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As a state owned corporation, Sydney Water is required to operate at least as efficiently as any comparable businesses and maximise the net worth of the State’s investment.

Sydney Water has to balance its responsibilities to protect public health and the environment with providing affordable services and a return to shareholders. The challenge is to do this while continuing to develop ongoing business efficiency.

As a state owned corporation, Sydney Water is required to operate at least as efficiently as any comparable businesses and maximise the net worth of the State’s investment.

This section summarises Sydney Water’s financial performance during 2009–10. Further financial information can be found in the Performance section of this report.

Performance summary

Profit after tax for 2009–10 was $446 million, $76 million above the Statement of Corporate Intent (SCI) target of $370 million. The increase in profit was largely due to lower financing charges and operating expenses.

Items	Budget 2009–10 $M	Result 2009–10 $M
Service and usage income*	2,054	2,023
Other income	152	164
Total income	2,206	2,187
Operating expenses	1,112	1,076
Depreciation, amortisation, impairments and sales losses	200	182
Borrowing costs	363	291
Total expenses	1,675	1,550
Profit before tax	530	638
Income tax expense	160	192
Profit after tax	370	446
Dividend payable	232	232
Return on assets (%)	6.7	7.0
Funds flow interest cover ratio (times)	1.8	2.2
Capital investment program	1,143	1,072
Net new borrowings	1,140	935
Gearing ratio%	55	54

* Service and usage income includes social program reimbursement from the NSW State Budget.

Income

Total income for the year was $2.19 billion, $19 million below the SCI target of $2.21 billion. This is primarily due to lower actual water volumes than forecast and hence lower usage charges. This was partially offset by higher capital contributions and other income.

Expenditure

Operating expenses for the year were $1.08 billion, $36 million below the SCI target of $1.1 billion, primarily due to lower contractor costs and savings in materials, plant and equipment costs.

Total asset charges (depreciation, amortisation, impairments and sales for assets) for the year were $182 million, $18 million lower than the target of $200 million, mostly due to a partial reversal of previous asset impairments.

Total borrowing costs for the year were $291 million, $72 million below the SCI target of $363 million, due to lower than budgeted interest rates, higher capitalisation of interest costs associated with asset investment and the deferral of the payment of the Rouse Hill Stage 3 debt.

Tax

Tax expense for the year was $192 million, $32 million above the SCI target of $160 million, due to higher net profit before tax.

Dividends

A dividend of $232 million has been declared for 2009–10, as agreed with the Shareholder Ministers. The dividend paid in 2008-09 was $205 million.

Financial indicators

Return on assets was seven per cent, higher than the target of 6.7%, due to the improved operating result.

Cash from operations (and other capital contributions) was $474 million, $83 million above the target of $390 million. The funds flow from the operations interest cover ratio was 2.2, which was higher than the target of 1.8, due to the improved operating result and lower borrowing costs.

New net borrowings were $935 million and total balance sheet borrowings for the group were $6.5 billion. Sydney Water’s gearing for the year was 54%. This was lower than the targeted gearing of 55%, due to lower borrowings mostly related to savings on the desalination project and the deferral of the payment of the Rouse Hill Stage 3 debt.

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