Annual Report 2011 - Watercare

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Watercare Services Limited 2011 ANNUAL REPORT Chief executive’s Report “Our challenge involved radical rethinking to ensure that the customer sits at the heart of everything we do.” Significant change occurred in our company parts of our business to ensure we were since it took over responsibility for service from 1 November 2010. That was the date on equipped to meet our new responsibilities. delivery from the former network operators. which we assumed responsibility for directly serving around 1.3 million Aucklanders. Before that, Watercare was purely a wholesaler in the water and wastewater utility business. Our half-dozen customers were local councils or water retail companies that each operated As a result, no part of the Watercare business is unchanged. From the way we answer phones to the thinking we employ when designing a process improvement or responding to a complaint, our approach now puts the customer at the heart of Wastewater prices increased by 4.5 per cent from the same date. While no customer welcomes a bigger bill, the wastewater increase was significantly lower than the price rises ranging from 6.9 to 36.9 per cent that had been forecast by the previous councils. local networks and onsold our services to our operations. For the 2011/12 financial year we are Chief Executive’s report PAGE 10 households and businesses in different parts of the Auckland region. But legislative change has resulted in our transformation into an integrated water utility and we now have full responsibility for all water supply from sourceto-tap, and for all wastewater services. By any measure this makes Watercare big business. Our workforce has increased to 611 permanent staff and our annual revenue is now $373 million. Our asset base has increased and is valued at $7.8 billion – greater than that of many of New Zealand’s most significant listed companies. Despite the huge growth in year-on-year revenue and the significant capital programme we discharged, I am pleased to report that our total operating expenses of $156.5 million (excluding depreciation) were under budget by more than $10 million at year-end. The greatest change we have experienced has been about much more than the throughput of cash or the addition of some new assets. It has involved radical rethinking to ensure that the customer sits at the heart of everything we do. Along the way, we have had to challenge ourselves – and this has sometimes been difficult. We have made structural and organisational changes; some staff have left and others have joined; we have rethought, refreshed and, where necessary, relocated We have brought forward significant IT projects to ensure our retail billing and customer-management systems are effective and customer-friendly. We have engaged with social agencies to ensure that our approach to handling customers experiencing hardship is fair. We have taken over a network of maintenance contractors – the crews that respond to faults in local water and wastewater pipes, all of whom have had to be inducted into the Watercare way of working. Most of all, we are reminded every day of our direct responsibility to the people of Auckland who pay for our services. Outstanding and affordable services For many years, Aucklanders have paid directly for the water they use through meters in homes and businesses. It is a matter of great pride at Watercare that we have been able to reduce the retail price of water across Auckland through cutting the unit rate, and also scrapping the fixed service charges for water that were previously payable in some areas. As the Chairman has noted on page 6, Watercare cut the prices of water for all Aucklanders effective 1 July 2011, with the new tariff set at $1.30 (including GST) for 1,000 litres. The lower price is thanks to efficiencies generated by Watercare continuing to charge for wastewater services according to the various methodologies applied by the old councils – that is to say, either fixed fees per property or variable sums linked to the consumption of metered water. However, from 1 July 2012, Watercare is required to introduce a new, single wastewater tariff and Auckland Council has proposed to us that it consults with the public on tariff methodologies that meet our funding requirements. While Watercare is solely responsible for setting the charges for both water and wastewater, we agree with our shareholder’s logic on this point. Watercare’s decisions on wastewater pricing will coincide with a number of council decisions which also impact on individual households and businesses, including the rationalisation of the rates system in Auckland and a number of other council funding decisions. One meaningful round of public consultation – rather than several – seems to us to be sensible. Of course price is just one part of our commitment to customers. Our vision is to supply outstanding and affordable services to all Aucklanders, and it is clear that some of the assets we inherited on 1 November 2010 fell well short of being outstanding, especially in non-metropolitan parts of our region. We have a range of long- and short-term initiatives Return to Contents page
Watercare Services Limited 2011 ANNUAL REPORT Watercare Chairman Ross Keenan, Auckland Mayor Len Brown and Mark Ford attend an event to commemorate the Waitakere Dam’s 100th year of operation in December 2010. Water prices reduced by Watercare, effective 1 July 2011 Old price per 1,000 litres (pre-July 2011) Watercare price per 1,000 litres (post-July 2011) Percentage change reduce the frequency of overflows. If all goes according to plan, we will apply for resource consents in mid-2012, with construction planned for 2016-20. Rodney District (rural) Rodney District (urban) $3.50 table -62.9% $1.96 -33.7% North Shore City $1.52 -14.5% Over the next 10 years, we have an ambitious capital investment programme totalling more than $4.7 billion, including $2 billion on water and wastewater network expansion and a further $1.4 billion on updating our existing networks. Waitakere City $1.74 $1.30 -25.2% Auckland City (ex-Metrowater) Manukau City (ex-Manukau Water) to address the shortfalls and, in our current Asset Management Plan, we have allocated $150 million over 10 years towards the improvement of non-metropolitan water and wastewater plants. Some of the work is already under way. At Pukekohe township, in the former Franklin district south of Auckland, we announced a $13.1-million project to construct a large, 6.5-kilometre-long watermain that will supply the community with the same quality of water supplied to metropolitan Auckland. The problems we discovered at Pukekohe are typical of some smaller communities where significant capital investment has not occurred due to the relatively small customer base that was expected to fund the work. At Pukekohe, there was insufficient water to satisfy peak demand and there were long-standing complaints about the water colour and quality. I’m pleased to report that design work on this $1.62 -19.7% $1.31 -0.6% Franklin District $2.00 -35.0% project is now in progress, and we expect the new watermain to be operational by mid-2013. Progress on projects Other significant capital works are under way in the north-west of our region, in the former Rodney District, where a number of rural water and wastewater schemes are under development, and at Kawakawa Bay, on the east coast to the south of the region, where a new wastewater treatment plant, planned and developed under the former Manukau Water Limited, will become operational this year. Our largest single capital project, the Central Interceptor, is still in its earliest planning stages. This is a 13-kilometre-long tunnel proposed to collect and carry wastewater along a route from the Western Springs area of Central Auckland to Mangere. When completed, in addition to meeting planned growth and development, this project will see the replacement of ageing infrastructure and In our next Asset Management Plan we have committed $330 million to Hunua No. 4, a major new pipeline running the 26 kilometres from Redoubt Reservoir to Campbell Road. This is a critical asset with a 100-year lifespan that will mitigate security of supply risks and allow for Auckland’s continued population growth. Other significant projects include: the Waikato Water Treatment Plant upgrade, valued at around $90 million; water and wastewater improvements in the NORSGA (Northern Strategic Growth Area) around Hobsonville and in the Kumeu, Huapai and Riverhead areas; southern area water improvements; upgrades at Mangere and Rosedale wastewater treatment plants; and continued water treatment plant work at Ardmore and Huia. I am also pleased to report that the development of Puketutu Island as a public open space has come a step closer with the granting of designation and resource consents by the Environment Court. This occurred on 18 July 2011, shortly after the end of the financial year, and clears the way for the rehabilitation of the island’s quarry with clean fill and treated biosolids from the adjacent Mangere Wastewater Treatment Plant, and for the creation of a new regional park. Chief Executive’s report PAGE 11 Return to Contents page
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