Multiplex Corporate Governance Charter

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					     Water Corporation

         Report 2007



SOURCING • MANAGING • CONSERVING
                            Contents
What We Do

How We Work

Chairman‘s Report and CEO‘s Report

2006-07 Overview

Meeting Water Needs in a Drying Climate

Our Core Business
      Changing the Way We Think and Work

Our People
      Maintaining a Safe and Healthy Work Environment

Our Customers and Community
      Genuinely Engaging with Our Stakeholders

Glossary

Corporate Information
      Economic Performance
      Governance
      Board Member Profiles
      Directors‘ Report
      Organisational Structure
      Executive Team
      Performance Summary
      Global Reporting Initiative (GRI) Index

Financial Report

Further Information and Feedback
Sourcing • Managing • Conserving
These three words represent how the Water Corporation approaches planning
for the Western Australian community‘s future water needs.

Western Australia has experienced noticeable changes in climate, particularly
in the southern half of the State where run-off into our dams has dropped to a
quarter of the inflows we used to get 30 years ago.

In the face of this drying climate, we are adopting innovative solutions to
protect the community‘s water supplies now and in the future.

This financial year a new major water source, seawater desalination, was
brought online to provide a solution for the community that does not rely on
rainfall.

We also began preparatory work for an investigation into using treated
wastewater to replenish groundwater supplies. This potential new source and
others will ensure our existing resources are used for the benefit of present
and future generations.

An active water conservation and demand management campaign is another
major part of our approach, and is proving successful in reducing per person
water consumption across the State.

These strategies come together under our Security through Diversity program
to provide a high standard of water and wastewater services, making Western
Australia a great place to live and invest.
What we do
The Water Corporation manages Western Australia‘s water supply
catchments, removes and treats wastewater, manages drainage networks and
irrigation and supplies drinking water to communities spread across 2.5 million
square kilometres of one of the driest countries on Earth.

Owned by the Western Australian Government, the Water Corporation is one
of Australia‘s largest and most successful water service providers. We directly
employ more than 2,400 people, serve almost two million Western Australians
and manage more than $10.9billion in water supply, sewerage and drainage
infrastructure.

Our focus is on balancing environmental, social and economic outcomes to
‗sustainably manage water services to make Western Australia a great place
to live and invest‘.

We take pride in the leading role our organisation has played in developing
the vast and diverse State of Western Australia.

As we plan for the community‘s future water needs, we draw on a history of
excellent performance with 100 years of commercial and technical
experience, responsible environmental management and community
partnerships.

The majority of our profits are returned to the Government as a dividend to
contribute to the development of the State.

Where we undertake water, wastewater and drainage projects that are for
community benefit but which do not raise sufficient revenue to fund the costs,
the Government compensates us for these activities in the form of a
Community Service Obligation payment.

Key Information
1,038,336 properties served
2,406 employees
60 recycled water schemes
355,468 megalitres of water supplied in 2006-07
140,542 megalitres of wastewater collected in 2006-07
32,270 kilometres of water mains
14,261 kilometres of wastewater mains
2,838 kilometres drains
1,521 water and wastewater pump stations
254 water treatment plants
113 dams and weirs
How we work
Our Purpose
‗Sustainable management of water services to make Western Australia a
great place to live and invest.‘

This means:
 Our customers are our advocates
 We are the point of excellence in Western Australia on matters related to
   water services
 We are leaders in sustainability

We are committed to continuously improving the quality and value of water
with a focus on the following sustainable business principles:

Social
   Protect the health and safety of all and support the wellbeing of our
    employees and customers
   Respect the values of all
   Enhance community capacity

Economic
   Preserve our capacity to provide water services to meet present and future
    needs
   Find efficiencies that reduce internal and external costs
   Enhance the economic value to our customers, suppliers and the
    community while delivering shareholder returns

Environmental
   Prevent harm to the environment
   Conserve the value of the environment
   Enhance the resilience of the natural and human environment

In the delivery of our services we will:

Ethical
   Meet our legal requirements and do the right thing
   Be accountable for our business and responsible for our actions
   Be trustworthy in our actions and honest in our communications
Stakeholder
   Maintain our mandate to operate our water business
   Responsibly advocate the water service needs of the community to our
    shareholder
   Enhance our capacity to support WA‘s water future

Governance
   Maintain best practice business systems and follow our corporate
    procedures and policies
   Make decisions with humility, recognising our duty to be properly informed
    and account for what we cannot know
   Listen to and consider our stakeholder‘s views throughout planning and
    decision making
Chairman‘s Report
The successful commissioning of the Perth Seawater Desalination Plant was
clearly the highlight of a year in which water issues continued to dominate on
the political and media stage throughout Australia.

When Western Australia‘s Premier, the Hon Alan Carpenter, in late November
2006 became the first person to drink water from the country‘s inaugural major
climate-independent water factory, he reaffirmed the leading role the Water
Corporation has established in Australia‘s water industry. In April 2007
following a complex and demanding commissioning period the plant began
operating to its full capacity of 144 million litres of water per day, becoming the
largest single source of water supply on the Integrated Water Supply Scheme.

The establishment of the desalination plant was a courageous yet essential
decision for the Western Australian Government. Equally, its obvious success
as a critical element of Western Australia‘s water supply in the face of climate
change has led other States‘ governments to announce similar plants.

The Board congratulates everyone involved with the planning, construction
and commissioning of this landmark facility in the ongoing evolution of water
supply in Australia. Its success has resulted in the Government requesting
that the Corporation build a second desalination plant in the South West as
the next major water source for the Scheme that provides 1.6 million people
with their drinking water.

In a further innovative move during the 2006-07 year, the Corporation began
preparatory work for a four-year groundwater replenishment trial. This trial,
which benefited from a $15million grant from the Australian Government, is
designed to demonstrate that when already highly treated wastewater
undergoes reverse osmosis treatment it can be safely injected into
groundwater for later use as drinking water. If successful, and the Corporation
is confident it will be, groundwater replenishment will take its place by the
middle of next decade as an option for the Integrated Scheme‘s next major
water source.

The unprecedented residential and commercial development of Western
Australia continued unabated during the year and with it the increasing
demand for infrastructure development. To meet this challenge, the Board
signed off on a 2007-08 capital works program of more than $750million.
A major Board initiative during the year was a review of a possible future
direction for the water industry in Western Australia. The review examined
possible models for structuring the industry to improve efficiencies through
private sector participation and competition. A number of themes were
identified and extended into a blueprint which, when implemented, will create
new opportunities for private participation in the water industry, increasing
both competition and the scope for innovation potentially benefiting the
Corporation‘s customers.

The results of this work will be provided to the Economic Regulation Authority
to assist in its proposed inquiry into competition in the water industry.

The Board‘s previous Chair, Mr Tim Ungar and Deputy Chair, Ms Tracey
Horton both resigned from their positions in January 2007. Their tenures
coincided with some of the most challenging times experienced by the
Corporation. It reflects well on their strategic leadership that the utility is in
excellent shape for the challenges ahead. I thank them for their outstanding
service. On behalf of the Board I also thank management and staff for their
continuing support in another difficult but fast-moving year for the Corporation.



Mr Patrick O‘Connor
Chairman
CEO‘s Report
There is no longer any doubt that the drying climate has substantially affected
the supply security of the Integrated Water Supply Scheme that provides two
thirds of Western Australia‘s population with its drinking water.

This unprecedented threat to our way of life has been managed through our
Security through Diversity program which continues to enjoy strong support
from the Western Australian Government and the community. The result has
been that, despite climate change hitting the south west of this state earlier
and harder than anywhere else in Australia, there has been a continuation of
the mildest water restriction regime in Australia.

During 2006-07 the Corporation continued strongly to address the water
supply and demand balance. Foremost was the commissioning of Australia‘s
first major seawater desalination plant. The introduction of further measures to
reduce demand, together with a commitment to a major trial to determine if
highly treated wastewater can be further refined to enable it to become a
major water source for the future, were other significant initiatives during the
year.

Late in the financial year, the State Government announced that the next
major water source for the Integrated Scheme would be a second desalination
plant, in the South West. This decision was not only a ringing endorsement of
the new Perth Seawater Desalination Plant, but also removed all doubt about
the medium term water supply security for the Integrated Scheme. With the
Southern Seawater Desalination Plant to come online in 2011, the
Corporation and the State are now in the fortunate position of not requiring a
further major source until about 2015, by which stage a number of options will
be available for the future.

The Corporation‘s aim this year had been to begin the development of the
South West Yarragadee groundwater aquifer as the next major source, and
for it to be operational by the end of 2009. The fact that the South West
Yarragadee proposal was proved to be sustainable was a tribute to the
excellent work of the specialists who worked on the four-year project.

While the project will now not proceed, it remains a magnificent source of
drinking water and because of the investigations will serve the south of
Western Australia for decades into the future.
The Corporation continued to address the major challenge of the staffing
resources required to manage not only its ongoing operations, but also an
estimated $4.6billion capital works program through the next five years.
Engaging and retaining staff is a key challenge for the Corporation, as it is for
most public and private sector organisations throughout Australia.

During 2006-07 the Corporation completed a whole-of business workforce
planning analysis aimed at addressing the challenge the organisation faces
now and in the future in an environment of a competitive labour market,
changing trends in employee expectations and increasing demands on the
business.

This work and its outcomes are critical to the Corporation‘s future. The utility
today has a more diverse workforce and an increasing number of younger
Indigenous and other people in apprenticeships, traineeship and graduate
positions. However, more than 50 per cent of the workforce is aged 45 years
or older and this percentage is set to increase significantly over the next five
years.

I am confident the Corporation is in a sound position to meet the expectations
of our burgeoning State, and thank all our people for their contribution in the
2006-07 year. I also thank my fellow Board members for their ongoing
strategic support and acknowledge the contribution of the Corporation‘s
former Chair, Mr Tim Ungar and Deputy Chair, Ms Tracey Horton who left the
Board in January 2007.



Dr Jim Gill
Chief Executive Officer
2006-07 Overview
This report reviews our operations during 2006-07. It provides an update on
our activities and progress towards achieving key performance targets and
strategic business objectives.

Achieving Security Through Diversity

Our Waterwise programs and other water efficiency initiatives continue to
result in substantial water savings of around 45 gigalitres a year. To enhance
our water conservation efforts, we formed a Water Efficiency Branch during
the past year. We also worked closely with a number of regional communities
to help them improve efficiencies.

We assisted many businesses to improve their water planning, and our
successful partnerships with industry were noted in a national report: Water
That Works – Sustainable Water Management in the Commercial Sector.

Our trading agreement with Harvey Water has so far secured an additional
11.8 of a total 17.1 gigalitres of water a year and is significantly reducing
irrigation water losses.

The Kwinana Water Reclamation Plant will shortly reach full capacity of 16.7
megalitres a day of recycled water for industry.

Funding has now been secured and preparatory work is underway for a major
groundwater replenishment trial commencing in 2009. Once the trial is
successfully completed, this process has the potential to provide an additional
25 to 35 gigalitres of drinking water a year.

The Wungong Catchment Environment and Water Management Project is a
further initiative to increase our water supply and also improve the health of
our natural environment. It was awarded the 2006 Water Environment Merit
Award by the Australian Water Association (WA).

The Perth Seawater Desalination Plant began producing drinking water in
November 2006 and is now fully operational, supplying 45 gigalitres of water,
or 17 per cent of Perth‘s needs, annually. Extensive monitoring has confirmed
the environmental soundness of the plant. The plant also minimises its
environmental footprint by sourcing 100 per cent of its energy needs from the
Emu Downs Wind Farm near Cervantes.

Planning is now well underway for a second seawater desalination plant to be
powered by renewable energy. This will be constructed at Binningup, and is
due to produce a further 45 gigalitres a year from 2011.

Ensuring Water Quality

During 2006 we achieved 100 per cent compliance with all elements of our
Operating Licence and met all Health Department targets for drinking water
quality. We also acquired five new mobile emergency filtration units to help
maintain regional water supply quality in times of crisis and support local
supplies while new infrastructure is constructed.

Undertaking Significant Capital Works

A $900million a year capital works program is planned for the next five years.
Around half of this work will be undertaken in partnership with private industry.
A number of significant alliances were formed over the past year and are
already producing substantial benefits.

Our 2006-07 capital works program exceeded $650million. Significant projects
during the year included an additional 25 megalitre storage tank in Albany, the
ongoing construction of a fourth storage reservoir in Kalgoorlie and significant
supply system upgrades in Port Hedland and other regional towns.

Substantial upgrades of wastewater treatment facilities were commenced in
the Peel region, Kwinana, Donnybrook and Albany and our regional infill
sewerage program continued. A major upgrade of the Perth main sewer was
also progressed.

During 2006-07, more than $29million of a total $100million of work was
completed to reduce the incidence of wastewater overflows into river and
wetland areas around Perth.

Delivering Quality Customer Service

We continue to work to exceed our service targets and encourage feedback
direct from our customers and through our Customer Advisory Council. A new
format was developed during the past year to make our accounts easier to
read and understand and to further encourage water conservation. We also
launched an enhanced BuilderNet® online lodgement and approval service to
deliver greater speed and convenience for both the building and land
development industries.

Enhancing Sustainability

Sustainability is a key principle in everything that we do and is expressed
across every facet of our organisation.
A key initiative during 2006-07 was the development and implementation of a
tool for standardising environmental risk management across the wide
geographical area and scope of our activities.

We continue to make good progress in greenhouse abatement. Overall, 30
per cent of our energy needs are now met from renewable sources.

Over the past year we worked to build closer relationships with all the
communities with whom we interact. It is our aim to communicate openly,
engender trust and inspire behaviour change across all our many stakeholder
groups. To assist this, we adopted a standardised, best practice approach to
the planning, implementation and evaluation of our community engagement
activities. This has already delivered results in effective consultation in regard
to metropolitan and regional initiatives.

We continued to work to enhance relationships with Indigenous communities.
In 2006-07 we formed a specialised Indigenous Resources Group, developed
a ―Statement of Commitment to Indigenous people and communities‖, and
also commenced an important partnership with the Wunan Foundation in
Kununurra which will develop skills in Indigenous workers, and provide
valuable local housing.

We also maintained 12 major community partnerships with a range of
organisations, as well as supporting many more local and regional groups and
initiatives.

Developing Our People

We are committed to developing an organisation-wide culture of sustainability
and a motivated, high-performing team that works together effectively. We are
working to develop a corporate culture that is constructive, and encourages
motivation, satisfaction, teamwork and service quality. During the past year all
of our employees were involved in our cultural change program through
workshops.

In 2006-07 we focused on building a solid foundation by identifying and
growing our workforce capability and re-aligning our corporate culture to
position the Water Corporation as an employer of choice.

Maintaining a safe and healthy workplace remains a strong focus. In 2006-07
around 1500 Water Corporation and contractor staff undertook Construction
Safety Awareness Training and we continued our ―Five to Stay Alive‖ fatality
prevention campaign, with four of five modules now having been launched.
Meeting water needs in our
drying climate
“Careful planning is the key to providing for the future water need
of Western Australia”
Ben Jarvis, Manager Water Efficiency Branch

Our planning to meet Western Australia‘s water needs in the light of our drying
climate is based on three primary platforms: working with our customers to
further reduce demand for drinking water; optimising the efficient capture and
use of available water and developing new water sources that are not
dependent on rainfall.

During the past 12 months we have made significant progress in all these
areas, including bringing a new climate-independent water source online,
securing a significant water trading agreement and commencing tests on the
use of recycled wastewater to replenish our groundwater reserves.

Reducing Water Consumption

Our Waterwise programs have resulted in substantial water savings and
enhanced community support for Waterwise behaviour. Since 2001, Perth‘s
per person water consumption has reduced more than 18 per cent from 185 to
151 kilolitres a year. On average, almost 45 gigalitres (that is, 45 billion litres)
of water have been saved every year as a result of the Waterwise programs,
water efficiency initiatives and the two-days-a-week sprinkler roster.

In 2006-07 we introduced a number of new initiatives to reduce consumption
including trials on the impact of retrofitting various water-efficient products,
targeted communications to 100,000 of our highest water consumers,
installation of Weathertrack irrigation controls to more efficiently apply garden
water, and a pressure management trial in Waterford.

To enhance our water conservation efforts we established a new Water
Efficiency Branch from what was formerly the Water Cycle Project. During the
past year the Water Efficiency Branch developed an Integrated Water Source
Demand Planning Model for the Integrated Water Supply Scheme (IWSS)
which allows the impacts of demand management measures and new source
options to be assessed on an equal footing.

We continue to work closely with regional communities to help them improve
efficiencies within their individual schemes. Several regional towns, including
Bridgetown, Northampton, Australind, Eaton, Dalyellup, Walpole and
Northcliffe were assisted with initiatives to help reduce local water use,
including the retrofitting of Waterwise products to replace older, less water
efficient alternatives.

„Our Waterwise programs have resulted in substantial water
savings and enhanced community support for Waterwise
behaviour.‟

Providing rebates for water savers

We continue to administer the State Government‘s Waterwise Rebates
Program and provide advice on product uptake, expenditure and program
content. Almost $35million has been rebated for water saving products since
the program commenced in 2003, and it has resulted in water savings of more
than 5.8 gigalitres per year, or a projected 66 gigalitres over the working lives
of the installed products.

The Waterwise family of businesses distributing water-saving products and
information has also expanded and now includes Waterwise Partners, Garden
Centres, Irrigators, Irrigation Design Shops, Plumbers, Display Villages, Land
Developments and Lawn Mowing contractors.


Case study
Supporting Waterwise behaviour in regional areas

Challenge:
Water supplies in some areas of our North West region have been under
extreme pressure for several years as a result of insufficient rainfall and
inadequate recharge to local water sources, or from water quality issues
caused by heavy monsoonal rains. Although affected communities are doing
their best to conserve water, some extra help is still required.

Solution:
Intensive demand management campaigns have been implemented in Halls
Creek and Christmas and Cocos (Keeling) Islands, including installation of
Waterwise products, leak detection in homes and community buildings and
coordination with commercial customers to improve water efficiency.

Outcome:
As a result of localised awareness campaigns, major customers implemented
leak detection and water pressure reduction programs. Immediate changes
such as the modification of operations at the community pool and changes to
taps and reticulation on Christmas Island resulted in significant water savings.

In Halls Creek, we worked closely with the Shire to identify and implement
improvements in water use. A major leak at the town‘s airport was identified
and rectified and a new pipeline was installed on Duncan Highway to improve
efficiencies within the scheme.

Water demand management campaigns continued in booming resource
communities such as Karratha and Port Hedland to encourage efficient use of
current water supplies. Similar campaigns were introduced in fast growing
tourist towns such as Broome.

The water demand management strategy in Broome focused on improving
water efficiency across the community and reducing inflow to the wastewater
scheme. A water efficiency consultant visited the town during March 2007 and
conducted free water audits on the properties of major commercial customers.
By measuring flow rates from taps and showers, analysing water usage rates,
occupancy figures, irrigation schedules and maintenance records they were
able to provide these customers with detailed plans to significantly improve
their water efficiency.
Working cooperatively with businesses

Although our primary demand management focus is on residential customers
who use 70 per cent of Perth‘s scheme water, our Waterwise Business
Program also offers commercial and industrial customers a suite of tools to
help identify and implement improvements in their water management. The
program benefits business customers by reducing their water and industrial
waste costs.

To date, 52 key customers have taken part in the program‘s diagnostic
sessions and receive ongoing support. For smaller customers (using up to
50,000 kilolitres a year), a web-based diagnostic tool called ―Water
Challenger‖ and information sheets and checklists allow them to self-assess
their water management and plan improvements.

Western Australian Water Awards

To highlight organisations and individuals that have developed products,
processes or systems that contribute to the sustainability of Western
Australia‘s water resources, the Water Corporation and the Department of
Water jointly established the Western Australian Water Awards in 2006. The
awards covered nine categories and attracted more than 80 entries from
every section of our community – from massive industrial sites to kindergarten
flower beds, from individuals to small business, from councils to residential
land developers.

Harvey Water was the outright winner, receiving three awards for its water
efficiency programs including the 2006 Award for Excellence. Other category
winners included Belmont Forum Shopping Centre, the City of Melville, Tiwest
Joint Venture and CSBP. The 2007 Awards will be held in October.

Building Waterwise behaviour in future generations

The Waterwise Schools Program reached an important milestone during
2006-07 as we recognised our 300th Waterwise School. This program has
been educating students on the value of water since 1995, and now reaches
30 per cent of WA schools and more than 100,000 students each year.

„The Waterwise Schools Program reached an important milestone
during 2006-07 as we recognised our 300th Waterwise School.‟
To celebrate National Water Week and the ―International Decade For Action -
Water For Life‖, we produced a DVD The Value of Water: A Day in the Life of
Western Australia. The DVD and 20 A4 picture cards to stimulate discussion
on the importance of water in our lives, and the need to value and protect it for
the future, were distributed to all schools in the State.


Case study
Water trading deal secures supply

Challenge:
Despite success through our business and consumer campaigns in reducing
consumption, our fast-growing community means that new water sources are
required.

Solution:
We are working collaboratively with Harvey Water to investigate the
opportunity to reduce water losses in their irrigation districts by converting
their existing open irrigation channels to a piped distribution scheme.

Outcome:
In the largest deal of its kind in Australia, we secured a trading agreement with
Harvey Water on 25 August 2006 to permanently transfer water entitlements
of 17.1 gigalitres per year from the regional water cooperative to the Water
Corporation for urban use through the IWSS.

In return, we provided funding for the upgrade of the Harvey and Waroona
piped irrigation scheme distribution systems. This project will replace open
irrigation channels in the Harvey Irrigation District with a pipe network. The
staged conversion will reduce evaporation and seepage losses from the old
open channel system, resulting in irrigation water savings of up to 30 per cent.
The water saved will be used to boost the IWSS.

To date 11.8 gigalitres of the ultimate trade of 17.1 gigalitres per year has
been transferred from Harvey Water‘s irrigation allocation to the Water
Corporation and made progressively available to the IWSS. Stages 1 and 2 of
the planned 3-stage conversion project have been completed. After formal
advice from the Minister, the final stage will proceed allowing the balance of
the allocation to be transferred.

The project also creates further potential on-farm improvements in water
efficiency through improved watering practices as water is now delivered to
irrigators under pressure.

Making Better Use of Our Existing Water Sources

Water recycling is an important part of our Security through Diversity strategy
to meet Western Australia‘s future water needs in the face of our drying
climate.

There are currently 60 water recycling schemes across the State supplying
water to golf courses, parks, gardens and race courses. Notable examples
include McGillivray Oval in Floreat and golf courses in Derby, Broome and
Busselton. Recycled water is also used extensively by industry in Kwinana
and to irrigate tree plantations and food crops in the South West.

Irrigating McGillivray Oval was a significant trial for water recycling at a major
Perth sporting facility. The trial has had little or no adverse impact on
community health or amenity and has recycled a significant amount of treated
wastewater that otherwise would have been discharged to the ocean.

Supplying recycled water to business

Since November 2004, the Kwinana Water Reclamation Plant has provided
6.7 gigalitres of high grade recycled water to local industries. During 2006-07,
the plant supplied a total of 3.6 gigalitres and is expected to reach its full
capacity of 16.7 megalitres per day (that is, 16.7 million litres per day) in
December 2007. Currently, 80 per cent of the plant‘s water production
capacity is committed to industry under supply contracts.

„Since November 2004, the Kwinana Water Reclamation Plant has
provided 6.7 gigalitres of high grade recycled water to local
industries.‟

Developing new ways to conserve drinking water

―The Green‖ water conservation trial at the Brighton land estate is the first of
its type in Australia. It will tap a shallow aquifer on the coastal plain to provide
non-drinking water for 1500 new homes and their gardens, as well as parks,
streetscapes and public open spaces. By irrigating these areas from the
aquifer and implementing water conservation measures it is expected that the
Brighton initiative will result in total household and Council water use 30 to 40
per cent less than that in comparable metropolitan areas.
Homes and parks will be connected to community bores set up in public open
spaces and automated, climate-sensitive water control systems will enable
highly efficient watering of gardens, lawns and parks.

We are now developing tools for land developers considering alternative non-
drinking water sources. These will help them evaluate rainwater tanks,
groundwater, grey water and several other options to determine which best
suits their development, and assist them to understand and navigate the
planning, health and environmental regulatory requirements.

As part of our Security through Diversity strategy, we began a 12-month trial
in Waterford in March 2007 to gradually reduce high water supply pressures
to optimal levels. This will reduce water consumption and the incidence of
leakage and pipe bursts. Following its initial success, the trial will be extended
to Rossmoyne and Shelley later in 2007.

Recognition for industry partnerships

Our successful partnerships with six industry and business customers were
highlighted in a national report, Water That Works - Sustainable Water
Management in the Commercial Sector, launched in May 2007 by Malcolm
Turnbull, Australian Government Minister for Water. The report, issued by the
Committee for Economic Development of Australia (CEDA), explains the
issues, trends and best practices for water management in the commercial
sector.

We have also made significant contributions to the development of water
efficiency industry standards, including the mandatory National Water
Efficiency Labelling Scheme for appliances and the Smart Approved
Watermark Scheme. We also support Western Australia‘s mandatory Five-
Star Plus building requirements for new housing (and its planned expansion to
existing homes) to ensure homes meet a minimum water efficiency standard.

Catchment management awarded

The Wungong Catchment Environment and Water Management Project was
awarded the 2006 Water Environment Merit Award by the WA division of the
Australian Water Association. The ground-breaking project is a 12-year,
$20million research trial to improve the health of the forest and natural
environment while increasing inflows to the Wungong Dam through forest
thinning in selected parts of the catchment area.
Improved catchment management was identified as a potential water source
in the Western Australian Government‘s State Water Strategy. The Wungong
Catchment Management Project is part of our Security through Diversity
strategy, and was developed after extensive consultation with a range of
stakeholders including State Government agencies, local government and the
local community.

Groundwater replenishment trials

Groundwater replenishment is a process where water from Perth‘s
wastewater treatment plants is further treated to the highest standard by
microfiltration and reverse osmosis and is then used to enhance the natural
replenishment of groundwater. The high quality treated water is pumped back
into the aquifers where it slowly mixes with natural groundwater flows, to be
taken out many years later and treated again for use in Perth‘s drinking water
system.

For the past two years we have been working closely with the Western
Australian Departments of Water and Health, and universities and research
organisations including the CSIRO to investigate groundwater replenishment.

In February 2007, the Australian Government announced $15million partial
funding for a groundwater replenishment trial through the Water Smart
Australia Program. This three-year trial is due to commence in 2009 and will
demonstrate to both the community and environmental and health regulators
that groundwater replenishment is a safe and sustainable water source option
for Perth.

The trial involves the construction of a 5 megalitre per day reverse osmosis
UV disinfection water treatment plant which will further treat water from the
existing Beenyup Wastewater Treatment Plant in Craigie. High quality water
from this process will be pumped into the Leederville aquifer at a depth of
around 200 metres. The trial will monitor the performance of the treatment
processes, water quality before and after the water is injected into the
groundwater, and any changes to the aquifer and water movement once the
highly treated water is introduced.

Water from this trial will not be used for drinking or for other purposes, but it
will be closely monitored and tested as part of the trial and research program.
Results of the trial will be made publicly available.
Following this trial, and subject to approvals by the relevant regulators and the
necessary community support, we will investigate the development of a large-
scale reverse osmosis groundwater replenishment scheme by 2015. It is
anticipated this could provide an additional 25 to 35 gigalitres of drinking water
per year for the IWSS.

Planning A Sustainable Water Future

Unfortunately, there are no quick fixes or simple solutions when it comes to
securing Western Australia‘s future water supply needs. It is anticipated that
by 2031 Perth will need another 150 gigalitres of water per year – equivalent
to three Perth Seawater Desalination Plants.

We are continually planning and developing new water sources to meet the
community‘s future needs, while also adapting to a changing climate and local
conditions, and applying sustainability principles across all our water supply
systems around the State.

Our overall Security Through Diversity strategy places equal importance on
developing new and sustainable sources of water that are independent of
rainfall, reducing consumption and optimising the efficiency with which we use
existing water sources.

South West Yarragadee proposal

In December 2006, the Environmental Protection Authority (EPA) gave
conditional support to our proposal to abstract 45 gigalitres of water annually
from the South West Yarragadee groundwater aquifer. This followed a
$16million sustainability evaluation undertaken over the past four years.

The EPA‘s conditional support was followed in March 2007 by the release of a
report by the South West Yarragadee Expert Sustainability Panel also
recommending that the project should go ahead under stringent conditions.
The Expert Panel was established by the State Government to report on the
social, economic and environmental impacts of the proposal.

In its report, the Expert Sustainability Panel concluded that:
 ―the South West Yarragadee proposal as presented would be sustainable
     with the inclusion of adaptive management and monitoring commitments of
     the Water Corporation and recommended conditions of the Environmental
     Protection Authority‖; and
 ―should be allowed to proceed as the Water Corporation has planned well
   to achieve ‗net benefit‘ outcomes socially, economically and
   environmentally‖.

In May 2007, following careful consideration of available options, the State
Government announced that our next major water source would be a climate-
independent second desalination plant. Planning for the new desalination
plant is now well under way and it is due to be commissioned in 2011.

Perth Seawater Desalination Project

Australia‘s first, large-scale seawater desalination plant at Kwinana provides
Western Australia with an abundant source of drinking water that is
completely independent of rainfall. Owned by the Water Corporation and
operated by Dégremont until 2031, it is the largest reverse osmosis
desalination plant in the southern and eastern hemispheres. It began
delivering drinking water into Perth‘s public water supply system on 18
November 2006 and is now fully operational.

It is Perth‘s largest single source of water and supplies 17 per cent of the
city‘s needs. On average, the plant produces 130 million litres of desalinated
water per day, or 45 gigalitres per year.

To reduce its environmental impact, the seawater desalination plant is
powered by renewable energy from the Emu Downs Wind Farm at Cervantes,
200km north of Perth. Together, these two facilities represent a secure,
climate-independent water source that does not contribute to the production of
carbon dioxide or other greenhouse gases.

A system of three marine monitoring buoys in Cockburn Sound transmit data
on water conductivity, temperature, salinity and dissolved oxygen levels as
well as wind speed and direction to our central State Operations Centre in
Perth every 30 minutes via GSM and radio technology. Reviewed 24 hours a
day, 7 days a week, this data provides a highly reliable early warning system.
This highly sophisticated monitoring is demonstrating that the Perth Seawater
Desalination Plant is environmentally sound.

Next major water source decided

Since 2001, southern Western Australia has suffered severe drought
conditions. Average inflows to Perth‘s metropolitan dams have dropped to
less than 90 gigalitres a year compared with 340 gigalitres in 1975. In the face
of our drying climate and increasing development and population growth in
Perth and surrounding regions, the Water Corporation had projected that
Perth would require a major new water source in the coming years if we are to
avoid more severe water restrictions in the future.

Following extensive investigations of possible sites along the coast from
Jurien Bay to Bunbury, we identified Binningup, 30km north of Bunbury, as the
most sustainable location for a second seawater desalination plant.

Western Australian Premier Alan Carpenter announced on 15 May 2007 that
a seawater desalination plant at Binningup would be the next major water
source for the State and was planned to be operating in 2011. Like the current
Kwinana desalination plant, it will deliver 45 gigalitres of water per year, with
the potential to ultimately deliver 100 gigalitres per year and be powered by a
renewable energy source.
Our Core Business
“Ensuring safe and reliable water and wastewater services right
across Western Australia are our highest priorities”
Keith Cadee, General Manager Water Technologies

A high quality water supply relies on much more than just new sources of
water. An ongoing, year-round program of works see us continually
maintaining our existing facilities and developing the new infrastructure that
allow us to sustainably deliver services to our customers today – and
tomorrow.

While new sources in development and our highly visible demand
management campaigns are the aspects of our organisation with the greatest
public awareness, it is the vast amount of work we do ‗behind the scenes‘ that
enables us to effectively and efficiently supply clean water to the community
and remove and treat wastewater and drainage.

‗Sustainability is central to the way we undertake this day-to-day business,
and is expressed in the high standards we uphold in managing our assets,
delivering services to homes and businesses and providing high quality
drinking and non-drinking water to our customers.‘

Better Operations For Better Service

Following the establishment of our statewide Operations Centre and the Asset
Management Division in 2005-06, we have made significant progress in
extending ‗best practice‘ management strategies across all of our operations.

The new Operations Centre is now well established as the hub of our
Integrated Service Delivery capability and is being recognised as one of the
best of its kind in the world. In 2006-07 our Operations Centre managed the
normalisation of the Goldfields-Agricultural and Mandurah Water Supply
Schemes and integration of flows from the Perth Seawater Desalination Plant
into the IWSS. It also took over the monitoring and control of four major
metropolitan water treatment plants and established a customer liaison
function for people affected by leaks and bursts.

To ensure the efficient and effective operation of our infrastructure at all times,
asset management capabilities have been strengthened and work
commenced to develop maintenance plans and renewal programs. Staff are
working on the development of strategic renewal plans for water and
wastewater reticulation mains, water trunk and distribution mains and main
sewers. We have also joined with other water utilities across Australia to
undertake and share research outcomes related to managing infrastructure
assets.

‘Fully compliant’ operating audit result

We consistently operate at a high level of achievement, and this has been
verified by the latest independent audit of compliance with the conditions of
our Operating Licence for the provision of water supply, sewerage, drainage
and irrigation services.

In 2006, we achieved 100 per cent compliance with all elements of our
Operating Licence, receiving the highest rating of ‗fully compliant‘ for 22 of the
23 elements, and compliant for the remaining element. ‗Fully compliant‘
indicates that we have effectively maintained our required quality, customer
response and operational standards and ‗compliant‘ indicates compliant apart
from minor issues and recommendations.

As a result of this outcome, the audit period has now been extended from two
to three years. Our Operating Licence was issued in 1996 and expires in
2021.

Water Quality

Supplying safe drinking water to our customers is our highest priority and
during 2006-07 we met all health targets for drinking water quality set by the
Department of Health.

To ensure we continue to provide clean, safe drinking water and as part of our
commitment to the 2004 Australian Drinking Water Guidelines developed by
National Health and Medical Research Council, we are developing Water
Safety Plans for each of our 245 localities in Western Australia. These plans
promote near-continuous monitoring at each key point in the supply chain,
from the source through treatment, disinfection and distribution to customers.

As monitoring is carried out at a number of points along the supply system, it
is possible to immediately detect any potentially detrimental changes in water
quality and take action to overcome these before the water reaches
customers. This process ensures the provision of safe drinking water to each
and every customer across Western Australia.

We have now undertaken responsibility for water and wastewater services in
Nilgen and Kambalda that were previously operated by private service
providers. As part of the transfer of operations, we spent $2.5million
upgrading wastewater facilities in Kambalda in 2006-07 and will undertake
$6.6million in upgrades to the Nilgen scheme, to be completed by December
2009.

Major water supply works

Work on a 25 megalitre water storage tank in Albany is progressing well. The
new Mt Clarence tank is a duplicate of the 25 megalitre tank built on Mt
Melville two years ago and will replace an existing 24 megalitre reservoir. This
$7.1million project will be completed in July 2007.

Construction of a fourth storage reservoir at Kalgoorlie continued in 2006-07.
When this is completed in the 2007-08 summer, the combined storage
capacity of the city‘s reservoirs will almost double to more than 800
megalitres. The new reservoir‘s sustainable twin cell design, each being about
the size of Subiaco Oval and holding 200 megalitres, ensures it will meet the
current needs of the region and provide for future growth. The project is being
delivered by Water Horizons, an alliance between Water Corporation, Kellogg
Brown & Root and Clough Projects Australia.

Six kilometres of pipeline have been installed in Port Hedland to duplicate the
existing above ground mains and increase the transfer capacity within the
local water supply scheme. Works are planned to commence later in 2007 to
increase the supply capacity of the Yule River Borefield, including the
installation of 4.7km of pipeline, equipping two bores and extending power
supplies.

A new desalination plant began operating at Yalgoo in 2007. This plant is
trialling improvements to the desalination process that will substantially reduce
the amount of source water required. This is an important consideration given
the scarcity of water resources in the Murchison and Goldfields areas and if
the new plant is successful it likely to result in similar technology being applied
at further towns in the region. Construction of a pipeline connecting Yarloop to
the IWSS is also under way, and this will improve the reliability and quality of
water supply.

Work is progressing on the $120million Bridgetown Regional Water Supply
Scheme. The scheme will interconnect seven of the state‘s most drought-
affected communities; Bridgetown, Boyup Brook, Hester, Balingup,
Greenbushes, Mullalyup and Kirup, improving water quality and facilitating
growth until 2050.

The scheme will be primarily supplied by local surface water sources, with a
groundwater bore near Nannup to provide security during severe drought
sequences. The groundwater component of the scheme is being developed
as a priority to help bring relief to the communities‘ existing water supply
sources while the rest of the scheme is built. The bore will also help to
drought-proof nearby Nannup.


Case study
Ensuring safe water supply in times of crisis

Challenge:
Our water supply area covers more than 2.5 million square kilometres and
maintaining water supplies in many extremely remote areas presents
significant challenges. It is particularly difficult to ensure water quality during
periods of intense rainfall, algal blooms and bushfires or cyclones, all of which
can dramatically affect water sources.

Solution:
In the past, the only practical option was to transport water by road tankers to
affected areas. Now, our acquisition of five new mobile emergency filtration
units allows us to restore high quality water supplies quickly. These mobile
plants can be quickly mobilised to an incident site to provide up to 500
kilolitres of high quality water a day. Other water treatment units are available
for specialised applications, including a mobile reverse osmosis unit on
standby to overcome major temporary disturbances to water quality.

Outcome:
These mobile filtration units have been effectively used in Bridgetown and
Wyndham, where they have been connected to the towns‘ water supplies to
improve water quality for customers.

The quality of water from Wyndham‘s Moochalabra Dam is regularly affected
by cyclonic rain. A temporary mobile filtration unit has the capacity to provide
half of Wyndham‘s normal daily water needs and will support the town water
supply until a new permanent ultrafiltration plant is commissioned in the next
12 months.
Mobile plants have also been brought into operation at Bridgetown to
temporarily provide additional water supply during the prolonged drought. A
major new water supply scheme is currently being planned for seven towns in
this regional area.

Wastewater

Our wastewater operations play a vital role in supporting Western Australia‘s
lifestyle and protecting our environment. We currently operate three major and
six minor treatment plants servicing the Perth metropolitan area, and a further
93 wastewater treatment plants in regional areas.

The three large metropolitan wastewater treatment plants at Beenyup,
Woodman Point and Subiaco treat about 80 per cent of the State‘s
wastewater. In one of our most significant upgrades to wastewater
infrastructure, $352million will be spent over the next five years to increase
the operational capacity of these plants and reduce environmental impacts
such as odours. This project will see us working alongside private sector
engineering and construction partners in an innovative alliance arrangement.

The capacity of the Beenyup and Subiaco plants will each be increased by at
least 15 million litres a day, while maintaining their current high standards of
odour control. The Woodman Point plant‘s solids treatment capacity will
increase to align with the overall hydraulic capacity of the plant of 160
megalitres a day and its odour emission levels will decrease by 50 per cent in
the first stage of the works.

The population of Perth‘s north-west coastal corridor from Mindarie onwards is
growing rapidly and is predicted to reach about 150,000 by 2030. To cater for
this growth, planning is well advanced for a major new wastewater treatment
plant in the soon-to-be-created suburb of Alkimos, and this is scheduled to be
operating by early 2010.

The quality of all treated wastewater is routinely and independently monitored
before it is returned to the environment. The Perth Long-Term Ocean Outlet
Monitoring program and the Bunbury Ocean Outlet Monitoring program have
consistently shown that discharging treated wastewater to the ocean is
environmentally sustainable and is not harming our beaches or the marine
environment.

We are upgrading the Perth Main Sewer in stages to improve the safety and
reliability of this important system. Work on Section 5, which runs through
Leederville, was completed in March 2007. Work on Section 6, which crosses
Perth, began in January 2007 and will extend to Highgate when completed in
December 2007. The upgrade project uses micro-tunnelling to install new
wastewater pipes with minimal disruption to normal activities above the
ground.

Minimising impacts from treatment plants

We continue to work with the relevant Government agencies to develop a
long-term strategy to resolve, or prevent, potential land-use conflicts caused
by urban encroachment on facilities such as our wastewater treatment plants.
Where it is not sustainable to fully contain odour emissions within a
wastewater plant‘s boundary our preferred model is to establish buffer zones
around the plant and to promote compatible land use and development within
them. We continue to focus primarily on the minimisation of odours wherever
possible.

100 per cent of biosolids used

Biosolids are the nutrient-rich organic materials generated from household
waste and removed during the wastewater treatment process.

Our aim is to sustainably manage these, and Western Australia is at the
forefront of biosolids re-use for an expanding range of industries. They are
used in agriculture and forestry to improve soil characteristics and reduce the
need for chemical fertilisers, and in compost products for domestic and
commercial landscaping. In 2006-07, 100 per cent of metropolitan biosolids
were beneficially used.

Waste not, want not – growing trees on wastewater

Developing new ways to recycle treated wastewater is becoming more and
more important as our drying climate demands we find sustainable
alternatives to discharging a potentially valuable resource into the ocean. In
Albany, 500,000 ‗heavy drinking‘ Tasmanian blue gum trees have been
irrigated since 1995 with water from the Albany Wastewater Treatment Plant.
The irrigation of these trees creates a valuable environmental double positive.
The blue gums‘ fast growth rate means they require high volumes of water,
but it also makes them extremely effective absorbers of carbon dioxide. This
single 400-hectare area of blue gums absorbs around 6,000 tonnes of carbon
dioxide every year – and provides a significant financial return from the sale of
sustainable plantation timber for woodchips.

Regional wastewater works

During 2006-07, our Infill Sewerage Program connected around 2500 lots to
deep sewerage at a cost of $35million. To date, about 85,500 lots of an
overall target of 100,000 have been connected and the program is due for
completion in 2012-13.

A series of innovations helped us complete a new wastewater treatment
scheme at Wiluna ahead of time and budget. Although we were not previously
responsible for wastewater services in Wiluna, the State Government asked
us to develop and implement a solution to replace a controversial pond
system that was causing serious public health concerns. A new wastewater
treatment facility was completed in early 2007, six months ahead of schedule
and $900,000 under budget.

We are investing around $135million to upgrade four wastewater treatment
plants in the Peel region and Kwinana. The Sunset Coast Water alliance will
significantly improve existing plants at Caddadup (Dawesville), Gordon Road
and Halls Head in Mandurah, and one in Kwinana. Work at these plants will
be progressively completed by the end of 2008.

A $10million upgrade of the Donnybrook Wastewater Treatment Plant is also
underway to cater for growth at Donnybrook and Boyanup until 2020. This will
enhance the existing treatment system, and treated wastewater will be filtered
and disinfected before being re-used on a 45-hectare woodlot. An $8million
upgrade to the Albany Wastewater Treatment Plant is also well advanced.
This will double its capacity to 12 megalitres a day and is due to be completed
by late 2007.

A site for a second wastewater treatment plant at Broome has been identified
following extensive consultation with stakeholders and the local community.
Pending the necessary approvals, construction of the new plant is expected to
begin in mid-2008 and it is scheduled to be operational by late 2009.

Construction of an ultrafiltration plant has commenced in Wyndham. A
temporary plant is supplementing the town‘s water supply until the permanent
facility is commissioned in the next 12 months.

Managing the risk of wastewater overflows
In 2004, we launched a $230million 15-year Wastewater Overflow Risk
Management program. The first five years of the program will focus on
reducing the frequency and volume of wastewater overflows into sensitive
river and wetland areas around Perth.

„The first five years of the program will focus on reducing the
frequency and volume of wastewater overflows into sensitive river
and wetland areas around Perth.‟

During 2006-07, about $29million was spent under the program. Works
included the construction of six emergency overflow storage tanks and
improvements to wastewater pumping stations and pressure mains. Thirty-two
bypass pumping facilities were commissioned, critical spare parts purchased
and emergency power installations undertaken at six sites across the State.
Remote control and monitoring facilities were installed at five wastewater
pumping stations. Major sewer refurbishment involved re-lining 5km of main
sewers and a further 4km of reticulation sewers.


Case study
Partnership strategy delivers early results

Challenge:
Upgrades of our pipes and pump stations were traditionally undertaken in-
house. However, the rapid growth of our Capital Works Program created a
potential shortage of people and resources to complete the required work. To
attract bids to undertake these upgrades on our behalf, we needed to package
the work into larger ‗bundles‘, which would be more attractive to potential
contractors.

Solution:
Our Partner Delivery Strategy grouped together ‘like work‗ based on asset
type, technology or geographic location in ‗bundles‘ of sufficient size to attract
interest from private industry. We would then develop long term relationship
based contracts with private partners to complete the works. About half the
value of the Capital Works Program is now being delivered in these ‗bundles‘,
using various forms of relationship-based contracts.

Outcome:
The Pipelines and Pump Stations partnership of Transfield Services and
Sinclair Knight Merz was the first major initiative of the Partner Delivery
Strategy. Its first project, upgrades to the tank and pipelines servicing Hyden,
has already been completed. This project also restored and protected ancient
Aboriginal water collection rock holes by replacing an old water supply main
close to them with a new pipeline further away.

Other projects are in progress at Yarloop, Meadow Springs, Ellenbrook, Mt
Barker and Mandurah, and several larger projects at Boddington, Mandurah
and Geraldton-Northampton are due to commence later in 2007.

The Pipelines and Pump Stations partnership was originally planned to
undertake a program of 50 new projects across the State each year over five
years at a total cost of $250million. Our expanding workload has seen the
partnership also assisting in critical pipeline strengthening works on the
Canning trunk main and the total value of its projects has now increased to
$319million.

Capital Works Program

Our Capital Works Program for the next five years will significantly increase
from around $600million per year to more than $900million a year – this is a
substantial and demanding workload. To ensure the program is effectively
delivered, approximately half the value of the program will be delivered by our
in-house resources, while the remainder of the program will be delivered
through partnerships with private industry. These partnerships include:

Partnerships
Bundle Identification    Timeframe   Partner           Description
(Name)                               Organisation(s)
SCADA Systems            2009        Serck Controls    Formed 2003 to integrate
Integrator Services                                    control and monitoring
(SCADA SI Alliance)                                    systems throughout the State
                                                       with corporate systems and
                                                       the Operations Centre.
Bunbury Wastewater       2010        Tenix Alliance    Formed 2005 to upgrade the
Treatment Plant                                        Bunbury Wastewater
Amplification (Bunbury                                 Treatment Plant to facilitate
Wastewater Treatment                                   an increase in capacity of the
Plant Amplification                                    existing plant.
Alliance)
Metropolitan Ground      2008        Leicon Notley,    Formed 2004 to upgrade
WTPs Automation and                  GHD, Serck        metropolitan water treatment
Centralisation                       Controls          plants to allow operation from
(A+C‘tion Alliance)                                    a central location outside
                                                       normal business hours.
Large Steel Tanks        2009        GHD               Formed 2005 to deliver large
                                                       steel tanks for the Goldfields,
                                                    Agricultural, Great Southern
                                                    and South West Regions.
SCADA Integrator          2009   ABB Australia      Formed 2006 to integrate
Services (ICE Alliance)                             control and monitoring
                                                    systems throughout the State
                                                    with corporate systems and
                                                    the Operations Centre.
Risk Overflows and        2008   PB                 Formed 2006 to deliver
Sewer Relining                                      projects under the Water
                                                    Corporation‘s Wastewater
                                                    Overflow Risk Management
                                                    Program.
Kalgoorlie Reservoir      2008   Clough Projects,   Formed July 2006 to design
(WaterHorizons                   KBR                and construct a new 400
Alliance)                                           megalitre water storage
                                                    facility in Kalgoorlie to
                                                    improve the reliability of water
                                                    supply for customers over the
                                                    peak summer demand period.
Pipelines and Pump        2011   Transfield         Formed August 2006 to
Stations MC (PPS                 Services, SKM      deliver water and wastewater
Partnership)                                        pipelines and pump stations
                                                    throughout the State.
South Metropolitan        2009   John Holland,      Formed 2006 to upgrade
Wastewater Treatment             Worley Parsons,    existing wastewater treatment
Plants (Sunset Coast             KBR                plants at Mandurah,
Water Alliance)                                     Caddadup, Kwinana and
                                                    Halls Head.
Metropolitan              2011   Black & Veatch,    Formed late 2006 to upgrade
Wastewater Treatment             Thiess, SKM        existing wastewater treatment
Plants (W2WA)                                       plants at Woodman Point,
                                                    Subiaco and Beenyup.
Alkimos Wastewater        2009   Multiplex,         Formed early 2007 to
Scheme (Alkimos                  Macmahon, Zublin   construct the Quinns Main
Water Alliance)                                     Sewer and ocean outfall and
                                                    undertake bulk, earthworks
                                                    for a future wastewater
                                                    treatment plant.
Changing the way we think and work

In order to effectively achieve our business purpose we must continually adapt
to changes in both our natural environment and the needs of the communities
we serve.

Positioning Water Corporation for the future

In June 2006, our Board initiated a review of a possible future direction for the
water industry in Western Australia. The review, undertaken with GEM
Consulting and Farrier Swier, examined models for improving efficiencies in
the water industry through private sector participation and competition.

It explored opportunities for greater competition through structural reform and
assessed the costs of setting up alternative structures against the potential
benefits. Unlike other industries such as energy, there is no ‗standard‘ model
for industry reform and competition in the water industry. Consequently, a
range of water reform models from around the world were examined as well
as those used for electricity and gas. The key question was: ―what would
deliver the greatest benefit for Western Australian water customers?‖.

A number of themes were identified and extended into a strategy that, if
implemented, will create new opportunities for private participation in the
water industry, increasing both competition and the scope for innovation for
the benefit of our customers.

A framework was subsequently developed for the procurement of future water
sources and wastewater treatment plants. Extensive consultation with the
private sector was undertaken to ensure the viability of the process and
balance the cost and resources required to develop a competitive proposal
against the likelihood and benefits of success.

We are also developing an Access Regime for the Water Corporation‘s
monopoly assets and improvements in the cost-benefit assessment of
changes in regulations that result in significant costs to ourselves and our
customers.

The Water Corporation will provide the results of this work to the Economic
Regulation Authority to assist in its inquiry into competition in the water
industry.
Energy use and greenhouse abatement

Water is heavy. Simply transporting it through our vast network of pipelines
around the State to taps, showers and toilets requires large amounts of
energy. In addition to this, significant energy is required for our many drinking
water and wastewater treatment plants.

Desalination is also an energy intensive process. To minimise its greenhouse
impact, the new Perth Seawater Desalination Plant uses state-of-the-art
energy efficiency technology and sources renewable power from the Emu
Downs Wind Farm near Cervantes, 200km north of Perth. We use 68 per cent
of the total energy produced by the wind farm, which makes us one of the
largest users of wind energy in Australia Overall, more than 30 per cent of our
total energy needs are met from renewable sources.

Early abatement initiatives have enabled us to reduce our greenhouse gas
emissions by more than 10 per cent over the last six years compared to the
level they would have been at without us taking action.

The figure below shows that while our energy use increased over the last six
years, our greenhouse gas emissions have not. We are improving efficiencies
in pumping of water and wastewater, wastewater treatment, and use of water
– the main contributors to our electricity use and greenhouse gas emissions.
We are also investigating the possible generation of renewable energy from
the sun, biogas and gravity flow of water within our own operations.

Our customers also play a significant role in reducing greenhouse gas
emissions from water use. Reducing average water use by just 15 kilolitres
per person per year – around a 10 per cent saving on current use – would
avoid around 25,000 tonnes of carbon dioxide emissions every year. By
achieving this level of reduction in our water consumption we create a triple
win for the future; reducing the demand for water from the environment,
reducing the demand for energy, and helping meet the challenge of ongoing
climate change.

„Overall, more than 30 per cent of our total energy needs are met
from renewable sources.‟

Where do our emissions come from?
(According to pie chart)
Moving water – 50%
Treating wastewater – 22%
Treating water – 17%
Moving wastewater – 6%
Transport 3%
Other 2%

Annual CO2-e emissions and energy use
(Graph omitted)

Improving environmental performance

We operate over a wide geographical area and our activities have potential
significant environmental impacts. To date our approach has been to maintain
environmental management systems (EMS) for each of our functional areas,
however, to ensure we manage these in the best way possible, an integrated,
organisation-wide approach was necessary.

In 2006, we developed a tool for standardising environmental risk
assessment. It ensures rigorous risk identification and evaluation, enabling us
to direct our energy and resources to the environmental issues of highest
priority. By standardising and simplifying the process, it has become both
more efficient and effective.

The new system was implemented widely across our operations during 2007.
Information gained was used to identify appropriate controls for specific risks
and to inform organisation-wide environmental planning and priority setting.
Consequently, our environmental improvement programs have been targeted
at the highest environmental risks and to take advantage of available
opportunities. The system will be certified against the international ISO 14001
standard during 2008-09, ensuring the most rigorous environmental
management processes are followed.

How employees rate us on sustainability

We have placed considerable emphasis over the past several years on
embedding sustainability thinking into our decision making and introduced 18
business principles that govern how we conduct our business and define our
relationships with all our stakeholders. (see page 3)

In March 2007, we tested our staff knowledge and alignment with
sustainability through a survey open to all our employees. It aimed to measure
how well the key concepts and initiatives behind our business principles were
understood, and tested the commitment of our staff to further action in
pursuing sustainable business practices.

„The results showed that 97 per cent of employees surveyed
supported our becoming a more sustainable organisation.‟

The results showed that 97 per cent of employees surveyed supported our
becoming a more sustainable organisation. Climate change, the attraction and
retention of appropriately skilled staff, and the protection of waterways were
perceived as our highest priority sustainability issues.

Staff identified that to further enhance our performance we need to strengthen
the visible commitment to sustainability by the Corporation‘s leaders, clearly
communicate our sustainability vision and goals, and encourage and reward
individuals who contribute to sustainability.


Case study
Integrating sustainability into infrastructure planning

Challenge:
Over the past year we have been working to integrate our sustainable
business principles into planning for new infrastructure and upgrading of
existing infrastructure.

Solution:
We now have a set of sustainability guidelines that relate specifically to issues
that need to be addressed in the planning process, including clearing of native
vegetation, water for the environment, assessing social values, aboriginal
heritage and economic considerations.

These guidelines were trialled on specific projects over several months. More
than 1200 planning staff, consultants and internal stakeholders also attended
Sustainability Training Workshops on how to incorporate them into the
planning process.

Outcome:
Planners now evaluate the range of options for each project against these
guidelines using a sustainability tool developed to assist them to compare
options and formalise the process for sustainable decision-making when
planning for upgrades of existing facilities or developing new ones.
“While planners have been undertaking informal sustainability
assessments for some time, these guidelines provide a structured
frame work from which to make informed decisions”.
Kevin Bradley, Infrastructure Planning Branch Manager
Our People
“We work hard to provide an environment that‟s safe and provides
encouragement and challenge to enable our people to grow”
Paul Ferguson, General Manager Business Services

“We‟ve got a fantastically strong organisation with a reputation for
achievement. Now‟s the time to open up, get generous and help
each other, surprise everyone with our teamwork, and be the place
everyone wants to join.”
Jim Gill, Chief Executive Officer

Creating A Great Place to Work

Our success to date has been driven by the hard work and commitment of our
employees. Their commitment to delivering exceptional customer service
goes a long way toward achieving our ambition of providing sustainable
management of water services to make Western Australia a great place to live
and invest.

With water services a growth industry right across Australia, meeting the
challenges of recruiting and retaining high quality people requires a
sustainable working environment and a constructive corporate culture that
creates high levels of motivation, satisfaction, teamwork and service quality.

We want to create a great place to work where our people feel inspired and
empowered to achieve. We want to build motivated and high-performing
teams where the capability and quality of our people is widely recognised.

Our strategies incorporate the key elements of workforce planning,
recruitment, training and development, succession planning, remuneration
and benefits, performance management, work force diversity and work/life
balance.

We manage these key activities with an awareness of external labour market
conditions, regional differences in our operations, and changing expectations
of our people and society. Internally, our strategies are underpinned by our
focus on performance improvement, building high performance teams, a
constructive corporate culture and our identified need for improved
employment diversity.

In 2006-07 we focused on building a solid foundation for our future by
identifying and growing our workforce capability and re-aligning our corporate
culture to position the Water Corporation as an employer of choice.

Sustaining and Growing Our Capability

We seek to attract and retain capable and skilled people with the right
behavioural values and fit by providing competitive and sustainable
remuneration and employment conditions, encouraging and recognising
employee contributions and through a commitment to developing and training
our employees at all levels of the Corporation.

Current workforce profile

Water Corporation has five generational groups within its workforce, with an
average age of 44.4 years, marginally higher than the All Industry benchmark
of 41.2 years.

We have identified our workforce requirements for the next five years and are
implementing a range of training and development opportunities and flexible
work arrangements to meet the differing career and lifestyle expectations of
these generational groups.

Age Profile
(Graph omitted)

Equity and diversity for better business

We have a strong presence in every community across the State and being
sustainable means we must understand the needs of the diverse groups
making up our communities. Having these communities represented in our
workforce is one of the smartest ways we can build this understanding into our
business.

Equity and Diversity
Representation   Community        2005     2006     2007     2008      2009
(%)              Representation   Actual   Actual   Actual   Target    Target
Women in         n/a              28.6     28.6     28.6     28.6      28.6
executive
management
Women in           n/a                 9.1          6.8          9.3        15.5     17.0
senior
management
People from        17.0                17.5         9.3          12.6       17.5     17.5
culturally
diverse
backgrounds
Indigenous         3.2                 1.2          1.2          1.3        2.0      2.4
Australians
People with        4.0*                2.9          1.6          1.6        3.2      3.4
disabilities
Youth (17-24)      11.5                3.8          4.3          5.2        4.8      5.5
* People with disabilities include people with a mild disability aged 16-64 years.


Overcoming the skills shortage

Our Apprenticeships and Traineeships Programs commenced this year to
address the skills shortage and create a pool of skilled and ‗job-ready‘ trades
people and water industry workers.

We currently have 30 apprentices and 25 trainees in business areas including
engineering, construction, business administration, drafting and customer
service. To support our commitment to building workforce diversity, over 20
per cent of the apprenticeships and traineeships are held by people from an
Indigenous background.

We appointed an Apprenticeships and Traineeships Coordinator in May 2006
to coordinate the program and ensure that all our Trainees, Supervisors and
Managers receive the required levels of training and support. As a part of our
commitment to maintain and grow our water quality standards, we have
introduced a program to train our existing employees to nationally accredited
standards and provide recognition for their current knowledge and skills. This
program has been extremely well received and to date 27 of our employees
have completed Certificate II in Water Industry Operations.


Case study
Creating a sustainable culture

Challenge:
Our ambition is to be a motivated, high-performing team that works together
effectively. We believe the performance of our business will be enhanced by
developing a corporate culture that is constructive. This means encouraging
people to work to their full potential, creating high levels of motivation,
satisfaction, teamwork and service quality.

Solution:
We first measured our culture in 2004 and again in October 2006.
Comparison showed significant improvement in some areas, particularly the
reduction of defensive behaviours. It also highlighted the need to further
develop more constructive behaviours.

During 2006, we explained the latest results to all our employees through
small group workshops. Everyone had the chance to participate and provide
feedback. Employees also acknowledged that considerable change is still
required to achieve our desired culture.

Outcome:
We have identified five areas of focus to improve our culture further over the
next two years. These are:
 Reviewing our core values so that we become very clear about what‘s
   important to us as a business and as individuals;
 Improving the way we assess and reward performance;
 Developing a stronger customer service focus so everyone in the business
   understands how their work is helping to meet customer needs;
 Developing more constructive styles of leadership; and
 Improving how we recruit and promote so that we are increasingly effective
   in matching people and their skills to jobs.

By achieving more constructive behaviours across our organisation, we
expect to have a positive impact on our ability to attract, motivate and retain
high quality people. We also believe it will help us deliver the best outcomes
for our customers and the environment in Western Australia and position us
well for future challenges.

What does it mean to have a sustainable culture?

Some people think it is just about being nice, but what it‘s really about is:
 Improving business performance and customer service
 Taking personal responsibility – holding ourselves to account
 Teamwork
 Encouraging and supporting others
 Being honest
 Acting with integrity and respect
 Feeling good about coming to work
Re-energising our values

During May and June 2006, we conducted 40 employee workshops statewide
aiming to help re-energise our corporate values by capturing and defining
what is unique about our organisation and makes us proud to be part of it. We
did this because we want our values to be meaningful and relevant to our
employees, more than just statements on a poster. We want our people to
know what we‘re about and to be able to communicate what is great about the
Water Corporation as an employer. The stories and experiences of over 450
employees have contributed to a new values set that truly comes from the
heart of the organisation. The next stage is embedding or ‗living our values‘,
an ongoing programme directly linked to our overall cultural engagement
programme.

Developing Inspirational Leadership

A focus on effective leadership runs through all levels of our business. During
2006-07, each member of the Executive team and all senior managers
undertook personalised development and coaching. This process resulted in
action plans being developed for each individual to improve their effectiveness
in leading our business.

Training for future leaders

As part of our commitment to developing our employees‘ leadership skills
throughout their careers, we run a number of development programs. UpLiFT
is targeted at team leaders, and Stepping Up is a parallel program for non-
managerial employees looking to enhance their leadership potential. These
programs aim to promote greater self-awareness, build skills in relationship
management and personal leadership, and assist participants in goal setting
and action planning.

Graduate Development Program

Our Graduate Development Program provides graduates with support,
guidance and mentoring to develop their skills and help them reach their full
potential.

Our graduates receive skills training, guidance and mentoring to help them
reach their full potential. The developmental calendar for our graduates
includes rotations in various regions and divisions with our business, along
with regular forums, skills training, involvement in the Engineers Australia
competency program, mentoring and site visits. Currently 92 graduates are
participating in the program.

Effectively Engaging With Our Employees

Our Employee Communications Group, comprising 15 employee business
representatives was formed in August 2005. The group‘s purpose is to provide
ongoing feedback to our Internal Communications team on its activities.
Members also assist with developing our annual internal communication
strategy story and associated action plans.

Several ideas have been implemented over the past 12 months. Ideas in
action include a new and more sustainable process for distributing our internal
newsletter ‗Flowing Forward‘, developing policies and guidelines for
communicating internally and the introduction of a site tour program for office-
based employees in the metropolitan area.

The group meets monthly and between meetings an online knowledge-
sharing forum is used to progress and share points of view. To maintain fresh
perspectives, five members retire and are replaced each year.

Celebrating our achievements

We held a breakfast to celebrate Water Corporation‘s tenth anniversary and
recognise the hard work of our people in October 2006. More than 600 people
joined in the celebration.

The breakfast was organised as a result of a phone poll of 150 employees to
determine the time and type of recognition event they would prefer. The event
received strong support and will be held annually from 2007, with smaller
events in regional areas.

Encouraging physical activity

We encourage our employees to live a healthy lifestyle, sponsoring corporate
teams in various sporting events including the City to Surf fun run.

In 2006-07 a large team of 56, including our Chief Executive Officer and Chief
Operating Officer, pumped up their tyres for the City of Perth Great Bike Ride.

We also entered several successful teams in the Skilled Corporate Teams
Triathlon and the City of Perth Lord Mayor‘s Cup.
Giving back to the community

Our employees are also generous in giving their time and money to support
worthy community events.

The daring and generosity of our people placed us eleventh highest fundraiser
in WA for the World‘s Greatest Shave 2007. From seven events across the
State and through sponsorship collected by the 40 employees who had their
hair shaved off, we raised a total of $15,808.

In June 2007, more than 150 people attended ‗Fashion for Water‘, a fashion
parade featuring second-hand clothes donated by employees. The event
raised more than $2,500 for World Vision‘s ―Water Health Life‖ program to
tackle unsafe water and aid sanitation works in developing countries.

We also participated in Clean Up Australia Day, collecting more than 6,500
litres or 80 bags of rubbish from around the Leederville area in just under two
hours.



Maintaining A Safe and Healthy Work Environment

Our target is to provide a safe and efficient workplace with no injuries to
employees, contractors or visitors. There has been a strong focus on
improving safety performance with a wide range of initiatives.

Injuries, incidents and hazards

Our significant injury frequency rate for 2006-07 was 7.5.

OSH Reporting and Significant Injury Frequency Rate (SIFR)
(graph omitted)

Incident and hazard reporting

The number of hazards and incidents reported on our Corporate OSH
database for 2006-07 was 1712 and 543 respectively. This demonstrates a
marked increase in reported hazards from previous years, indicating an
improved health and safety culture.

Going forward, our focus remains on fostering a strong safety culture and in
2007-08 this will include fatigue management, improvements in the operation
and maintenance of tools and equipment and extending safety management
procedures to contractors.

Significant Injury Frequency Rate

              2000-01   2001-02   2002-03   2003-04   2004-05   2005-06   2006-07
Significant   19.4      18.7      17.4      11.0      9.0       9.0       7.5
injury
frequency
rate



Increasing safety awareness

With our substantial capital works program and many of our employees
involved in construction and maintenance activities, safety awareness training
is essential. In 2006-07, a total of 1500 employees of the Water Corporation
and our alliance contractors completed WorkSafe accredited half-day
Construction Safety Awareness Training. This provides information on ‗duty of
care‘, applying hazard control principles, and common hazards associated
with construction work.

A further 300 employees involved in heavy construction have undertaken an
expanded full-day version of the course. Both courses have been partly
customised to reference our systems, procedures and standards relevant to
the accredited course content.

„With our substantial capital works program and many of our
employees involved in construction and maintenance activities,
safety awareness training is essential.‟


Helping prevent fatalities

The safe use of mobile plant and the dangers inherent in excavations were
the focus of the ―Five to Stay Alive‖ campaign to prevent fatalities in 2006-07.
To date, four of five program modules have been implemented, with the final
module ―Confined Space Entry‖ to be launched later in 2007.

The Mobile Plant and Excavation Module includes operation of protective
devices such as proximity meters and boom limiters and restrictors for use
when performing work near overhead power lines. This can be a major risk
area for our employees and contractors. A comprehensive assessment tool
for mobile plant and excavation work is now available and covers a wide
range of excavation topics including overhead and underground services,
training and competency and public safety.

Tailored online induction

All new employees are comprehensively inducted in safety matters before
they begin work. An online induction provides relevant information on safety
issues and is divided into a number of modules. Employees complete the
modules appropriate to their area of work.

Corporation-wide OSH accreditation

Following 18 months‘ work towards a whole of organisation accreditation in
health and safety, our external auditor has recommended the Water
Corporation for a Gold Certificate of Achievement under the WorkSafe Plan.
This means that we have achieved a 75 per cent or more rating, with a
number of our initiatives being rated to a Platinum standard.

As at June 30, a final site visit to confirm the auditor‘s evaluation was due
prior to the certificate being formally awarded.

“Occupational Safety and Health is one of the most important
aspects of our business and it must be constantly reviewed and
upgraded to maintain its effectiveness.”
Jim Gill, Chief Executive Officer
Our Customers and Community
“It‟s not just about providing water services, we want to ensure our
customers and the wider community are happy with the way we do
it”
Jim Brown, General Manager Customer Services

Over the past year we have made it easier for residential customers and the
building industry to do business with us. We have assisted a range of
community initiatives and organisations, and worked hard to build closer
relationships with communities across the State through support and
consultation.

Customer Service

We aim for excellence in service delivery and strive to exceed the
commitments of our Customer Charter to maintaining timely and effective
communications and promptly responding to customer feedback and
complaints.

Over the past year, our Call Centre and Operations Centre received 744,000
calls from customers and a further 31,000 customers contacted us in writing
or in person.

Around 36,000 of the contacts made by customers were complaints. Our
formal complaints handling process includes a dedicated Correspondence
and Complaints Coordinator with responsibility for monitoring response times
and ensuring the highest level of compliance with our Customer Charter.

Our Customer Service Record

It is our aim to resolve all complaints within 21 days, and we achieved this in
99 per cent of cases during 2006-07. We also responded to 97 per cent of
correspondence within ten business days.

Customer Complaints by Category
(Ranked according to pie chart)
1 – Operations Water (e.g. pressure and flow, no water, property connections)
2 – Operations Wastewater (blockages, overflows, odour)
3 – Water Quality (e.g. dirty water, stained laundry, taste and odour)
4 – Billing Response (explanation of account, customer or account details)
5 – Water Conservation (sprinkler roster breaches or exemptions)
6 – Other (consists of a further 19 categories)

Action/Commitment
Action/Commitment               2006-07               2005-06
Calls received by Operations    167,000               162,000
Centre
Calls received by Call Centre   577,000               562,000
Complaints received             36,000                35,000
Complaints resolved within      99                    99
21 calendar days (%)
Complaints resolved within 2    97                    97
business days (%)
Written correspondence          97                    98
answered within 10 business
days (%)


Case study
Ensuring access for all members of the community

Challenge:
One in five Western Australians has a disability. People with disabilities,
English as a second language, low literacy levels, low socio-economic status
and those who live in rural or remote areas often report difficulty accessing
information, facilities and services. Our challenge is to ensure that our
business is accessible and inclusive to the whole community.

Solution:
In 2006, we developed our Disability Access and Inclusion Plan that led to a
large range of actions being successfully implemented across the business to
improve access and inclusion.

Outcome:
Our Corporate Real Estate Branch undertook access audits to identify access
barriers and continued to improve our buildings and facilities statewide.

The Customer Centre reviewed customer surveys to ensure the process is
inclusive, improved the TTY service, introduced information in alternative
formats for people with special needs and improved the accessibility of the
concession application process.

The Communications Division developed Community Engagement guidelines,
included the ‗alternative format notation‘ on customer information and
received recognition for the ‗easier ways to save water‘ advertising campaign.
Feedback from customers, including the WA Deaf Society and Customer
Advisory Council, commended the campaign‘s use of plain language, minimal
text, large illustrations and humour to convey the desired message
successfully.

Our new Operations Centre supports inclusiveness by offering assistance to
disadvantaged callers to the faults, emergencies and security line, including
using of the TTY service for the hearing impaired and, providing bottled water
to customers on dialysis in the event of a service outage. In 2006-07 the
Operations Centre appointed a Customer Liaison Coordinator to provide an
additional layer of care.

In 2007-08 we will roll out the Access and Inclusion online training course
statewide, to ensure our people understand and accept their individual
responsibility and have the necessary skills and resources to deliver access
and inclusion outcomes.
Measuring customer satisfaction

We commission two specific surveys which are conducted biannually to
measure customer satisfaction and to understand customers‘ perceptions of
our management and delivery of water services.

The Customer Satisfaction Index helps measure customer satisfaction with
our water and wastewater products and services, perceptions of service
quality and the value we offer our customers.

Results over 2006-07 confirm that our customers have a high regard for our
capacity to deliver fresh, clean drinking water and our ability to manage
wastewater services, while their perception of the value we provide is at an all
time high, with strong ratings provided by both residential and business
customers in terms of quality and price.

The Strategic Image Measure (SIM) aims to measure and understand shifts in
community perceptions of how we manage Western Australia‘s water supply
system and how effective our strategic communications activities are in
influencing change within the community.

Results of the November 2006 SIM for residential customers showed a
positive increase in the majority of areas including effectiveness of our
Waterwise information, waterwise management, water supply management
and delivery of household services. The score achieved for pricing fairness
remained steady. Responses from our business customers were also positive
with increases in the effectiveness of our Waterwise information and
waterwise management. All other factors were consistent with the previous
survey.

Our residential customers‘ perception of pricing fairness increased in the June
2007 survey, declined for water supply management and delivery of
household services and held steady against all other factors. Responses from
business customers showed a decline against all factors except perception of
pricing fairness which showed an improvement.

Customer Advisory Council

Our Customer Advisory Council represents a broad cross-section of the
people to whom we provide water services and is a strong example of
community engagement in action.
The Council includes representatives from each region of the State as well as
some industry groups. Council members evaluate proposed products and
services and provide valuable community feedback on our guiding principles,
procedures, initiatives and service levels. The Council is an important
sounding board that helps us better understand prevailing community
attitudes and incorporate these in policy development. It is also influential in
our ability to anticipate customer needs and deliver innovative customer
service.

Over the past year, the Council provided advice and identified new
opportunities in a number of areas, including the Financial Assistance
Scheme, the SewerSmart Program and a proposal for mandatory individual
metering. It also participated in a sustainability workshop, reviewed our
Customer Charter and was actively involved in the development of our new
account format, which took effect from 1 July 2007.

New account format

We have introduced a number of improvements to make our Annual Service
and Water Use Accounts easier to read and understand for customers. For
customers with special needs we provide accounts in alternative formats on
request. The new format will also encourage water conservation by providing
customers with more information on their water use. A comparative usage
graph on the water use account (pictured) shows their water use for the same
time in previous years and, where sufficient data is available, a comparison
with average water use in their suburb is provided.

Contributing to Our Communities

We continue to expand our support of community organisations through
partnerships with many organisations in Perth and across regional Western
Australian. These cover a very broad range, from the West Australian
Symphony Orchestra to the Shire of Collie Tidy Town Competition.

We currently work with 12 major partners to benefit the community, including
Scitech, Perth Zoo, Swimming WA, City to Surf, Kings Park and Botanic
Garden, AQWA Foundation, The Rock Eisteddfod Challenge and the
Leukaemia Foundation.

In addition, we have regional partnerships with the Tall Ship Leeuwin and the
Regional Arts Program, which allows the West Australian Ballet and the West
Australian Opera to conduct performances and workshops in regional towns
and remote communities. We also support many other regional events and
organisations.

Our financial commitment to major partners totals $450,000, and $50,000 is
allocated to Refreshing WA Water bottled water grants for our partners and
community requests.

In addition to our formal partnerships, we participate in hundreds of local
community events right across the State.

Genuinely engaging with our stakeholders

We work consistently and proactively to ensure that we engage the
community effectively as we work to manage their current water needs
effectively, and plan for the future. Our broad range of community
partnerships allows us to support worthwhile events and organisations, and to
participate more closely in the daily lives of many Western Australians.

The support and trust of the broader community is critical to the achievement
of our strategic objectives, and we work consistently to effectively
communicate openly with all our diverse stakeholder groups.

We face substantial challenges and a great deal of work to meet the demands
of our changing climate and fast growing State. As we do so, we are firmly
committed to building strong and communicative relationships with the many
communities with which we interact.

Stakeholder survey measures

Our latest independent research showed that 92 per cent of stakeholders
rated our engagement ‗as good as‘ or ‗better than‘ similar organisations,
compared with 88 per cent in 2005-06. This improvement shows we continue
to build on our success in stakeholder engagement with major stakeholders.

Building Closer Relationships

One important way in which we aim to create a sustainable water future for all
Western Australians is by building strong and communicative relationships
with the many communities with which we interact. Doing so will enable the
people best placed to understand the impacts of our decision-making to
contribute to that process. To help us achieve our goal, we have established a
Community Engagement Policy and Guidelines for projects or corporate
initiatives where effective community engagement is essential to sustainable
decision-making. The policy and guidelines encourage early community
engagement during the planning, development and implementation of new
initiatives or projects, including those projects delivered by industry partners
through our Capital Delivery Strategy.

During the past year, as part of our adoption of a standardised approach to
the planning, implementation and evaluation of community engagement
activities, we implemented formalised training programs for staff members
involved in community engagement. Training is provided by the International
Association for Public Participation (IAP2), which has developed tried, tested
and internationally endorsed methods of community engagement. IAP2
philosophies and methods are widely used by organisations seeking to
establish best practice in community engagement, including many of our key
stakeholders.

„We aim to create a sustainable water future for all Western
Australians by building strong and communicative relationships.‟

Building better relationships with Indigenous communities

We have introduced several new initiatives to enhance our relationships with
Indigenous communities in the protection and management of the State‘s
wetlands.

We are keen to learn more about caring for land and water from our
Indigenous people, and are implementing programs aimed at making a
positive difference to communities in areas where we operate through
improving relationships, providing employment opportunities and establishing
community partnerships.

During 2006-07, we formed a specialised Indigenous Resources Group to
provide a centre of expertise for Indigenous matters, particularly those related
to Native Title and Heritage Management.

Our Indigenous employment increased from 28 to 38 people during the past
year. We appointed an Indigenous Community Relations Officer in the Mid
West Region as part of a 12-month pilot program to enhance relationships
with local Indigenous groups.
Partnerships such as the Wunan Foundation in Kununurra were also
established and will provide many benefits for local communities in the future.
(see case study)

To ensure these and other Indigenous initiatives are successfully
implemented and reviewed annually, we have developed a ―Statement of
Commitment to Indigenous people and communities‖.

This statement outlines our strategies for building better relationships with
Indigenous communities, including:

   consulting with Indigenous groups and communities to promote an
    understanding of each other‘s concerns and aspirations;
   assisting Indigenous groups to manage issues and challenges they face
    as a result of our activities;
   assisting Indigenous people to compete effectively for employment within
    the Water Corporation;
   identifying and supporting partnering opportunities that make a positive
    difference to Indigenous communities; and
   learning from and working with Indigenous people to achieve sustainable
    management of water.

The ―Statement of Commitment to Indigenous people and communities‖ can
be found on our website - www.watercorporation.com.au


Case study
Indigenous engagement providing job-ready skills

Challenge:
Employment opportunities for Aboriginal people in the East Kimberley,
particularly the long term unemployed, can be limited due to their lack of ‗job-
ready‘ skills.

Solution:
The Wunan Foundation Inc was organising a housing project called
―Something Concrete‖ in Kununurra to tackle both employment and housing
issues for Aboriginal people. The work with local Aboriginal trainees to build a
new triplex employees. project would employ builders and qualified tradesman
to unit development on land owned by the Wunan Foundation. The completed
units will accommodate Wunan Foundation
The project was originally established by the Wunan Foundation and the
Beacon Foundation. A key strategy of the Beacon Foundation is to initiate
original and innovative projects that demonstrate solutions to youth
unemployment and encourage self-help at the local level.

The Wunan Foundation was established in 1997 as a community-driven
initiative by the elected representative body for Indigenous people in the East
Kimberley, ATSIC Wunan Regional Council. The purpose of the Wunan
Foundation is to build capacity to sustain innovative and progressive
programs for improving socio-economic outcomes for Indigenous people in
the East Kimberley.

We became a major sponsor of ―Something Concrete‖ as it is closely aligned
to our Indigenous Engagement principles and provided the opportunity for us
to support a project providing the same outcomes delivered through our
Indigenous traineeship program.

Outcome:
―Something Concrete‖ will increase the available pool of skilled Aboriginal
people in the East Kimberley. This will benefit skilled Indigenous workers,
local employers and various industries including the water sector.
Can you see this kid, Mr Truck Driver?

We regularly undertake communications about our work: community-wide,
within neighbourhoods, with individuals – and even in schools.

During 2006-07, we knew that upgrades planned for the Caddadup
Wastewater Treatment Plant would increase the number of trucks on Ocean
Road in Dawesville so our alliance partner, Sunset Coast Water, visited local
primary schools in November 2006 to teach students about safety around
trucks.

About 800 children from Ocean Road and Dawesville Catholic Primary
Schools were shown how far a truck needs to brake and the limited range of
vision a truck driver has through his windows and in his mirrors. Students
were asked to guess how far it takes a truck travelling at different speeds to
stop – initial guesses ranged from three metres to a mile – and were then
shown the real distances marked on the road. The children also learned about
wastewater and the extensive treatment processes it undergoes after leaving
their homes and before it is returned to the environment.

A number of teachers commented that the distances a truck needs to stop
and the narrowness of a truck driver‘s field of vision also surprised them. As
one of the teachers remarked,― Hopefully the kids will remember not only to
take care around trucks, but also that their poo doesn‘t go straight to the
ocean!‖

Keeping residents informed

At any given time, our employees and contractors are working in various
locations across the State carrying out planned maintenance or emergency
repairs. In all cases, we do our best to keep local residents and businesses
informed about what is planned or happening.

Local communities are kept informed of upcoming work through provision of
advance notice wherever possible through direct mail and media advertising,
as well as written notices, information cards and in-person contact. Where
appropriate, communities are also given the opportunity to contribute to the
final outcome.

One example of this consultative process occurred when rapid development in
Perth‘s northern corridor required implementation of the next stage of the
Carabooda-Neerabup Water Supply System. To ensure drinking water
supplies to the area are maintained this project includes the installation of a
60 megalitre water tank on Water Corporation owned land at Carabooda Hill.
Although the tank‘s elevated location was dictated by the need for a gravity
feed into the water system, Carabooda residents were invited to help us
determine how the tank looked. Our planners produced a number of simulated
landscapes (see below) and the local residents were invited to view these and
agree on a preferred tank option that caused the least disruption to their
views. The new tank is planned for installation in 2009.

Broome Wastewater Treatment Plant community engagement

Driven by a booming tourism industry, Broome is one of Western Australia‘s
fastest growing towns with a population that is projected to double by 2021.

Over the past six years, we have engaged with the community of Broome,
local Indigenous groups, the Kimberley Land Council, the Shire of Broome,
local environmental groups and relevant Government departments to develop
solutions for managing the town‘s increasing volumes of wastewater. To date,
we have upgraded the existing wastewater treatment plant to cater for
increased flows, at the same time increasing the capacity of the town‘s
recycling scheme.

Following extensive consultation with stakeholders and the local community,
we have also identified the preferred site for a second wastewater treatment
plant to cater for the long-term growth of the town. The site is approximately
10km north-east of the Broome township and a new treatment plant is
scheduled to begin operation there in 2009.

We are committed to engaging the local community during the planning,
development and implementation of water and wastewater projects.
Glossary
Aquifer
An underground layer of water-bearing permeable rock or consolidated
materials (clay, sand, silt or gravel) from which groundwater can be extracted.

Biosolids
Biosolids are the stabilised, nutrient rich, organic solid residues generated
from the wastewater treatment process.

Catchment
The areas of land which collect rainfall and contribute to surface water or to
groundwater.

Desalination
The process that removes salt from saline water to produce fresh water.

Drinking water
Water that is safe to use for drinking and cooking.

Gigalitre (GL)
A metric unit of volume or capacity equal to one billion (a thousand million)
litres of water. This volume would fill 500 Olympic-sized swimming pools.

Greenhouse effect
Some gases (greenhouse gases) in the Earth‘s atmosphere trap some of the
sun‘s energy, rather than letting it escape back into space; this is the
Greenhouse Effect, it is natural, and helps keep temperatures at a level
necessary to sustain life. Human activities have enhanced the levels of some
of the greenhouse gases in the Earth‘s atmosphere, leading to more energy
being trapped and so raising Earth‘s temperatures; this is the Enhanced
Greenhouse Effect.

Greenhouse gases
Atmospheric gases that absorb and re-radiate the sun‘s energy, causing the
Greenhouse Effect. Water vapour, carbon dioxide, nitrous oxide, methane and
ozone are the primary greenhouse gases. Elevated levels of such gases
contribute to the Enhanced Greenhouse Effect.

Groundwater
Water in the soil below the surface of the ground, typically found in an aquifer.

Groundwater replenishment
A process that enhances the natural replenishment of groundwater by
artificially supplying aquifers with additional water.

Hectare
Measure of area equal to ten thousand square metres.

Infrastructure
Services and equipment needed to support urban communities.

Integrated Water Supply Scheme (IWSS)
The IWSS supplies water to 1.5 million of the 1.9 million people living in
Western Australia. It services towns in the South West, metropolitan Perth
and from Mundaring Weir to towns and farmlands in the Central Wheatbelt out
to Kalgoorlie–Boulder. The scheme is supplied from multiple groundwater and
surface water sources (dams) located over a wide geographic area. From late
2006, it was also supplied by the Perth Seawater Desalination plant.

Kilolitre (kL)
A metric unit of volume or capacity equal to 1,000 litres.

Megalitre (ML)
A metric unit of volume or capacity equal to one million litres.

Reverse osmosis
Salty water is placed under pressure, causing salt and impurities to separate
from fresh water. The fresh water then passes through a filter or membrane,
leaving salt and other impurities behind.

Significant Injury Frequency Rate (SIFR)
The number of medically treated injuries and lost-time injuries per million
exposure hours.

Surface water
All water naturally open to the atmosphere (rivers, lakes, dams, streams,
oceans, etc).

Sustainability
Meeting the needs of current and future generations through integration of
environmental protection, social advancement and economic prosperity.
Corporate Information
“We deliver strong performance that benefits the community and
State as a whole”
Ross Hughes, Chief Financial Officer

Economic Performance

                3-year   1-year   2006-07   2005-06   2004-05   2003-04   2002-03
                target   target
Operating       551      496      535       479       461       423       404
cost per
property ($)
Total cost      1,501    1,386    1,438     1,329     1,320     1,283     1,262
per property
($)
Operating       683      639      731       676       601       554       469
profit before
income tax
($M)
Return on       4.5      4.5      4.5       4.5       4.3       4.1       4.0
assets (%)
Return on       4.7      4.6      4.5       4.5       4.5       4.5       4.4
assets
targeted (%)
Return on       5.5      5.2      6.0       5.6       5.0       4.7       4.0
equity (%)
Debt to         27.4     21.8     20.9      17.4      12.7      13.0      12.0
equity (%)
Interest        4.4      6.0      5.8       7.9       7.6       7.5       5.8
cover
(times)
Net accrual     161.2    180.0    202.4     218.3     201.7     195.6     134.2
to
Government
($M)


Notes:
1. Targeted return on assets is based on the achievement of a four per cent
return on pre-1996 assets (i.e. those owned on corporatisation) and a six per
cent return required on all post-1996 assets.



We aim to deliver strong economic performance that will enable us to meet
customers‘ increasing demands in an environment of changing community
expectations and climate variability. We also continue to pursue excellence in
our processes and strive to achieve best practice with our reporting,
compliance and governance procedures.

To address these challenges, we have:
 delivered a record capital investment program with a significant focus on
   providing water-related services as part of our diverse portfolio of supply
   and demand programs;
 consolidated and improved our procurement services to establish a more
   service-oriented and enabling procurement environment and centre of
   expertise;
 achieved efficiency savings through improvement initiatives;
 taken further steps towards best practice in capital efficiency planning,
   operations and maintenance of assets;
 regularly benchmarked our performance with other water services
   providers in Australia and overseas;
 engaged with our customers and the community on our plans, services,
   standards and costs; and
 met stringent regulatory requirements in an evolving regulatory
   environment.

We are committed to managing and delivering a high level of capital
investment for the benefit of the State.

We will do this by implementing process improvement recommendations in
capital planning and design as well as in our program and project
management and developing long-term relationships with private industry to
deliver the work through our partner delivery program. We will also strive to
gain further improvements in business processes and operating efficiency.

Financial results

We achieved an after-tax profit of $513million, up 8.4 per cent.

Total revenue grew by 10.3 per cent to $1.6billion, as the result of increased
revenue from rates and fees, increased usage revenue driven by greater
customer demand as a result of the prolonged dry weather conditions,
increased developer contributions due to continued strong lot development
activity and higher Community Service Obligation (CSO) contributions
received from Government.
Revenue growth had a positive effect on net cash inflows from operating
activities which increased by 12.8 per cent to $749million.

The increase in expenses from ordinary activities is reflective of the significant
growth in the number of properties serviced fuelled by the current buoyant
housing market. Operating expenses were also impacted by the additional
requirements related to the drying climate and from external cost pressures.

The average general price increase approved for the year was 3.6 per cent, in
line with the Consumer Price Index.

Shareholder returns

The Board approved dividend payments totalling $356million to the State
Government, our sole shareholder. We received a Community Service
Obligation payment from the Government of $360million to provide non-
profitable services, mostly in rural and remote areas of the State.

Capital investment

As the result of enhanced capacity through our Partner Delivery Program
initiative, we were able to deliver a record $674.3million capital investment
program for 2006-07.

Investment in water projects included final costs for the Perth Seawater
Desalination Plant ($98.8million), other water source development and
treatment projects ($78million), the water distribution network ($132.3million)
and other water-related projects ($61.2million). Investment in the wastewater
business included treatment and conveyance activities ($144million),
continuing work on the Infill Sewerage Program ($41.2million) and other
wastewater-related projects ($18.8million).

Treasury and funds management

The considerable capital investment program during both 2005-06 and 2006-
07 has resulted in a significant increase in our level of debt. Almost half of our
2006-07 capital investment program was funded from net operating cash
flows, with $332million funded from new borrowings. Net debt increased by 23
per cent to $1.8billion as a consequence.

The additional borrowings resulted in an increase in our debt-to-total assets
ratio to 16.3 per cent from 14.0 per cent in 2005-06. As a result, interest cover
weakened to 5.8 times (2005-06: 7.9 times) but still remains at a level where
we can comfortably service our debt.

Tax and dividends

Our dividend policy is to pay 85 per cent of after-tax profits (excluding
developers‘ take-over asset contributions) to the State Government. This
policy returns value to our shareholder while ensuring there is sufficient cash
to meet our business needs. Our dividend forms part of the State‘s
Consolidated Revenue and is used to meet broader State commitments.

The National Tax Equivalent Regime administered by the Australian Taxation
Office requires the Corporation to lodge an income tax return and pay tax
equivalents to the State.

The CSO contributions received from Government, for services that are not
commercially viable, partially offset the dividends and tax payments we
provide. The separation of tax and dividends payments and CSO receipts
provides transparency of payments to and from Government.

Land development

Activity in land development and building industry during 2006-07 mirrored the
exceptional level of economic activity associated with the mining boom and
delivered record number of lots cleared onto the market. Lots cleared totalled
25,335, an increase of 11 per cent on 2005-06, generating total developer
contributions of $264million ($207million in 2005-06). The distinguishing
feature of this record income has been the marked increase in revenue from
the regions, particularly Goldfields, Mid West and North West regions rather
than the traditional areas of Perth and Peel in the South West region.
Governance

We will continue to pursue excellence in our processes with a focus on
optimising asset management, delivering effective and efficient services, and
providing quality products to our customers.

This section of the report includes a description of our main corporate
governance practices for the 2006-07 financial year. These form a framework
to ensure that we act with high standards of corporate behaviour and in the
best interests of our stakeholder.

The Board of Directors

As our governing body, the Board has the legislative authority to perform the
functions and determine the policies that control our activities. It is responsible
for our overall corporate governance and approves our goals, strategic
directions and budgets. It ensures that legal compliance; ethical behaviour
and proper risk management processes are in place and operate effectively.
Comprehensive monthly reports are provided to the Board to enable it to
monitor performance.

The structure of the Board is subject to the following parameters:
 the Board must comprise at least six and not more than seven directors
   (one of whom is the Chief Executive Officer);
 the Chief Executive Officer is the only executive director;
 the directors are appointed for terms of up to three years and are eligible
   for re-appointment;
 the Governor on the Minister‘s nomination, appoints the Chairman and
   Deputy Chairman from the non-executive directors;
 the Board should comprise directors with a broad range of skills and
   experience; and
 Board meetings are generally held once a month at the Water
   Corporation‘s head office in Perth.

Appointment of Directors

The Governor has appointed non-executive directors on the nomination of the
Minister for Water Resources. This is after consultation with, or on the
recommendation of, the Board. Appointments are staggered to ensure that
approximately one-third of the directors retires each year. Subject to
reappointment, there is no limit on the time a director may serve on the Board.
Their duties are not full-time.
The Minister appointed the inaugural Chief Executive Officer, with future
appointments to be made by the Board, subject to the Minister‘s agreement.
The Board can appoint a person to act in place of the Chief Executive Officer
during a vacancy in that office.

Changes to the Board

In March 2007, Board member Mr Patrick O‘Connor was appointed Chairman
following the resignation of Mr Tim Ungar. Mr O‘Connor was first appointed to
the Board in January 2003.

Ms Tracey Horton, Deputy Chairperson, resigned from the Board with effect
from 31 December 2006 and was replaced by Dr Brian Hewitt, a Board
member since 2003.

Two new Directors were appointed to the Board in July 2007 to fill the
resulting vacancies. Ms Zelinda Bafile and Professor Robert Harvey were
appointed for terms expiring on 31 December 2007 and 31 December 2008
respectively.

There were no other changes to the composition of the Board during the year.

Independent advice and training

Directors can seek independent professional advice on Board matters at the
Water Corporation‘s expense with the approval of the Chairman. No such
advice was sought during the year.

Directors’ and senior executives’ remuneration

The Minister, on advice, approves the remuneration of non-executive
directors. The Board, with the Minister‘s agreement, is responsible for the
remuneration package of the Chief Executive Officer, with remuneration being
reviewed annually. Non-executive directors receive no retirement benefits
except for nine per cent in superannuation.

The Chief Executive Officer has the delegated power to determine the terms
and conditions of service for staff.

Accountability and independence
As prescribed in the Water Corporation Act 1995, directors are to act honestly,
exercise due care and diligence, and disclose all material personal interest in
matters involving the Corporation that are raised in Board meetings. The
Board has complete independence to determine the policies and control the
affairs of the Corporation subject to restrictions imposed by the Water
Corporation Act 1995. Ministerial approval is required for transactions that will
have a material effect on the financial position of the Corporation.
Board Member Profiles

The Water Corporation Board: Brian Hewitt, Andrew Bantock, Karen Field,
Patrick O‘Connor, Jim Gill

Mr Patrick O’Connor
Chairman
Age 44
BCom, FAICD
Mr O‘Connor is the Managing Director of a boutique investment management
company, St George Capital Pty Ltd. He is non-executive Chairman of Perilya
Limited, Xceed Biotechnology Limited and SG Growth Equities Limited. He is
also a member of the State Infrastructure Strategy Reference Group.

Appointed as a non-executive director from 1 January 2003, his current term
expires on 31 December 2008.

Committee membership
Human Resources and Remuneration Committee (formerly Organisation
Development Committee).

Dr Brian Hewitt
Deputy Chairman
Age 62
BE(Hons),PhD, MBA, FIE Aust, CPEng, FAIM, FAICD
Dr Hewitt has a depth of experience in the areas of corporate development,
strategic planning, corporate governance, project management and property
development.

He held senior management, executive and Board positions with the Clough
Group of companies for over 25 years and served as Chief Executive Officer
and Managing Director of Clough Limited from the time of its listing on the
Australian Stock Exchange in 1998 until his retirement in 2003.

He is now Chairman of Acumen Capital Securities Limited, Chairman of the
Advisory Board of the Georgiou Group, and is a non-executive director of the
PCH Group.

Dr Hewitt is President of the Chamber of Commerce and Industry of Western
Australia, a member of a number of State Government advisory committees, a
Councillor of Curtin University and an adjunct professor at The University of
Western Australia.
Appointed as a non-executive director from 1 January 2004, his current term
expires on 31 December 2009.

Committee membership
Audit and Compliance Committee.

Dr Jim Gill
Age 60
BE(Hons), PhD (Cambridge), MPA (Harvard), FTSE, FIE Aust, CP Eng,
FAICD
Chief Executive Officer of the Water Corporation.
Dr Gill was Chief Executive Officer of Western Australia‘s railway system from
1988 and became Managing Director of the Water Authority in 1995.

Dr Gill was named Civil Engineer of the Year in 2006 by Engineers Australia.

He is a Fellow of the Australian Institute of Company Directors and was
recently president of the Western Australian Division of that body. Other
positions he has held include Chairman of the Water Services Association of
Australia, Chairman of the WA Division of Engineers Australia, Chairman of
Railways of Australia and a member of the Senate of The University of
Western Australia.

Appointed as Chief Executive Officer on 1 January 1996.

Mrs Karen Field
Age 59
BEc
Mrs Field is an Independent Director on the Boards of Sipa Resources
Limited, a Western Australian based mineral explorer and the Centre for
Sustainable Resource Processing for the mining industry.

She is a voluntary director on the Board of Anglican Homes Inc. which
delivers a diverse range of care, accommodation and community services to
1800 residents and clients across Western Australia and a voluntary member
of the WA Advisory Board of the Starlight Children‘s Foundation, which is a
national organisation that is dedicated to improving the lives of seriously ill
children and their families.

Appointed as a non-executive director from 1 January 2006, her current term
expires on 31 December 2007.
Committee membership
Chair: Human Resources and Remuneration Committee.

Mr Andrew Bantock
Age 41
ACA
Mr Bantock is a Chartered Accountant with extensive professional, corporate
and commercial experience in the resources, resource contracting and
infrastructure sectors.

He is Executive Chairman of Chalice Gold Mines Limited, Managing Director
of Liontown Resources Limited and Corporate Director of Uranium Equities
Limited, which operate as exploration and development companies in their
respective commodity areas.

Appointed as a non-executive director from 1 June 2006, his current term
expires on 31 December 2009.

Committee membership
Chair: Audit and Compliance Committee

Ms Zelinda Bafile
Age 51
BJuris, LLB, FAICD, FCIS, SFFin
Ms Bafile is a director on the Corporations and Markets Advisory Committee,
a member of the Curtin University of Technology Council, Chair of the
Resources Unit for Children with Special Needs Inc and a member of the
Council of Friends of the Perth International Arts Festival.

A lawyer, Ms Bafile is Past President of the Corporate Lawyers Association
(WA Chapter) and was runner-up, 2006 Australian Corporate Lawyer of the
Year.

Ms Bafile was appointed as a non-executive director from 1 July 2007 and her
current term expires on 31 December 2007.

Professor Robert Harvey
Age 58
BE(Hons), MBA
Professor Harvey is Executive Dean Faculty of Business and Law and Pro
Vice-Chancellor (Engagement and Indigenous) Edith Cowan University.
He is a member of the Board of the Joondalup Business Centre, and in 2006
and 2007 was a member of the State Water Planning Review Panel, providing
independent advice to Government on the State Water Plan.

Professor Harvey was previously Executive Director of the Department of
Justice and has held senior positions in the Department of Contract and
Management Services and the Water Authority of Western Australia.

Appointed on 1 July 2007 as a non-executive director, his current term expires
on 31 December 2008.
Board Committees

Committees of the Board that operated during the year ended 30 June 2007
were:

   Audit and Compliance
   Organisation Development

Audit and Compliance Committee

The Audit and Compliance Committee assists the Board in fulfilling its
fiduciary, corporate governance and legislative responsibilities.

The committee‘s primary task is to monitor the effectiveness of internal
controls and management reporting relating to financial and compliance
matters and risk management. It oversees the financial management reporting
process and ensures that external reports are prepared in accordance with
the relevant standards.

The committee oversees the internal audit function and liaises with the
external auditor.

Organisation Development Committee

The Organisation Development Committee‘s focus is on ensuring that the
Corporation has the required strategies, resources and cultural drivers to build
workforce capability and adaptive capacity to meet our current and future
business needs. The three key areas of focus are composition of the
workforce, capability and culture.

The Organisation Development Committee‘s terms of reference were
amended by the Board at its meeting of 19 June 2007, and its name changed
to Human Resources and Remuneration Committee. The key areas of focus
have been expanded to include remuneration processes and practices,
proposing criteria for selection of new Board members, and Board and
Committee performance evaluation.

Directors’ meetings

The number of meetings of the Board and committees of directors held and
the number of meetings attended by each director during the 12 months
ended 30 June 2007 are shown in the following table. Where directors held
office for some but not all of the financial year, the number of meetings held
while they were a director is shown in brackets.

Meetings of Committees
                     Board Meetings      Audit and            Organisation
                                                                           4
                                         Compliance           Development
Number of meetings   11                  6                    6
held:
Number of meetings
attended:
           1
P O‘Connor           11                  4                    3
J Gill               11                  *                    *
A Bantock            11                  4                    *
K Field              11                  *                    6
B Hewitt             10                  5                    *
        2
T Ungar              5(6)                *                    3(3)
         3
T Horton             5(6)                *                    3(3)


* Not a member of the relevant committee.
1. Mr O‘Connor ceased with the Audit and Compliance Committee in February
2007 and joined the Organisation Development Committee in April 2007.
2. Mr Ungar resigned as director with effect from 31/01/2007.
3. Ms Horton resigned as director with effect from 31/12/2006.
4. The Organisation Development Committee‘s terms of reference were
amended by the Board at its meeting of 19 June 2007, and its name changed
to Human Resources and Remuneration Committee.

Risk management

Risk management is a key element of our governance framework.

We have an established risk management framework that provides a common
understanding of risk and a set of processes for managing risk in accordance
with Australian Standard AS/NZS 4360 Risk Management. The Framework
ensures a formalised, structured and corporate-wide approach to the
identification, evaluation and control of risks which have the potential to
threaten the achievement of our objectives and our ability to provide services.

All managers are responsible for the identification and management of risks
that will impact upon their business processes. The management of risk within
the business is supported by process risk profiles. The process profiles
consist of a register of process risks, key risks and associated action plans to
ensure that risks are managed to an acceptable level.
A comprehensive commercial insurance program is maintained covering
insurable risks which may have a significant impact on our assets,
construction activities and legal liability.

Managing financial exposures

We have a central Treasury function to manage financial exposures in
accordance with our Treasury Policy. Regular reporting ensures the Board
can monitor financial risk management.

Managing incidents

Our incident management process is based on national guidelines that have
been adopted by emergency services and utilities throughout Australia.

This process encompasses all actions required to prevent controllable
incidents and minimise the severity of those that do occur.

Incidents are reported in accordance with approved procedures and the
requirements of Acts and Regulations. During 2006-07, we managed some
130 significant and major incidents.

Security (Critical Infrastructure Protection)

Critical Infrastructure Protection remains a priority activity for the Corporation,
with executive representation within the Federal Trusted Information Sharing
Network on the Water Services Infrastructure Assurance Advisory Group
(WSIAAG) and the integration of the critical infrastructure protection work into
the Water Services Association of Australia (WSAA) Asset Management. The
Corporation actively participates in national critical infrastructure security
projects and national/regional incident exercises.

The Corporation‘s security program embraces the national and international
―all hazards‖ approach and is integrated with the incident management,
emergency management and business continuity programs. External
benchmarking by Federal and State agencies assesses the program
development as at the forefront of the State agencies and the national water
sector. Supporting the program is a proactive Executive liaison program with
the Western Australian Police, Federal and
State Agencies, including the Department of Premier and Cabinet security
team, and the National Security Division of The Department of the Prime
Minister and Cabinet.
Disclosure of interest

We have established procedures to identify, prevent or resolve conflicts of
interest. These procedures are outlined in our procurement standards.

All our personnel with duties related to the negotiation of a contract must
disclose current or prospective interests to their immediate supervisor. If
known, they must also disclose the interests of members of their immediate
family.

In such cases, we will assess the appropriateness of the situation and
determine if the basis of that interest should be discontinued, or if the person
should cease the duties involved, or if it is proper and ethical to continue the
transaction.

Regulatory framework

A number of organisations regulate or have a significant impact on our
operations. The principal organisations are:
• Economic Regulation Authority
• Department of Water
• Department of Environment and Conservation
• Environmental Protection Authority
• Department of Health
• Australian Competition and Consumer Commission (ACCC)
• National Water Commission.

Strategic Development Plan and Statement of Corporate Intent

We have a five-year Strategic Development Plan (SDP), reviewed every year,
and a Statement of Corporate Intent (SCI) covering 12 months. The SCI is a
public document and is in the form of an agreement with the Minister for
Water Resources. It contains an outline of the Corporation‘s objectives and
performance targets for the year.

These plans were developed for the 2006-07 year and presented to the
Minister.

Performance monitoring and reporting

We provide written quarterly reports and this annual report to the Minister for
Water Resources detailing our performance and progress made in fulfilling the
SCI. Written quarterly reports on compliance with performance standards
specified in the Operating Licence are also provided to the ERA. In addition,
the Board and Corporate Executive receive written monthly performance
reports covering a diverse range of financial and non-financial matters.

Ethical standards

We require all directors, employees and contractors to exercise high
standards of ethical behaviour in carrying out their duties. A code of conduct is
published on our internal website and all managers are required to monitor
adherence to the standards. A report on compliance is forwarded to the Office
of the Public Sector Standards Commissioner.

Public interest disclosures

The Public Interest Disclosures Act 2003 has been enacted to protect the
privacy and confidentiality of both the individual making a public interest
disclosure and the subject of that disclosure.

Public Interest Disclosure Officers for the Corporation have been appointed.
Internal procedures relating to the Corporation‘s obligations under the Act
have been developed and implemented in accordance with the guidelines
provided by the Office of the Public Sector Standards Commissioner.

There were no public interest disclosures in the period under review.

Information security management system

We maintain a security management framework that is based on the
Australian Standard for Information Technology — Security Techniques —
Code of Practice for Information Security Management AS/ NZS ISO/IEC
17799.2006.

State Records Act 2000

In accordance with Section 61 of the State Records Act 2000 and the State
Records Commission Standards (Standard 2 — Principle 6), the Corporation
has an approved Recordkeeping Plan that describes how records are created,
maintained, managed and disposed of in accordance with the Corporation‘s
Standards and Principles. Previous research and development schedules;
RD1999-013 and Ad Hoc schedule RD96-008 were replaced by a new
approved schedule, RD2004278 in October 2006.

The Corporation conducted an evaluation of the efficiency and effectiveness
of its recordkeeping system whilst preparing the Recordkeeping Plan and
during the Corporate Document Management System (CDMS) upgrade
project in 2006. A further evaluation will be conducted in 2009 on completion
of a corporate-wide document management system deployment project.

Regular in-house records and document management training is conducted
with feedback and evaluations sought from all attendees. The corporate
deployment of CDMS includes reviewing and updating all training material and
documentation in 2007, inclusive of feedback received.

The Corporation has implemented an online induction process for all new staff
which includes employee‘s roles and responsibilities with regard to
compliance with the approved Recordkeeping Plan, and includes ―information
on record keeping and information management compliance for the Water
Corporation‖ and ―information security awareness‖.

Information management, including records management, is acknowledged as
critical to the effectiveness and success of the business and the Corporation
is committed to continuously improving its management.

Advertising codes

We comply with the Advertising Federation of Australia Code of Ethics. In
addition, our advertising agencies have full compliance policies with the
ACCC. There were no breaches or complaints recorded in the reporting year.

Reportable expenditure

The Electoral Act 1907 (S. 175 ZE) requires the disclosure of certain
categories of expenditure. Details of the organisations contracted and the
amounts paid for the financial year are as follows:

Advertising agency
(The Brand Agency) $828,649
(303 Advertising) $272,382

Media advertising
(Media Decisions) $2,454,055
Market research
(Synovate) $533,143
(Data Analysis Australia) $139,486

Freedom of information

We met our obligations under the Freedom of Information Act 1992. Details
are available on our website.

During 2006-07, we received 31 applications for information under the
provisions of the Act. Four applications were carried over from the prior year.
Of these 35 applications, 15 were provided with full access, nine were
provided with edited access, five applications were denied access, three were
withdrawn and three were on hand at year-end. One internal review was also
requested.

Fees and charges totalling $540 were received for processing these
applications with 25 days being the average processing time.
Directors’ Report

The directors of the Water Corporation present their report for the 12 months
ended 30 June 2007.

Directors

The following persons were directors of the Water Corporation at the date of
this report:
Mr Patrick O‘Connor Director since 1 January 2003 (Chairman)
Dr Jim Gil Chief Executive Officer since January 1996
Mr Andrew Bantock Director since 1 June 2006
Mrs Karen Field Director since 1 January 2006
Dr Brian Hewitt Director since 1 January 2004
Ms Zelinda Bafile Director since 1 July 2007 (replacement for Tracey Horton)
Professor Robert Harvey Director since 1 July 2007 (replacement for Tim
Ungar)

Principal activities

The Water Corporation was established as a body corporate under the
provisions of the Water Corporation Act 1995 and is the principal water utility
in Western Australia. Water, wastewater, drainage and irrigation services are
provided under this Act and other legislation and subsidiary legislation, which
controls the water industry.

The principal functions of the Corporation in the course of the financial year
were to:
 acquire, store, treat, distribute, market and otherwise supply water for any
   purpose;
 collect, store, treat, market and dispose of wastewater and surplus water;
 undertake, maintain and operate any works, system, facilities, apparatus
   or equipment required for any of these purposes;
 develop and turn to account any technology, software or other intellectual
   property that relates to any of these functions;
 manufacture and market any product or by-product that relates to any of
   these functions; and
 use expertise and resources to provide consultative, advisory or other
   services for profit.
There has been no significant change in the nature of these activities during
the year.
Operating results

We made a profit before income tax of $731million (2006: $676million). On an
after-tax basis, profit was $513million (2006: $474million).

Dividends

Dividends paid or declared by the Water Corporation since the end of the
previous financial year were:

Declared and paid during the year 2006-07
                           Total ($M)                 Date of payment
Final 2005-06              24                         30 Oct 2006
Interim 2006-07            332                        30 June 2007
Total Amount               356


Declared after end of year

After the balance sheet date, the directors have proposed a final dividend of
$46million for the 2006-07 year, payable on or before 31 October 2007. The
dividend has not been provided and there are no income tax consequences.
The financial effect of this dividend has not been brought to account in the
financial statements for the year ended 30 June 2007 and will be recognised
in subsequent financial reports.

Review of operations

Established on 1 January 1996, the Water Corporation operates in a
regulatory framework comprising the Economic Regulation Authority (ERA),
the Department of Water and the Department of Environment and
Conservation. Clear commercial objectives and strict environmental targets
and accountabilities have been established through the Statement of
Corporate Intent and a system of licences through the various regulators.

As a condition of our Operating Licence, an independent auditor completed a
review of the effectiveness of our asset management systems in December
2006. The audit found our processes and systems are of a very high standard
and as a result the ERA increased the audit period from two to three years.

During the year, the Corporation supplied 355,468 megalitres of water and
treated 140,542 megalitres of wastewater.
Environmental performance

The Water Corporation is subject to particular and significant environmental
regulations under both Commonwealth and State laws. These include:
 Environment Protection and Biodiversity Conservation Act (Cwlth) 1999
 Environmental Protection Act 1986
 Contaminated Sites Act 2003
 Aboriginal Heritage Act 1972
 Dangerous Goods Safety Act 2004
 Poisons Act 1964

Under the Environmental Protection Act 1986, we are required to report any
unplanned incidents that have the potential to do harm to the environment.

It is inevitable with significant infrastructure across the State that unplanned
incidents will occasionally occur and that some of these will affect the
environment, public health and public amenity. Our incident management
process ensures a fast and effective response to such accidents or incidents.

Our environmental performance is underpinned by our Environmental Policy
and Environmental Management System which enable systematic
identification of environmental risks, setting of targets and development of
environment improvement plans to reduce risks and ensure our activities are
sustainable. This system is based on implementing best practice, meeting our
legal requirements and rigorous monitoring and reviewing of our performance.
(See page 26)

State of affairs

There were no significant changes during the year ended 30 June 2007 in the
state of affairs of the Water Corporation not otherwise disclosed in this report
or the financial statements.

Events subsequent to balance date

Since the end of the financial year on 30 June 2007 and the date of the
release of this report, the directors are not aware of any matter or
circumstance not otherwise dealt with in the report or financial statements that
has or may significantly affect the Corporation‘s operations, the results of
those operations or the Corporation‘s state of affairs in subsequent financial
periods.
Likely developments

Likely developments in our operations are covered elsewhere in this report.
Any further information regarding likely developments in the operations and
expected results of those operations in subsequent financial years has not
been included in this report because, in the opinion of the directors, it would
prejudice our interests.

Directors’ interests and benefits

In the 12 months to 30 June 2007, no director received, or became entitled to
receive, any benefit (other than a benefit included in the total amount of
remuneration received or due and receivable by directors) by reason of a
contract made by the Water Corporation with the director or with a firm of
which the director is a member, or with an entity in which the director has a
substantial interest.

Indemnification of Directors and Auditors

In the 12 months ended 30 June 2007, the Water Corporation has not
indemnified against a liability, a person who is, or has been, a Director or
auditor of the Corporation. During the period ended 30 June 2007, we paid
insurance premiums in respect of directors‘ and officers‘ liability insurance for
any past, present or future commissioner, Director, Board/committee member,
secretary, executive officer or employee of the Water Corporation.

This statement is made in accordance with a resolution of the Board.



P. O‘Connor
Chairman

J. I. Gill
Chief Executive Officer
PERTH, 5 September 2007
Organisational Structure

Shareholder
The Hon. John Kobelke
Minister for Police and Emergency Services; Community Safety; Water
Resources; Sport and Recreation



Board Chairman
Patrick O‘Connor

Chief Executive Officer
Dr Jim Gill
 Executive services
 Management review and audit
 Ministerial support

Chief Operating Officer
Peter Moore
 Operations leadership
 Operational strategy
 Issues management

Chief Financial Officer
Ross Hughes
 Financial management and reporting
 Strategic business planning and business development
 Treasury
 Corporate governance
 Risk management
 Legal services
 Pricing and evaluation

General Manager Communications
Catherine Ferrari
 Media liaison
 Stakeholder and community engagement
 Marketing, promotions and advertising
 Community partnerships
 Internal communications
General Manager Customer Services
Jim Brown
Delivery of water, wastewater, drainage and irrigation services to customers
through regional operations, land development services and the Operations
and Customer Centres. Responsible for customer contacts, billing and
collections.

General Manager Water Technologies
Keith Cadee
Management and operation of metropolitan water sources, water treatment,
water distribution, and the treatment, re-use and disposal of wastewater and
industrial waste. Management of drinking water quality and related research
and innovation.

General Manager Business Services
Paul Ferguson
Business support services including human resources, occupational safety
and health, information services, corporate real estate, environmental
management, engineering and construction services, and procurement.

General Manager Planning and Infrastructure
Sue Murphy
Infrastructure planning, design and project management to deliver the capital
programme. Also demand management via the Water Efficiency Branch.

General Manager Asset Management
Graham Cargeeg
Strategic, tactical and operational asset management together with the
provision of mechanical and electrical services.
Executive Team

Peter Moore
Age 57
Assoc Civil Eng, GradDip Mgmt, CP Eng, FIE Aust, GAICD, MAWA
Chief Operating Officer
Mr Moore has a long history in the water industry commencing in 1970. He
has been involved in many facets of the business through operations, regional
management, planning, project delivery bulk water and water treatment roles,
a number of high-profile project tasks and senior executive management
roles.

He attended Harvard University‘s Advanced Management Program in 1998.
Mr Moore is a past State President of the Australian Water Association and
former association board member.

Mr Moore was appointed Chief Operating Officer in October 2006.

Jim Brown
Age 62
GradDip Bus and Admin, CP Eng, FIE Aust, GAICD, MAWA
General Manager, Customer Services
Mr Brown is Chairman of the Water Corporation‘s Customer Advisory Council
and the two major metropolitan Alliance Contracts. He attended Harvard
University‘s Advanced Management Program in 2000.

He was a member of the Catholic Education Commission for a number of
years chairing the School Resources Standing Committee. He is a member of
the Commission‘s Review Committee on the conditions of employment of lay
principals.

Mr Brown is President of the WA Division of Engineers Australia, a member of
the Golden Pipeline Council and is an active member of the Australian Special
Air Services Association.

Keith Cadee
Age 53
BE (Hons), ME, CP Eng, MIE Aust, GAICD, MAWA
General Manager, Water Technologies
Mr Cadee has had more than 30 years‘ experience in the water industry. He
has had a range of senior positions including those responsible for water and
wastewater treatment and water production.
He is a member of the Water Services Association of Australia‘s Water,
Health, Environment and Sustainability Committee, and has been a board
member of the Cooperative Research Centre for Water Quality and Treatment
since 1995 and also chairs its Commercialisation Committee.

Graham Cargeeg
Age 56
Assoc Applied Geology, Assoc Civil Eng, MBA, CP Eng, MIE Aust, MAWA
General Manager, Asset Management
Mr Cargeeg has more than 30 years experience in the water industry. Prior to
his current appointment in November 2005, he was the Water Corporation‘s
Regional Business Manager for the Perth Region for 10 years. In this role he
was a member of the Alliance Leadership Team for each of the two
Metropolitan Operation & Maintenance Alliance contracts.

Graham is currently a member of several of the Alliance Leadership Teams
for Water Corporation Alliance Contracts. He is a member of the Water
Services Association of Australia‘s Asset Management Committee.

Paul Ferguson
Age 58
Assoc Civil Eng
General Manager, Business Services
Mr Ferguson is a civil engineer who has worked in the water industry for more
than thirty years and has extensive operational, construction and strategic
planning experience in both regional Western Australia and metropolitan
Perth.

Mr Ferguson‘s variety of roles over the last decade include a leadership role in
the water industry restructure in WA of 1995 and Project Director of
implementation of the SAP system within the Corporation, along with three
other major restructuring and business improvement projects.

Mr Ferguson was appointed General Manager Business Services in February
2007.

Catherine Ferrari
Age 48
BBus, PGradDipBus, MLM, FCPA, GAICD
General Manager, Communications
Ms Ferrari was the Chief Executive Officer of the West Australian Symphony
Orchestra and prior to that was the Western Australian Director of the
Australian Society of Certified Practising Accountants. She has a strong
record in the strategic positioning of organisations and of engagement with
key stakeholders and the community.

In 2004, Ms Ferrari began her current role as General Manager
Communications with the Water Corporation. She is a board member of
Screenwest and West Australian Opera.

Ross Hughes
Age 46
BBus FCPA FAICD
Chief Financial Officer
Mr Hughes was appointed to the Water Corporation in June 2006 after a long
career with HBOS Australia and BankWest, where he was CFO from 2001.

Mr Hughes commenced his career with BankWest under the graduate
recruitment program in 1981. His major roles included positions as head of
emerging business, senior manager of market development and associate
director structured finance, Bank of Scotland Edinburgh.

He has been extensively involved in several merger and acquisition activities
on behalf of BankWest including the sale of PIBA in 1994, BankWest
privatisation in 1995-96, the establishment of Unisys West in 2000 and the
acquisition of the minority interests by HBOS plc in 2003.

Sue Murphy
Age 49
BEng (Hons), CP Eng, FIE Aust, GAICD
General Manager, Planning and Infrastructure
Ms Murphy joined Clough Engineering Ltd after graduating as a civil engineer
from The University of Western Australia in 1979.

Many years in the field as a site engineer and project manager led to
corporate roles with a focus on human resources, safety and engineering
design management. In 1998, she was appointed the first female board
member of Clough Engineering Ltd.

In 2004, Ms Murphy commenced as General Manager Business Services with
the Water Corporation, moving to the role of General Manager Planning and
Infrastructure in December 2005. She is Deputy Chair of the Rottnest Island
Authority.
Further information

To provide feedback on this report, email report@watercorporation.com.au

Previous reports can be found in the publications section of our website
www.watercorporation.com.au

For customer enquiries or feedback about Water Corporation services, email
cust_centre@watercorporation.com.au

General and Customer Account Enquiries
Telephone: 13 13 85 (8am – 5pm weekdays)

Building Services and Subdivision Enquiries
Telephone: 13 13 95 (8am – 5pm weekdays)

Faults, Emergencies and Security
Telephone: 13 13 75 (24 hours)

Postal Address
Water Corporation
PO Box 100
Leederville WA 6902

ISSN 1447-4212

				
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