This is the final installment of annual report reviews for Melbourne Metro water authorities. You will find the the previous annual report reviews below:
Melbourne Water Annual Report Review 2023-24
Greater Western Water Annual Report Review 2023-24
Yarra Valley Water Annual Report Review 2023-24
In each review, including this one, the focus is on Governance, Key Performance Indicators and Financial Results for ease of comparison. Where appropriate, results have been compared with those of other metro Melbourne water corporations for ease of reference.
Governance
South East Water has a unique governance structure unlike other water corporations. Aside to having a board of directors for South East Water, it also has a separate board for Iota, a subsidiary entity wholly owned by South East Water. Iota’s board is largely a subset of the same board membership as that of South East Water’s with the exception of Andrew Foster-Knight who is also a member of the South East Water’s executive team acting as General Manager for Service Delivery.
As of June 2024, Iota maintained a board consisting of five (5) members including Selina Lightfoot (Chair), Lynn Warneke, Dr Nick Fleming, Dr Kim McGrath, and Andrew Forster-Knight.
South East Water board, as of June 2024, consisted of nine (9) members Lynn Warneke (Chair), Dr Rohan Henry, Dr Kim McGrath, Aaron Wood, Timothy Lyons, Julie Stanley, Bianca Goebel, Dr Nick Fleming, and Selina Lightfoot.
Similar to other water corporations during this reporting period, the composition of South East Water board changed. Incoming members Lynn Warneke, Selina Lightfoot, Dr Nick Fleming, and Bianca Goebel replaced outgoing members Lucia Cade, Gabrielle Bell, Jason Kambovski, and Louise Asher.
Lasa Olsen was the managing director for the 23-24 reporting period having begun her tenure at South East Water in February 2020. It was announced recently that her contract was extended until the end of 2025. In 2024, Ms Olsen received a total remuneration in the $490,000 – $499,999 range. By comparison, Managing Directors of Yarra Valley Water (Patrick McCafferty), Greater Western Water (Maree Lang), and Melbourne Water (Nerina Di Lorenzo) each received a total remuneration in the range of $530,000-$539,999, $480,000-$489,000, and $610,000-$619,999 respectively.
The board members and managing director received a total remuneration of $2.79 million in 2024 setting the record for the highest paid board amongst metro water corporations. By comparison, the remuneration for the executive officers of Yarra Valley Water, Greater Western Water and Melbourne Water was $1.11m, $1.06m and $1.14m respectively.
South East Water disclosed no material related party transactions with key management personnel during this reporting period.
Key Performance Indicators
In the 23-24 reporting period, South East Water (SEW) achieved most financial and operational targets except for the following items:
- SEW achieved a 98.6% success in containing sewer spills from reticulation and branch sewers within 5 hours against a target of 100%, down 0.5% from the previous reporting period. For comparison, Yarra Valley Water (YVW) and Greater Western Water (GWW) reported a success rate of 99.7% and 99%, respectively, for the same reporting period.
- While number of customer water quality complaints were down 3% compared to the previous year to 0.28 per 100 customers, SEW was 56.4% off its target of 0.18. For comparison, YVW and GWW reported a result of 0.36 and 0.28 respectively, for this same indicator.
- Internal Financing Ratio which is a ratio of net operating cash flow less dividends over net capital expenditure decreased by 83.2% to 11.2%. This is an indication that SEW is increasingly reliant on external financing to fund capital projects. YVW and GWW reported a ratio of 19.68% and 0%. This shows that while SEW is experiencing the same difficulty as that of YVW, GWW is almost entirely dependant on external financing.
Conversely, SEW performed well in the following operational and financial key indicators:
- SEW was able to increase its production of recycled water to 28.3% as a proportion of its effluent produced while YVW and GWW achieved a proportion of 18.8% and 41.6% respectively.
- SEW reported a strong current ratio of 119.2%. This measure is a rough indication that SEW has more than it needs to cover its short term liabilities with its current assets. It could also suggest that SEW is holding on to too much cash that would be better utilized in capital investment. By comparison, YVW and GWW reported a current ratio of 29.68% and 80% respectively suggesting that YVW may not be able to pay its for its current liabilities. For context, IBISWorld reports an industry average of 43% across all water utilities in Australia and NZ in their database.
Other areas that are not specifically an operational or financial key performance indicator are non-revenue water as a result of leakage and safety performance with the results tabulated below:
- SEW reported a total of 15,409.7ML of leakage through its network during the 2023-24 reporting period. With 14,639 km of water pipes including service connection in SEW network, this would yield a leakage rate of 105.26ML per 100km of pipe. By comparison, GWW and YVW reported 173 ML and 98.5 ML of leakage per 100km of pipe respectively (note YVW total length of water pipes was extracted from their 2023-28 Price Submission to ESC on page 182).
- SEW reported an overall Total Recordable Injury Frequency Rate (TRIFR) rate of 9.51 injuries per million work hours compared with MW, YVW, GWW who each reported a rate of 7.1, 3.5, and 9.6 respectively. This shows that YVW remains the safest work environment amongst all metro water corporations.
Financial Report
During this reporting period, SEW reported a consultancy expenditure of $2.7 million and a capital expenditure of $301.1m (which was well below $326m forecast). SEW is expected to spend $380.8 million on capital expenditure in 2024-25 period of which it has committed $82.76 million as of 30th June 2024.
SEW reported a Net Profit Before Tax of $106.4 million. With a total FTE employee count of 837.4, SEW yielded a profit of $12.7 million per 100 FTE. For comparison, this Net Profit Before Tax per 100 FTE for Melbourne Water (MW), YVW, and GWW for the same reporting period was $19.2 million, $23.6 million, and $14.2 million respectively.
Three major contracts(valued more than $10m) were disclosed during this financial year listed below:
- Meter Reading Services – valued at $15 million – awarded to Service Stream Energy & Water Pty Ltd from 1 April 2024 to 31 Mar 2030
- Meter Exchange Services – valued at $33.7 million – awarded to awarded to Service Stream Energy & Water Pty Ltd from 1 April 2024 to 31 Mar 2030
- Telco-SIMS – valued at $12.3 million – Supply of sims cards for inclusion into the digital meters – awarded to TPG Telecom from May 2024 to May 2034
SEW did not disclose the following contract even though they are reported on Buying for Victoria website and above $10m in value:
- Digital Meter Supply – total contract value of $37.8 million – awarded to Avnet Electronics starting on 8 Feb 2024 and ending on 30 June 2029
A summary of SEW’s financial data can be found here (excel file).
QANAT 