In this section: Summary profit and loss Summary balance sheet Summary cash flow

 

• Reduced revenue against budget from continuing water restrictions and demand management plus removal of regulated developer charges on water, wastewater and stormwater.
• Operating expenses below budget due to productivity gains and operating efficiencies.
• Record high capital expenditure driven by desalination plant construction and increase in recycling projects.
• Increasing debt, but gearing will stabilise at the level needed for normal growth and asset replacement from 2009–10.

Total income increased by 11% over 2007–08. Regulated price increases partly offset lower income from water sales and the removal of regulated developer charges.

Total operating expenditure increased by five per cent over 2007–08, driven mostly by higher labour and bulk water costs.

Construction of the desalination plant and pipeline was almost half of the 2008–09 capital expenditure. Expenditure also continued in asset renewals and servicing growth.

Despite continuing operating efficiencies and higher income from regulated price increases, profit before tax decreased by $35 million. This was mainly driven by $152 million in asset impairments, reflecting adoption of a new methodology to value system assets.

Record high capital expenditure was driven by building of desalination plant and pipeline and increased recycling.

Gearing (debt to debt plus equity) continues to rise, as new borrowing occurs to cover the large increase in capital expenditure including the desalination project.

Summary profit and loss

	2008–09 $M	2007–08 $M	2006–07 $M	2005–06 $M	2004–05 $M
Total revenue	1,958	1,766	1,693	1,541	1,422
Operating expenses	1,027	975	969	887	797
Earnings before interest, tax, depreciation and amortisation (EBITDA)	931	791	724	654	624
Depreciation, amortisation and impairments	343	193	184	225	201
Interest expense	235	210	180	172	153
Profit before tax	353	388	360	257	270
Taxation expense	176	109	103	135	55
Profit after tax	178	279	257	122	215

In 2008–09, total income was $1,958 million, an increase of $192 million on the previous year. This increase was largely due to regulated price increases.

Total core operating expenses for the year were $1,027 million, an increase of five per cent over 2007–08. The increase includes a 10% increase in costs of bulk water purchases, increased maintenance and chemical expenses and higher general labour costs from award wage increases.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was $931 million, an increase of 17% over the previous year.

Depreciation and amortisation expenses of $343 million included an asset impairment cost of $152 million due to changes in the estimates of future revenues used under Australian Accounting Standards to test the carrying value of assets.

After allowing for interest, depreciation and amortisation expenses, the profit before tax was $353 million. Taxation expense was $176 million and profit after tax was $178 million.

Summary balance sheet

	2008–09 $M	2007–08 $M	2006–07 $M	2005–06 $M	2004–05 $M
Property, plant and equipment	12,315	12,355	11,909	10,528	11,328
Other assets	398	318	387	291	246
Total assets	12,713	12,673	12,296	10,819	11,574
Total debt	5,558	4,218	3,276	2,875	2,639
Other liabilities	1,774	1,714	1,780	1,460	1,707
Total liabilities	7,332	5,932	5,056	4,335	4,346
Net assets/ shareholder funds	5,381	6,741	7,240	6,484	7,228
Return on shareholder funds (%)	3.3	4.1	3.6	1.9	3.0
Capital expenditure	1,731	1,311	618	500	405

Total assets at the end of 2008–09 were $12,713 million, an increase of $40 million over the year. Assets were revalued this year due to changes to the revenue estimates used under Australian Accounting Standards to test their carrying value. This resulted in an asset impairment of $1.7 billion at year end. Total liabilities increased by $1,400 million, mainly as a result of new borrowings of $1,331 million to fund capital expenditure and an increase in liabilities under defined benefit superannuation schemes of $327 million. Net assets declined by $1,360 million during the year to $5,381 million.

The after-tax profit represented a 3.3% return on equity, which was lower than last year’s result, reflecting the large asset impairment in 2008–09.

Sydney Water’s capital expenditure was $1,731 million in 2008–09 and net new borrowings to fund this were $1,331 million.

Total debt outstanding at the end of the year increased to $5,558 million.

Summary cash flow

	2008–09 $M	2007–08 $M	2006–07 $M	2005–06 $M	2004–05 $M
Sources
Receipts from operations	1,891	1,618	1,534	1,392	1,303
Grants, interest, CSO and other operational receipts	138	119	106	98	87
Borrowings	1,331	1,100	420	254	173
Other	26	270	121	68	80
Total sources	3,386	3,107	2,180	1,812	1,643
Uses
Operational expenses	1,244	1,172	1,052	924	905
Capital expenditure	1,475	1,182	568	433	379
Dividends paid	190	140	193	120	115
Income tax paid	71	105	63	41	40
Interest paid	266	245	206	196	176
Other	162	257	95	87	46
Total uses	3,408	3,101	2,176	1,801	1,661
Increase (Decrease) in cash balances	-22	6	5	11	-18

Cash receipts from operations in 2008–09 were $1,891 million, an increase of 17% over the previous year. Borrowings also increased by $1,339 million in response to the very large capital expenditure program.

Cash used for operational purposes increased by six per cent, compared to 2007–08. A total of $1,566 million was used to finance capital expenditure, the largest capital outlay in Sydney Water’s history.

Overall, Sydney Water achieved a solid result during 2008–09, despite lower than budgeted income from water sales due to continuing water restrictions and the removal of charges on property developers for new water, wastewater and stormwater assets. On the cost side, there were increases in bulk water charges, labour costs and financing costs. While the financial returns do not yet meet normal commercial standards, results continue to improve once one-off asset adjustments are excluded.