (7,577)
Interest received 293 83
Borrowing costs (72,048) (73,928)
Other revenue 49,479 54,179
Net cash i nfl ow from operat i ng act i vi t i es 31 228,998 228,933
Cash f lows f rom invest ing act ivit ies
Payment for property, plant, equipment and works in progress (115,456) (84,457)
Proceeds from sale of property, plant and equipment 8,873 3,031
Net cash (out fl ow) from i nvest i ng act i vi t i es (106,583) (81,426)
Cash f lows f rom f inancing act ivit ies
Proceeds from borrowings 241,500 354,011
Repayment of borrowings (264,574) (402,844)
Dividend paid (99,400) (98,942)
Net cash (out fl ow) from fi nanci ng act i vi t i es (122,474) (147,775)
Net increase/ (decrease) in cash held (59) (268)
Cash at the beginning of the financial year 271 539
Cash at end of t he fi nanci al year 6 212 271
Details of financing arrangements are detailed in notes 26 and 35.
The above statement of cash flows should be read in conjunction with the accompanying notes.
STATEM ENT OF CASH FLOWS
for the year ended 30 J une 2003
50
1. Summar y of si gni f i cant
account i ng pol i ci es
1. 1 General
These general purpose financial statements are prepared
in accordance with the Financial Management Act 1994,
Australian Accounting Standards, Statements of
Accounting Concepts, Urgent Issues Group Consensus
Views and relevant statutory and other requirements.
The financial statements have been prepared on the basis
of historical cost and do not take into account changing
money values or current valuations of non-current assets,
except where stated.
Amounts in the financial statements have been rounded
to the nearest thousand dollars. The accounting policies
adopted, and the classification and presentation of items,
are consistent with those of the previous year, except
where a change is required to comply with an Australian
Accounting Standard or Urgent Issues Group Consensus
View, or an alternative accounting policy permitted by
an Australian Accounting Standard is adopted to improve
the relevance and reliability of the financial report.
Where practicable, comparative amounts are presented
and classified on a basis consistent with the current year.
1. 2 Changes i n account i ng t reat ment
Empl oyee Benef i t s
Melbourne Water has applied the newly revised AASB
1028 Employee Benef it s for the first time commencing
1 J uly 2002.
When applied, this Standard supersedes AAS 30
Account ing f or Employee Ent it lement s and its purpose
is to prescribe recognition, measurement and disclosure
requirements for employee benefits.
Prior to the application of the new standard, employee
entitlements have been measured using the
remuneration rates that were current as at reporting
date. For the reporting period ending 30 J une 2003,
the Corporation has measured employee benefits on
remuneration rates expected to apply when the obligation
is settled (i.e. taking into account future increases in
remuneration rates).
The change in the measurement basis has resulted in
higher liabilities of $87,028 being recognised.
Provi si ons, Cont i ngent Li abi l i t i es and
Cont i ngent Asset s
Melbourne Water has applied AASB 1044 Provisions,
Cont ingent Liabilit ies and Cont ingent Asset s for the first
time from 1 J uly 2002. The purpose of this Standard
is to prescribe requirements for the recognition,
measurement, presentation and disclosure of provisions
and recoveries receivable to assist users to assess
their nature and amount.
It also prescribes requirements for the disclosure of
contingent liabilities and contingent assets to assist users
to assess their nature and amount and the uncertainties
expected to affect their ultimate outcome. Contingent
liabilities and assets are not recognised in the financial
statements but are only disclosed by way of a note, and
if quantifiable are measured at nominal value.
Reval uat i on of Non-Current Physi cal Asset s
Melbourne Water will progressively revalue the Crown Land
holdings from deprival value to fair value for reporting
periods ending no later than 30 J une 2005. In line with
the transitional provisions of AASB 1041, Melbourne
Water has a documented plan outlining each stage and
requirement for each reporting date up until the cessation
of the progressive revaluation.
1. 3 I ncome Tax
Under Section 88(3D) of the St at e Owned Ent erprises Act
1992, Melbourne Water became subject to the National
Tax Equivalent Regime from 1 J uly 2001. The tax
equivalent rules are based on the Income Tax Assessment
Act 1936 and the Income Tax Assessment Act 1997.
The essential difference between the National Tax
Equivalent Rules and the Commonwealth legislation is that
the tax liability is to be paid to the State Government and
not the Commonwealth Government.
Melbourne Water has adopted the liability method of tax
effect accounting in accordance with the requirements
of AAS 3 Income Taxes.
1. 4 Goods and Ser vi ces Tax
Revenues, expenses and assets are recognised net of
the amount of goods and services tax (GST), except where
the amount of GST incurred is not recoverable from the
Australian Tax Office (ATO). In these circumstances the
GST is recognised as part of the cost of acquisition of
the asset or as part of an item 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 Statement of Financial Position.
Cash flows are included in the statement of cash flows
on a gross basis in accordance with AAS 28 St at ement
of Cash Flows. 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.
NOTES TO THE ACCOUNTS
1. 5 Val uat i on of non-cur rent asset s
Property, plant and equipment, excluding crown land, are
recorded at historical cost. Those assets acquired from
external sources are valued either at values shown in the
statement of financial position of the acquired entity or at
an arms-length value.
Crown land was revalued by the Office of the Valuer
General at 30 J une 2000 using the deprival value
concept basis (refer to note 9). Transfers to and from
other Victorian Government entities are adjusted against
contributed equity in accordance with formal approval
by the Minister of Finance. Crown land revaluations are
adjusted against the asset revaluation reserve.
1. 6 Asset reval uat i on reser ve
Revaluation increments are credited directly to the asset
revaluation reserve, except that, to the extent that an
increment reverses a revaluation decrement previously
recognised as an expense in the statement of financial
performance, in respect of that same asset class,
the increment is recognised immediately as revenue
in the statement of financial performance.
Revaluation decrements must be recognised as an
expense in the statement of financial performance,
except that, to the extent that a credit balance exists
in the asset revaluation reserve, in respect of that same
asset class, the decrement grossed up for any related
recognised current tax and deferred tax must be debited
directly to the asset revaluation reserve.
1. 7 Recoverabl e amount of non-cur rent asset s
To ensure compliance with the provisions of AAS 10
Recoverable Amount of Non Cur rent Asset s, Melbourne
Water undertook an internal analysis of asset values
in J une 2003. Expected net cash flows at major asset
grouping level were discounted to their present value to
calculate the recoverable amount as prescribed in AAS 10.
As the recoverable amount for each major asset group
was in excess of the written down carrying value, a write
down of in service assets was not required.
1. 8 Depreci at i on
Non-current assets are depreciated on a straight line
basis over the estimated useful lives of the assets to
the Corporation. Depreciation commences in the month
subsequent to the date where service can be obtained.
The estimated useful lives are:
Buildings and leasehold improvements 5 to 80 years
Minor plant and equipment 3 to 50 years
Infrastructure assets 20 to 100 years
The useful lives of the assets are reviewed annually.
The results of the review undertaken during 2002/ 03
are detailed in note 3.
1. 9 Leased non-cur rent asset s
A distinction is made between finance leases, which
effectively transfer from the lessor to the lessee
substantially all risks and benefits incidental to ownership
of leased non-current assets, and operating leases under
which the lessor effectively retains substantially all such
risks and benefits.
Finance leases are capitalised. A lease asset and
liability are established at the present value of minimum
lease payments. Lease payments are allocated between
the principal component of the lease liability and the
interest expense.
The leased asset is amortised on a straight-line
basis over the term of the lease, or where it is likely
that the Corporation will obtain ownership of the asset,
over the useful life of the asset to the Corporation.
The Corporation has one finance lease at 30 J une 2003
(a water treatment plant at Yan Yean) which is being
amortised over a 21 year period.
1. 10 Recei vabl es and revenue recogni t i on
Trade debt ors
Water usage and sewage disposal charges consist of a
variable metered component and a fixed fee. The metered
usage revenue is recognised when the service has been
used with settlement at seven days. The fixed fee is
recognised on a monthly basis with settlement at 14
days. Collateral is not obtained for this class of debtor.
Drainage rates revenue is recognised monthly, derived
from the total expected rates to be collected for the year.
Rates are levied quarterly, based on property valuations
as at 30 J une 1990. To secure the debt, a lien is held
over the property.
Ot her recei vabl es and revenue
Developer charges and contributions when assets
are acquired at no cost to the Corporation an equivalent
amount is recognised as revenue on completion of
works and their acceptance by the Corporation. Cash
contributions are recognised when received.
Proceeds from sale of non-current assets property sales
are recognised on signing of an unconditional contract
of sale. Debtors are provided with commercial terms.
Interest received/ receivable income receivable is
accrued in accordance with terms and conditions of
the underlying financial instrument or other contract.
In accordance with Urgent Issues Group Abstract
31 Account ing f or t he Goods and Ser vices Tax (GST),
a receivable has been created to record the anticipated
GST on finance lease liabilities, payables and provisions.
Other receivables are recognised at their carrying amount.
Collateral is not normally obtained for other receivables.
52
Bad and doubt f ul debt s
A provision for doubtful debts is based on a review of
all amounts outstanding at balance date. Bad debts are
written off in the period in which they are identified.
1. 11 Account s payabl e
Creditors and accruals represent liabilities for goods/
services which are unpaid at 30 J une 2003. Trade creditors
are usually paid within 30 days from receipt of invoice.
Interest payable interest is accrued in accordance
with the terms and conditions of the underlying financial
instrument or other contract.
Advances represent security deposits and other advances
paid by developers / land owners for constructing
drainage works. The amounts are unsecured and
refunded to the developer at completion of the project.
1. 12 Bor rowi ngs
All borrowings are required to be transacted through the
Treasury Corporation of Victoria whose liabilities are
guaranteed by the Victorian Government.
All borrowings are carried at their principal amount.
Interest is accrued based on the applicable interest
rate for each loan.
1. 13 Deri vat i ve Fi nanci al I nst r ument s
As at 30 J une 2003, Melbourne Water had no derivative
positions and there are no additional positions in place
to hedge future transactions.
1. 14 Cash
For the purposes of the Statement of Cash Flows,
cash includes deposits at call with financial institutions
and other highly liquid investments with short periods to
maturity that are readily convertible to cash on hand and
are subject to an insignificant risk of change in value,
net of outstanding bank overdrafts.
1. 15 Empl oyee benef i t s
Sal ari es and annual l eave
Liabilities for salaries, including non-monetary benefits
expected to be settled within 12 months of the reporting
date, are measured at their nominal amounts in
respect of employees services up to the reporting date.
The nominal basis of measurement uses employee
remuneration rates that the entity expects to pay as at
each reporting date and does not discount cash flows
to their present value.
Annual leave benefits are accrued on a pro rata basis in
respect of services provided by employees up to balance
date, having regard to future rates of remuneration
and on-costs.
Si ck l eave
Sick-leave payments are made in accordance with relevant
awards, determinations and Corporation policy. No provision
is made in the financial statements for unused sick-leave
entitlements as these are not vested benefits.
Long ser vi ce l eave
Long service leave expected to be paid within 12 months
of the reporting date is recognised in the provision for
employee benefits and is recorded as a current liability
in the Statement of Financial Position at its nominal value.
Long service leave expected to be paid later than one year
is recognised in the provision for employee benefits and
is measured at the present value of the estimated future
cash outflows to be made for these entitlements and
recorded as a non-current liability.
Consideration is given to expected future employee
remuneration rates, employment related on-costs and
other factors, including experience of employee departures
and periods of service. Commonwealth Bond Rates are
used for discounting future cash flows.
Superannuat i on
In respect of the Corporations defined benefits
superannuation funds, any contributions made to the
superannuation plans by the Corporation are recognised
in the statement of financial performance, when due.
WorkCover
Melbourne Water is registered as a self-insurer for workers
compensation and is liable to the workers or workers
dependents to pay compensation under the Accident
Compensat ion Act 1985.
Based upon actuarial assessment, a provision of
$4.6 million ($4.7 million in 2001/ 02) is made for
outstanding claims incurred and not settled, and for
claims incurred but not reported. Other claims incurred
and settled during the period are charged to the
statement of financial performance.
Workers Compensat i on
Melbourne Water continues to be liable for workers
compensation claims incurred prior to the introduction
of WorkCare (now WorkCover). Based on actuarial
assessment, a provision of $147,000 is made for all
outstanding workers compensation claims at 30 J une
2003 ($200,000 in 2001/ 02).
1. 16 I nvent ori es
St ores ( consumabl es)
Stores consist mainly of materials and supplies for
asset construction, systems operation and general
administration, and are valued at lower of cost and net
realisable value.
Li vest ock
Livestock include cattle and sheep held in connection
with operating the Corporations Werribee Agriculture
operations. Cost is based on the absorption costing
methodology and includes expenditure incurred in
acquiring the livestock and bringing them to their
existing condition. Cost comprises direct materials,
direct labour and an appropriate proportion of variable
and fixed overhead expenditure.
1. 17 Prepayment s
The Smart Water Fund was established by Melbournes
four water businesses for the purpose of providing grant
funding to support the development of sustainable water
use projects. Each water business has a 25 per cent
interest in the fund and will contribute $2 million over
a two year period to 30 J une 2004 (providing a Fund total
of $8 million).
Contributions made to the Smart Water Fund are initially
recognised as prepayments in the water businesses
Statement of Financial Position. Expenses are
subsequently recognised by the water businesses when
incurred by the Fund.
1. 18 Di vi dends
An obligation to pay a dividend only arises after
consultation between the Corporations board of directors,
the Victorian Governments Minister for Environment and
Conservation and the Treasurer. Following this consultation,
a formal determination is made by the Treasurer.
1. 19 Segment Repor t i ng
As Melbourne Water operates solely within Australia,
segments have been selected on the basis of business
activity (i.e., Water, Sewerage, Waterways and Drainage),
rather than geography.
1. 20 Comparat i ve Fi gures
Where applicable, comparative figures have been
adjusted to conform with changes in the presentation
in the current year.
54
2003 2002
$000 $000
2. Revenue
Revenue f rom operat i ng act i vi t i es
Water usage charges 164,464 154,448
Sewage disposal charges 166,030 162,450
Drainage rates 111,606 105,579
442,100 422,477
Revenue f rom out si de t he operat i ng act i vi t i es
Developer charges and contributions 44,714 36,386
Proceeds from sale of non-current assets 9,534 9,298
Rent received 2,167 1,745
Interest received/ receivable 293 83
Miscellaneous 11,922 10,161
68,630 57,673
Revenue from ordi nar y act i vi t i es 510,730 480,150
3. Prof i t f rom ordi nar y act i vi t i es bef ore i ncome t ax expense
3a. Net gai ns and expenses
Profit from ordinary activities before income tax expense includes the
following specific gains and expenses:
Net gai ns/ ( l osses)
Net gain/ (loss) on disposal of non current assets 4,376 (5,605)
Expenses
Depreciation
Buildings and leasehold improvements 1,498 902
Minor plant and equipment 6,684 4,780
Infrastructure assets 60,035 57,999
Total depreciation 68,217 63,681
Amortisation
Infrastructure assets under finance leases 1,108 1,109
Total depreciation and amortisation expense 69,325 64,790
Assets written off/ written down 512 2,259
Other charges against assets
Bad and doubtful debts other debtors 5 37
Reversal of Property Decommissioning (included in operational expense) (19,223)
Borrowing costs
Interest and finance charges paid/ payable 74,225 76,142
3b. Revi si on of account i ng est i mat es
During the financial year an asset-life review was conducted. No change has
been made to the effective lives of assets as a result of this review.
2003 2002
$000 $000
4. I ncome t ax
The aggregate amount of income tax expense attributable to the financial year
is reconciled to the prima facie tax payable on the profit from ordinary activities.
Profit from ordinary activities before income tax 218,425 185,811
Prima facie income tax calculated at 30%(2001/ 02 30%) 65,528 55,743
Adjustment for the tax effect of permanent differences:
Non-deductible expenses 505 144
Net exempt income
Research and development concession (1,016) (332)
Income tax adjusted for permanent differences 65,017 55,555
Adjustment to deferred tax balance (see note) 3,455
Income t ax expense 68,472 55,555
Income tax expense comprises:
Current taxation provision 30,036 18,372
Deferred income tax provision 33,065 37,262
Future income tax benefit 5,371 (79)
68,472 55,555
Adj ust ment t o def er red i ncome t ax bal ances
A review of Melbourne Waters deferred tax balances was undertaken during 2003. As a result of this review,
adjustments were made to the future income tax benefit and deferred income tax provision. This resulted in an
increase in income tax expense of $3.5 million during 2002/ 2003.
Waterways
Water Sewerage & Drainage Consolidated
$000 $000 $000 $000
5. Segment repor t i ng
5a. Segment repor t s as at 30 June 2003
Busi ness segment s
Revenue
External segment revenue 173,303 175,993 161,141 510,437
Tot al segment revenue 173,303 175,993 161,141 510,437
Other unallocated revenue 293
Tot al revenue 510,730
Resul t
Segment result 88,836 98,457 103,324 290,617
Unallocated corporate revenue less unallocated
corporate expenses (72,192)
Profit from ordinary activities before income tax expense 218,425
Income tax expense (68,472)
Profit from ordinary activities after income tax expense 149,953
Extraordinary items after tax
Net profi t 149,953
Depreciation and amortisation 24,692 32,267 12,366 69,325
56
Waterways
Water Sewerage & Drainage Consolidated
$000 $000 $000 $000
Busi ness segment s
Asset s
Segment assets 1,133,524 1,306,761 599,270 3,039,555
Unallocated corporate assets 11,880
Consol i dat ed t ot al asset s 3,051,435
Li abi l i t i es*
Segment liabilities 188,667 170,627 161,057 520,351
Unallocated corporate liabilities 1,149,642
Consol i dat ed t ot al l i abi l i t i es 1,669,993
Acquisition of non-current assets 19,111 29,178 59,888 108,177
[purchased during the year and form
part of the total segment assets]
* Provision for income tax and the provision for deferred tax are now included in Segment liabilities totals.
5b. Segment repor t s as at 30 June 2002
Revenue
External segment revenue 158,987 174,856 146,224 480,067
Tot al segment revenue 158,987 174,856 146,224 480,067
Other unallocated revenue 83
Tot al revenue 480,150
Resul t
Segment result 80,846 84,144 95,013 260,003
Unallocated corporate revenue
less unallocated corporate expenses (74,192)
Profit from ordinary activities before income tax expense 185,811
Income tax expense (55,555)
Profit from ordinary activities after income tax expense 130,256
Extraordinary items after tax
Net profi t 130,256
Depreciation and amortisation 22,863 30,880 11,047 64,790
Asset s
Segment assets 1,143,979 1,289,422 549,916 2,983,317
Unallocated corporate assets 11,542
Consol i dat ed t ot al asset s 2,994,859
Li abi l i t i es
Segment liabilities 68,310 54,890 35,323 158,523
Unallocated corporate liabilities 1,508,207
Consol i dat ed t ot al l i abi l i t i es 1,666,730
Acquisition of non-current assets 20,694 18,872 29,460 69,026
[purchased during the year and form
part of the total segment assets]
2003 2002
$000 $000
6. Cur rent asset s cash
Cash at bank and on hand 212 271
Tot al current asset s cash 212 271
7. Cur rent asset s recei vabl es
Trade debtors 11,840 11,967
11,840 11,967
Other receivables 23,149 23,089
Less: provision for doubtful debts 5 23
23,144 23,066
Tot al current asset s recei vabl es 34,984 35,033
8. Cur rent asset s ot her
Prepayments 2,123 589
Stores (consumables) 2,726 2,490
Livestock 12,327 10,964
Property, plant and equipment held for resale 521 962
Tot al current asset s ot her 17,697 15,005
9. Non-cur rent asset s proper t y, pl ant and equi pment
Bui l di ngs and l easehol d i mprovement s
Crown land at valuation * 110,461 107,701
Freehold land and buildings at cost 27,209 25,524
Less: accumulated depreciation buildings 6,746 6,121
Total land and buildings 130,924 127,104
Mi nor pl ant and equi pment
Plant and equipment at cost 41,265 31,130
Less: accumulated depreciation 29,486 24,572
Total minor plant and equipment 11,779 6,558
I nf rast r uct ure asset s
Infrastructure assets at cost 3,622,627 3,535,666
Less: accumulated depreciation 913,822 853,886
Sub total infrastructure assets 2,708,805 2,681,780
Infrastructure assets under finance lease 23,280 23,280
Less: accumulated amortisation 5,543 4,435
Sub total infrastructure assets under finance lease 17,737 18,845
Total infrastructure assets 2,726,542 2,700,625
Capi t al works i n progress 123,396 98,990
Total non-current assets property, plant and equipment 2,992,641 2,933,277
58
* Crown Land
The Corporation controls 9,376 hectares of crown land. A revaluation was undertaken by the Office of the Valuer
General at 30 J une 2000. Melbourne Water will progressively revalue the Crown Land holdings from deprival value to
fair value for reporting periods ending no later than 30 J une 2005. In line with the transitional provisions of AASB 1041,
Melbourne Water has a documented plan outlining each stage and requirement for each reporting date up until the
cessation of the progressive revaluation.
9a Reconci l i at i on of movement i n proper t y, pl ant and equi pment
Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and end of the
current financial year is set out below.
Freehold land,
buildings and Minor Infrastructure
Crown leasehold plant and Infrastructure assets under Works in
land improvements equipment assets finance lease progress Total
2002/ 03 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Carrying amount at 1 J uly 2002 107,701 19,403 6,558 2,681,780 18,845 98,990 2,933,277
Additions 3,016 3,922 12,082 89,157 108,177
Disposals (256) (1,521) (199) (2,359) (4,335)
Depreciation/ amortisation expense (1,498) (6,684) (60,035) (1,108) (69,325)
Transfers between classes (284) 22 262
Increase in assets identified for sale 441 441
Assets spares/ consumables
Capital expenditure 117,909 117,909
Capitalisation of works in progress (93,503) (93,503)
Carr yi ng amount at 30 June 2003 110,461 20,463 11,779 2,708,805 17,737 123,396 2,992,641
Freehold land,
buildings and Minor Infrastructure
Crown leasehold plant and Infrastructure assets under Works in
land improvements equipment assets finance lease progress Total
2001/ 02 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Carrying amount at 1 J uly 2001 107,701 14,569 9,624 2,684,900 19,954 66,470 2,903,218
Additions 11,871 2,803 54,351 69,026
Disposals (5,735) (85) (472) 787 (5,505)
Depreciation/ amortisation expense (902) (4,780) (57,999) (1,109) (64,790)
Transfers between classes (1,000) 1,000
Increase in assets identified for sale (400) (400)
Assets spares/ consumables (4) (55) (59)
Capital expenditure 98,134 98,134
Capitalisation of works in progress (66,346) (66,346)
Carr yi ng amount at 30 June 2002 107,701 19,403 6,558 2,681,780 18,845 98,990 2,933,277
2003 2002
$000 $000
10. Non-cur rent asset s def er red t ax asset s
Future income tax benefit 5,901 11,273
Tot al non-current asset s deferred t ax asset s 5,901 11,273
11. Cur rent l i abi l i t i es payabl es
Trade creditors 27,612 26,554
Interest payable 22,150 22,230
Accruals 52,566 50,347
Advances 610 927
Tot al current l i abi l i t i es payabl es 102,938 100,058
12. Cur rent l i abi l i t i es i nt erest -beari ng l i abi l i t i es
Lease liabilities (refer to note 26) 1,951 1,774
Borrowings 183,100 139,400
Tot al current l i abi l i t i es i nt erest beari ng l i abi l i t i es 185,051 141,174
13. Cur rent l i abi l i t i es cur rent t ax l i abi l i t i es
Income tax 21,975 15,629
Tot al current l i abi l i t i es current t ax l i abi l i t i es 21,975 15,629
14. Cur rent l i abi l i t i es provi si ons
Employee benefits (refer to note 30a) 4,241 4,199
Insurance claims 694 641
Property decommissioning 194 1,559
Other provisions 2,897 1,047
Tot al current l i abi l i t i es provi si ons 8,026 7,446
15. Non-cur rent l i abi l i t i es payabl es
Trade creditors 1,879 218
Advances 160 76
Tot al non-current l i abi l i t i es payabl es 2,039 294
16. Non-cur rent l i abi l i t i es i nt erest -beari ng l i abi l i t i es
Lease liabilities (refer to note 26) 14,592 16,543
Borrowings 950,000 1,015,000
Tot al non-current l i abi l i t i es i nt erest beari ng l i abi l i t i es 964,592 1,031,543
17. Non-cur rent l i abi l i t i es def er red t ax l i abi l i t i es
Deferred income tax 371,243 338,178
Tot al non-current l i abi l i t i es deferred t ax l i abi l i t i es 371,243 338,178
60
2003 2002
$000 $000
18. Non-cur rent l i abi l i t i es provi si ons
Employee benefits (refer to note 30a) 13,034 12,328
Insurance claims 346 204
Property decommissioning 0 18,624
Other provisions 749 1,253
Tot al non-current l i abi l i t i es provi si ons 14,129 32,408
19. Cont ri but ed equi t y
Opening balance 662,692 662,692
Adjustment relating to recognition of government contribution
of Crown land (refer to note 22) 2,547
Cl osi ng bal ance 665,239 662,692
20. Reser ves
Asset revaluation reserve
Opening balance 32,366 32,366
Adjustment relating to recognition of government contribution
of Crown land (refer to note 22) 213
Cl osi ng bal ance 32,579 32,366
21. Ret ai ned prof i t s
Retained profits at the beginning of the year 633,071 601,757
Net profit 149,953 130,256
Dividends paid (refer to note 28) (99,400) (98,942)
Ret ai ned profi t s at t he end of t he year 683,624 633,071
22. Equi t y
Total equity at the beginning of the year 1,328,129 1,296,815
Net profit 149,953 130,256
Net increment in contributed equity due to Crown land (refer to note 19) 2,547
Net increment in asset revaluation reserve due to Crown land (refer to note 20) 213
Dividends paid (99,400) (98,942)
Tot al equi t y at t he end of t he year 1,381,442 1,328,129
23. Remunerat i on of audi t or s
Audit fees paid or payable to the Victorian Auditor-General's Office
for auditing the Corporation's annual financial statements.
Paid as at 30 J une 25 30
Payable as at 30 J une 75 67
Number Number
24. Remunerat i on of di rect or s
The number of Corporation directors and income they received
is shown below in their relevant income bands.
Remuneration between
$10,000 $19,999
$30,000 $39,999 5 4
$40,000 $49,999 1
$60,000 $69,999 1 1
$290,000 $299,999
$300,000 $309,999 1
$310,000 $319,999 1
Total number 7 7
$000 $000
Total amount 653 632
During the financial year the Corporation paid insurance premiums in respect
of director and officer liability insurance. The policies do not specify the premium for
individual directors and officers but the value of this benefit has been included in
total remuneration.
Number Number
25. Remunerat i on of execut i ves
The numbers of executive officers whose remuneration during the period was
in excess of $100,000 are shown below in their relevant income bands.
Remuneration between
$100,000 $109,999 4 4
$110,000 $119,999 4 6
$120,000 $129,999 4 6
$130,000 $139,999 4 1
$140,000 $149,999 5 3
$150,000 $159,999 1
$160,000 $169,999 1
$170,000 $179,999 1 4
$180,000 $189,999 4 1
$190,000 $199,999 1
$200,000 $209,999 3 1
$210,000 $219,999 1
Total number 31 28
$000 $000
Total amount 4,551 3,880
62
2003 2002
$000 $000
26. Commi t ment s
Capi t al commi t ment s
Total capital expenditure contracted for the construction of water, sewerage
and drainage infrastructure at balance date but not provided for in the accounts:
Not later than one year 104,823 32,731
Later than one year but not later than five years 13,826
Later than five years
Tot al capi t al commi t ment s 118,649 32,731
Operat i ng l ease commi t ment s
Total lease expenditure contracted for at balance date but not provided for
in the accounts:
Later than one year but not later than five years 8,801 7,724
Later than five years 6,555 7,790
Tot al l ease commi t ment s 18,682 19,295
Land and proper t y l ease agreement s are renewable upon completion of the lease term providing the terms and
conditions identified in the lease agreement are met by Melbourne Water. The lease agreements contain restrictions
imposed on Melbourne Water in regards to subletting, the use of, and alterations to the premises as identified in the
lease agreements.
Mot or vehi cl es and phot ocopi er l ease agreement s have finite lease terms, no renewal clauses or purchase options.
The lease terms do not contain any further restrictions.
Fi nance l ease commi t ment s
Commitments in relation to finance lease are payable as follows:
Minimum lease payments 22,810 26,325
Less: Future finance charges 6,267 8,008
Tot al fi nance l ease l i abi l i t y 16,543 18,317
Representing lease liabilities:
Current (refer to note 12) 1,951 1,774
Non-current (refer to note 16) 14,592 16,543
Tot al fi nance l ease l i abi l i t y 16,543 18,317
Ot her operat i ng commi t ment s
Total operating expenditure (excluding leases) contracted for at balance date but not provided for in the accounts:
Later than five years 4,424
Tot al ot her commi t ment s 15,538 9,387
2003 2002
$000 $000
27. Cont i ngent l i abi l i t i es
Details and estimates of maximum amounts of contingent liabilities for
which no provision is included in the accounts, are as follows:
Out st andi ng cl ai ms
Claims or possible claims against the Corporation arising out of various
matters connected with the Corporations business dealings 470 870
Additional contingent consideration of $44.4M in respect of anticipated
outflows for environmental compliance and decommissioning costs in 44,400
respect of surplus sites. Melbourne Water regards the contingent amount
to be the best estimate of the known obligation at balance date.
* Following rehabilitation of the surplus sites, it is expected that a
significant proportion of the decommissioning costs disclosed will be offset
by eventual revenue from land sales.
In accordance with Section 146(5)(a) of the Accident Compensat ion Act 1985
the Corporation must provide a bank guarantee to the Victorian WorkCover
Authority. The value of this bank guarantee at 30 J une 2003 was $6.9 million.
28. Di vi dend
Final dividend paid (relating to previous financial year) 47,800 49,742
Interim dividend paid (relating to reported financial year) 51,600 49,200
Tot al di vi dend pai d 99,400 98,942
The proposed final dividend payable in relation to the 2002/ 03 financial year is $51.7M. This amount is subject to
final determination by the Treasurer after consultation with the Melbourne Water Board of Directors and the Minister for
Environment and Conservation and consequently has not been booked as a provision as at 30 J une 2003.
29. Cont ract ual ar rangement f or t he suppl y of el ect ri ci t y by t he pri vat e sect or
On 25 February 2000, Melbourne Water signed a build, own and operate (BOO) contract with AGL Ltd to purchase
a minimum of 21.2 GWh of electricity per year for a period of 10 years.
Under this contract AGL will build, own and operate a power generation plant, which has been constructed on land
owned by Melbourne Water at the Western Treatment Plant. This arrangement becomes commercially operational on
1 J uly 2003.
Once the arrangement commences, the minimum obligation (excluding the effect of inflation) for the term of the
arrangement is $10.2 million. This calculation has been based on best estimates of volume throughput, peak and
off-peak consumption and other relevant variables as detailed in the contract.
Fut ure mi ni mum obl i gat i ons
Commitments, payable within:
Not later than one year 896 896
Total value of future minimum obligations 10,199 10,199
Asset s acqui red
Rights to receive electricity 10,199 10,199
64
2003 2002
$000 $000
30. Provi si ons i ncl udi ng empl oyee benef i t s
30a. Empl oyee benef i t s
Aggregat e empl oyee benef i t s l i abi l i t y
Accrued salaries (part of note 11) 302 323
Provision for employee benefits current (note 14) 4,241 4,199
Provision for employee benefits non-current (note 18) 13,034 12,328
Tot al empl oyee benefi t s l i abi l i t y 17,577 16,850
The aggregate employee benefit liability includes amounts for annual leave,
shift leave, long-service leave, salaries, WorkCover and superannuation.
All employees of the Corporation are entitled to superannuation benefits upon
retirement, disability or death through membership of the following funds:
Def i ned benef i t s f und
The equi psuper superannuation fund provides lump-sum benefits based on length of
service and final superannuable salary for employees engaged up until 31 December 1993.
Employees contribute at rates between 0 to 7.5 percent of their superannuation salary.
The Corporation contributes to the fund based on Melbourne Waters commitments under
the Employee Participation Agreement and Contribution Policy with the Trustee of the fund.
Actuarial assessment of the fund is undertaken on a triennial basis. The last such
assessment was made as at 31 J une 2001 by William M Mercer Pty Ltd.
Act uari al Est i mat e
Net market value of assets held by the fund 65,200 66,729
Present value of employees accrued benefits 60,800 58,686
Excess of net market value of assets over employees
accrued benefits to meet future benefit payments 4,400 8,043
Vested benefits 66,200 63,928
Net market value of assets held by the fund 65,200 66,729
Vested benefits 66,200 63,928
Excess/ (deficit) of net market value of assets over employees vested benefits (1,000) 2,801
The superannuation funds position ($1.0 million deficit for 2002/ 03) is measured as
the difference between the equi psuper fund assets and the employees vested benefits.
In accordance with the trust deed, the deficit advised by the actuarial estimate will give
rise to a revision of the contribution rate for the 2003/ 04 year.
Accumul at i on f unds
Employees engaged from 1 J anuary 1994 are entitled to benefits under accumulation funds.
The majority of these employees are covered by LASPLAN. Employees have the opportunity
to make personal contributions to this fund at a self-nominated rate or amount. The minimum
employer contribution to the fund, pursuant to the Superannuation Guarantee Charge,
was 9.0 percent in 2002/ 03 (8.0 percent in 2001/ 02).
Empl oyer cont ri but i ons
Employer contributions to the funds 2,285 810
Loans
There were no loans by the superannuation funds to the Corporation during 2002/ 03.
30b. Provi si ons
Movement s i n Provi si ons
Movements in each class of provision during the financial year, other than employee benefits, are set out below.
Insurance Property Other
30 June 2003 Claims Decommissioning Provisions Total
Carrying amount at start of year 846 20,183 2,300 23,329
Additional provisions recognised 495 471 1,700 2,666
Reversal of unused provision (19,724) (19,724)
Amounts utilised during the year (301) (736) (354) (1,391)
Carrying amount at end of year 1,040 194 3,646 4,880
Insurance Property Other
30 June 2002 Claims Decommissioning Provisions Total
Carrying amount at start of year 1,411 21,051 183 22,645
Additional provisions recognised 427 2,117 2,544
Reversal of unused provision (234) (234)
Amounts utilised during the year (992) (634) (1,626)
Carrying amount at end of year 846 20,183 2,300 23,329
31. Reconci l i at i on of net cash provi ded by operat i ng act i vi t i es t o net prof i t
2003 2002
$000 $000
Net profit 149,953 130,256
Depreciation 69,325 64,790
Provision for doubtful debts (18) (20)
Profit on sale of assets (6,730) (5,727)
Loss on sale of assets 2,354 122
Assets written off / written down 512 2,259
Value of works taken over from developers (11,577) (2,654)
Changes in assets and liabilities:
Decrease (increase) in receivables (28) 6,323
(Increase) in other assets (3,133) (2,277)
(Increase) in deferred tax assets (395) (79)
Decrease (increase) in payables 1,256 (11,052)
Decrease (increase) in provisions (17,699) (1,065)
Decrease (increase) in current tax liabilities 6,346 10,795
Decrease in deferred tax liabilities 38,832 37,262
Net cash provi ded by operat i ng act i vi t i es 228,998 228,933
66
32. Rel at ed Par t i es
Responsi bl e per sons
Persons who held office as a director of Melbourne Water Corporation at any time during the year ended 30 J une 2003
are: Graeme W Bowker, Brian R Bayley, Carolyn J Schultz, J ohn So, Mary Anne Hartley, Merran H Kelsall and Robert Squire.
The responsible Minister during the period 1 J uly 2001 to 5 December 2002 was the Hon. S. Garbutt, Minister for
Environment and Conservation, and from 5 December 2002 to 30 J une 2003 was the Hon. J Thwaites Minister for Water.
Remunerat i on of responsi bl e per sons
Information on the remuneration of directors is disclosed in note 24.
Loans t o responsi bl e per sons
There were no loans to responsible persons at 30 J une 2003.
Ot her t ransact i ons of responsi bl e per sons and t hei r rel at ed par t i es
A director, Robert Squire, is the Chief Executive of Connell Wagner Pty Ltd, which has provided engineering services
to Melbourne Water during the reporting period on normal commercial terms and conditions.
These dealings are managed to ensure that issues pertaining to conflict of interest do not arise.
The aggregate amount spent on these services is:
2003 2002
$000 $000
Engineering fees 5,041 2,573
33. Economi c dependency
The normal trading activities of the Corporation depend to a significant extent on the sale of bulk water and
sewage services to Yarra Valley Water Ltd, South East Water Ltd and City West Water Ltd. In addition, the Corporation
depends on Yarra Valley Water Ltd, South East Water Ltd and City West Water Ltd for the provision of billing and
collection services with respect to drainage rates.
34. Event s occur ri ng af t er bal ance dat e
No material events occurred after balance date.
35. Fi nanci al i nst r ument s
35. 1 I nt erest rat e exposure
The Corporations interest rate and the effective weighted average annual interest rate for each class of financial asset
and liability is set out below:
Melbourne Water has entered into a contract with Treasury Corporation of Victoria to refinance loans of $5 million
and $10 million on 17 September 2002 for a 10 year period at rates of 6.32%and 6.37%respectively.
Floating Fixed interest rate maturing Non-
Weighted avg. Interest 1 year 1 to over interest
annual effective rate or less 5 years 5 years bearing Total
30 June 2003 interest rate % $000 $000 $000 $000 $000 $000
Financial asset s
Cash 3.55 212 212
Tot al fi nanci al asset s 212 34,984 35,196
Financial liabilit ies
Creditors and accruals 104,207 104,207
Lease liabilities 16,543 16,543
Advances 770 770
Borrowings* 6.13 83,100 100,000 450,000 500,000 1,133,100
Tot al fi nanci al l i abi l i t i es 83,100 100,000 450,000 500,000 121,520 1,254,620
Net fi nanci al asset s (l i abi l i t i es) (82,888) (100,000) (450,000) (500,000) (86,536) (1,219,424)
* Of the total amount of borrowings at floating interest rate, $83.1 million will mature within 12 months.
Floating Fixed interest rate maturing Non-
Weighted avg. Interest 1 year 1 to over interest
annual effective rate or less 5 years 5 years bearing Total
30 June 2002 interest rate % $000 $000 $000 $000 $000 $000
Financial asset s
Cash 4.67 271 271
Tot al fi nanci al asset s 271 35,033 35,304
Creditors and accruals 99,349 99,349
Lease liabilities 18,317 18,317
Advances 1,003 1,003
Borrowings* 6.14 104,400 100,000 450,000 500,000 1,154,400
Tot al fi nanci al l i abi l i t i es 104,400 100,000 450,000 500,000 118,669 1,273,069
Net fi nanci al asset s (l i abi l i t i es) (104,129) (100,000) (450,000) (500,000) (83,636) (1,237,765)
* Of the total amount of borrowings at floating interest rate, $54.4 million will mature within 12 months and the
remaining $50 million will mature between one to three years.
35. 2 Fai r val ue
The book values and net fair values of financial assets and liabilities at balance date are:
2003 2002
Book Net fair Book Net fair
value value* value value*
$000 $000 $000 $000
On bal ance sheet
Financial asset s
Cash 212 212 271 271
Trade debtors 11,840 11,840 11,967 11,967
Other receivables 23,144 23,144 23,066 23,066
Deposits
Tot al fi nanci al asset s 35,196 35,196 35,304 35,304
Trade creditors and accruals 104,207 104,207 99,349 99,349
Lease liabilities 16,543 16,543 18,317 18,317
Advances 770 770 1,003 1,003
Borrowings 1,133,100 1,209,194 1,154,400 1,185,950
Tot al fi nanci al l i abi l i t i es 1,254,620 1,330,714 1,273,069 1,304,619
* Net book values are capital amounts. The differences between book values and net fair values relate principally to
interest rate movements.
Net fai r val ues of fi nanci al i nst rument s are det ermi ned as fol l ows:
Cash, deposit investments, short-term borrowings, cash equivalents and non-interest-bearing financial assets and
liabilities (trade debtors and trade creditors) are valued at cost.
Other borrowings are estimated based on the present value of expected future cash flows discounted at current market
interest rates quoted for securities issued by Treasury Corporation of Victoria.
Investments in securities, other financial assets and liabilities are estimates based on present value of expected future
cash flows discounted at current market interest rates for assets and liabilities of similar risk and maturity structure.
68
35. 3 Credi t ri sk
The carrying amounts of financial assets included in the Statement of Financial Position represent the Corporations
exposure to credit risk in relation to those assets, net of any provisions for doubtful debts.
Melbourne Water controls risk through credit ratings, limits and monitoring procedures consistent with board-approved
policy. Collateral or other security is not required to support financial instruments.
All financial risk management instruments are transacted with the Treasury Corporation of Victoria (TCV), whose
liabilities are guaranteed by the Victorian Government. Melbourne Water potentially has a concentration of credit risk
with Treasury Corporation of Victoria as the central borrowing authority of Victoria. The risk is considered minimal.
Melbourne Water does not have any significant trade credit exposure to an individual counterparty as at 30 J une 2003.
35. 4 Fi nanci ng ar rangement s
The capacity to borrow funds and manage the associated risks is subject to the provisions of the Bor rowing and
Invest ment Power s Act (1987). In accordance with this Act, the Victorian Treasurer issues annual approvals permitting
new borrowings and the refinancing of all loan maturities for that year. All funding is sourced from the Treasury
Corporation of Victoria.
In the opinion of the directors of Melbourne Water Corporation:
(a) the accompanying financial statements are drawn up so as to present fairly the financial performance of
the Corporation for the year ended 30 J une 2003 and the financial position of the Corporation as at that date; and
(b) at the date of this statement there are reasonable grounds to believe that the Corporation will be able to pay
its debts as and when they fall due.
We certify that the financial statements have been prepared in accordance with the requirements of the Financial
Management Act 1994 and applicable accounting standards.
We are not aware, at the date of this statement, of any circumstance which would render any particulars in the
financial statements to be misleading or inaccurate.
Dated at Melbourne on this 22nd day of August 2003.
On behalf of the board:
Graeme W Bowker
Chairman
Bri an R Bayl ey
Managing Direct or
Mal col m T Haynes
Chief Finance Of f icer
STATEM ENT BY DI RECTORS AND
CHI EF FI NANCE OFFI CERS
70
AUDI TOR-GENERAL S REPORT
72
COM PLI ANCE I NDEX
Cl ause Di scl osure Sect i on Page
Repor t of operat i ons
Char t er and purpose
9.1.3 (i) (a) Manner of establishment and relevant Minister Who we are/ Corporate governance 1, 4, 3
9.1.3 (i) (b) Objectives, functions, powers and duties Who we are/ Corporate governance 1, 4, 3
9.1.3 (i) (c) Services provided and persons or sections What we do/ who we work with 2, 3
of community served
Management and st ruct ure
9.1.3 (i) (d) (i) Names of governing board members, audit Corporate governance 42, 43
committee and chief executive officer
9.1.3 (i) (d) (ii) Names of senior officeholders and brief Our People/ Statutory information 37
description of each office
9.1.3 (i) (d) (iii) Chart setting out organisational structure Our People 37
9.1.3 (i) (e) Workforce data and application of merit and Our People/ Corporate governance 35, 36
equity principles
9.1.3 (i) (f) Application of FOI Act 1982 Statutory information 78
Financial and ot her inf ormat ion
9.1.3 (ii) (a) Summary of financial results with previous Financial results 38
four-year comparatives
9.1.3 (ii) (b) Summary of significant changes in financial Financial results 38, 39
position
9.1.3 (ii) (c) Operational and budgetary objectives for the Statement of Corporate Intent 74, 75
year and performance against those objectives
9.1.3 (ii) (d) Major changes or factors affecting achievement Statement of Corporate Intent 74, 75
of objectives
9.1.3 (ii) (e) Events subsequent to balance date Financial statements Note 34 67
9.1.3 (ii) (f) Consultancies >$100,000 Full details of each Statutory information 77, 78
consultancy
9.1.3 (ii) (g) Consultancies <$100,000 Number and total Statutory information 77, 78
cost of consulting engagements
9.1.3 (ii) (h) Extent of compliance with Building Act 1993 Managing reliable built assets 30, 31
9.1.3 (ii) (i) Statement that information listed in Part 9.1.3 Statutory information 79
(iv) is available on request
9.1.3 (ii) (k) Statement on implementation and compliance Statutory information 78
with national competition policy
9.8.2 (i) A statement of occupational health and safety Our People 32
matters
9.8.2 (ii) Occupational health and safety performance Our People 32
measures
Fi nanci al st at ement s
Preparat ion
9.2.2 (ii) (a) Statement of preparation on accrual basis Financial statements Note 1 51
9.2.2 (ii) (b) Statement of compliance with Australian Financial statements Note 1 51
Accounting Standards and associated
pronouncements
9.2.2 (ii) (c) Statement of compliance with accounting Financial statements Note 1 51
policies issued by the Minister for Finance
St at ement of f inancial operat ions
9.2.2 (i) (a) A statement of financial performance Financial statements 48
for the year Statement of financial performance
9.2.3 (ii) (a) Operating revenue by class Financial statements Note 2 55
9.2.3 (ii) (b) Investment income by class Financial statements Note 2 55
9.2.3 (ii) (c) Other material revenue by class including sale Financial statements Note 2 & 3 55
of non-goods assets and contribution of assets
9.2.3 (ii) (d) Material revenues arising from exchanges of N/ A
goods or services
Cl ause Di scl osure Sect i on Page
9.2.3 (ii) (e) Depreciation, amortisation or diminution in value Financial statements Note 3 55
9.2.3 (ii) (f) Bad and doubtful debts Financial statements Note 3 55
9.2.3 (ii) (g) Financing costs Financial statements Note 3 55
9.2.3 (ii) (h) Net increment or decrement on the revaluation Financial statements Note 20 61
of each category of assets
9.2.3 (ii) (i) Auditor-Generals fees Financial statements Note 23 61
St at ement of f inancial posit ion
9.2.2 (i) (b) A statement of financial position for the year Financial statements 49
Statement of financial position
Asse ts
9.2.3 (iii) (a) (i) Cash at bank or in hand Financial statements Note 6 58
9.2.3 (iii) (a) (ii) Inventories by class Financial statements Note 8 58
9.2.3 (iii) (a) (iii) Receivables, including trade debtors, loans Financial statements Note 7 58
and other debtors
9.2.3 (iii) (a) (iv) Other assets, including prepayments Financial statements Note 8 58
9.2.3 (iii) (a) (v) Investments by class N/ A
9.2.3 (iii) (a) (vi) Property, plant and equipment Financial statements Note 9 58
9.2.3 (iii) (a) (vii) Intangible assets N/ A
Lia b ilitie s
9.2.3 (iii) (b) (i) Overdrafts N/ A
9.2.3 (iii) (b) (ii) Bank loans, bills payable, promissory notes, Financial statements Note 12 & 16 60
debentures and other loans
9.2.3 (iii) (b) (iii) Trade and other creditors Financial statements Note 11 & 15 60
9.2.3 (iii) (b) (iv) Finance lease liabilities Financial statements Note 12, 60, 63
16 & 26
9.2.3 (iii) (b) (v) Provisions, including employee entitlements Financial statements Note 14, 18, 60, 61,
30a & 30b 65, 66
E q u ity
9.2.3 (iii) (c) (i) Contributed equity Financial statements Note 19 61
9.2.3 (iii) (c) (ii) Issued capital N/ A
9.2.3 (iii) (d) Reserves, and transfers to and from reserves Financial statements Note 20 61
(shown separately)
St at ement of cash f lows
9.2.2 (i) (c) A statement of cash flows for the year Financial statements 50
Statement of cash flows
Not es t o t he f inancial st at ement s
9.2.2 (i) (d) Notes to the financial statements by nature Financial statements Note 30a 65
and amount of ex-gratia payments
9.2.2 (i) (d) Amounts written off Financial statements Note 3 55
9.2.2 (iv) (a) Charges against assets/ depreciation Financial statements Note 3 55
9.2.2 (iv) (b) Material contingent liabilities and extent to Financial statements Note 27 64
which they are secured over assets
9.2.2 (iv) (c) Commitments for expenditure Financial statements Note 26 63
9.2.2 (iv) (d) Government grants received or receivable Statutory information 78
and source
9.2.2 (iv) (e) Employee superannuation funds Financial statements Note 30a 65
9.2.2 (iv) (f) Assets received without adequate consideration N/ A
9.4.2 Transactions with responsible persons and Financial statements Note 32 67
their related parties
9.7.2 Motor vehicle lease commitments Financial statements Note 26 63
9.10 Consistency of Budget and Departmental N/ A
Reporting (Departments only)
74
STATEM ENT OF CORPORATE I NTENT
Who we are
Melbourne Water is owned by the Victorian Government.
Our operating area extends from Melbournes water
supply catchments high up in the Yarra Ranges, to the
Mornington Peninsula and Western Port, north to Yan Yean
and west to Werribee.
We are a significant business, managing $7.1 billion of
natural and built assets. Our annual operating revenue
of more than $510 million is earned from water supply,
sewage treatment and drainage rates. This is used to
fund dividends and equivalent taxes to the Government,
our operations and our capital program, and to pay off debt.
We plan to invest more than $145 million a year over the
next three years on our infrastructure including reservoirs,
sewage treatment plants, pumping stations, sewers and
drains to help ensure we meet our objectives. We are
committed to decision-making based on economic, social
and environmental considerations.
An independent Board of Directors is responsible for the
governance of Melbourne Water. The responsible Minister
is the Minister for Environment and Water.
Our people have diverse skills and expertise, and range
from environmental scientists to engineers and research
and technology specialists, and we place a high priority
on building strong partnerships and relationships in the
government, industry and community sectors.
What we do
We have a significant role as environmental managers,
and we manage Melbournes water resources in a way
that aims to ensure that future generations enjoy one
of the best urban environments in the world.
Who we work wi t h
EPA Victoria and the Department of Human Services
regulate the environmental and public health aspects
of our business. We work across several arms of the
State Government, including the Department of
Sustainability and Environment, and the Department
of Treasury and Finance.
Our customers include the metropolitan retail water
companies City West Water, South East Water, Yarra
Valley Water and Western Water other water authorities,
local councils, land developers, businesses that divert
river water, and water recyclers.
Industry partners include AGL Ltd, which generates
electricity from biogas to help power the Western
Treatment Plant at Werribee, research organisations
such as the CSIRO and Co-operative Research Centres,
engineering consultants, and contractors who carry out
tasks ranging from inspecting and maintaining assets
to catchment surveillance and litter removal.
We work closely with a wide range of community
stakeholders including Friends of, Landcare, resident
and environment groups, advisory bodies, rural
landowners, and the education sector.
Vi si on, val ues, busi ness pri ori t i es
At Melbourne Water, we understand that engaging our
stakeholders is the key to achieving our vision of
Maki ng Mel bourne t he worl ds most wat er-sensi t i ve ci t y .
We also appreciate that achievements occur through
the contribution of our people and through our values.
We are people who:
recognise that we achieve more by working with others
feel privileged to be the custodians of our water

resources
behave with integrity
attain excellence through creativity and innovation
celebrate our achievements and learn from our

experiences.
Ini t i at i ves t o suppor t t he achi evement of t he vi si on
are out l i ned under Mel bourne Wat ers busi ness pri ori t y
areas, whi ch are:
water resources and the environment
waterways, bays and oceans
asset and risk management
financial management
customers and community.

These initiatives support key Government policy platforms
and are developed within a framework of decision-making
based on economic, environmental and social
considerations. They reflect our commitment to:
Avoi di ng t he need t o bui l d fur t her wat er st orages by:
Working with our stakeholders to reduce water

consumption by 15 per cent by 2010 and to
achieve behavioural change
Achieving 20 per cent water recycling by 2010

Prot ect i ng t he envi ronment by:
Reducing nitrogen inputs to Port Phillip Bay by

a minimum of 500 tonnes a year by 2006
Reducing our greenhouse gas emissions by

35 per cent by 2006
Recycling 100 per cent of biosolids produced at

our sewage treatment plants by 2010
Undertaking projects to enable all Melbournes

waterways to be rated in good condition by 2025
Meet i ng t he needs of t he Vi ct ori an Government ,
our cust omers and t he communi t y by:
Operating efficiently and providing appropriate financial

returns to the Victorian Government
Ensuring that at least 85 per cent of the community

continue to rate Melbournes drinking water as good
or very good
Ensuring that at least 80 per cent of our customers

rate our services as good or very good
Ensuring the community is kept informed and involved

in projects that may impact on them
Scal e of t he busi ness
Melbourne Water:
has total fixed assets valued at approximately

$7.1 billion in replacement cost terms
has an annual operating revenue of approximately

$510 million derived mainly from bulk water and
sewerage services to the retail water companies
and from drainage services to the community
supplies some 480 gigalitres of potable water to

the retail water companies annually
collects some 330 gigalitres of sewage from the retail

water companies annually for treatment and disposal
is responsible for providing regional drainage services

within the greater Melbourne area covering
approximately 7800 square kilometres. (Municipalities
are responsible for local drainage systems.)
Capi t al i nvest ment
Melbourne Water has made provision for significant
capital investment for its business priorities:
water resources and the environment
waterways, bays and oceans
asset and risk management
financial management
customer and community.

Capital investment for 2003/ 04 is $144.8 million.
Di vi dend
The dividend to be paid to the Victorian Government is in
accordance with the amount determined by the Victorian
Treasurer after consultation with Melbourne Waters Board
of Directors.
St at ut or y requi rement s
Environmental and health regulations
Melbourne Water is committed to meeting statutory and
other requirements, in particular:
compliance with EPA Victoria discharge licences issued

for the Eastern and Western treatment plants and
other related agreements or understandings
achieving drinking water quality and supply standards

specified in the bulk water supply contracts between
Melbourne Water and City West Water, South East
Water and Yarra Valley Water and others including
Southern Rural Water, Western Water and
Gippsland Water
compliance with the Vict orian Occupat ional Healt h

and Saf et y Act 1985 and regulations
Performance repor t i ng
Melbourne Waters operational and financial position is
reported to its owner, the Victorian Government, at the
end of each financial year.
Melbourne Water demonstrates its commitment to
environmental and public health performance and to
meeting its community obligations by annual public
reporting on its regulatory and internal procedures and
policies and performance against established benchmarks.
Busi ness pol i ci es
Melbourne Water has policies covering its key
responsibilities and obligations including environment,
public health, community, employees, occupational
health and safety, risk management, accounting,
legal and commercial.
76
STATEM ENT OF CORPORATE I NTENT
KEY PERFORMANCE I NDI CATORS FOR THE PERI OD 2 0 0 3 / 0 4 - 2 0 0 5 / 0 6
Annual t arget s
03/ 04 04/ 05 05/ 06
Managing Melbournes wat er resources and t he environment
Mont hly measures
Odour complaints < 2 1 < 1 9 < 1 1
Annual measures
%of community that continue to rate Melbournes drinking water as good or very good 8 5 % 8 5 % 8 5 %
%reduction in water consumption* 0 .4 % 0 .6 % 1 .6 %
%of water recycled from the total volume discharged from wastewater treatment plants 1 0 .5 % 1 3 .5 % 1 5 .5 %
%reduction in greenhouse gas emissions 1 0 .0 % 2 0 .0 % 3 5 .0 %
%of biosolids recycled
Eastern Treatment Plant 6 7 .0 % 1 0 0 % 1 0 0 %
Western Treatment Plant n /a 3 3 .0 % 6 7 .0 %
Prot ect ing our bays and wat erways
Mont hly measures
%of water harvesting points meeting environmental flow requirements to rivers 1 0 0 % 1 0 0 % 1 0 0 %
Number of sewage spills
wet weather 4 4 4
dry weather 0 0 0
Annual measures
Reduction in nitrogen load to Port Phillip Bay from Western Treatment Plant 5 0 0 to n n e s 5 0 0 to n n e s 5 0 0 to n n e s
Reduction in nitrogen load to Port Phillip Bay from wetlands 2 8 to n n e s 3 3 to n n e s 4 0 to n n e s
Breaches in EPA Victoria licence requirements
Eastern Treatment Plant n il n il n il
Western Treatment Plant n il n il n il
Responsible financial management
Annual measures
Free cash flow $ 1 8 6 .4 m $ 1 4 4 .3 m $ 1 6 9 .7 m
Debt to equity 4 5 :5 5 4 6 :4 5 4 6 :5 4
Operating return (EBIT) on average total assets 8 .4 % 8 .5 % 8 .5 %
Return on equity 9 .5 % 9 .4 % 9 .6 %
Economic return on capital employed 7 .4 % 7 .4 % 7 .4 %
Credit rating AA- AA- AA-
Capital structure:
Interest coverage ratio (times) 3 .5 3 .4 3 .5
Debt to total assets ratio 3 7 .3 % 3 7 .5 % 3 7 .3 %
%of capital projects completed
on time 8 0 % 8 2 % 8 5 %
within budget 9 5 % 9 5 % 9 5 %
Working wit h our cust omers and t he communit y
Customers:
Mont hly measures
%compliance with retail water company water pressure requirements 9 9 .5 % 9 9 .5 % 9 9 .5 %
Aesthetically pleasing water -
breaches in water colour and turbidity requirements n il n il n il
%of water samples at wholesale/ retail interface with no E. coli present 1 0 0 % 1 0 0 % 1 0 0 %
Annual measures
%of customers rating our services as good or better 7 0 % 7 5 % 8 0 %
%of waterway plans in place for river diverter customers 1 6 % 3 3 % 1 0 0 %
%of environmental management and quality risk management plans in place 1 0 0 % 1 0 0 % 1 0 0 %
for recycled water customers
Communit y
Mont hly measures
Number of lost time injuries
Melbourne Water people n il n il n il
major contractors n il n il n il
Annual measures
%satisfaction level with community consultation programs 8 0 % 8 2 % 8 5 %
%of stakeholders rating our relationship as good or better 8 0 % 8 2 % 8 5 %
Level of community knowledge and understanding of water resource issues 7 0 % 7 5 % 8 0 %
Level of knowledge and understanding of the organisations business priorities 7 0 % 7 5 % 8 0 %
by our people
* Target ref lect s Melbourne Wat ers init iat ive in wat er conser vat ion.
STATUTORY I NFORM ATI ON
Publ i cat i ons
Melbourne Water produces a range of publications to
increase community knowledge and understanding of
water issues and our activities. This year, we began
producing our bi-monthly magazine, The Source, and
other publications on CD-ROM to save paper and reduce
costs. We produced the following magazines, booklets,
brochures, newsletters, CD-ROMs and technical papers:
Wat er
Living With Drought
Our Precious Drinking Water
Rain Hail Shine flyer (updated)
St ormwat er/ drai nage/ wat erways
Wetlands Natures Filter
Water Sensitive Urban Design
Protecting stormwater quality from building and
construction sites (with Municipal Association
of Victoria and EPA Victoria)
Recycl i ng/ sewage
Recycling Water for a Greener Future
Western Treatment Plant: A Remarkable Community Asset
Western Treatment Plant Essential Facts (CD-ROM)
Western Treatment Plant Environment Improvement
Plan Summary
Recycled Water Handbook
An introduction to the proposed Balliang district
recycled water pipeline studies
Balliang Recycled Water Project: Feasibility
Study Summary
On-Site Water Recycling using recycled water
for a greener future
Energy and greenhouse
Meeting the Greenhouse Challenge
St rat egi c pl an
Catchment to Coast: Our long-term plan to make
Melbourne the worlds most water-sensitive city
(also on CD-ROM)
Pri vacy pol i cy
Melbourne Water Privacy Policy protecting your
information privacy
Annual repor t
Melbourne Water Business Review 2001/ 02
Melbourne Water Environment Review 2001/ 02
Melbourne Water Social Review 2001/ 02
Melbourne Water Annual Report 2001/ 02 CD-ROM
Educat i on
Drain Safety the signs are everywhere
Water Education Tours
Drains to our Waterways (booklet and video)
Western Treatment Plant Explorer (CD-ROM)
Home Water Investigator (CD-ROM)
All About Water an education resource (CD-ROM)
Essential Facts various fact sheets
EdStream Newsletter (February 2003 and J une 2003)
GreenPlumber s Caring for Our Water Householder Guide
GreenGardeners: Caring for Our Waterways Program guide
GreenGardeners: Caring for Our Waterways
Householder guide
Consul t at i on
Community information bulletins for various capital
works programs
Hoddles Creek Streamflow Management Plan
(Draft for comment and Final)
Diamond Creek Streamflow Management Plan
(Draft for comment and Final)
Devilbend Reservoir Draft Master Plan
Protecting Melbournes Water Supply
M41 Punt Road Water Main Replacement Project
Protecting Melbournes Northern Waterways
The Northern Diversion Sewer Project
Newsletter updates for diverter customers
Patterson Lakes Newsletters
Patterson Lakes J etty Guidelines
Patterson Lakes Tidal Residents Directory
Patterson Lakes Quiet Residents Directory
Eastern Treatment Plant Community Liaison
Committee Newsletters
Newsl et t ers
Irrigation and Commercial Farm Dams Licence to Water:
Registering or Licensing Existing Dams
The Source
Issue 21, August 2002
Issue 22, November 2003
Issue 23, December 2003
Issue 24, February 2003
Issue 25, May 2003
Issue 26, J une 2003 (CD-ROM and online versions)
Techni cal
Constructed Wetland Systems: Design Guidelines
for Developers
Modelling Urban Stormwater Improvement
Conceptualisation (MUSIC) Input Parameters and
Constructed Wetland Design Guidelines for Developers
Waterway Activity Management Plans, monitoring reports,
assessments, studies and waterway quality data reports
Various scientific and technical reports
Int ernal
Code of Conduct
In Touch newsletter (J une 2002 and May 2003)
Consul t ant s
During 2002/ 03, Melbourne Water engaged 60
consultants to undertake operational and capital
activities at a total cost of $2.7 million. Four
individual consultancies exceeded $100,000:
78
Gover nment grant s
Melbourne Water received $250,000 in grants from the
Department of Sustainability and Environment, Frankston
City Council, Port Phillip and Westernport Catchment
Management Authority, Environment Australia, Natural
Heritage Trust and EPA Victoria to undertake programs
such as the Port Phillip Regional River Health Strategy,
Werribee Tourist Precinct Water Recycling Initiative and
Healthy Rivers Initiative of Fish Passage.
Nat i onal compet i t i on pol i cy
As part of its commitments under National Competition
Policy, the Victorian Government commissioned an
independent review of Victorias water legislation. The aim
of the review was to identify opportunities to make better
use of competition so that the community benefits from
improved industry performance.
Melbourne Water contributed to the review by meeting
the Governments consultants and preparing detailed
submissions on their issues paper and final report.
In J une 2002, the Victorian Government released
its response to the review including a timetable for
implementing many of the reviews broad-ranging
recommendations.
In the past year, Melbourne Water has assisted the
Government develop legislative amendments to clarify and
refine by-law making powers provided to Melbourne Water
under the Melbourne and Met ropolit an Board of Works
Act 1958. Melbourne Water will continue to assist the
Government to implement the reviews recommendations.
Freedom of I nf or mat i on
Melbourne Water is subject to the Freedom of Inf ormat ion
Act 1982 (Vic.) and is committed to making documents
and information available to the community whenever it can.
The designated persons for the purpose of the Act are:
Principal of f icer :
Brian Bayley
Managing Director
Melbourne Water Corporation
Aut horised of f icer :
J ane Denton
Freedom of Information Officer
Request s for i nformat i on
This year we received six requests for access to
documents under the Freedom of Information legislation.
We processed these requests as follows:
Access in full 0
Access in part 1
Access refused 0
Documents not located 3
Transferred to another agency 0
Applicant did not proceed 0
Not finalised 2
The applications received related to the following issues:
Property development 2
Personal injury 1
Property damage 3
Year Number of request s
2000/ 01 19
2001/ 02 22
2002/ 03 6
Access t o document s
People wanting access to Melbourne Water documents
under the Freedom of Inf ormat ion Act 1982 (Vic.)
should write to:
Freedom of Information Officer
PO Box 4342
Melbourne Victoria 3001
Each application must clearly identify the documents
sought and be accompanied by a $20 application fee.
General inquiries concerning freedom of information
can be made by telephoning the Freedom of Information
Officer on (03) 9235 7184 between 8am and 5pm
Monday to Friday or via email to
fo i@ m e lb o u rn ewa te r.co m .a u .
Information on our consultative arrangements, required
under Section 7 of the Act, is set out in the Melbourne
Water Social Report 2002/ 03. Information on our publications,
also required under Section 7, is included on page 77.
Cat egori es of document s
We use a computerised records management system
to manage our correspondence and documents. We use
online computer systems to manage our financial, human
resource and other operational activities and plans
relating to our water supply, waterways and drainage and
sewerage functions. Historical archives on our activities
are available through the Public Record Office Victoria.
Consul t ant Proj ect
Gartner IT Service Provider Transition
Ernst & Young Disaster Recovery Planning
Kellogg Brown & Root Balliang District Recycled Water
Rendell McGuckian Balliang District Recycled Water
Tot al fees i ncurred bet ween
$100,000 - $199,999 3
$200,000 - $299,999 -
$300,000 - $399,999 -
$400,000 - $499,000 -
$500,000 - $599,999 1
Tot al number 4
Pri ci ng changes
Bulk water and wastewater charges to the metropolitan
retail water companies and drainage rates increased
up to 4.1 per cent in accordance with the Victorian
Governments pricing order. Further information on
bulk water and sewerage charges and drainage rates
is available on the Melbourne Water website,
www.m e lb o u rn ewa te r.co m .a u .
Pri vacy l egi sl at i on
Melbourne Water is subject to the Inf ormat ion Privacy Act
2000 and t he Healt h Records Act 2001 and is committed
to protecting the privacy of all personal and health
information it collects and handles. Melbourne Water
collects and handles personal and health information
only to carry out our functions and activities.
Melbourne Water is committed to openness and
transparency and welcomes any queries about our
approach to privacy. We also endeavour to resolve
any privacy complaints quickly and effectively. People
wanting to make a privacy complaint should write to:
Privacy Officer
Melbourne Water
PO Box 4342
Melbourne Victoria 3001
Energy and Wat er Ombudsman ( Vi ct ori a)
The Energy and Water Ombudsmans role is to receive,
investigate and facilitate resolution of complaints and
disputes between Victorian consumers of energy and
water and providers of these services. The scheme
provides consumers with a free, specialised and
independent dispute resolution process as an alternative
to legal proceedings or other complaint processes.
Industry participants fund the scheme and its board
includes representatives from the water, gas and
electricity industries as well as consumer bodies.
Its independent chairman is appointed by the Victorian
Government, which also appoints the Ombudsman.
Melbourne Water has a procedure to ensure prompt
response to all complaints received from the
Ombudsmans office. Our objective in investigating
issues underlying these complaints is to improve our
service to customers.
Of the six complaints received this year, four related to
property damage and the others related to water diversion
licences. Four of the six complaints were not resolved
by 30 J une 2003. We have taken steps to improve our
operations in areas where there have been complaints.
Whi st l ebl ower s prot ect i on and procedures
The Whistleblowers Protection Act commenced operation
on 1 J anuary 2002. It aims to encourage and facilitate
disclosure of improper conduct by public officers and
public bodies.
Melbourne Water is committed to the aims and objectives
of the Act, has established the following procedures and
takes the following approach to disclosures of improper
conduct:
a reporting system has been established with

Protected Disclosure Officers reporting to the
Protected Disclosure Co-ordinator, who in turn,
reports to the Managing Director
Melbourne Water will take all reasonable steps

to protect the identity of a whistleblower and is
committed to the protection of genuine whistleblowers
against reprisals for making protected disclosures
the principles of natural justice will be followed

in any investigation of a public interest disclosure.
The following appointments have been made to facilitate
and manage disclosures of improper conduct:
Prot ect ed Di scl osure Co-ordi nat or:
Ian Morrison Group Manager, Human Resources
Prot ect ed Di scl osure Offi cers:
Nick Ronan
Kevin Woff
Salyana Williams
Steve Hosking
Peter Wylie
J ane Denton
J udith Palmer
Linda Duprey
Nicole Latham
Melbourne Water has established detailed written
procedures, which can be obtained by contacting a
Protected Disclosure Officer or Protected Disclosure
Co-ordinator at:
Melbourne Water
100 Wellington Parade
East Melbourne Victoria 3002
Telephone (03) 9235 7111
I nf or mat i on avai l abl e on request
Further information on the following is available on
request: pecuniary interests of relevant officers,
details of Melbourne Water publications, major external
reviews carried out on Melbourne Water, research and
development activities, overseas visits, major
promotional, public relations and marketing activities,
assessments and measures to improve the occupational
health and safety of employees, statement of industrial
relations and details of time lost through industrial
accidents and disputes, and major sponsorships.
Please ring 131 722 (within Victoria) or
(03) 9235 7100 (within the rest of Australia)
or visit our website, www.m e lb o u rn ewa te r.co m .a u .
80
We are requi red t o repor t annual l y on act i vi t i es
rel at i ng t o t he Whi st l ebl owers Prot ect i on Act .
For 2002/ 03:
The number of disclosures made to Nil
Melbourne Water
The number of disclosures referred by Nil
Melbourne Water to the Ombudsman for
determination as to whether they are
public interest disclosures
The number of disclosed matters referred Nil
to Melbourne Water by the Ombudsman
The number of disclosed matters referred Nil
by Melbourne Water to the Ombudsman
to investigate
The number of investigations of disclosed Nil
matters taken over by the Ombudsman
from Melbourne Water
The number of requests made under Nil
section 74 to the Ombudsman to investigate
disclosed matters
The number of disclosed matters that Nil
Melbourne Water has declined to investigate
The number of disclosed matters that Nil
were substantiated on investigation
Any recommendations of the Ombudsman Nil
under the Act that relate to Melbourne Water
FEEDBACK FORM
Mel bourne Wat er Annual Repor t 2002/ 03
Please help us to improve our public reporting. Complete this form and return it to Melbourne Water by facsimile
(03) 9235 7177 or by mail as a pre-paid envelope. You can also provide feedback by completing this form on our
website or by sending your comments to inquiry@melbournewater.com.au.
If you include your name and address we will send you a f ree pass t o visit Melbourne Museum!
Your name (optional)
Your address (optional)
Postcode State
Your organisation (if any)
Your position (if any)
Repor t cont ent
The level of detail in the report was: too much about right too little
The report covered Melbourne Waters
performance in a way that was: easy to follow hard to follow
The reports design helped make it: easy to read hard to read
The most interesting parts of the report were:
The least interesting parts of the report were:
The report could be improved by:
Is there information you would like included in future reports?
How do you think Melbourne Water could improve its reporting?
Thank you f or complet ing our quest ionnaire. Please f old and moist en seal bef ore ret urning t his pre-paid envelope.
M e lb o u rn e Wa te r
1 0 0 We llin g to n P a ra d e , E a st M e lb o u rn e
P O B o x 4 3 4 2 M e lb o u rn e Victo ria 3 0 0 1
Te le p h o n e 1 3 1 7 2 2 Fa csim ile 0 3 9 2 3 5 7 2 0 0
www.mel bournewat er.com.au
I S S N 1 4 4 8 -5 5 9 1
For information on Melbournes water resources in languages other
than English, call 131 722 or visit www.mel bournewat er.com.au and
click on the Community Languages link.
Desi gn: Stuart Pettigrew Design and Digital Image
Phot ography: Noel Butcher, Neale Duckworth, Tony Gay and Rohan Young
Cerami c Ar t i st : J an Friedman
Printed on paper manufactured at the Burnie mill in Tasmania, which
has ISO14001 environmental system certification. Water at the mill
is recycled and reused. The paper is acid free, has neutral pH and is
made of pulp from plantation timbers and pre-consumer waste.

2002-03 Annual Report

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2002-03 Annual Report

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M ELBOURNE WATER

Annual Report 2002/ 03

recognise we achieve more by working with others

feel privileged to be custodians of our water resources

behave with integrity

attain excellence through creativity and innovation

celebrate our achievements and learn from our

Conserve Melbournes high quality,

Operate in a manner that improves

Improve the health and amenity of Port

Ensure that Melbournes natural waterways

Ensure that the integrity of our water,

Remain Australias most efficient water

Provide excellent service.

The community is well educated

A motivated and skilled workforce that

National Health and Medical Research Council drinking

Victorian Government Health (Quality of Drinking Water)

Healt h (Fluoridat ion) Act 1973

Food Act 1984.

Operat e i n a manner t o i mprove t he envi ronment

Ensure t he communit y is well educat ed and informed on wat er issues

A study of the potential to achieve a 12 per cent

An audit of the trade waste component of the inflow.

Remai n Aust ral i as most effi ci ent wat er aut hori t y

Provi de ongoi ng fi nanci al ret urns t o our owner, t he Vi ct ori a

Provi de excel l ent ser vi ce

A mot i vat ed and ski l l ed workforce t hat generat es new i deas

Retailers surpassed their licence standard that 95 per

Retailers surpassed their licence standard that 90 per

Tests demonstrate that Melbourne's water supply is

Net cash flow from ordinary activities of $324.7 million

Consolidation and restructuring of mechanical,

Renegotiation of electricity supply contracts will provide

Applying value engineering to drive innovation and

Generating on-going operating efficiencies through

Ensuring our financial systems and processes can

the establishment of long term outcomes based on

the approval of budgets together with key performance

the approval of annual financial statements and the

it meets 11 times a year, undertakes site visits and

board papers are available to all directors seven days

conflicts of interest are declared and a director does

directors have the right to seek independent

declarations of pecuniary interest by directors are

recognise that we achieve more by working with others

feel privileged to be the custodians of our water

behave with integrity

attain excellence through creativity and innovation

celebrate our achievements and learn from our

water resources and the environment

waterways, bays and oceans

asset and risk management

customers and community.

Working with our stakeholders to reduce water

Achieving 20 per cent water recycling by 2010

Reducing nitrogen inputs to Port Phillip Bay by

Reducing our greenhouse gas emissions by

Recycling 100 per cent of biosolids produced at

Undertaking projects to enable all Melbournes

Operating efficiently and providing appropriate financial

Ensuring that at least 85 per cent of the community

Ensuring that at least 80 per cent of our customers

Ensuring the community is kept informed and involved