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Sydney Water Annual Report 2009
Performance review: Being an economically efficient business
 
Sydney Water is well
on track to achieve
target savings of
$148 million for the
five-year period
2007–08 to
2011–12.
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In this section:

download View our sustainability performance indicators for this goal
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During 2008–09, Sydney Water continued to fully meet its Operating Licence targets to protect public health and environment and system performance standards, while controlling its expenditure. As a state owned corporation, Sydney Water must operate at least as efficiently as similar private sector businesses.

Sydney Water’s challenge is to continue to deliver efficiency gains in its operations and capital works program and to earn enough income to ensure that it remains a viable business in the long term.

Maintaining long-term financial sustainability

Sydney Water’s prices for water and sewerage services increased on 1 July 2009. This was the second year of a four-year pricing determination announced by the Independent Pricing and Regulatory Tribunal (IPART) in June 2008.

The new price for 1,000 litres of water is $1.87. The residential wastewater service charge is $501 a year and the water service charge is $102. As a result of these increases, the water bill of a typical household using 200,000 litres of water a year will rise by 11.2% or $99 a year in 2009–10.

The new prices are needed to cover the costs of major projects to increase Sydney's water supply. These include the desalination project and two large recycling schemes at Rosehill/Camellia and St Marys, Western Sydney. The increase also includes the rise in the cost of dam water that Sydney Water buys from the Sydney Catchment Authority, as well as 3.9% inflation.

Sydney Water’s capital expenditure program is $4.6 billion for the five years to 2013–14. This will complete the largest capital works program Sydney Water has ever delivered. The major part of the program is Sydney’s desalination project, but there are also major investments in renewing water and wastewater infrastructure, developing recycled water schemes and building services for growth areas in the north-west and south-west of Sydney.

Over the past two years, Sydney Water has worked with NSW Treasury Corporation to raise $2.3 billion to fund this capital program. From 2011–12, Sydney Water’s capital expenditure will stabilise at around $700 million a year, in real terms.

Sydney Water actively managed its debt portfolio, to take advantage of market opportunities and the liquidity provided by the Federal Government guarantee to the state. This has meant that overall debt costs have been kept under control during the financial crisis. Sufficient operational funding continued to be available. Sydney Water also diversified suppliers of key inputs, such as chemicals to manage cost increases.

There was a shortfall in revenue in 2008–09 of $89 million compared to budget. This was due to reduced water sales and the NSW Government abolishing developer charges. Operating costs were well controlled and were below budget by $33 million, offsetting the impact of lower revenue.

During the year, Sydney Water made a one-off change to its asset values by adopting a new model, which complies with Australian Accounting Standards, to determine the recoverable amount of its assets. Adoption of the new model involved a reassessment of the estimated future cash flows to be generated by Sydney Water’s physical and intangible assets, based on the regulatory principles used by IPART. This resulted in a significant decrease in asset values in the balance sheet by $1.7 billion and reduced profit before tax by about $152 million.

Sydney Water’s defined benefit superannuation net liability position increased by $327 million during 2008–09. This was mainly due to the impact of the global financial crisis on both government bond rates in the Australian economy and on the fair value of the assets of each plan, both of which decreased significantly.

During 2008–09, Sydney Water maintained an investment grade credit rating.

Efficient cost of operations

Sydney Water’s core operating expenditure is well controlled and was below budget for 2008–09. Sydney Water is well on track to achieve efficiency target savings of $148 million for the five-year period 2007–08 to 2011–12.

Key efficiency initiatives include:

  • delivering a Renewable Energy Program that will see 11 gas cogeneration and hydroelectric facilities operating by the end of 2009. They will supply about 22% of Sydney Water’s energy needs, achieving annual savings of $4 to $5 million a year. This does not include the power needs of the desalination plant, which will be fully offset by renewable energy produced at a wind farm near Bungendore
  • reducing energy costs by locking in energy supply contracts, moving power use at pumping stations to non-peak times and supplying diesel generated power to the electricity grid. These saved $1.9 million in 2008–09 and will yield savings of $3.9 million in 2009–10
  • introducing a wireless scheduling system so field crews can receive job requests via portable computers. This Field Resource Management Program will achieve annual efficiencies of $2.4 million
  • updating the vehicle fleet, with fewer and more cost effective cars and trucks – saving about $4.8 million a year
  • undertaking reforms to customer service operations – saving $3.7 million a year
  • making improvements in safety performance and insurance risk management – saving about $5.6 million a year in insurance premiums.

 

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Feature:
Testing the quality – an Australian first

Until recently, Sydney Water was unable to test the quality of the Granulated Activated Carbon it imported for use at its sewage treatment plants. In an Australian first, Bob Lovatt, a scientist at Sydney Water’s West Ryde Laboratory, found a way to do so. The quality of activated carbon needs to be known so Sydney Water can accurately predict how long it will effectively remove odours before it needs to be replaced.
Sydney Water built a new Hydrogen Sulphide adsorption test rig at its Liverpool treatment plant laboratory. It also designed and installed a monitoring system for toxic gases to ensure safety. Now Sydney Water can test the quality of activated carbon batches it buys and validate the product on delivery.

Sydney Water buys about $750,000 of activated carbon for use in odour control at its treatment plants each year. With a known quality of activated carbon, Sydney Water will be better able to control odours at its plants and reduce the likelihood of odour complaints from nearby residents.

Testing at Castle Hill Sewage Treatment Plant

Testing at Castle Hill Sewage Treatment Plant

Efficient procurement

Last year, Sydney Water automated most of its end-to-end payment process. In August 2008, the final step was to install intelligent character recognition software to scan all invoices. Not only is a copy of the invoice stored, but details are also entered automatically into the finance system. This completes Sydney Water’s initiative to use a totally automated, paperless payment process.

A detailed procurement plan for the Operations and Maintenance divisions was prepared during the year. Over the next three years, Sydney Water will implement a series of strategies to improve the value for money achieved for goods and services contracts and to continue Sydney Water’s transparent dealing with suppliers. Part of the plan is to move away from a panel of suppliers to a strategy where contracts include key performance measures. Tender processes for new traffic control and plant and equipment hire contracts began in late 2008–09.

Delivering information technology efficiencies

Sydney Water has a strong record of delivering information technology (IT) efficiencies to lower operating costs. In 2008–09, Sydney Water continued to deliver technology improvements to enable staff to work smarter. Highlights included:

  • implementing a new system to consistently manage strategic risks across Sydney Water. In 2009–10, the system will be expanded to manage operational and environmental risks
  • introducing new data analysis and reporting solutions across financial, asset management, water consumption, people and safety information to support better business decision-making
  • developing Stage 2 of Field Resource Management that will enable field staff to access updated network maps, safety information and work instructions. This will be rolled out from early 2009–10.

Sydney Water’s IT Services won the 2008 ’it Services Management Forum’ Innovation Award for its Service Activation processes. The IT Services management team worked out how to better support IT systems before they are commissioned and new ways to reduce project risk. This has been successful in ensuring that projects are delivered on time and to budget.

 

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Feature:
Plumbing inspectors go wireless

To better manage up to 40,000 plumbing and drainage inspections each year, Sydney Water’s plumbing inspectors are using new portable, wireless computers. In November 2008, the Plumbing Inspections and Assurance Services (PIAS) team began using technology that enables inspections to be centrally scheduled. Bookings are sent to inspectors in the field via the computer-based system.

’The technology has significant benefits for the team and enables us to work smarter,’ Jackie Hiddlestone, Manager Ancillary Services and Plumbing Assurance said.

Inspectors can access diagrams and job information and complete forms electronically from the job site. This helps them spend more time in the field, reduces paperwork and improves team collaboration by making information readily accessible.

The move to centralised scheduling is part of a broader strategy to improve how Sydney Water works with plumbers and the plumbing industry.

’We’re always looking for ways to improve the way we work. It’s about streamlining our processes, promoting good plumbing practice and serving our customers better,’ Jackie said.

As part of the NSW Government’s strategy to streamline plumbing and drainage regulation, Sydney Water’s PIAS team will transfer to the Office of Fair Trading in early 2010.

Plumbing inspectors are using new wireless computers that enable inspections to be centrally scheduled

Plumbing inspectors are using new wireless computers that enable inspections to be centrally scheduled.

Successfully delivered largest capital works program

Sydney Water’s capital works program renews and upgrades existing assets, delivers government programs and supports urban growth.

In 2008–09, Sydney Water’s capital works expenditure was about $1.7 billion. This was $400 million more than the previous year.


Major capital works projects completed 2008–09

Project

Project benefits

Rouse Hill Recycled Water Plant Stage 2 STP upgraded and increased capacity of the recycled water plant

Completed the upgrade of the Rouse Hill Sewage Treatment Plant and the amplification of the recycled water plant to support urban growth, reduce environmental impacts and increase the supply of recycled water. The upgrade will also improve wastewater quality discharging to the Hawkesbury-Nepean River. The project was delivered under budget.

Sewer main renewals

Renewed 79 km of critical sewers, that are nearing the end of their service life, to minimise the impact of sewer failures on the community and the environment.

Water main renewals

Renewed and replaced 114 km of water reticulation mains and critical water mains to maintain performance of water supply systems and minimise interruptions to supply.

Water flow meters and Pressure Management Schemes

Installed 35 flow meters and 40 pressure reducing schemes to further reduce system leaks and customer water use.

Dry Weather Overflow Abatement Program
(part of the SewerFix Program)

Completed the 2008–09 program to reduce blockages and resulting overflows from sewers in dry weather and contributed to licence requirements for customer service and environmental protection.

SCAMPS modelling

Completed hydraulic computer models of the 210 sewer catchment areas in Sydney. They assess performance, target areas for dry and wet weather overflow reductions and help identify best solutions. The project timeframe was extended as project resources were redirected to higher priority projects.

Warriewood STP odour control

Completed the construction of a new odour control facility to reduce local impacts and support commercial and residential development. The project was completed ahead of the development date and delivered under budget.

Telephony and network upgrade

Upgraded telephone and data systems at over 60 sites including the new head office building at Parramatta. This project has enabled improved communication across the organisation, reduced the risk of disruption to services, and will support technology changes and enhancements to meet business growth.

 

 

Major capital works in progress as at 30 June 2009

Project

Forecast completion date

Forecast
($ million)

Desalination plant and pipeline – constructing a desalination plant at Kurnell and associated pipe work into the drinking water network.

Early 2010

1,896

Replacement flows – replacing 18 billion litres a year of dam water into the Hawkesbury-Nepean River system with recycled water.

Mid 2010

194

Upper Blue Mountains Sewerage Scheme – substantially completed the scheme to improve sewerage services to over 1,400 properties in Mount Victoria, Blackheath and Medlow Bath. It will improve the health of the waterways in the sensitive Blue Mountains area. Will be delivered under budget as a result of realised savings. The project met the Operating Licence requirement to make connections available under Stage 1 of the Priority Sewerage Program.

Mid 2010

182

North Head Sewage Treatment Plant upgrade – replacing assets, upgrading biosolids handling capacity to cater for projected growth and supply reliable wastewater treatment services to the community.

End 2009

224

Freemans Reach, Glossodia and Wilberforce Sewerage Scheme – constructing a reticulated sewerage system to provide around 1,660 properties with sewerage connections. The scheme will also protect the environment and reduce risks to public health.

Mid 2011

138

Water reticulation main and critical water main renewals – continuing program to replace water mains nearing the end of their service life to minimise supply interruptions.

Ongoing

130 a year

North-west and south-west growth centre development – constructing about 23 km of drinking water pipelines, a new drinking water reservoir, recycled water pipelines and sewer mains for the first release precincts in Riverstone and North Kellyville.

Late 2010

128

Hoxton Park Recycled Water Scheme – supplying recycled water to service up to 16,000 new homes, industrial users, and irrigation customers. The completion date is delayed and project budget increased due to changes made to enhance the recycled water part of the scheme.

Mid 2013

99

Wet Weather Overflow Abatement Program 2007–12 – reducing repeat wet weather overflows to properties and near beaches and environmentally sensitive sites. Works beyond 2012 subject to further review.

2012

80 a year

Water Pressure Management Program – reducing water pressure in areas receiving high pressure to reduce leaks and water use.

Mid 2012

72

Critical Sewer Main Renewals – renewing critical sewer mains nearing the end of their service life.

Ongoing

70 a year

Brooklyn and Dangar Island Sewage Treatment Plant and reticulation works – building a new sewage treatment plant at Brooklyn to provide tertiary treatment and high-level disinfection of wastewater to 500 properties. This will improve water quality in the Hawkesbury River system and protect public health. Works are substantially complete, with most properties to be connected in early 2010. Met the Operating Licence requirement to make connections available under Stage 1 of the Priority Sewerage Program.

Early 2010

56

Hawkesbury Heights and Yellow Rock Sewerage Scheme – constructing a reticulated sewerage system to provide around 350 properties with sewerage connections. Will also protect the environment and reduce risks to public health.

Late 2010

53

Customer Management System – developing an information technology program to improve customer service and reduce operating costs.

Early 2011

55

Renewable Energy Program – installing renewable energy generation plants and programs to improve energy efficiency at Sydney Water sites. The original budget increased and timeframe to complete extended largely due to the upsizing of plant and underestimated costs.

November 2009

55

Potts Hill Facility Consolidation – developing an efficient operational headquarters and storage facilities at Potts Hill to improve accommodation for staff and dispose of surplus land.

December 2009

51

West Camden Sewage Treatment Plant – upgrading the plant to meet growth and supply recycled water for agricultural use in the local area.

July 2009

49

Glenfield to Liverpool Effluent Diversion Scheme – constructing hydraulic control devices to transfer secondary wastewater from Glenfield Sewage Treatment Plant into the Liverpool to Ashfield Pipeline. This will service the proposed Rosehill/Camellia Recycled Water Project and other potential recycled water customers along the pipeline.

Mid 2010

32

Water Flowmeter Program – installing flowmeters to target system leakage.

Late 2010

32

Maximo Consolidation – renewing and consolidating key asset and maintenance information systems.

Late 2010

31

Agnes Banks and Londonderry Sewerage Scheme – constructing a reticulated sewerage system to provide around 290 properties with sewerage connections. Will also protect the environment and reduce risks to public health.

Late 2010

42

Ryde Water Pumping Station – renewing pumps and other works at the critical Ryde Water Pumping Station to improve reliability and meet growth. Works are substantially complete.

November 2009

29

Sewage pumping station and sewage treatment plant renewals – continuing to replace equipment nearing the end of service life.

Ongoing

28 a year

Illawarra Integrated Control and Telemetry Systems renewals – replacing control and telemetry units on both sewer and water assets.

November 2009

27

Sydney Water Information Management Program – delivering new systems to better access and share information to enhance the efficiency of business operations.

End 2010

24

Water models – installing new water modelling software and updating the models.

September 2009

23

Dry Weather Overflow Abatement Program – continuing to rehabilitate small sewers suffering overflows caused by blockages.

Ongoing

20 a year

Wollongong Biosolids project – upgrading biosolids handling and odour management to meet the Department of Environment, Climate Change and Water requirements to reduce the odour impact of sludge handling on the neighbourhood.

Mid 2010

16

Winmalee Sewage Treatment Plant Renewal and Modification – enhancing the reliability of the plant and increasing the disinfection capacity to cater for additional flows coming from Blackheath Sewage Treatment Plant and other newly sewered areas.

Late 2010

16

The Sydney Water website contains regularly updated information on these projects.

 

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Feature:
Desalination construction innovations

At the end of 2008–09, the desalination plant and the pipeline were about 80% complete. The 18 km pipeline from the plant at Kurnell crosses Botany Bay and connects to Sydney’s water supply in Erskineville.

The Botany Bay pipeline is the largest ever laid from a barge and the first twin pipes to be laid in tandem. The barge was purpose designed and built to cross the relatively shallow bay.

The pipe-laying barge, the ’Nebula’, weighed about 6,000 tonnes, was 130 metres long, 30 metres wide and about six storeys high.

Original plans to tow the Nebula from Malaysia to Sydney were altered because of the risk of encountering tropical cyclones along the route. Instead, Sydney Water had the Nebula winched onto a ship and transported to Sydney.

Twin pipes were laid seven km across Botany Bay to connect to the land pipelines at Kurnell and Kyeemagh. Twelve metre lengths of pipe were welded together on board the Nebula. An international crew of 160 specialists was assembled and they worked around the clock to lay the pipeline.

Sydney Water took great care to make sure the marine environment was not affected by the work. Microtunnelling was used for the first 800-metre section of pipeline off Kurnell to protect the sensitive seagrass beds.

The dual pipeline was laid in trenches that were dredged in the sea floor. Sediment curtains were used to make sure that silt from the work did not muddy the water around the pipeline.

A flotilla of vessels was needed to lay the pipes. These included the lay barge, two dredgers cutting the trench, two barges covering the pipes after they were laid and support vessels to move the anchors, transport materials, pipes and staff to the barge.

Sydney Water maintained the flow of information to the large number of commercial and recreational boats that use Botany Bay. Patterns of use were identified, large signs were installed at busy points and messages circulated through existing stakeholder communication networks.

Desalination pipe-laying barge Nebula

Desalination pipe laying barge Nebula

Capital expenditure forecast

Sydney Water’s capital works budget for 2009–10 is over $1.14 billion. Planned capital expenditure includes:

  • completing the plant and distribution pipelines of the desalination project ($338 million)
  • renewing and rehabilitating assets to meet regulated system performance standards and customer service levels ($384 million)
  • completing NSW Government programs, mainly the Priority Sewerage Program and the Replacement Flows Project ($182 million)
  • constructing new water, wastewater, recycled water and stormwater infrastructure to meet the needs of urban growth in both new and existing areas ($138 million)
  • implementing new regulatory standards such as wastewater system performance under environmental protection licences ($64 million)
  • realising business efficiencies such as information technology, energy efficiency and energy generation projects ($36 million).

Over the next five years, Sydney Water will deliver a capital program of about $4.6 billion.

Capital expenditure graph

Sydney Water prioritises projects to make sure the five-year capital program delivers the best mix of projects. The analysis enables Sydney Water to evaluate future investment decisions against corporate objectives, while assessing the risk of deferring projects.

A value score is assigned to each project based on its contribution to Sydney Water’s seven corporate goals, such as ’Securing Sydney’s water supply’ or ’Serving customers’. The risk score is estimated by assessing the risk of deferring the investment by a year.

The result is an investment program that minimises risk exposure, meets current commitments, gives the greatest value for money and enables Sydney Water to compare all projects on the same basis.

Looking ahead

From 2009–10, both capital expenditure and new borrowings will begin to decline to the level needed for normal growth and asset replacement. As a result, debt as a percentage of total assets will also begin to decline to a level in line with long-term targets.

Income and profits will increase slightly as new prices set by IPART and the introduction of Water Wise Rules to replace water restrictions come into effect. Operating efficiencies will continue to be used to control costs. More performance information on economic efficiency is available in the Sustainability indicators section of this report.

The Sydney Water website contains more information on this topic.