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Our reference: C:\DOCUMENTS AND SETTINGS\GARNERG\DESKTOP\PUBLICATIONS\FEASIBILITY STUDY STRATEGIC ALLIANCE
AQUATEC & IPSWICH COUNCIL.DOC
25 May, 1998
PRIVATE & CONFIDENTIAL
Regional Business Development Scheme
FEASIBILITY STUDY TO IDENTIFY THE BENEFITS OF A STRATEGIC ALLIANCE WITH AQUATEC-MAXCON PTY LTD &
IPSWICH CITY COUNCIL
FINAL REPORT
1. PREFACE
This Feasibility Study sets out, inter alia, operational guidelines for a Feasibility Study to identify the benefits of a strategic alliance ("the Project") between Aquatec-Maxcon Pty Ltd and Ipswich City Council (‘‘the Alliance’’ ). This Project, initiated by Messrs. Peter J Gilchrist and Greg M Johnston of Aquatec-Maxcon Pty Ltd and later supported by the Ipswich City Council (both parties therefore representing ‘‘the Client’’) has been carried out utilising the services of Gary O Garner & Associates, and Hollingsworth Project Consultant (‘‘the Consultants’’) as an RBDS Feasibility Study package (under the Regional Business Development Scheme program), as arranged through the Ipswich Regional Office of the Department of Tourism, Small Business & Industry (‘‘DTSBI’’) .
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TABLE OF CONTENTS
1. PREFACE ................................................................................................. 1
2. EXECUTIVE SUMMARY........................................................................... 7
3. INSTRUCTIONS/TERMS OF REFERENCE ........................................... 14
TERMS OF REFERENCE................................................................................................ 14 BACKGROUND................................................................................................................ 14 THE PUBLIC BENEFIT ASSESSMENT REPORT TO IPSWICH CITY COUNCIL (WATER & SEWERAGE SERVICES) - THE “PBA” REPORT ........................................ 15 STRATEGIC DIRECTION ................................................................................................ 15 OTHER FACTORS TO BE CONSIDERED...................................................................... 16 PURPOSE OF CONSULTANCY...................................................................................... 17 OBJECTIVES & OUTCOMES OF THE CONSULTANCY ............................................... 17
4. DEFINITIONS.......................................................................................... 19
5. BACKGROUND BRIEF AND JOINT CORPORATE VISION........ .......... 23
BACKGROUND................................................................................................................ 23 Aquatec-Maxcon ......................................................................................................... 23 Ipswich City Council .................................................................................................... 23
IMPLEMENTATION OF COMMERCIALISATION OF IPSWICH COUNCIL’S WATER AND SEWERAGE SERVICES & WASTE SERVICES ...................................... 23
Council Decision on Water & Sewerage ..................................................................... 24 The Charter and Establishment of “Ipswich Water”..................................................... 25
Charter & Establishment Agreement ................................................................................... 25 The Business Activities of Ipswich Water That Are Related to the Proposed Alliance........ 25
THE PROPOSED JOINT CORPORATE VISION ............................................................ 26
6. THE NATIONAL COMPETITION POLICY (NCP) & THE HILLMER REPORT ................................................................................................. 27
INTRODUCTION - ADOPTION OF NCP BY IPSWICH CITY COUNCIL ........................ 27 Application of NCP by Ipswich City Council, and Public Benefit Assessment............. 27 Implementation of NCP / Commercialisation of Business Activities, by Ipswich
City Council ....................................................................................................... 28 OVERVIEW OF NCP ....................................................................................................... 28
NCP - A Summary....................................................................................................... 29 BACKGROUND & GENERAL INFORMATION................................................................ 30
The Need for NCP....................................................................................................... 30 Aims Of the NCP ......................................................................................................... 31 Benefits of the NCP..................................................................................................... 31 April 1995 COAG Agreements .................................................................................... 32 The Key Elements Of the NCP.................................................................................... 33 Application to Local Government ................................................................................ 33 NCP Implementation Safeguards................................................................................ 34 Relationship With Corporatisation And Commercialisation ......................................... 35
THE TRADE PRACTICES ACT ....................................................................................... 35 Application of Extended Coverage of the TPA to Local Government.......................... 35 The Restrictive Trade Practices Provisions Of The TPA ............................................ 36
Application to Local Government ........................................................................................ 36 Types Of Restrictive Trade Practices.................................................................................. 36
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Handling Restrictive Trade Practices .......................................................................... 38 THIRD PARTY ACCESS.................................................................................................. 38
Objectives Of Third Party Access ............................................................................... 38 Access Regimes.......................................................................................................... 39 Entities To Be Covered ............................................................................................... 39
PRICES OVERSIGHT ...................................................................................................... 39 Objectives Of Prices Oversight ................................................................................... 39 Applying State Based Prices Oversight to Local Government .................................... 40
Background ......................................................................................................................... 40 Threshold for prices oversight ............................................................................................. 40
Local Government Social Commitments ..................................................................... 40 STRUCTURAL REFORM OF PUBLIC MONOPOLIES ................................................... 41
Definition of Structural Reform .................................................................................... 41 The Necessity for Structural Reform ........................................................................... 41 Implications for Local Government.............................................................................. 41
COMPETITIVE NEUTRALITY.......................................................................................... 42 Competitive Neutrality Defined.................................................................................... 42 Key Issues................................................................................................................... 43 Businesses Subject to Competitive Neutrality: Types of Government Businesses..... 43 Reforming Type 1 and Type 2 Businesses ................................................................. 43 Reforming Type 3 Business Activities ......................................................................... 44 A Corporatisation Model for Local Government .......................................................... 44 Public Benefit Assessment.......................................................................................... 44 Timing.......................................................................................................................... 45
OTHER REFORMS.......................................................................................................... 46 Water Reform.............................................................................................................. 46
SOURCES USED IN THIS SECTION:............................................................................. 47 CONCLUSIONS - ADDRESSING THE KEY POLICIES CONTAINED WITHIN NCP.......................................................................................................................................... 48
7. INDUSTRY CAPABILITIES & BUSINESS OPERATIONS OF THE PARTIES................................................................................................. 51
AQUATEC-MAXCON ....................................................................................................... 51 Overview & History...................................................................................................... 51 Corporate Structure..................................................................................................... 53 Management & Human Resources ............................................................................. 53
Directors & Management..................................................................................................... 53 Staffing Levels & Organisation ............................................................................................ 54 Quality Assurance ............................................................................................................... 54
Operational Capability / Experience ............................................................................ 54 Equipment Manufacture & Installation................................................................................. 54 Engineering & Design / Construct Reference Plants........................................................... 56 Contract Plant Operations - Aquatec-Operations Pty Ltd.................................................... 57 BOOT Projects .................................................................................................................... 57 Overseas Experience .......................................................................................................... 57
Equipment Range........................................................................................................ 58 Research & Development ........................................................................................... 61 Financial Strength........................................................................................................ 62
Key Financial Performance Indicators................................................................................. 63 IPSWICH CITY COUNCIL................................................................................................ 64
Overview ..................................................................................................................... 64 Primary Functions of the Water & Sewerage Branch.................................................. 66 Major Assets and Infrastructure - Water & Sewerage Services .................................. 67 Internal Support Charges ............................................................................................ 68 Management & Human Resources ............................................................................. 69 Wastewater Treatment Centres .................................................................................. 71
Wastewater Treatment Centres - Tabulated Summary ....................................................... 73 Rosewood Wastewater Centre............................................................................................ 73 Karana Downs Wastewater Centre ..................................................................................... 74 Tivoli Wastewater Centre .................................................................................................... 74
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Bundamba Wastewater Centre ........................................................................................... 75 Carole Park Wastewater Centre.......................................................................................... 77 Goodna Wastewater Centre................................................................................................ 78
Water Treatment Centres............................................................................................ 78 Performance of the Water & Sewerage Services Branch ........................................... 78
Existing Profitability & “Balance Sheet” Strength ................................................................ 78 Comparable Performance Against Other Municipalities...................................................... 80
Legislation & Compliance............................................................................................ 83
8. A COMPARISON OF THE CORPORATE STRATEGIES OF AQUATEC-MAXCON PTY LTD AND IPSWICH CITY COUNCIL.... ....... 84
AQUATEC-MAXCON ....................................................................................................... 84 Mission Statement ....................................................................................................... 84 Strategic Direction ....................................................................................................... 84 Major Business Initiatives ............................................................................................ 87
IPSWICH CITY COUNCIL................................................................................................ 88 Ipswich City's Corporate Plan 1997-2002 ................................................................... 88 Introduction to the Ipswich City’s Corporate Plan........................................................ 88
Vision for Ipswich ................................................................................................................ 89 Mission for Ipswich City Council.......................................................................................... 89
Statement of Objectives and Strategies ...................................................................... 90 Themed Programs............................................................................................................... 90
Waste Management Program ..................................................................................... 91 Water Program............................................................................................................ 92 Sewerage Program ..................................................................................................... 92 Economic Development Program................................................................................ 93
9. S.W.O.T. ANALYSIS.................................. ............................................. 96
STRENGTHS ................................................................................................................... 96 WEAKNESSES ................................................................................................................ 97 OPPORTUNITIES ............................................................................................................ 97 THREATS......................................................................................................................... 98
10. STATEMENT OF BUSINESS OBJECTIVES................... ..................... 100
STRATEGIC MANAGEMENT OBJECTIVES ARISING OUT OF SWOT ANALYSIS ... 100
11. MISSION STATEMENT......................................................................... 101
12. ACTION PLANS....................................... ............................................. 102
13. MARKET ANALYSIS .................................... ........................................ 107
INDUSTRY DESCRIPTION............................................................................................ 107 THE SUPPLY OF WATER & SEWERAGE SERVICES IN AUSTRALIA....................... 107
The Role of Local Government & Other Authorities .................................................. 111 Sewerage .......................................................................................................................... 112 The National Water Quality Management Strategy. .......................................................... 114 Water Management........................................................................................................... 114
Engineering Construction Activity in Australia - Water Supply, Sewerage & Drainage (An Overview).................................................................................. 115
MARKET OVERVIEW (BOO / BOOT PROJECTS & EQUIPMENT SUPPLY) - INTRODUCTION............................................................................................................ 117
NATIONAL MARKET................................................................................................. 117 Overview ........................................................................................................................... 117 Australian States ............................................................................................................... 120 Queensland ....................................................................................................................... 121
THE WATER MANAGEMENT INDUSTRY IN THE UNITED STATES..................... 123 AQUATEC - MAXCON OUTLOOK FOR 1997/1998...................................................... 127
Municipal Market ....................................................................................................... 127
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Marketing Plan........................................................................................................... 128 General.............................................................................................................................. 128 Market Segments .............................................................................................................. 128 Target Markets .................................................................................................................. 129
EXPORT MARKET......................................................................................................... 130 General...................................................................................................................... 130 Aquatec-Maxcon: Outlook for 1997/98...................................................................... 132
New Zealand ..................................................................................................................... 132 Ausaid ............................................................................................................................... 132 Australian Industrial........................................................................................................... 132 Standard Products............................................................................................................. 132 ADB / World Bank ............................................................................................................. 132 Indonesia........................................................................................................................... 133
Overseas Expansion ................................................................................................. 134 IPSWICH CITY COUNCIL - WATER & SEWERAGE SERVICES................................. 134
The Market, & Future Prospects ............................................................................... 134 Primary Customer Base .................................................................................................... 134 Pricing ............................................................................................................................... 135 Planned Capital Expenditure............................................................................................. 136
14. BUSINESS DEVELOPMENT OPPORTUNITIES FOR THE PROPOSED ALLIANCE - MAJOR INFRASTRUCTURE PROJECTS IN QUEENSLAND...................................... ........................................... 137
PROJECTS COMPLETED DURING 1996/ 1997........................................................... 137 PROJECTS COMMITTED ............................................................................................. 138 PROJECTS UNDER STUDY ......................................................................................... 140
15. PROPOSED CORPORATE STRUCTURE OF THE ALLIANCE ....... ... 144
OVERVIEW .................................................................................................................... 144 LEGISLATIVE CONSIDERATIONS RELATING TO CORPORATE STRUCTURE & LIABILITY ....................................................................................................................... 144
Allowable Corporate Structures................................................................................. 144 Other Restrictions Applying Under the Local Government Act / Regulations ........... 145 Allowable Purposes Under the Local Government Act - “Good Rule and
Government” ................................................................................................... 145 Other Matters to be Considered ................................................................................ 146
COMPARISON BETWEEN POSSIBLE CORPORATE STRUCTURES, & CONCLUSIONS ............................................................................................................. 148
Conclusions............................................................................................................... 150 RECOMMENDED STRUCTURE ................................................................................... 150
Option 1 (Preferred) .................................................................................................. 150 Operating and Other Details.............................................................................................. 152
Option 2 (Alternative) ................................................................................................ 153 Option 3 (Alternative) ................................................................................................ 153
16. MANAGEMENT OF THE ALLIANCE ENTITY.................. .................... 156
KEY MANAGEMENT...................................................................................................... 156 QUALITY ASSURANCE (QA) & TOTAL QUALITY MANAGEMENT (TQM) ................. 156
Quality Assurance - Government Requirements....................................................... 157
17. ORGANISATION & PERSONNEL........................... ............................. 158
OBJECTIVES ................................................................................................................. 158 ORGANISATIONAL STRUCTURE ................................................................................ 158 STAFFING LEVELS ....................................................................................................... 158
Other Staff Issues...................................................................................................... 159 ORGANISATIONAL CHART .......................................................................................... 159 GENERAL COMMENTS ................................................................................................ 160
Position Job Descriptions .......................................................................................... 160
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Use of Contract Labour and Enterprise Bargaining................................................... 161
18. FINANCIAL PLAN & ANALYSIS .......................... ................................ 162
OBJECTIVES ................................................................................................................. 162 MAJOR ASSUMPTIONS................................................................................................ 162 CAPITAL INVESTMENT REQUIREMENTS .................................................................. 163 EQUITY .......................................................................................................................... 163 PROFIT & LOSS / CASH FLOW STATEMENTS .......................................................... 163
Cash Flow Summary - By Project ............................................................................. 168 Cash Flow Summaries - Graphical............................................................................ 169
BREAK EVEN / SENSITIVITY ANALYSIS ..................................................................... 171 FUNDING OPTIONS OR ASSISTANCE AVAILABLE ................................................... 175
Overall Funding Requirements.................................................................................. 175 Other Funding / Assistance Available ....................................................................... 175
19. SUMMARY OF MAJOR RECOMMENDATIONS & IMPLEMENTATION SCHEDULE............................ .............................. 176
20. DISCLAIMER & QUALIFICATION BY CONSULTANT........... .............. 178
21. APPENDICES ....................................................................................... 179
APPENDIX A - POTENTIAL SAVINGS THROUGH COMMERCIALISATION / CORPORATISATION..................................................................................................... 179 APPENDIX B - PROFIT & LOSS (IPSWICH CITY COUNCIL WATER & SEWERAGE SERVICES) .............................................................................................. 180 APPENDIX C - BALANCE SHEET (IPSWICH CITY COUNCIL WATER & SEWERAGE SERVICES) .............................................................................................. 181 APPENDIX D - PROFIT & LOSS (AQUATEC ENVIRONMENTAL LTD & CONTROLLED ENTITIES) ............................................................................................ 182 APPENDIX E - BALANCE SHEET (AQUATEC ENVIRONMENTAL LIMITED AND CONTROLLED ENTITIES) ............................................................................................ 183 APPENDIX F - AQUATEC GROUP - AUSTRALIAN ORGANISATION CHART ........... 184 APPENDIX G - ACKNOWLEDGMENTS & BIBLIOGRAPHY ........................................ 185
22. ATTACHMENTS ........................................ ........................................... 188
PROJECT IMPLEMENTATION & ACTION (“ENTERPRISE DEVELOPMENT”) PLAN .............................................................................................................................. 188 PROPOSED ALLIANCE - PROFIT & LOSS / CASH FLOW DETAIL, SUMMARIES & ASSOCIATED SCHEDULES ...................................................................................... 188 AQUATEC ENVIRONMENTAL LTD & CONTROLLED ENTITIES - BALANCE SHEET ANALYSIS & KEY FINANCIAL RATIOS ........................................................... 188 WATER INDUSTRY OUTSOURCING (NSW & VIC.; QLD., S.A. & W.A.).................... 188 SEPARATE BOOKLET: BIZ-LINK REPORT (GOVERNMENT ASSISTANCE AVAILABLE) ................................................................................................................... 188
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2. EXECUTIVE SUMMARY
This Feasibility Study is designed to form the base strategy document detailing operational guidelines for a proposed Alliance between Ipswich City Council’s Water & Sewerage Services, and Aquatec-Maxcon Pty Ltd. The proposed entity name of the Alliance is Sunshine Water (Pty Ltd). The Project examines the viability for the economic development of the joint venture which would see:
• the commercialisation of that part Ipswich City Council’s Water & Sewerage Services related to the treatment of water, and treatment and disposal of sewage and
sewerable trade waste1.
• the development of a new, vertically integrated water business utilising the long term municipal water and waste water system operating experience of Ipswich City Council on the one hand, and the water and waste water treatment plant design and construction / engineering experience of Aquatec-Maxcon on the other.
With a turnover of approximately $4m - $5m in the first few years of operation, rising to
approximately $10.2m in the medium to longer term, the Project has the potential to generate an annual income stream in the order of $325,000 to Ipswich City Council (by
way of concession fee), plus dividends / profit sharing and (if applicable2) preference
share entitlements. Compliance with NCP3 will also mean additional subsidy income available to Council under the new privatisation rules. Projected Earnings After Tax for Sunshine Water Pty Ltd (“year-in-year-out”) is estimated @ $0.22m, with break-even planned for the first few years of operation.
In addition, the Project will have the effect of immediately reducing Ipswich City
Council’s Treatment Services costs by 5%. There is also potential to reduce this amount further in the medium to longer term. Projected growth of the new business will also increase both direct and indirect employment opportunities in the region, and enhance / expand career prospects for existing Council personnel.
In short, this study demonstrates that the “sum of the two parties” working together is
greater than that where they are working “alone”. The concept, prima facie, has benefits to both parties since:
• Ipswich City Council will considerably expand their current activity in the water industry, enabling potentially profitable participation in commercial projects in regions throughout Australia and overseas, as compared to their current “non-commercial” involvement which is essentially restricted to the Ipswich region only. Increased revenue stream to Council is the primary objective.
• Aquatec Maxcon are currently well positioned in the Australian, and parts of the Asian, water industry. The company’s competitive position as a leading Australian water industry company will be considerably enhanced since they will be able to claim significant operating experience - allowing the Alliance to successfully compete against overseas companies (particularly those from France and
1 The “Hilmer Report” and subsequent National Competition Policy having raised the possibility of the
private sector to compete with the public sector in areas that were previously restricted to government
control. The new entity is proposed to involve itself in the operation and maintenance of the Council’s
six waste water treatment centres, and the Warrill Creek Water Treatment Centre.
2 The payment of preference share entitlements will depend upon the corporate structuring option
selected.
3 National Competition Policy
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England) who are currently winning significant business in Australia and south-east Asia.
Additional specific benefits to Ipswich City Council include:
• Provides significant potential for developing training opportunities. By virtue of the current active involvement of Aquatec-Maxcon in the region, there are sound prospects for developing south-east Asian Training Centre (reciprocal arrangements could apply), and associated cross-cultural activities.
• The establishment, development and growth of the proposed Sunshine Water Pty Ltd will also assist in the development of Ipswich generally, including the associated growth of small businesses providing goods and services to the new corporate entity.
• The Council’s involvement with one of the relatively few true “corporates” in the region, especially one where there is already a strong established relationship, could be seen as a genuine attempt by Council to assist in the development and growth of the region. This compliments the stated “vision” of Ipswich City Council, which includes the promotion of Ipswich generally as a key regional centre for south east Queensland, the encouragement of investment and local investment, and assisting the business community to reach full potential in their commercial endeavours. In this case, Council will be a direct participant.
• The proposed Alliance will encourage greater efficiencies in the delivery of existing services.
• The Alliance will promote an increased focus on customer service (best possible service at the best possible price).
• It is anticipated that a number of direct and indirect benefits to consumers and other businesses will ensue.
• The proposed Alliance is consistent with the general thrust of the commercialisation process being adopted by Ipswich City Council, where the benefits of implementing reforms clearly outweigh the costs. This is adequately demonstrated in the Bentleys Report where the reforms have been subject to public benefit assessment tests.
• The economic efficiency gains from competitive neutrality have demonstrated benefits to communities and consumers alike, and will further assist in the transparency of the true cost of existing council business activities, specifically in the operation of wastewater centres (initially), and in other areas (longer term).
• The proposed Alliance will actively seek out other markets both within and outside Council boundaries, assisting the cost / benefit equation.
• The Alliance will assist in bringing about increased focus on achieving commercial goals, and even greater accountability of that portion of the Council’s business. The Consumer Charter of Ipswich Water currently being developed, and suggested to be a core element of the proposed Alliance’s modus operandi, will ensure confidence in the reform process and act as an integral part of the public consultation process.
• Closer control, and transparency of Council’s involvement in their water and sewerage activity.
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In addition, community benefits are likely to eventuate:
• It is probable that the citizens of Ipswich will enjoy a more competitive water and sewerage service without any sacrifice in the quality of their
service4. It might also be argued that the water and sewerage service provided will have greater accountability through the separate entity.
• Whilst applicable to both organisations, the current Ipswich City Council (Water & Sewerage) employees in particular will have enhanced career prospects.
• There is real potential for the new business to grow into a significant corporate entity, with the accompanying implications for, inter alia, employment, and the demand for local goods and services.
• The new business potentially has the ability to attract higher quality personnel than might otherwise be the case for either organisation operating separately.
From a commercial point of view, benefits to be derived include:
• The Alliance gives size (critical mass) and momentum more likely to be attractive to potential customers, and gives greater economic strength for competitive bidding.
• The establishment of Sunshine Water Pty Ltd will subsequently “push” the Aquatec-Maxcon group to a new / next level of competitiveness because of the economies of scale gained and other factors mentioned.
• It provides the Ipswich region with a corporate entity capable of delivering a totally integrated water business, ranging from design and construction of plants, and equipment supplies, through to plant operation and technology transfer.
• The proposed Alliance provides greater opportunities for the undertaking of research and development activity likely to result in direct commercial benefit.
The primary target market for the operations would be cities and towns of less
than 150,000 EP plants (i.e. medium to large sized plants). The strategy also compliments the outcome of the recent Public Benefit
Assessment Report to Ipswich City Council - Water & Sewerage Services5, which recommended that the Council resolve to transfer the activities of water and sewerage services to a commercialised business activity, effective from 1 July 1988, with possible future corporatisation, (subject to certain financial, strategic and operational matters, and other criteria including community and public consultation, and the development of reform legislation and a Consumer Charter).
4 The Bentleys Report (ref. follows) suggests that “on the supply side, commercialisation and
corporatisation would enhance the access of business to a wide range of suppliers, with a positive
effect on prices” - Bentleys Chartered Accountants (in Association with Clayton Utz, Kinhill Economics,
and John Larcombe and Associates) Public Benefit Assessment Report to Ipswich City Council (Water &
Sewerage Services), June 1977. pp 26-27
5 Bentleys Chartered Accountants (in Association with Clayton Utz, Kinhill Economics, and John Larcombe
and Associates) Public Benefit Assessment Report to Ipswich City Council (Water & Sewerage Services),
June 1977.
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It is proposed to retain existing staffing at their current level. Essentially, this means takeover of the majority of existing personnel attached to the current Treatment & Scientific Services section of the Water and Sewerage department of Ipswich City Council, and all personnel attached to Aquatec Operations Pty Ltd.
In addition to operation of the Council’s Treatment Plants, it is proposed for the
current plant operating contracts conducted by Aquatec-Operations Pty Ltd to be brought into the Alliance. Aquatec Operations employs qualified operators and currently run 7 treatment plants in South East Queensland for a variety of government and private industry clients such as Q Build (the Numinbah Correctional Centre), Ansett Maintenance Workshops Brisbane, Caboolture Caravan Park, Idemitsu - Ebenezer Mine, ANI Bradken - Ipswich, STP, Swanbank Power Station (near Ipswich) and Woodford Prison. (In Jakarta, Aquatec has contracts for operation of two waste water treatment plants).
It should be noted that whilst the Alliance would involve commercialisation / corporatisation of that part Ipswich City Council’s Water & Sewerage Services related to the treatment and disposal of sewage and sewerable trade waste, other key business activities undertaken by the Council’s Water & Sewerage Services, such as the purchase and treatment of bulk water, delivery, storage and distribution of water supply to the customers of Ipswich City, and the collection of sewage and sewerable trade waste from customers of Ipswich City, are all outside the scope of the proposed Alliance. These activities are proposed to remain with Council, albeit commercialised under a proposed new business unit of the Council to be known as “Ipswich Water”.
However, both these activities, and perhaps other parts of Ipswich City Council’s
current business activities - even some outside Water & Sewerage Services - could potentially become part of the Alliance’s activities. This might even extend to provision of a “marketing service” for Ipswich City generally. However, this Study is concerned primarily with the first stage of the commercialisation process and is generally restricted to considering the benefits of the corporatisation of services related to the treatment and disposal of sewage and sewerable trade waste only.
This Report suggests that there are sufficient prospects for development of the
Project. The Consultant has therefore attempted to develop required action plans related to the Strategy, ensuring a clear direction in terms of management and implementation. Importantly, the financial outcomes likely to result from the Alliance have been quantified , in addition to testing some possible operating scenarios.
In terms of Corporate structuring it is recommended that the Alliance proceed on
the basis of forming a limited liability non-exempt proprietary company. It offers the best alternative for a flexible, yet relatively stable structure. It also addresses the issue of shareholder liability in a more clearly defined way.
The following options address how the Project could be progressed:
Option 1 (Preferred) A joint operating company is proposed along the following lines:
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1. To enable progression of the Alliance, creation of a new entity (limited liability, proprietary company), to be known for the purposes of this discussion as Sunshine Water Pty Ltd (“Sunshine”).
2. Aquatec Maxcon, through their parent company Aquatec Environmental (“AE”), to provide $500,000 in capital to Sunshine in the form of 500,000 Class A shares of $1.00 per share.
3. Sunshine in turn will issue 450,000 Class B shares to Ipswich City Council (“ICC”). Class B Shares will be entitled to earn a payment equivalent to 10% of dividends paid to ordinary shareholders. This would be the “Preference Share Payment (Entitlement)”.
4. ICC will earn a Concession Fee from Sunshine, calculated yearly as follows:
450,000 Concession Fee = Earnings before Interest and taxes X ------------------------------------ (EBIT) Total Class A and Class B
Shares on Issue
(The above calculation is equivalent to a payment equaling 47.37% of EBIT)
5. Two Directors will be appointed by AE to Sunshine, and one Director plus one observor appointed by ICC at its election.
6. The Operation Fee paid monthly, one month in arrears by ICC to Sunshine for the operation of its plants will be calculated as follows:
FEE IN YEAR ONE = 95% of independently audited average adjusted costs6 for
1996/1997, adjusted for volume
FEE IN YEAR TWO AND SUBSEQUENT
YEARS =
Fee in Previous Year PLUS (Fee in Previous Year x Inflation
Index7 X [1 + % volume8 increase])
6. AE will provide all clerical, accounting and reporting functions for 23.46% of revenue earned from the operation of the Council’s plants. This is the Administration Fee, and is broadly equivalent to, and will cover all items currently included within ICC’s Support Plan Charges. This is equivalent to 65% of current Support Plan charges being paid by ICC’s W & S Treatment Section.
The above structure is based upon the following premise:
• ICC to grant Sunshine a concession to operate the plants owned by ICC for 10 years (plus further 10 year option at the discretion of AE), i.e. operating the six waste water treatment plants, and the Warrill Creek Water Treatment centre.
• Sunshine will be responsible for taking over the operation of existing plants currently operated by AE (or its subsidiaries including Aquatec Operations Pty Ltd) in S.E. Queensland (i.e. Numinbah Correctional Centre, Ansett Maintenance Workshops Brisbane, Caboolture Caravan Park, Idemitsu - Ebenezer Mine, ANI Bradken - Ipswich, STP, Swanbank Power Station and
Woodford Prison).9
6 1995 and 1996 costs adjusted for inflation in costs and expansion in volumes
7 Published CPI Index by the Australian Bureau of Statistics, calculated on a yearly basis
8 As measured by plant monitoring
9 That is, AE will use Sunshine as a subcontractor to execute its existing operating contracts in SE
Queensland.
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• Within three years from commencement ICC and AE will discuss in good faith the extension of their agreement to include the inclusion of the ICC water and / or waste water distribution / collection systems. In principle, Aquatec and ICC will be treated in a similar manner for any other concessions - options for extensions to be included as part of extensions for those contracts and not necessarily incorporated into this agreement.
• Primary assets (treatment plants) currently owned by ICC will remain owned by them. Similarly, treatment plants owned by AE (or its subsidiaries including Aquatec Operations Pty Ltd) - if any - will be retained by that entity.
• ICC will be responsible for all planning and capital works requirements. However, Sunshine would provide an annual report with recommendations for any required upgrades based on a 2 year planning horizon.
• If ICC builds additional plants in Ipswich, ICC and Sunshine will negotiate in good faith to add operation of these plants to this agreement.
• Sunshine will be the “Bidding arm” for the operations of both parties. Various other operational matters are contained within this Report.
Option 2 (Alternative) The Alliance could proceed on a basis similar to Option #1 above, but with equal
capital contribution coming from both parties, rather than from Aquatec-Maxcon solely. In this instance, both Ipswich City Council and Aquatec Maxcon provide $250,000 each in Capital, with Sunshine in turn issuing 250,000 Ordinary shares to ICC, and 250,000 Ordinary Shares to AE.
• The Concession Fee, Operation Fee and Administration Fee is calculated in the same way as for Option #1. There is no Preference Share Payment entitlement for any party.
• Two Directors will be appointed by AE to Sunshine, and two Directors appointed by ICC. One “independent” Director will be appointed by joint agreement.
• Operating and other details will be as for Option #1.
Option 3 (Alternative) A further alternative to either the preferred option, or Option #2, is the creation of
a partnership with limited Council liability clauses, with a further option to incorporate to the above or similar structure after say, one years successful operation. Whilst this is a less straight forward approach, it may offer more flexibility to Council in the shorter term. It also allows the opportunity for each party to assess the ability of the Alliance to achieve their own objectives prior to committing to a longer term relationship. However, from the perspective of Aquatec-Maxcon, there may be no particular advantages in pursuing this route.
Several diagrams, simplifying the above alternatives, is shown at the end of
section entitled “Proposed Corporate Structure of the Alliance” (See Page 154) Finally, at this point in time, acquisition of Council assets by the Alliance is not
proposed, however this could be an option worthy of consideration in the future.
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3. INSTRUCTIONS/TERMS OF REFERENCE
TERMS OF REFERENCE The terms of reference for this Consultancy results from discussions held with
Aquatec-Maxcon principals and officers from the Ipswich City Council, in liaison with DTSBI's Ipswich Office staff (Mr Alastair Kane), and as contained in formal written instructions received (provided by DTSBI on 16 April 1997), with revised Terms of Reference received 15 October 1997. The Consultant's proposal dated 31 October 1997 responds to this documentation and relevant discussions.
The following background information was provided by Aquatec-Maxcon Pty Ltd
under their Terms of Reference (Consultant’s Brief), and is reproduced here as a
matter of record and as a guide to the Consultants.
BACKGROUND AQUATEC-MAXCON (Aquatec) is a complete waste and wastewater treatment
company, providing process design, equipment supply, contract management,
commissioning and Boo/Boot (sic) schemes. It operates in the waste industry in
Australia, New Zealand, India and Vietnam, and has a turnover of $33 million. The
Company was formed in 1970, and has its head office in Ipswich where it
employs 125 staff. It also has permanent offices in Sydney, Auckland, Jakarta,
Bogor, Surabaya, and a project office in Bombay.
Aquatec have grown steadily and are recognised as a leader in the Australian
water industry. Their competition now comes from overseas companies and in
order to compete, Aquatec has to gain further operating skills. The partnership
with their local Council would provide an operating platform for a transfer of skills
and a potential for further growth.
With the introduction of the Hillmer Report, an opportunity arises for the private
sector to compete with the public sector (or, as in this case, form joint venture /
strategic alliances)10 in areas that were restricted to government control. Waste
water management is such a window of opportunity for the private sector to
participate in.
The above brief provided the principal basis for the Consultant’s proposals. It has
been subsequently agreed that the Report needed to cover a broad range of issues from the perspective of both parties / organisations.
The REVISED Terms of Reference therefore requests that the issues / aspects to be
addressed by the study should include the following:
1. Current Position
2. Strengths / Weaknesses
3. Financial Analysis
4. Supply / Demand
5. Potential Market Expansion
10 Comment added by Consultants
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6. Future Demand
7. Research & Development Required
8. Quality
9. Staffing Levels / Resources
10. Staffing Arrangements
11. Financial Reports
12. Legal implications
13. Benefits to Ipswich City Council and Surrounding Area
14. Community Needs - Sharpen Focus
15. Range of Co-operation Alternatives
The Revised Brief also emphasises the need to look at human relations / resources
and industrial issues (especially the relationships between Council and Staff
during a time of significant reform). It also focuses on the need to investigate the
creation of opportunities for efficiency increases in the internal business and the
establishment of a strong platform for expansion into external markets.
THE PUBLIC BENEFIT ASSESSMENT REPORT TO IPSWICH CITY
COUNCIL (WATER & SEWERAGE SERVICES) - THE “PBA”
REPORT The revised terms of reference have also been issued in the context of the
availability of the above report, completed by Bentleys Chartered Accountants, in association with Clayton Utz, Kinhill Economics and John Larcombe and Associates.
This document outlines the likely future of the existing Water and Sewerage
business of the Council, reviews the costs and benefits of possible reforms, and details public and other consultation undertaken including issues raised during consultation. Recommendations for Reform, and timetable for implementation are also provided.
The availability of this Report will reduce the amount of data collection and
research time allocated in the Consultant’s original proposal. In particular, it recommends that the Council resolve to transfer the activities of
water and sewerage services to a commercialised business activity, effective from 1 July 1988. This was in lieu of “full cost pricing” for the activity, or corporatisation of the activity.
Other key recommendations in the PBA Report are also given in relation to
possible future corporatisation, community and public consultation, reform legislation required, the development of a Consumer Charter, and certain financial, strategic and operational matters.
Accordingly, the framework for this consultancy proposal has, therefore, been
more clearly defined, with the scene set for a more effective strategic planning process.
STRATEGIC DIRECTION
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The Alliance intends to set in place a strategic direction which will involve them in unique commercial partnership between local government and business. Fundamentally, the benefits of such a partnership require identification and quantification, with any dis-incentives recognised.
Accordingly, a component of the Consultancy will involve a degree of market
research in order to establish the size, nature and scope of opportunities available. This will be greatly assisted by the PBA Report. The research conducted will ensure that both parties involvement in the proposed Alliance has the best chances for commercial success. With the proposed initial investment being relatively significant, the venture also represents a significant challenge in terms of management, future direction and possibly funding. Therefore, and in keeping with the Company's Terms of Reference, consideration will also need to be given to personnel structures, training, community needs, co-operation alternatives and other general requirements in support of the Project.
In particular, the Consultants will need to determine procedures for determining
customer satisfaction and needs. This will allow for the ongoing monitoring of the Project assuming implementation proceeds, and provide the catalyst for change.
The whole process will involve all prospective parties (i.e. proposed members of
the Alliance being Aquatec Maxcon, and Ipswich City Council). It is important for this to occur to ensure that there is maximum commitment and understanding of the Project and its implications between these members.
The outcome of this Consultancy will be a “bankable” document with which the
Alliance can be appropriately marketed to the Project’s proponents and participants.
OTHER FACTORS TO BE CONSIDERED In addition to factors mentioned previously, there are a number of reasons why
the establishment of the Alliance has become both a desirable Project and potentially, a commercial proposition. This includes:
• Most importantly, to realise on a “window of opportunity” which will assist the Company in developing a history in the “hands-on” operation of water treatment facilities. This will establish Aquatec Maxcon (in alliance with the Ipswich City Council) as being a competitive alternative to overseas operators whom have tended to dominate the industry.
• The complementary nature of the Project with the existing operations of the Aquatec group of companies.
• The opportunity to capitalise on recent “anti-competitive” policy and legislation. Plant operations are now becoming available for tendering by commercial operators.
• The opportunity for the Ipswich City Council to build upon recent commercial successes such as their establishment as an Internet Service Provider, the establishment of a regional University, and the establishment of a major regional airport facility. The Council could be seen as a leader / model for the rest of the nation.
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• The opportunity to further develop local employment opportunities, and improved career paths.
• The opportunity to further develop local commercial opportunities including those either directly or indirectly associated with the Project (i.e. cluster industries).
The challenge for the Alliance is one primarily of its ability to satisfactorily address
the needs of all interested parties, and to ensure that the above factors (and others) are met with a strategic focus and a clear action planning process. Given progress to date, including the development of a draft “Heads of Agreement” (Partnership Agreement), and the PBA Report findings, there is strong evidence supporting the Alliance's ability and effectiveness in this regard. However, the Consultant's involvement will ensure that the complex array of issues are properly canvassed and further explored, and priorities set for implementation, taking into account all relevant internal and external circumstances.
PURPOSE OF CONSULTANCY The proposed consultancy is a concept development / pre-feasibility study
designed to cover the major elements of management, structure, human resources, markets, strategy and funding. This is fundamental in the Feasibility Study process in order to establish a viable Project enterprise that addresses the strategic benefits of an alliance between Aquatec Maxcon and Ipswich City Council.
The final result will be a practical, and "user-friendly" Strategic Management Plan
for the development of the Alliance. It will be fully detailed and time-bound to enable the smooth management and implementation of the Strategic Actions developed during the Course of the Consultancy.
OBJECTIVES & OUTCOMES OF THE CONSULTANCY The primary objective of the Consultancy is to develop a 3 to 5 year Strategic
Management Plan which will highlight the following:
* In overall terms, to ensure the key issues associated with the development of a strategic alliance are addressed. It is believed that our approach is simple and robust.
* Provide a detailed marketing strategy which defines the current and future
opportunities available for exploitation by the Project's proponents. * Prepare cash flow / profit and loss projections for the full planning period
specifying likely returns and expenditures. The projections will provide a basis for developing organisational performance measures, and with the input of Aquatec-Maxcon and Ipswich City Council, and others, will provide broad detail as to capital expenditure and working capital requirements.
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* Ensure the Feasibility Study (incorporating marketing, financial and organisational plans) is sufficiently detailed to provide the Alliance's executive with a clear direction in terms of the management and implementation of the Strategy.
* Recommend the appropriate corporate mechanism for delivery of the
Strategy (both under commercialisation, and corporatisation operating scenarios). Establish partnering arrangements and objectives.
* Provide detailed Implementation (Action) Plans identifying the key tasks,
the timing of those tasks, and allocation of resources. This will therefore detail how the objectives can be achieved.
* Provide detail attached to each Action Plan, covering personnel structures,
training, quality assurance, R & D, and other requirements. The results will be further amalgamated to provide a Project Overview of resource requirements overall.
* Assist with the planning of the practical aspects of implementation in order
that the key tasks are able to be effectively carried out. * Establish ongoing monitoring and evaluation procedures to ensure that the
Project's manager(s) are able to keep track of the Project and ensure performance objectives are adequately met.
* The above procedures will additionally include those procedures necessary
to determine client satisfaction and needs. The Consultants therefore believe that the above approach will considerably
"value-add" to the Terms of Reference as defined in Company's / DTSBI’s Terms of Reference.
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4. DEFINITIONS
aerobic aer�o�bic (â-rö´bík) —adj. 1. Living or occurring only in the presence of
oxygen. 2. Of or relating to aerobics. 3. Of or relating to aerobes.11
anaerobic (Biological Oxidation and Reduction)
The vast majority of living organisms rely on oxygen to generate oxidative power. The actual mechanism is not a direct chemical reaction but a series of electron transfers through a number of intermediate compounds that readily accept and release electrons, alternating between an oxidized and a reduced form. This route is called the electron transport chain and is similar in all organisms. As the strongest oxidizing agent of the chain, oxygen is the final electron acceptor. Its vital role in living organisms is essentially as a substance on which to "dump" electrons. Many microorganisms are anaerobic; that is, they do not require oxygen for survival. These organisms are able to utilize other substances, such as sulfur and some of its compounds, as oxidizing agents. All organisms generate reducing power through the reversible biochemical reactions of substances such as nicotinamide-adenine dinucleotide (NAD), flavins, and cytochromes, which can exist in an oxidized or reduced form. By participating in the electron transport chain, the reduced form is continually regenerated from the oxidized
form.12
iosolids Dewatered sewage sludge
BOO / BOOT Schemes
Refers to the way in which water / water treatment plants (and other major construction Projects) are developed, viz:
BOO: Build / Own / Operate (typically, long term operation and
ownership)
BOOT: Build / Own / Operate and Transfer (ownership is eventually
transferred to the relevant authority)
Corporatis-ation of government business activities involves restructuring of these business activities in such a way that they operate on a commercial basis, whilst maintaining government ownership. That is, corporatisation aims to replicate the operating environment of the private sector, without sacrificing government ownership. Examples include electricity, rail and
port authority activities.13
11 Microsoft Bookshelf © 1987 - 1992 Microsoft Corp. (Houghton Mifflin Company). Based upon Roget's II:
The New Thesaurus.
12 Stephen Fleishman, The New Grolier Multimedia Encyclopedia (Release 6), 1993.
13 Source: The State of Queensland (Queensland Treasury): NCP Help, Queensland Government Version 1
(Electronic), NCP Unit, May 1996 (Implemented by GoWrite [Yenlo Pty Ltd])
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Commerc-ialisation
of government business activities is a similar, but not quite as extensive, process to corporatisation. The key difference with corporatisation relates to the organisational structure. That is, commercialised entities remain as separate business units within government departments (or councils), whereas corporatised entities are separate legal entities with their own boards of directors (as happens in the private sector). Examples include the state governments' forestry services, car fleet,
publishing and building services14.
digestion DI�GES�TION (dï-jés´ch•n) (dí-) ------n. 1. PHYSIOLOGY a. The primarily
enzymatic bodily process by which foodstuffs are decomposed into simple, assimilable substances. b. The ability to digest food. c. The result of this process. 2. The process of decomposing organic matter in
sewage by bacteria. 3. The assimilation of ideas; understanding.15
effluent EF�FLU�ENT (éf´l•-•nt) —adj. Flowing out or forth.
—n. Something that flows out or forth, esp.: a. A stream flowing out of a lake or other body of water. b. An outflow or discharge of waste, as from a sewer. [ME < Lat. effluens, pr.part. of effluere, to flow out : ex-,
out + fluere, to flow.]16
Equivalent population (term commonly used to describe plant capacity)
influent in�flu�ent (ín´fl•-•nt) (ín-fl•´-) —adj. Flowing in or into.
—n. Something that flows in or into, esp. a tributary. [ME < Lat. influens,
flowing in. —see influence. ]17
potable po�ta�ble (pö´t•-b•l) —adj. Fit to drink.
—n.potables. Drinkables. [Fr. < LLat. potabilis < Lat. potare, to drink.]
po'ta�bil´i�ty po´ta�ble�ness n.18
sewage SEW�AGE (s•´íj) —n. Liquid and solid waste carried off with ground
water in sewers or drains. [ sew(er) + -age. ]19
sewerage SEW�ER�AGE (s•´•r-íj) —n. 1. A system of sewers. 2. The removal of
waste materials by means of a sewer system. 3. Sewage.20
14 Source: The State of Queensland (Queensland Treasury): NCP Help, Queensland Government Version 1
(Electronic), NCP Unit, May 1996 (Implemented by GoWrite [Yenlo Pty Ltd])
15 The American Heritage Dictionary, (Houghton Mifflin, 1987), Microsoft Bookshelf 1992, s.v. "di�ges�tion."
16 Microsoft Bookshelf © 1987 - 1992 Microsoft Corp. from The American Heritage Dictionary and Electronic
Thesaurus (Houghton Mifflin Company). Based upon Roget's II: The New Thesaurus.
17 Microsoft Bookshelf © 1987 - 1992 Microsoft Corp. from The American Heritage Dictionary and Electronic
Thesaurus (Houghton Mifflin Company). Based upon Roget's II: The New Thesaurus.
18 Microsoft Bookshelf © 1987 - 1992 Microsoft Corp. from The American Heritage Dictionary and Electronic
Thesaurus (Houghton Mifflin Company). Based upon Roget's II: The New Thesaurus.
19 The American Heritage Dictionary, (Houghton Mifflin, 1987), Microsoft Bookshelf 1992, s.v. "sew�age."
20 Microsoft Bookshelf © 1987 - 1992 Microsoft Corp. from The American Heritage Dictionary and Electronic
Thesaurus (Houghton Mifflin Company). Based upon Roget's II: The New Thesaurus.
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sludge (slúj) —n. 1. Mud, mire, or ooze covering the ground or forming a
deposit, as on a river bed. 2. Slushy matter or sediment such as that precipitated by the treatment of sewage or collected in a boiler. 3. Finely broken or half-formed ice on a body of water. [Perh. alteration of
dial. slutch, mire.] sludg´y adj.21 Sludge is a concentrated suspension of solids in a liquid (usually water) obtained by gravity settlement; further concentration may require a centrifuge, filter, or drier. In water purification, chemical sludges result from the precipitation of flocculants that absorb microorganisms, debris, coloring matters, and other unwanted materials as they settle. Such sludges are waste products that must be concentrated as far as is economically possible before dumping. The purification of municipal sewage produces large quantities of unstable and difficult sludges. Most advanced sewage purification works use sludge digestion, a process that stores sludge in tanks out of contact with air and heated to about 35 deg C (95 deg F). At this temperature bacterial action produces combustible gas, part of which is used to maintain the temperature. Digested sludge is usually dumped in landfills or barged or pumped out to ocean dumps--a practice that the Environmental Protection Agency [in the United States] hopes to end soon. Powdered household sludge is an excellent soil builder, but industrial sludge contains metals that make it unsuitable for this use. New methods that can recover the metals may eventually be used to produce a valuable
compost from industrial sludge22.
sullage SUL�LAGE (súl´íj) —n. 1. Silt deposited by a current of water. 2. Waste
materials or refuse; sewage. [Perh. < OFr. souiller, to soil. —see soil2 .]23
waste disposal waste disposal, generally, the disposal of waste products resulting
from human activity. Once a routine concern, the disposal of waste has become a pressing problem in the 20th cent. because of the growth of population and industry and the toxicity of many new industrial byproducts. Traditionally, waste was often dumped into nearby streams. Man-made sewers, which date back at least to the 6th cent. b.c. in Rome, were widely introduced in U.S. cities in the mid-19th cent. In the absence of sewerage, waste has often been stored in underground cesspools, which leach liquids into the soil but retain solids, or in simple sewage tanks, e.g., septic tanks, in which organic matter disintegrates. Raw sewage is now commonly treated before being discharged as effluent, usually by reducing solid components to a semiliquid sludge. Although sludge may be processed, e.g., as fertilizer, it has often been buried or dumped at sea, a practice
denounced by many environmentalists24.
21 The American Heritage Dictionary, (Houghton Mifflin, 1987), Microsoft Bookshelf 1992, s.v. "sludge."
22 Denis Dickinson, , The New Grolier MultiMedia Encyclopedia (1993), Release 6.
23 The American Heritage Dictionary, (Houghton Mifflin, 1987), Microsoft Bookshelf 1992, s.v. "sul�lage."
24 The Concise Columbia Encyclopedia, (Columbia University Press, 1991), Microsoft Bookshelf 1992, s.v.
"waste disposal."
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water supply —n. 1. The water available for a community or region. 2. The sources
and delivery system of a water supply.25
25 Microsoft Bookshelf © 1987 - 1992 Microsoft Corp. from The American Heritage Dictionary and Electronic
Thesaurus (Houghton Mifflin Company). Based upon Roget's II: The New Thesaurus.
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5. BACKGROUND BRIEF AND JOINT CORPORATE VISION
BACKGROUND
Aquatec-Maxcon
• IS A WASTE AND WASTE WATER TREATMENT COMPANY
• PROVIDES PROCESS DESIGN EQUIPMENT MANUFACTURE & SUPPLY, PROJECT & CONTRACT MANAGEMENT & COMMISSIONING
• IS INVOLVED IN BOO & BOOT SCHEMES
• OPERATIONS - AUST, NZ, INDIA, INDONESIA, VIETNAM
• RECOGNISED TO BE LEADERS
• COMPETITION FROM OVERSEAS FOR PROJECTS IN AUSTRALIA
• NEED TO PROVIDE A FULL INTEGRATED SERVICE TO COMPETE
• NCP PROVIDES THE OPPORTUNITY TO COMPETE WITH LOCAL GOVERNMENT IN THE OPERATION & MANAGEMENT OF WATER & WASTE WATER TREATMENT
• PARTNERSHIP WITH LOCAL GOVERNMENT WOULD PROVIDE OPPORTUNITY FOR SKILLS TRANSFER ,THE AMALGAMATION OF EXPERIENCE AND CONSEQUENTLY GROWTH INTO OPERATION & MANAGEMENT
Ipswich City Council
• VISION FOR IPSWICH - QUALITY LIFESTYLE IN THE GLOBALLY RECOGNISED AND PROGRESSIVE CITY OF IPSWICH
• NCP IS BEING IMPLEMENTED IN THE IPSWICH CITY COUNCIL
• COMMERCIALISATION OF WATER, SEWERAGE & WASTE SERVICES INTO A BUSINESS UNIT
• ESTABLISHMENT OF
◊ ESTABLISHMENT CHARTER TO SET THE POLICY OBJECTIVES FOR THE BUSINESS UNIT
◊ CUSTOMER CHARTER TO FOCUS ON CUSTOMER SERVICE.
◊ ANNUAL OPERATING AGREEMENT TO SET TARGETS AND OBJECTIVES. • PARTNERSHIP WITH A PRIVATE COMPANY THAT IS RECOGNISED FOR THE
MANUFACTURING, SUPPLY ,CONSTRUCTION AND PROJECT MANAGEMENT OF WATER & WASTE WATER TREATMENT PLANTS WOULD ENHANCE ITS SKILLS BASE AND EXTEND THE OPPORTUNITIES FOR ITS BUSINESS UNIT AND ITS STAFF.
IMPLEMENTATION OF COMMERCIALISATION OF IPSWICH
COUNCIL’S WATER AND SEWERAGE SERVICES & WASTE
SERVICES
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The proposed Alliance augurs well with recent (27 August 1997) Council decision regarding the commercialisation of its water and sewerage services and waste services.
Although the Alliance proposes a joint entity to essentially operate the Council’s
Wastewater Treatment Centres (and Water Treatment Centre), which is only a part of the Council’s overall involvement in water, sewerage, and waste services generally, it is nonetheless a significant part of the Council’s existing activity. The Alliance’s activities will therefore be restricted to maintenance and operation
only, and excludes rehabilitation26.
Council Decision on Water & Sewerage Council resolutions passed as the 27 August 1997 meeting (referred to above) are
shown below27:
A. That Council resolve to transfer the activities of Water and Sewerage Services to a commercialised business activity effective from 1 July 1998.
B. That Council reviews the operations of the commercialised business activity three years subsequent to the date of the Public Benefit Assessment Test Report (in June 2000) with a purpose to determine if the commercialised activity should be corporatised.
C. That a National Competition Policy Steering Committee be established by Council as soon as possible with a primary focus being the successful commercialisation, from 1 July 998, of Water and Sewerage Services.
D. That an ongoing, active public consultation process be maintained with the views of employees, elected members, rate payers and other stakeholders being obtained and considered. A particular, but not exclusive, focus should be on pricing issues and the effect and quantum of price increases.
E. That Council continues to liaise with State and Commonwealth Departments in order to have available, appropriate reform legislation.
F. That a Consumer Charter be developed and publicised throughout the community.
G. That Council and the commercialised unit clearly document those issues dealing with management autonomy and accountability and political interface, together with financial, strategic and operational matters.
H. That the commercialised unit be actively encouraged to seek other markets both inside and outside the Council boundaries,
I. That Council maintains contact with Queensland Treasury and other parties in order that the National Competition Policy (NCP) Compensation Package can be accessed
J. That consideration be given to the payment of bonuses and other like remuneration to employees of the unit when key performance measures
26 Rehabilitation of Treatment Centres includes the upgrading of machinery, plant, or equipment.
27 This information is derived from Council’s internal memorandum dated 24 November 1997 from the
National Competition Policy Steering Committee to the Chief Executive Officer (Extract of the Council
decision as shown at Appendix 1 to the memorandum)
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are met and/or succeeded together with obtaining external advice on genera! employment conditions for a commercialised entity.
The Charter and Establishment of “Ipswich Water”
Charter & Establishment Agreement Subsequent to the above Council decision, a draft “Charter and Establishment
Agreement” has been formulated which:
• Describes how “Ipswich Water” is to become a commercial business unit established under the provisions of the Local Government Act (i.e. not a separate legal entity to Ipswich City Council)
• Sets out the broad picture of Ipswich Water, how it is constituted, and how it will undertake the broad functions of Water Sewerage Service delivery as a Business Unit of Ipswich City Council
• Sets out in broad terms how the objectives of the business unit match into the Corporate Plan for Ipswich City Council
• Describes the respective roles, relationships and responsibilities of the Business Unit and the Council.
Embedded in the document is the outline of a “Customer (Consumer) Charter,
pursuant to resolution F in the previous sub-section. This is to be a “separate “living” document which will cover both customer rights and Council rights. Also included in the Charter is an outline of the business unit’s required commitment to the environment, key business activities, management, operating / service level agreements, register of agreed policy objectives, and various other matters including financial matters such as asset / liability position, capital and financial management structures.
It would be anticipated that the proposed Alliance would need to commit itself to
many of the above aspects, especially with regards to the Consumer Charter and certain other community obligations.
The Business Activities of Ipswich Water That Are Related to the Proposed
Alliance The Business Unit “Ipswich Water” is planned to undertake the following key
activities as its primary business28:
1. Purchase and treatment of bulk water
2. Delivery, storage and distribution of water supply to customers of Ipswich City
3. Collection and transport of sewerage and sewerable trade waste from customers of Ipswich City
4. Treatment and disposal of sewage and sewerable trade waste.
28 Source: Council’s internal memorandum dated 24 November 1997 from the National Competition Policy
Steering Committee to the Chief Executive Officer (Appendix “Charter and Establishment Agreement”
to the memorandum)
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The proposed Alliance will be restricted to carrying out those activities related to point (4) above only, i.e. the treatment and disposal of sewage and sewerable trade waste. This will essentially involve the operation of the Council’s existing wastewater treatment plants, plus operation of the Warrill Creek Water Treatment Plant / Centre.
There is also the possibility for the Alliance to undertake further, related activities,
including acquisition / ownership of the whole system. There may be other parts
of Ipswich City Council’s current business activities - even some perhaps outside
Water & Sewerage Services - that could potentially become part of the
Alliance’s activities. This might even extend to provision of a “marketing service”
for Ipswich City generally. However, this Study is concerned primarily with the first
stage of the commercialisation process and is generally restricted to considering
the benefits of the corporatisation of services related to the treatment and
disposal of sewage and sewerable trade waste only. Further, the Charter describes that in undertaking its primary business, Ipswich
Water will be responsible for the operation, maintenance, rehabilitation and enhancement of the water and sewerage infrastructure assets.
In addition to its primary business activities, Ipswich Water may undertake :
5. Provision of services (Private Works) to individual (internal and external) customers where it is consistent with the Council’s corporate and operational plans.
6. Commercial and other activities, individually or in partnership, which are natural adjuncts to its primary business.
7. Activities on behalf of and as agreed with Ipswich City Council which may arise from time to time .
The proposed Alliance is therefore also consistent with points 5, 6, and 7 above.
THE PROPOSED JOINT CORPORATE VISION THE VISION FOR THE PARTNERSHIP WOULD BE A NATIONALLY AND INTERNATIONALLY
RECOGNISED BUSINESS UNIT IN THE FIELDS OF DESIGN, MANUFACTURE, SUPPLY, CONSTRUCTION, OPERATION AND MANAGEMENT OF WATER AND WASTE-WATER TREATMENT PLANTS.
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6. THE NATIONAL COMPETITION POLICY (NCP) & THE HILLMER
REPORT29
INTRODUCTION - ADOPTION OF NCP BY IPSWICH CITY
COUNCIL Application of NCP by Ipswich City Council, and Public Benefit
Assessment The National Competition Policy (NCP) has specific application to various
activities of local government. These policy initiatives set the scene for a comprehensive review of the legislative framework under which the Ipswich City Council and other local government bodies operate. This review has been achieved subsequent to the passage of the Local Government Act (1993) whereby “local governments can operate as they see fit subject to greater accountability as prescribed by the Act”....”While providing greater powers and flexibility, the requirements for accountability have also been entrenched to a
greater degree”30. Central to both NCP and the new Local Government legislation (in relation to the
commercialisation or corporatisation of Council activities) is the Public Benefit Test: i.e. an evaluation of the benefits to the community of a particular course of action, relative to the associated costs to the community; i.e. a community benefit/cost analysis.
A “Public Benefit Assessment” therefore essentially addresses competitive
neutrality reforms under National Competition Policy. This imposes upon Councils the need to demonstrate that benefits to the community outweigh associated costs. Public benefit assessments should consider various matters such as government legislation and policy relating to ecologically sustainable development; social welfare and equity issues including community service obligations; government legislation and policy relating to matters such as occupational health and safety, industrial relations and access and equity issues; economic and regional development, including employment and investment; growth; the interests of consumers; the competitiveness of Australian businesses; and the efficient allocation of resources.
Ipswich City Council have embraced the Public Benefit Assessment Guidelines as
published by the Queensland Department of Local Government and Planning, and Queensland Treasury. In March 1997 the Council resolved to retain the services of a consultant or consultant to undertake public benefit assessments in relation to water and sewerage (as well as waste services). This is a requirement of the current legislation.
29 Extensive data has been extracted electronically in this section from Primary source: The State of
Queensland (Queensland Treasury): NCP Help, Queensland Government Version 1 (Electronic), NCP
Unit, May 1996 (Implemented by GoWrite [Yenlo Pty Ltd]
30 Quotations from: de Chastel, Brett, City Solicitor, Ipswich City Council, Implications of the Local
Government Act - Contracting and Enterprise Powers, paper delivered to the Q.E.L.A. Seminar 5
December 1994.
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Subsequent to amendments to the Local Government Act, and with specific
reference to Ipswich City Council’s Water & Sewerage Services, Bentley’s31 performed a Public Benefit Assessment Review (June 1997) where various reforms were recommended to be initiated. These reforms, which have basically been adopted for implementation by Council, are detailed elsewhere in this Report, however they primarily relate to the commercialisation of the water and sewerage services of the Council, effective 1 July, 1998.
Whilst the broad principles of commercialising the water and sewerage services
of the Ipswich City Council have therefore been established, the proposed Alliance between Aquatec-Maxcon, and the Council, take matters one step further, i.e. commercialisation of a portion of the activities currently being undertaken by the Council’s water and sewerage services.
For this reason, we have taken the opportunity to review the “spirit and intent” of
the NCP, examined how it is being implemented in Queensland, and have reached certain conclusions as to how that may affect the Project to hand.
To assist in gaining an authoritative understanding of NCP, much of the material
in later sub-sections of this Report have been electronically sourced from “The
State of Queensland (Queensland Treasury): NCP Help”, Queensland
Government Version 1 (Electronic), NCP Unit, May 1996 (Implemented by GoWrite [Yenlo Pty Ltd].
Implementation of NCP / Commercialisation of Business Activities,
by Ipswich City Council Ipswich City Council has established a National Competition Policy Steering
Committee (27 August 1997) to oversee the implementation of the NCP reforms including the commercialisation of water and sewerage services and waste services of the Council.
This was one of a number of key recommendations made in the Bentley’s Report. The NCP Steering Committee have been engaged in researching, analysing and
advancing the “myriad” of implementation issues so that the commercialised Water and Sewerage business unit can commence operations on the target date of 1 July 1998.
This Study (i.e. Alliance between Aquatec-Maxcon and Ipswich City Council)
directly impacts considerations currently being undertaken by the NCP Steering Committee, and may therefore prove useful in considering any internal policy reforms considered necessary by the Committee.
OVERVIEW OF NCP The National Competition Policy (NCP) is a set of policy reform initiatives being
adopted by the Commonwealth and each of the state and territory governments. Much of it will also apply to certain activities of local government.
31 Bentley’s, in conjunction with Clayton Utz, Kinhill Economics and John Larcombe and Associates
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The various reform initiatives which, taken together, make up the NCP are not new to Australia. To a large extent, they are a continuation, or an expansion of, policy changes which most Australian governments have embraced over recent years. What is new, however, is the extent of the commitment of each of these governments to implement similar types of reforms in their own jurisdictions between now and the end of the decade.
While the overall NCP package of reforms to be implemented in Queensland will
be similar to what occurs in other States, there is also scope for Queensland's implementation to take account of local conditions. This is particularly relevant in the case of local government.
The National Competition Policy is comprised of seven separate (but in many
ways related) policies. These are detailed below:
Policy Purpose
1. Extension of coverage of the Trade Practices Act
• to limit anti-competitive conduct of firms, regardless of ownership
1. Third party access • to provide access to certain infrastructure essential for competition to "third parties" at "fair" prices
1. Prices oversight • to prevent the misuse of monopoly pricing power by government business activities
1. Structural reform • to reform the structure of government-owned businesses
1. Competitive neutrality • to allow competition
1. Legislation review • to remove benefits (and costs) that accrue to government businesses because of government ownership to review and, if required, reform government legislation which restricts competition
1. Other reforms • to further reform key sectors of the economy, including the water industry
An extensive program of microeconomic reforms - aimed at both the public and
private sectors - has been underway in Australia since the early 1980s. The most recent initiative (and arguably the most extensive to date) is the
National Competition Policy, which aims to increase the level of competition across the entire Australian economy. This policy is largely targeted at the continued reform of the public sector, but also applies to those areas of the private sector where there are legislative restrictions on competition. The focus on the public sector results from widespread recognition of the potential for increased gains to be realised from further exposing this sector to many of the competitive disciplines which apply in the private sector.
NCP - A Summary NCP Is:
• a wide-ranging reform program, which complements recent reforms, such as corporatisation and commercialisation;
• a policy that will result in substantial and ongoing benefits to the
community;
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• a policy that was developed in a manner which allows for the recognition
of other policy objectives, including social welfare and equity, community service obligations, consumer interests and environmental factors;
• flexible enough to allow for implementation by state and local
governments in a manner which takes account of particular Queensland circumstances;
• not a reform program of "competition for competition's sake"; • not a policy which compels privatisation; • not a policy which encourages governments to abandon or reduce their
community service obligations; and • not a reform initiative which can be ignored because:
◊ considerable benefits should accrue to the Queensland economy; ◊ Queensland taxpayers will gain substantially through higher
commonwealth government payments to the state (and possibly local) governments; and
◊ if the state government fails to implement NCP reforms, there is a
danger that the Commonwealth may do so itself (possibly in a manner which takes less account of local circumstances).
BACKGROUND & GENERAL INFORMATION The Need for NCP
All governments across Australia, be they local, state, territory or commonwealth,
are faced with the same problem - how to encourage the better use of resources within their jurisdiction in a way which will lead to a higher standard of living for their constituents.
One of the major impediments to resolving this problem is the lack of competition
in key markets within the economy. In the absence of competition, industries are not encouraged to operate at their optimum level, and wastage of resources occurs.
More specifically, through technological and other advancements, Australia is
now virtually a single national market; as opposed to a set of individual state/territory (or regional) markets, as has been the case in previous decades. This poses new challenges in attempting to increase the level of competition throughout Australia and requires an unprecedented degree of co-operation between each of the governments.
A national competition policy has been developed to increase competition so
that society as a whole will be better off. Importantly, it has not been developed as a policy of "competition for competition's sake". Rather, the underlying tenet is that competition is generally desirable, unless it can be demonstrated on a case-by-case basis that competition will not deliver socially beneficial outcomes.
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In 1992 the Council of Australian Governments (COAG) - which is made up of the
Commonwealth, each of the state and territory governments and the Australian Local Government Association - addressed the issue of how to generate more competition within the Australian economy.
COAG agreed to set up an independent committee of inquiry into this matter.
(That inquiry was headed by Professor Fred Hilmer, and hence the terms "NCP" and "Hilmer" are often used inter-changeably in the press.) In February 1994, the recommendations of the Hilmer Report were accepted in principle by COAG.
In April 1995, COAG endorsed a package of legislative and administrative
arrangements which underpin the establishment of the NCP. The package largely reflects the recommendations of the Hilmer Report.
Aims Of the NCP There are a number of aims of the NCP; the most important of which are:
• to develop an open and integrated Australian market for goods and services by removing unnecessary barriers to trade and competition;
• to ensure that no buyer or seller in the market is able to engage in
anticompetitive conduct against the public interest; • to ensure that, as far as possible, the same rules of market conduct apply to
all market participants, regardless of the form of business ownership (eg government business activities should not enjoy any special advantages);
• to ensure that government business activities which are potentially anti-
competitive are subject to some form of assessment of the likely costs and benefits; and
• to reduce regulatory complexity and administrative duplication between
the various governments.
Benefits of the NCP In a more competitive environment, businesses must provide a more attractive
"deal" to their customers. Introduction of competition in domestic air travel and telecommunications, for instance, has provided significant consumer benefits, including lower prices, a greater variety of products and better levels of service.
The Industry Commission has estimated that, if fully implemented, the NCP reforms
may increase the efficiency of Australia's production of goods and services to the extent of an additional $23 billion each year, largely through the impact of lower costs and increased productivity. It is forecast that this will be accompanied by higher real wages and increased employment in many sectors of the economy.
Specifically in relation to households, the Commission estimated that households
will benefit, on average, by $1,500 per annum from the implementation of competition policy reforms. The majority of the gains will flow from the impact of reforms of public utilities (e.g. water, electricity). Businesses and consumers can
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expect lower prices and wider choice as a result of greater competition in these sectors.
April 1995 COAG Agreements The April 1995 NCP package contained four parts: 1. the Competition Policy Reform Bill (which is now an Act) at the Commonwealth
level provides for:
• the application of the Trade Practices Act's conduct rules to both the "unincorporated" sector (i.e. entities other than corporations, which includes the professions) and state and local government business activities. That is, virtually all business activities will become subject to the key section of the Trade Practices Act dealing with anti-competitive conduct; irrespective of whether they are publicly or privately owned;
• a mechanism for businesses to negotiate access to services provided by
infrastructure which are "of national significance" and which are necessary for their operations - this is referred to as third party access;
• amendments to the Prices Surveillance Act to enable price surveillance of
government business enterprises; and
• the establishment of two new Commonwealth bodies:
(i) the Australian Competition and Consumer Commission (ACCC) - to be responsible for the enforcement of the competition and consumer protection provisions of the Trade Practices Act and making determinations under the access regime and prices surveillance; and
(ii) the National Competition Council (NCC) - to exercise
recommendatory powers on access and prices surveillance issues and to have advisory powers on matters including the extent to which states/territories have complied with the provisions of the various NCP agreements.
(It should be noted that the third party access regime and the prices oversight
powers of the ACCC will extend only to state and local government business activities if that state government does not have access or prices oversight regimes in place which are consistent with the principles of the NCP.)
2. the Conduct Code Agreement - this agreement between the Commonwealth
and the state and territory governments sets out the legislative means by which the application of the Trade Practices Act will be extended.
3. the Competition Principles Agreement - this agreement, between each of the
governments, sets out principles (and deadlines) for the development and implementation of policies on:
• establishment of state-based third party access regimes; • prices oversight of state-based government business enterprises which
have monopoly power;
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• structural reform of public monopolies; • imposition of competitive neutrality between government business activities
and their private sector competitors; and • a program of review of legislation to remove restrictions on competition.
4. the National Competition Policy and Related Reforms Agreement - this
agreement provides for the payment from the Commonwealth to individual States/territories of additional monies (i.e. above and beyond existing levels of payments) conditional upon the states/territories achieving prescribed reform milestones. In Queensland's case, the State stands to gain an additional $2.3 billion in Commonwealth funding over the decade to 2005-06. This is comprised of both "competition bonus payments" (to the State Government) and increased Commonwealth Financial Assistance Grants (to both State and local governments). The Queensland Government is considering providing a portion of its "competition bonus payments" to those local governments participating in the reform process.
The Key Elements Of the NCP The NCP package as agreed to by the various governments has seven policy
elements. These can, however, be summarised into two broad policy initiatives:
(i) the extension of the coverage of the anti-competitive provisions of the Trade Practices Act (detailed in the table as policy element no.1); and
(ii) the reforming of state and local government significant business activities in
a way that introduces incentives similar to those which prevail in the private sector (detailed in the table as policy elements 2 to 7 as listed in the table).
Application to Local Government In relation to local government, the CPA requires that, by June 1996, each state
and territory government is to publish a statement specifying the extent to which they propose to apply competitive neutrality, structural reform and legislation review to local government.
The Queensland Government has published its statement, following extensive
consultation with the Local Government Association of Queensland and those councils likely to be most impacted by the proposed reforms.
In June 1996, the State Government made a number of commitments to the
LGAQ in relation to the application of NCP to local governments in Queensland. These are as follows:
• the State Government will not seek any financial transfer from local
government by way of tax equivalent payments and will approach the Commonwealth seeking amendments to the Tax Acts to provide certainty that the Commonwealth tax regime will not apply, on a basis similar to that available to State Government owned corporations;
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• national competition policy will not require the application of compulsory competitive tendering to local government;
• the State Government is prepared to consider providing protection for
remote local government State road construction and maintenance contract arrangements;
• national competition policy will not restrict a council's ability to provide
cross-subsidies in relation to water activities. The water resource policy agreed to by the Council of Australian Governments means that cross-subsidies will need to be transparent. In addition, the application of the water resource policy may result in some councils requiring particular classes of water users to pay more for water consumption. The extent to which there is a change in the amount that individual users could pay for water will depend on how they adjust their water consumption patterns in response to user pays charging; and
• the State Government is prepared to explore the possibility of providing
financial support to affected councils, including access to special competition payments.
NCP Implementation Safeguards Safeguards have been built into the various NCP agreements to ensure that
governments' pursuit of increased competition within the economy does not limit other social objectives. These safeguards include:
• a commitment in the Competition Principles Agreement is that each
element of the NCP is to be implemented only if the benefits outweigh the costs;
• this Agreement also provides that the following matters are to be taken into
account when implementing NCP reforms:
◊ legislation and policies relating to ecologically sustainable development;
◊ social welfare and equity considerations, including community
service obligations; ◊ legislation and policies relating to matters such as occupational
health and safety, industrial relations and access and equity; ◊ economic and regional development, including employment and
investment growth; ◊ the interests of consumers generally or of a class of consumers; ◊ the competitiveness of Australian business; and ◊ the efficient allocation of resources;
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• exemption of anticompetitive activities from the application of the TPA, by legislation or regulation, if a government can demonstrate that the activities are in the public interest;
• one commissioner on the Australian Competition and Consumer
Commission having a consumer protection background; • consumer protection through the Fair Trading Act and Part V of the TPA still
applying; and • the introduction of a prices oversight regime to apply to state government
monopoly business activities to minimise the potential for excessive charging by these bodies.
Relationship With Corporatisation And Commercialisation The Queensland Government has, over the past two years, corporatised several
of its major business activities and has recently formally commenced the commercialisation of others. Corporatisation and commercialisation are important reform initiatives in the context of the NCP and will be relevant for many of the state's larger local government business activities. For clarification, the following distinction between the two initiatives is made.
Corporatisation of government business activities involves restructuring of these business activities in such a way that they operate on a commercial basis, whilst maintaining government ownership. That is, corporatisation aims to replicate the operating environment of the private sector, without sacrificing government ownership. Examples include electricity, rail and port authority activities.
Commercialisation is a similar, but not quite as extensive, process to corporatisation. The key difference with corporatisation relates to the organisational structure. That is, commercialised entities remain as separate business units within government departments (or councils), whereas corporatised entities are separate legal entities with their own boards of directors (as happens in the private sector). Examples include the state governments' forestry services, car fleet, publishing and building services.
Both reform processes involve examining each of the key aspects of NCP
although, in most cases, the extent of the reform to be undertaken is more significant in the case of corporatisation. For example, the NCP considerations were addressed in the corporatisation of the Queensland electricity industry and the commercialisation of the Department of Primary Industries' (DPI's) forestry activities.
THE TRADE PRACTICES ACT Application of Extended Coverage of the TPA to Local Government
In line with the practice in other industrialised nations, most Australian businesses
are required to abide by a set of rules that are designed to ensure that competition is not undermined by the anti-competitive behaviour of businesses either acting collusively or in their own right. These rules are contained in Part IV of
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the Commonwealth Trade Practices Act 1974 (referred to as the TPA). However, in the past these rules have not covered all participants in the market, and this has limited the capacity of the legislation to restrict anti-competitive conduct.
The NCP package attempts to remedy this situation through an agreement
between the Commonwealth and the various state/territory governments that coverage of the TPA should be extended to all businesses regardless of ownership.
The Restrictive Trade Practices Provisions Of The TPA Application to Local Government
Although it is believed Part IV of the TPA does already apply in the case of local
government, there has been some confusion on this point. This has been due mainly to conflicting court decisions on the application of the TPA to various activities of local governments and the different nature of local government bodies in each State.
Any such doubt as to the application of the Act to local government will be put
to rest when each State and Territory enacts legislation applying Part IV of the TPA to entities within their jurisdictions.
In other words, as from 21 July 1996 - the date of commencement of the
Queensland legislation - all Queensland local governments will be subject to Part IV of the TPA. This is the commencement date for the extended coverage of the TPA as agreed between Commonwealth, State and Territory Governments to be specified in their respective legislation.
Beyond that date, the only activities which will be exempt from this section of the
Act are:
• certain licensing activities; and; • transactions between persons who are acting for the same local
government.
Types Of Restrictive Trade Practices The provisions of the TPA dealing directly with the maintenance of competition in
the market place can be divided into:
(a) provisions which prohibit conduct automatically; i.e. regardless of the effect of the conduct on competition in a market (these are referred to as "automatic breaches" or "per se provisions"); and
(b) provisions which depend upon an analysis of the effect of the conduct on
competition in a market ("competition provisions").
Automatic Breaches Some types of conduct are considered to be anti-competitive by their very
nature and are automatically prohibited by the TPA. This is so regardless of the actual effect of the conduct on competition in the marketplace.
The automatic breaches of the TPA are:
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• price fixing between competitors - this occurs if two or more competitors
agree to fix or control prices, mark ups or discounts for goods or services; • resale price maintenance - this occurs if a supplier insists on, or attempts to
persuade, a reseller not to resell below a certain price. An example is where a manufacturer fixes a specified price at which its goods are to be resold by retailers;
• third-line forcing - this occurs if a supplier sells or offers to sell a product to a
purchaser only on the condition that the purchaser obtains another product from a nominated third party; and
• exclusionary agreements - an exclusionary agreement (sometimes called a
primary boycott) is an arrangement between two or more competitors under which they prevent, restrict or limit the supply or acquisition of goods or services to, or from, particular persons.
Competition Provisions
In order to determine whether or not there has been a breach of a provision of
Part IV of the TPA other than the automatic breaches, it is necessary to undertake a detailed analysis of the concepts of "market" and "competition" and how the particular conduct affects competition in the market.
Contraventions of the TPA which occur if the offending conduct results in a
substantial lessening of competition include:
• anti-competitive contracts, arrangements or understandings - the TPA contains a general prohibition against contracts, arrangements or understandings which have the purpose or likely effect of "substantial lessening of competition" in a relevant market;
• secondary boycotts - this occurs if two or more people engage in conduct
that hinders the supply of goods or services by a third person to a person, or hinders the acquisition of goods and services by a third person from a person. The conduct will breach the TPA if it has both the purpose and effect of substantially lessening competition in a market in which the target of the conduct competes;
• anti-competitive exclusive dealing practices - forms of anti-competitive
exclusive dealing practices which breach the TPA if they result in a substantial lessening of competition in the market place include the granting of exclusive territories, customer exclusivity requirements, minimum purchase requirements and tying products together for sale; and
• anti-competitive mergers - these arise where a person acquires shares or
assets in a corporation and the acquisition has, or is likely to have, the effect of substantially lessening competition in the market.
Misuse Of Market Power
Many parts of the TPA address the issue of the misuse of market power. This is
generally held to occur if a business has a substantial degree of market power
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and uses that power for the purpose of damaging a competitor, or preventing entry into a market or hindering competitive conduct in a market.
Handling Restrictive Trade Practices If a Local Government considers that it may be in breach of Part IV of the TPA in
regard to any of its business conduct or administrative arrangements, there are three options available:
• to seek an authorisation from the ACCC (or lodge notification, where
appropriate, with the ACCC); or • to seek a statutory authorisation from the Queensland Government; or • to terminate the conduct or dealings.
In considering these options, it will be necessary to take into account the relevant
"public benefit test" to justify an authorisation from the ACCC or a statutory authorisation. These options are discussed in more detail below.
THIRD PARTY ACCESS Objectives Of Third Party Access
The objective of third party access is to ensure that owners of significant
infrastructure are not able to prevent competition by denying others (the so called "third parties") access to that infrastructure in other areas of production.
For example, except in very unusual circumstances:
• for Optus (the "third party") to compete with Telstra, it must gain access to Telstra's telecommunications network. If Optus were unable to interconnect into Telstra's network, competition in telecommunications markets would be impossible and Telstra would be able to avoid competition altogether because of its capacity to prevent competitors gaining access to its network;
• electricity generators (the "third parties") cannot feasibly sell the electricity
they produce unless they are able to transmit it to buyers. The only feasible means of doing so is to utilise the electricity transmission grid. If the owner of the transmission assets refuses to allow a generator to transmit electricity, competition in the market for generation is clearly inhibited; and
• while Queensland Rail (QR) is able to prevent other rail service providers
(the "third parties") from using its tracks, no competition for rail services can occur because it will not be economic for rail providers to build new tracks which would be necessary for them to compete with QR.
In addition to the above examples of significant infrastructure, oil, gas and water
pipelines, and airports could potentially be classed as significant infrastructure. In other words, in the absence of third party access arrangements, owners of
significant infrastructure could prevent competition from occurring by not
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allowing the so-called third parties access to their infrastructure facilities. Third party access arrangements seek to overcome this problem.
Under a third party access regime, the owner of the infrastructure and the third
party are encouraged to reach agreement on the access issue; i.e. through normal commercial negotiations. If this fails, then a process is provided - under legislation - for the resolution of the dispute by an independent agency.
Access Regimes Recent amendments to the Trade Practices Act provide for the Commonwealth
third party access regime to apply to "significant" infrastructure. However, the Competition Principles Agreement allows State Governments,
instead, to subject infrastructure in their own jurisdictions to a State-based regime, provided these arrangements are consistent with the requirements of an effective regime set out in the Competition Principles Agreement. If an effective State-based regime applies to infrastructure then the Commonwealth regime will not also apply to that infrastructure.
On this basis, both State and local government owned infrastructure in
Queensland which passes the "significance" test will be subject to a third party access regime in one form or another; i.e. either via the Commonwealth or a State access regime.
Entities To Be Covered For local government, a degree of uncertainty exists regarding what might
constitute "significant" infrastructure for the purpose of third party access under the existing Commonwealth arrangements, especially for the larger local governments which are substantial owners of infrastructure. For these local governments, the assumption should be made that the Commonwealth access regime could apply on the basis of a broad interpretation of "significance" under Commonwealth arrangements.
PRICES OVERSIGHT Objectives Of Prices Oversight
The objective of prices oversight is to prevent monopoly or near monopoly
government business enterprises charging excessive prices for their goods or services. The Competition Principles Agreement requires the State Government to consider the establishment of an independent prices oversight mechanism.
Prices oversight:
• must be independent of the business undertakings being assessed; • should apply to all monopoly or near monopoly government business
undertakings; • should permit submissions by interested parties; and
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• should provide for publication of its pricing recommendations along with the reasons for these pricing decisions.
The Competition Policy Reform Act extends the jurisdiction of the ACCC to State
and, possibly, local government business enterprises unless an independent state regime is in place. The Queensland Government is currently considering putting in place a state regime.
Applying State Based Prices Oversight to Local Government
Background In applying State based prices oversight to local government business activities, it
is proposed that two key principles are relevant:
1. the status and independence of local government in the process be recognised so that ultimate decisions on prices are made by the level of government which is accountable to those who will pay for, and benefit from, the good or service being provided; and
2. for consistency and regulatory efficiency, the oversight of significant monopoly or near monopoly local government business activities should as far as possible be consistent with arrangements applying to State Government business activities.
Threshold for prices oversight In setting a threshold for prices oversight, a balance must be struck between the
costs associated with prices oversight and the gains the process offers. Applying prices oversight to very small local government business activities, even if they are monopolies, is unlikely to yield net benefits for a local community or for the State as a whole.
The proposed thresholds for monopoly or near monopoly business activities are:
• annual current revenue (from rates and charges) greater than $5 million (in 1992/93 dollar terms)
• for combined water and sewage services, revenue greater than $7.5 million
per year (in 1992/93 dollars) On this basis, most of the council business activities to be considered for
competitive neutrality could potentially be subject to a prices oversight regime; i.e. primarily water, sewerage and garbage services undertaken by the State's larger councils.
Local Government Social Commitments It is proposed that the prices oversight arrangements will not, in general, apply to
goods or services provided by local government that are the beneficiary of some form of direct government subsidy. Such subsidisation is to be exempt on the basis that it is unlikely that the goods or services in question would be affected by monopoly pricing. This relates to subsidies provided by the local government itself, or the State or Commonwealth Government.
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The focus will be on Local Government business activities whose users, or a
segment of users, may be paying excessive prices for goods or services provided.
STRUCTURAL REFORM OF PUBLIC MONOPOLIES Definition of Structural Reform
As the term suggests, structural reform refers to the restructuring of either
individual businesses or the market in which the businesses operates. This type of reform is usually undertaken as a means of improving the way in which the market operates. It is a particularly important aspect of the reform process in the case of businesses which enjoy some degree of monopoly power.
Many of the large monopoly businesses in Australia are government-owned; eg
water and electricity utilities, and sea ports. Structural reform is therefore an important consideration in any policy designed to increase the level of competition across the Australian economy.
The Necessity for Structural Reform The introduction of competition into markets supplied by government-owned
monopoly businesses often requires more than applying the Trade Practices Act or reviewing the legislation that established the entities.
If competition is introduced into markets which have traditionally been supplied
by government-owned monopolies, it is important to ensure that the structure of both the markets and those monopolies entities are thoroughly reviewed. If this is not done, there will be a risk that true competition will not result and that reform will not translate into benefits for the consumers in that market, or the economy generally. In other parts of the world, for instance, government water and electricity businesses have simply been sold to the private sector in a veiled attempt to increase competition. In some cases, instead of actually increasing competition, what were previously publicly-owned monopolies simply became privately-owned monopolies and no benefits to consumers or other businesses ensued.
While the NCP does not compel privatisation, it does emphasise that the
introduction of competition into a market traditionally supplied by a public monopoly should only occur following a careful consideration of the likely impact on the level of competition.
For local government, it is appropriate that discretion on whether or not to
introduce competition should rest with the relevant council.
Implications for Local Government Should a council wish to introduce competition into a market which it had
previously dominated, the seven structural reform issues outlined in the Competition Principles Agreement will need to be addressed.
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Any local government proposing such action should initially discuss the matter with the DLGP, especially if there are likely to be any legislative barriers to the introduction of competition.
The main monopoly businesses currently undertaken by local government in
Queensland are water, sewerage and certain garbage service activities. It is likely that the review of legislation required under NCP will impact on the
need to consider structural reform; i.e. reviews of some legislation may necessitate consideration of structural reform in situations where local governments operate as monopolies in markets, by virtue of legislative restrictions on competition in those markets.
COMPETITIVE NEUTRALITY Competitive Neutrality Defined
Achieving competitive neutrality means identifying and, where appropriate,
removing impediments to operating public business enterprises on a commercial basis.
Currently, many government business activities enjoy certain advantages that
would not be available if these business activities were conducted by the private sector.
In other words, private sector firms often find that they are not competing with
government businesses on equal terms. For a start, a disparity exists because virtually all government businesses have traditionally been exempt from taxation. Further, in many cases there is no requirement to pay dividends to the owner of the business (the government) and/or the business has access to cheaper sources of finance (courtesy of the government's higher credit rating and hence lower interest rate for borrowings). In addition, exemption from the Trade Practices Act can also result in benefits to the government businesses. However, exemptions of this nature no longer exist.
Conversely, government businesses may also suffer disadvantages which can
affect their ability to compete on an equal footing. While competitive neutrality is desirable on equity grounds alone, it has even
more significance when considered in the context of efficient use of the economy's limited resources. That is, if government businesses operate along more similar lines to the private sector, the same sorts of competitive incentives should follow.
The economic efficiency gains from competitive neutrality should result in social
and financial benefits for communities and for residential and other consumers of local government goods and services.
The application of competitive neutrality to local government will also continue
the process of reform established under the Local Government Act 1993, the first objective of which is to "… provide a legal framework for an effective, efficient and accountable system of local government in Queensland". Competitive neutrality principles promote efficiency within local government by making transparent the true cost of council business activities.
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Key Issues When considering competitive neutrality and local government, four key
elements must be kept in mind.
1. Competitive neutrality reforms will apply only to the business activities of local governments and not to non-business activities such as regulatory or "public good" activities.
2. The reforms only apply to business activities that are regarded as
"significant". 3. The reforms apply only to the extent it can be demonstrated the benefits of
implementing the reforms outweigh the costs. The final decisions on implementing the reforms should rest with each local government.
4. Where competitive neutrality is applied, it will not interfere with the
capacity of a council to subsidise the provision of goods or services to particular groups.
Businesses Subject to Competitive Neutrality: Types of Government
Businesses Three types of local government business activities are identified for specific
attention. However, only the first two types of businesses are subject to reform under NCP.
These two business types are considered to be significant because their financial magnitude gives them potential to have economic impact at the state or national level.
TYPE 1 BUSINESS ACTIVITIES
• the activity has a current expenditure, in the case of water and sewerage
enterprises combined, greater than $25 million a year in 1992/3 terms, or in the case of other enterprises, greater than $15 million.
TYPE 2 BUSINESS ACTIVITIES
• the business activity has current expenditure, in the case of water and
sewerage enterprises combined, greater than $7.5 million a year in 1992/3 terms, or in the case of other enterprises, greater than $5 million.
TYPE 3 BUSINESS ACTIVITIES
• smaller businesses trading goods and services in a local or regional market
in direct competition with the private sector.
Reforming Type 1 and Type 2 Businesses
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For Type 1 activities, if it is shown to be appropriate through a public benefit assessment, each respective council is to implement:
• a corporatisation model, and/or; • a tax equivalent regime for the business activity and the establishment of a
regime involving payments equivalent to debt guarantee fees; and • regulation equivalent to that applied to the private sector.
For Type 2 activities, similar reforms are to be implemented, where appropriate. In some cases, the public benefit assessment may indicate it is not appropriate
for the Type 2 business activity be subject to such reforms due to the smaller scale of operations (i.e. they may not be sufficiently large to warrant corporatisation). In these cases it may be more appropriate to, instead, implement "full cost pricing" (or commercialisation)
Reforming Type 3 Business Activities Type 3 businesses could be part of the operations of any local government. They
are businesses which are not sufficiently significant to have economic impact at the state or national levels, but are trading goods and services in a local or regional market in direct competition with the private sector (this will include certain roadworks).
For these small business activities, it is proposed each council would consider
adopting a Code of Competitive Conduct based on the principle of full cost pricing. Support and advice would be provided to assist councils in the development of such a code.
Because of their smaller scale, Type 3 business activities are being dealt with
separately from National Competition Policy. However, the proposed approach is consistent with the intent of competition policy reforms and with the Local Government Act.
The Code is currently being developed in conjunction with local government.
A Corporatisation Model for Local Government Corporatisation of a business activity would be the most significant reform that
might be implemented by a council under National Competition Policy.
Corporatisation of a government business activity involves restructuring so it operates on a commercial basis as a separate legal entity, whilst maintaining government ownership.
It is proposed legislation be developed to enable local governments to
corporatise their business activities to allow for instances where councils consider corporatisation an appropriate course.
Public Benefit Assessment
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Competitive neutrality reforms under National Competition Policy will occur only where it can be demonstrated that benefits to the community outweigh associated costs.
Under the Competition Principles Agreement, public benefit assessments should
consider:
• government legislation and policy relating to ecologically sustainable development;
• social welfare and equity issues including community service obligations;
• government legislation and policy relating to matters such as occupational health and safety, industrial relations and access and equity issues;
• economic and regional development, including employment and investment;
• growth;
• the interests of consumers;
• the competitiveness of Australian businesses; and
• the efficient allocation of resources. The State/Local Government NCP Working Group is currently considering
cost/benefit guidelines to assist councils in undertaking the assessment required for competitive neutrality reviews.
A Public Benefit Assessment for the Water & Sewerage Services department of
the Ipswich City Council has already been carried out - Public Benefit Assessment Report to Ipswich City Council (Report on Water & Sewerage Services to Ipswich City Council), (June 1997) - Bentleys Chartered Accountants: This has been the subject of much discussion in this Report.
Timing The Competition Principles Agreement requires the Queensland Government to
publish a policy statement on, amongst other things, the application of competitive neutrality to local government by June 1996. The Agreement stipulates that the policy statement include a timetable for the implementation of competitive neutrality, as well as details of a complaints mechanism to apply (i.e. to address claims from aggrieved parties in relation to government business activities not operating on competitively neutral terms).
Key deadlines as included in the Queensland Government policy statement are
detailed below:
Competitive Neutrality Reform Target Completion Date
(a) Corporatisation and/or tax and debt guarantee fee equivalents, regulatory neutrality
• Legislation by end 1996. • Public benefit assessment to be
completed by July 1997. • Implementation by July 1998.
(a) Full cost pricing • Legislation by end 1996. • Public benefit assessment to be
completed by July 1997.
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• Implementation by July 1998. • Note: Local governments with Type 1
and 2 businesses to report annually on introduction of competitive neutrality reforms.
(a) Code of Competitive Conduct (note: this does not form part of NCP)
• Development of a proposed Code by end 1996.
• Consideration by council of adoption of Code by July 1998.
OTHER REFORMS In April 1995, the Commonwealth, State and Territory Governments signed the
Agreement to Implement the National Competition Policy and Related Reforms. This Agreement effectively linked NCP reforms to other industry-specific reforms as spelt out in other previous inter-governmental agreements. The industries involved are:
• electricity • gas • water • road transport.
For Queensland (and elsewhere), these industry-specific reforms are crucial to the
better utilisation of the State's resources. In addition, due to the conditions of the April 1995 Agreement, substantial "bonus"
funding from the Commonwealth to the State is conditional on both the implementation of these reforms, as well as the implementation of the NCP package itself.
Water Reform The water industry reforms cover both urban and rural water supply services and
are to be phased in over the next five to eight years. For urban water supply, the directions for reform are as follows:
• pricing: consumption-based & full cost recovery with cross-subsidies made transparent
◊ for urban water, 2 tariffs & return on assets ◊ for metropolitan bulk water suppliers, volumetric charging (including
return on assets)
• achieving a positive rate of return on investment under some circumstances; and improving service delivery by:
◊ separating service provision and regulatory functions; and ◊ identifying and paying for community service obligations (CSOs).
For rural water supply, the directions for reform are as follows:
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• establishment of a pricing regime to provide financial viability in existing water supplies (including the disclosure of any pricing subsidies) and to ensure the best use of limited water supplies, both now and in the future;
• requiring new investment projects to demonstrate that they are
economically viable and ecologically sustainable; • introducing a market for trading in water entitlements to allow for the most
efficient use of available water resources, while providing sufficient allocations for the environment; and
• separating regulatory and resource management activities from
commercial water service delivery activities. An additional consideration for both urban and rural water supplies relates to
environmental issues and adopting an integrated catchment management approach to natural resource management to maintain the health and viability of river systems.
Overall, for Queensland, the process of water industry reform has already
commenced, but will gain momentum in line with the COAG requirements. The Government is already addressing many of the key issues outlined above, including developing a pricing policy for urban and rural water to encourage efficient and sustainable water use, beginning public consultation to develop a new system of tradable water allocations and entitlements, and developing options for increased local management in irrigation schemes. Resolution of some of these issues is likely to take some time and will only occur after considerable consultation with stakeholders.
Specifically in relation to local government, further consultation with councils will
occur on the application of these water policy principles. Proposals are expected to be developed in consultation with the State/Local Government Working Group to allow integration of the water and NCP reforms.
In particular, the Working Group proposes to address the water reform issues of:
(i) the cost-effectiveness of introducing two-part tariffs for urban water (two part tariffs comprise an access charge and a charge based on consumption);
(ii) full cost recovery for urban water supplies (although cross-subsidies can be
continued) and the identification of cross-subsidies between water users; and
(iii) volumetric pricing of metropolitan bulk water supplies.
SOURCES USED IN THIS SECTION: The primary source for data in this section has been extracted from The State of
Queensland (Queensland Treasury): NCP Help, Queensland Government Version 1 (Electronic), NCP Unit, May 1996 (Implemented by GoWrite [Yenlo Pty Ltd]
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NCP Help states that much of the material contained in this section is dealt with
in more detail in:
Pallesen, J. and King, R. (1995), "Microeconomic Reform: Surveying the Evidence",
Queensland Economic Review, June Quarter, pp 34-41. This article should be referred to for additional information on the subject of microeconomic reform.
Aviation - see (1994), Industry Commission Annual Report 1993-94, AGPS,
Canberra. Local Government - see: (i) Rimmer, S. (1991), "Competitive Tendering,
Contracting Out and Franchising: Key Concepts and Issues", Australian Journal of Public Administration, Vol 50, No 3, pp 292-302; (ii) "Competitive Tendering", Business Council Bulletin, February 1989, pp 10-14; (iii) Domberger, S. and Hall, C., "Competitive Tendering and Contracting: Are Cost Reductions Compatible with Quality of Service?", Business Council Bulletin, December 1991, pp 28-34.
Telecommunications - see (1995), Queensland Telecommunications (Q-Tel)
Annual Report 1994-1995, and Austel (1994), Beyond the Duopoly: Australian Telecommunications Policy and Regulation - Issues Paper, AGPS, Canberra.
Queensland Reforms - see Queensland Government (1995), From Strength to
Strength: Queensland Leading State - An Economic Development Statement. New South Wales Reforms - see (1994) Performance of NSW Government
Businesses - 4th edition. New Zealand Reforms - see Scott, G., Bushnell, P. and Sallee, N. (1990), "Reform of
the Core Public Sector", Governance, Vol 3, No 2, pp 138-167.
CONCLUSIONS - ADDRESSING THE KEY POLICIES CONTAINED
WITHIN NCP
Policy How the Proposed Alliance will Address or be Affected by the Issue
1. Extension of coverage of the Trade Practices Act
The proposed Alliance will be conducted pursuant to “permissible
company”32 provisions contained in the Local Government Act. Whilst it seems fairly clear that there will be no “automatic breaches” of the TPA (e.g. competitor price fixing or exclusionary agreements between two or more competitors), there may be some argument that there is a “substantial lessening” of competition (e.g. the granting of exclusive territories, customer exclusivity requirements or similar). However, if Council consider there to be any breach they have the option of seeking authorisation from the ACCC, or seeking statutory authorisation from the Queensland Government. However, in this case the “public benefit test” applies and therefore, subsequent to outcomes of the Bentley’s Report, TPA guidelines appear to have been met.
1. Third party access The proposed Alliance does not prevent competition by denying others access to relevant infrastructure. Indeed, it might be held that the proposed Alliance is a third party itself that would have access.
32 A “permissable company” is essentially one that does not have shares listed on the stock exchange.
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1. Prices oversight The proposed Alliance will encourage greater efficiencies in the delivery of services, with its fees essentially based on average audited operational costs, indexed by inflation. There is no scope within the proposal that promotes government charging excessive prices or misuse of monopoly pricing power. What will be promoted by the Alliance is an increased focus on customer service (best possible service at the best possible price). In relation to the seeking of alternate tenders and quotes, Council has the flexibility to circumvent this process via section 400 of the Local Government Act 1993. This allows exemptions on the basis of, for example, Council resolution that there is only one supplier reasonably available; preferred supplier / standing offer / pre-qualified supplier arrangements; or where the services to be supplied are so specialised or confidential that it would be impractical or disadvantageous to invite tenders or quotes. Any one of these exceptions might apply in this case.
1. Structural reform This aspect has been addressed in the Bentley’s Report. It is anticipated that a number of direct and indirect benefits to consumers and other businesses will ensue. Discretion on whether or not to introduce competition rests with the relevant Council. The proposed Alliance will be conducted under a regime of NCP Steering Committee oversight and the concentration on broader NCP policy issues by the Council’s NCP Task Force.
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Policy How the Proposed Alliance will Address or be Affected by the Issue
5. Competitive neutrality
The proposed Alliance is consistent with the general thrust of the commercialisation process being adopted by Ipswich City Council, where the benefits of implementing reforms clearly outweigh the costs. This is adequately demonstrated in the Bentleys Report where the reforms have been subject to public benefit assessment tests. The economic efficiency gains from competitive neutrality have demonstrated benefits to communities and consumers alike, and will further assist in the transparency of the true cost of existing council business activities, specifically in the operation of wastewater centres. In addition, the proposed Alliance will actively seek out other markets both within and outside Council boundaries, assisting the cost / benefit equation.
1. Legislation review The Local Government Act 1993 now allows for restructuring of business activities where a Council considers that corporatisation is an appropriate course. As stated in the Bentleys Report, the Council should continue to provide input into the legislative process and be ever conscious of the status of NCP legislation, including tax equivalents legislation.
1. Other reforms The proposed Alliance does not impinge upon the application of water policy principles allowing for the integration of the water and NCP reforms. In particular, there is no impact upon the ability to achieve full cost recovery for urban water supplies and the identification of cross-subsidies between water users. The Alliance will assist in bringing about increased focus on achieving commercial goals, and even greater accountability of that portion of the Council’s business. The Consumer Charter currently being developed, and suggested to be a core element of the proposed Alliance’s modus operandi, will ensure confidence in the reform process and act as an integral part of the public consultation process.
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7. INDUSTRY CAPABILITIES & BUSINESS OPERATIONS OF THE
PARTIES
AQUATEC-MAXCON (The majority of Information in this section has been derived from information
provided by Aquatec-Maxcon, primarily from their ”Capability Statement”
documentation)33
Overview & History
The Aquatec Group34 originated as a general fabricator. Although this capability has been retained, the company quickly developed an interest in wastewater treatment and commenced designing its own range of equipment in 1972. The Company now believes it has the most extensive range in Australasia, and has extended to all forms of water and waste water treatment.
Aquatec- Maxcon has two main Australian offices; one in North Ryde, Sydney,
and the other in Ipswich, Queensland. The Sydney office currently employs a staff of 24 persons, of whom half are professionally qualified engineers (civil, mechanical, electrical and chemical). The Ipswich office employs a similar number, with a similar range of disciplines.
Aquatec-Maxcon Headquarters - Leichardt, Ipswich (Brisbane), Queensland.
33 July 1996.
34 The Aquatec Group includes Aquatec Environmental Ltd and its wholly owned subsidiaries, including
Aquatec-Maxcon Pty Ltd, AquatecMaxcon (NZ) Pty Ltd, AquatecMaxcon Sdn.Bhd., Maxcon Industries
Pty Ltd, Aquatec Operations Pty Ltd, in addition to partly-owned P.T. Aquatec Maxcon Indonesia.
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The Ipswich site (4 Ha) is also home to “sister” company, Maxcon Industries Pty Ltd, which is also a wholly owned subsidiary of Aquatec Environmental Ltd. Maxcon Industries currently employs over 70 people, and undertakes high quality steelwork fabrication for Aquatec-Maxcon and a number of outside companies. Maxcon Industries also has a number of site installation crews, and undertakes all of Aquatec-Maxcon's sitework in Queensland, as well as much of it in other states.
Aquatec Environmental owns land, buildings and machinery at its Ipswich site -
currently valued at over $3 million - and has recently purchased a new office and workshop valued at $1.5 million at North Ryde.
In 1994 a subsidiary was established in Indonesia which is now completing a
number of contracts. This appears to be the first Indonesian based subsidiary of an Australian company for water/wastewater treatment.
Overseas project experience currently includes New Zealand, Papua New
Guinea, Indonesia, Singapore, India and Vietnam. The Aquatec Group is now the only specialist broad range manufacturer of water
and wastewater equipment in Australia. The Aquatec Group is unique in the Australian water industry in that in-house it:
• has design capacity • has manufacturing capability • has installation and commissioning capability • has extensive overseas capability • has operations capability • has the financial capability to fund BOOT projects.
Aquatec Group’s Workshop / manufacturing facilities at Ipswich
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Corporate Structure Aquatec Environmental Ltd is an unlisted public company. Its main shareholders
are another unlisted public company, 202 Ltd (about 70%), J & P Richardson (approximately 15%) and staff and the public (balance).
CORPORATE STRUCTURECORPORATE STRUCTURE
AQUATEC GROUPAQUATEC GROUP
202 LTDUnlisted public company
70%
IPSWICH SYDNEY AQUATEC SYSTEMS PTY LTDIn House Research & Development
AQUATEC-MAXCON PTY LTDWater & Wastewater Treatment TechnologyProject Management and Equipment for
Australia
AQUATEC-MAXCON (NZ) PTY LTD
AQUATECMAXCON Sdn. Bhd.Prequalified with Indah Water in jointventure with subsidiary of Tabung Haji
AQUATEC OPERATIONS PTY LTDTreatment Plant Operations(Owner/Contract Operator)
MAXCON INDUSTRIES PTY LTDManufacturer of Water & Wastewater
EquipmentSpecialised Steel Fabrication
Manufacturer of concrete batch plants /materials handling equipment
100%
P.T. AQUATEC MAXCON INDONESIAWater and Wastewater design / construct and
BOOT Treatment in Indonesia
80%
AQUATEC ENVIRONMENTAL LTDUnlisted public company
Staff & Public
15%
J & P Richardson
15%
Management & Human Resources Directors & Management
The Directors of Aquatec Environmental Ltd are as follows:
• Peter J. Gilchrist Chairman B.Eng (Hons) (Civil), M.B.A., M.Eng.Sc.
• Gregory M. Johnston Managing Director B.Eng (Hons)(Civil), Diploma Environmental
Eng., Diploma of Business Administration
• Tom U. Lawson Executive Director B.Sc. (Hons)
• Joe H. Richardson Non-executive Director
• Ross Johnston Non-executive Director
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The Company Secretary is Geoff O’Rourke - Chartered Accountant. P.T. Aquatec-Maxcon Indonesia employs an Indonesian Managing Director and
staff aided by an Australian design director residing in Jakarta.
Staffing Levels & Organisation In Australia the Group employs some 130 people including 20 engineers (civil,
mechanical, chemical and electrical) a similar number of draftsmen, licensed water and sewage treatment p]ant operators, boilermakers, fitters, painters and site crews, in addition to the appropriate accounting and clerical staff.
The company is committed to training and has a comprehensive record of
training graduates, apprentices and trainees for this industry thereby ensuring appropriate skilled and experienced personnel. This has translated also into a very stable workplace with several staff members enjoying in excess of 20 years with the company and many over 10 years.
In Indonesia the Group employs some 80 staff directly and indirectly in Jakarta,
Parung Bogor, Surabaya, Semarang, Jogjakarta and Bandung. An Organisation Chart is appended to this Report.
Quality Assurance Aquatec-Maxcon has been accredited to AS3901 / ISO9001 by the Queensland
Government Quality Assessment Unit. A recent audit by the officers of AWT (the trading arm of Sydney Water Board) has seen the company successfully meet their requirements.
Operational Capability / Experience
Equipment Manufacture & Installation Aquatec-Maxcon presently designs and manufactures almost every item of
substantial mechanical equipment commonly incorporated in municipal wastewater flowsheets, from screens and grit removal equipment at the inlet works, to the outlet weirs or final clarifiers at the plant outlet and sludge treatment and handling. The Ipswich branch of the company has been continuously engaged in this activity for almost 25 years, the Sydney branch for over 13 years.
Over the last 9 years a wide range of potable water treatment equipment has
also been developed from small package plants up to 2000 litres a second capacity. In this same period a wide range of equipment for industrial process water and wastewater has also been developed.
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Profile Cutter at Aquatec’s Ipswich Workshop manufacturing facility
Equipment has been manufactured and installed for hundreds of plants. Some
more notable references are listed below.
Location Capacity Details
Luggage Point STP, Brisbane Australia
1,000,000 persons
Numerous mechanical items including 8 inlet screens, primary clarifiers and eight 42.7 metre diameter clarifiers.
Black Rock STP, Geelong Australia
Design Flow rate 63,000 metres per day
Design and supply of screw pumps and large intermittent cycle extended aeration plant and equipment ($8.9m contract for the complete aeration system)
Loganholme STP, Logan City, Australia
Almost all equipment for the four upgrades of this plant.
Merrimac STP, Gold Coast City, Australia
Almost all equipment for this “leading edge technology” biological nutrient removal plant.
Eudlo Creek STP, Maroochydore, Australia
300,000 EP Equipment for four upgrades of this Plant provided.
Bombay STP, India 33 x 37kW and 34 x 15kW
Manufacture and installation of surface aerators for the Versova Sewerage Lagoon.
Karang Piland II WTP., Surabaya, Indonesia
Design Flow Rate 2,000 litres / second
World scale potable plant - construction carried out in joint venture with P.T. Waskita Karya (a subsidiary of the Indonesian Dept. of Public Works)
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Engineering & Design / Construct Reference Plants Amongst a long and wide-ranging (in its scope) installation lists, Aquatec-Maxcon
is particularly proud of the design and construction responsibility it has successfully undertaken for the following reference plants. For each of these, Aquatec-Maxcon has had responsibility for the process design to achieve set effluent quality objectives, and has also designed and commissioned the electrical and control systems:
Location Capacity Details
Porirua STP, New Zealand
75,000 EP Municipal sewerage treatment plant: extended aeration
plant35 plus main items of mechanical and control equipment except screens and sludge dewatering system.
Cameron Bay STP, Tasmania, Australia
30,000 EP Two contracts (1984 and 1994) for process design and mechanical / electrical equipment supply for Glenorchy City Council. All guarantees of effluent quality met.
Prince of Wales STP, Tasmania Australia
40,000 EP Second site (same scope of work)
Golden Circle Cannery WWTP, Brisbane Australia
Approx. $3m turnkey design construct contract - plant treats high strength industrial wastewater, using Aquatec’s upflow anaerobic sludge blanket (UASB). Plant has greatly reduced waste disposal costs to sewer and generates valuable gas resulting in 2-3 year payback period for the cannery.
Yatala Brewery WWTP, Brisbane Australia
Design and construction responsibility for this anaerobic wastewater treatment plant (approx. $3.1m). Included was design and finance of the works under a project management contract.
Bunbury STP, Western Australia
25,000 EP Supply and installation of all mechanical, electrical and control equipment for this intermittent cycle nutrient removal plant in the capacity of principal subcontractor to Clough Engineering - includes all process design and commissioning responsibility.
PT Freeport Indonesia, Irian Jaya, Indonesia
Up to 11,000 EP
Process design and equipment installation for some 12 Projects undertaken to date (wastewater treatment plants - extended aeration process in very remote locations)
Jakarta WWTP, Indonesia
Up to 170,000 people
Installation of two treatment plants including one on a BOOT basis over 8 years. Another BOOT Project is underway (design, construct and operate) with complete effluent reuse on site.
Taman Dayu, Indonesia
15,000 EP Intermittent Cycle treatment plant in Surabaya to treat effluent for re-use on a golf course development.
Green Island, Great Barrier Reef, Australia
Installation of Aquatec’s intermittent process with re-use of effluent for toilet flushing, fire-fighting, irrigation and other purposes. Reduces the island’s water consumption with effluent able to be safely discharged into the sensitive World Heritage Marine Park environment.
The Aquatec BIOPAQ UASB System has been installed at a number of Australian
locations for clients including APPM, Golden Circle, Mars Confectionery, ICI, Queensland Breweries and Cadbury Schweppes. Reactor volume ranges from
35 Utilised a large 20,000m3 oxidation ditch equipped with Landox rotors and a fine bubble diffused air
aeration system.
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100m3 to 2 x 975m3 with a COD Load of between 660 to 30,600 Kg/d. Applications have been for paper, cannery, chocolate, pharmaceuticals, and brewery.
Contract Plant Operations - Aquatec-Operations Pty Ltd Aquatec-Operations Pty Ltd was established to meet the perceived demand for
more expert operation of water and waste treatment plants as environmental legislation becomes more demanding. The company employs qualified operators and currently run treatment plants in South East Queensland for a variety of government and private industry clients.
These include:-
(1) Q Build Numinbah Correctional Centre trickling filter plant (2) Ansett Maintenance Workshops Brisbane (3) Idemitsu - Ebenezer Mine (4) ANI Bradken - Ipswich (5) STP (6) Swanbank Power Station (near Ipswich) (7) Woodford Prison
In Jakarta, Aquatec has contracts for operation of two (2) waste water treatment
plants.
BOOT Projects The Company has completed its first 8 year BOOT (Build / Own / Operate /
Transfer) project in Indonesia for the Government in Jakarta. Additional projects are now under design in Indonesia.
Overseas Experience Aquatec Maxcon have become more internationally focussed in the last few
years in both research and development, and operations. Examples include:
1. New Zealand Provision of various equipment, and completed plants from 75,000 persons to small dairy product factories
1. Papua New Guinea
Plant installations, e.g. Madang (potable) and Ok Tedi (Screens)
1. Thailand Part of an unsuccessful consortium for Bangkok Metro Authority Stage 1 (US $300m) and Stage 2.
1. Indonesia Large number of Projects including supply of 12 waste water and potable water plants in Irian Jaya for PT Freeport Indonesia), municipal waste water plants up to 170,000 EP, process water treatment plant, and various equipment supplies.
1. Singapore Aeration equipment for an industrial waste water plant and the Mobil refinery.
1. India Bid for major Bombay surface aeration installation.
1. Vietnam Equipment supply for an 18 megalitres per day potable water plant.
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Equipment Range Aquatec-Maxcon claims to be Australia’s leading supplier of wastewater
treatment equipment, having been engaged in the industry for over 25 years. The equipment range, which covers nearly all elements of municipal wastewater treatment includes:
Purpose Equipment Details
Municipal Wastewater
1) Fine Screens: In Channel Trommels
Designed to reduce headloss associated with other fine screen trommels. Largest existing installation at Logan City Council (Loganholme) - 2 units @ 1,560 l/sec. each
2) Step Screens Developed for fine screening where channel geometry does not allow installation of the trommel screen.
3) Raked Bar Screens
Both “Semi Rotary and Full Rotary”, and “Inclined” Screens. Largest installation of the former - Brisbane City Council, Luggage Point (8 screens with 12mm aperture to suit channel 2.0m x 2.0m)
4) Screenings Handling
Includes screenings conveyors, screenings presses, and carousels for screenings disposal bins or bags
5) Grit Removal Includes Constant Velocity Channel Dredges, Aerated grit channels, Vortex Grit Chambers, and Grit dewatering equipment.
6) Primary Clarifier Scrapers
Wide range of equipment including Circular tanks (centre drive and peripherally driven) and ancillary equipment; Rectangular tanks (including travelling bridges and chain and flight systems)
7) Aeration Aquatec dominates the Australian market with their estimated 80% market share. Includes diffused air aeration, and surface aeration. Typical installations have included aerators serving 75,000 to 100,000 EP.
8) Biological Filter Distributor Mechanisms
Top and bottom bearing filter distributor mechanisms are installed to 42.7m diametre - various applications. Dosing syphons and ancillary equipment also provided.
9) Secondary Clarifiers
Centre and peripheral drive mechanisms available using scraper, suction lift or submerged arm sludge removal mechanisms for tanks to 45m diametre.
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Municipal Wastewater (cont./..)
10) Tertiary Filtration Granular media filtration systems for removal of settleable solids to very low levels. Includes deep bed mono media filtration, and dual or multi media filtration (open filter or pressure filter configurations)
11) Disinfection Ultra Violet products (the “Trojan” range), and Ozone (license held from Ozonia Ltd Switzerland for ozone generators). Also conventional and liquid chlorination systems.
12) Thickeners Centre and peripherally driven thickener mechanisms for gravity thickeners for municipal and industrial wastes (e.g. paper mills) - installations to 32m diametre.
13) Digesters Equipped with vertical or spiral guides, floating or fixed covers for sludge digesters to 24m in diametre have been installed. Installed with gas control equipment, gas lift mixing, and heating.
14) Sludge Handling Sludge dewatering systems using centrifuges or belt presses have been installed. Associated conveyors, stockpiling and sludge stabilisation technologies also offered.
Water Treatment
PROCESSES
1) Full Conventional Potable Water Treatment
Screening, coagulation, flocculation, sedimentation, filtration, disinfection
2) D.A.F. as for conventional but applicable to poorly settling solids (low to moderate turbidity)
3) Direct Filtration low turbidity applications
4) Specific Element Removal Processes
e.g. removal iron, manganese, carbon dioxide, suphide, nitrates.
Water Treatment
1) Intake Screens Coarse / Fine Screens - Bar or travelling belt form
EQUIPMENT 1) Chemical Dosing Systems
Bulk storage, handling and metered dosing systems for water treatment coagulants, coagulant acids, oxidizers and pH correction agents
2) Rapid Mixing High intensity mixers to disperse coagulant chemicals into the raw water stream. Dynamic and static in-line designs available.
3) Flocculation Low shear rotary or oscillatory mixers to build settleable floc from the chemically dosed influent.
4) Clarification Clarifier Tanks and mechanisms to remove settleable floc solids or floatable floc material (dissolved air flotation) depending on the raw water characteristics. Various clarifier designs and sludge draw-off methods available
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Water Treatment
6) Dissolved Air Flotation
Used to separate solids where solids settle poorly (e.g. algae)
EQUIPMENT
(cont./...) 6) Filtration Granular media filtration systems to remove
non-settleable material (media system material can be mono, dual. or multi media form). Various filter designs, filter rate control methods and media systems can be designed.
7) Disinfection Removes any remaining harmful bacteria from
treated water, rendering the water completely safe for drinking and domestic use, e.g. processes include chlorine (gas or liquid), Ultra Violet, and Ozone.
8) Iron &
Manganese Removal
various processes dependent on raw water analysis, e.g. aeration / filtration plants, chemical oxidation / filtration plants, manganese Greensand filters, Birm media filters.
9) Package Plants Small community package style plants are
available up to 30 litres / second capacity incorporating any or all of the above-mentioned processes.
Industrial Water Treatment
1) Pretreatment Plant
Processes include chemical dosing systems, flocculators, clarifiers / sedimentation tanks, media filters and disinfection systems.
2) Softeners Hardness removal by Ion Exchange Softeners
(co-current, counter current and short cycle options / manual or automatic regeneration, available)
3) Demineralisers Cation, Anion and Mixed Bed Ion Exchange
Demineralising plant (counter-current regeneration technology). Capacity: small packaged units to large multi-train Power Plant type systems.
4) RO Desalinisation Reverse Osmosis plant (various membrane
options), for brackish water and seawater.
5) Packaged
Drinking Water Plant
Smaller plants suitable for Village water supply, mining camps, remote locations (river dam, or bore waters). Unitary steel construction (simplifies site installation and plant operation).
Tertiary Treatment
1) Tertiary Treated Water
Used for Cooling Tower make-up, Dual distribution systems, irrigation, washing, and some industrial processes. Typical application is for the treatment of secondary sewerage / industrial wastewater by some combination of coagulation and clarification, sand filtration, activated carbon filtration and final disinfection by chlorine or ultraviolet.
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Research & Development About 20 years ago Aquatec-Maxcon
started out using some overseas technology and some in-house designs. Some years ago the company accelerated its program to develop and use only its own technology. The reason for this was:
1) Royalty payments made overseas
technology un-competitive . 2) Overseas technology could not be
used in South East Asia or other countries by Australian companies in most cases.
$A13 Million has been spent by Aquatec-
Maxcon in the last 6 years. Some recent examples are:
Surface Aerators
Aquatec-Maxcon used to license a
surface aerator design from Europe but had no rights to this design in other countries. The Company’s Managing Director (Sydney office) set about building prototypes in plastic and steel a series of new designs. These alternative designs were tested for power consumption and oxygen transfer efficiency at a Sydney University. Several hundred thousand dollars later, final design was completed with independent testing by the Melbourne Public Water Authority. Large installations of 30kW and 37kW Aquastar Medium Speed Surface Aerators have since been completed at Werribee near Melbourne ($A3 Million) and at Bendigo north of Melbourne.
The Company believes that the Aquastar series of surface aerators has good
prospects for Indonesian manufacture and installation and has bid this equipment recently in Bombay.
Inclined Rotary/ In-Channel Fine Screens
Aquatec-Maxcon became aware that a market niche existed in adding fine screens (0.5mm to 5mm) to existing coarse screen installations if:
1) Headloss could be kept low, and 2) Stapling problems of conventional trommel screens could be overcome.
Once again, prototypes were constructed and through in plant testing a
successful design emerged after initial failures and large expenditure at the Company’s Brisbane (Ipswich) factory outside Brisbane (Ipswich). The design was coordinated by Aquatec’s Ipswich office.
This product has now been installed in a wide range of plants ranging from small
industrial waste water plants (e.g. poultry abattoirs) to large municipal installation of 2 x 1,560 l/sec. south of Brisbane.
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Financial Strength The Aquatec Group (i.e. Aquatec Environmental Limited and its controlled
entities36), with its debt free status and net tangible assets approaching $10m, has been a reasonably consistently profitable organisation for over 20 years -
refer EBIT37. The financial position and trends may be summarised as follows38:
$0
$10
$20
$30
$40
$0
$500
$1,000
$1,500
Actual ActualActual
ActualActual
ActualActual
EstimateBudget
Mill
ion
s
Tho
usa
nd
s
TUR
NO
VER
/ A
SSET
S
EBIT
1989/901990/91
1991/921992/93
1993/941994/95
1995/961996/97
1997/98
Turnover Net Tangible Assets EBIT
Aquatec Group of Companies
Financial Summary
Source: Aquatec Maxcon Pty Ltd - Capability Statement: Aquatec Group (July 1996)
Additional Source: Aquatec Group 1997/98 Budget
In the Year ended 30 June 1996, Operating Profit before abnormal items and
income tax was $405,005 compared to the previous years $1,206,864. Operating Profit After income tax and abnormals was $526,228 and 662,606 in the respective years, with dividends provided equalling $419,500 and $417,500.
The un-audited Half Year Financial Report (Aquatec Environmental & Controlled
Entities) for the six months ended December 1996 indicates that Operating Profit Before Tax was $799,565 ($71,454 for the six months ended December 31, 1995); Operating Profit After Income Tax was $529,032 ($84,920 six months ended Dec. 1995) with sales revenue of $19.9m ($10.14m six months ended Dec. 1995).
Key financial results are summarised below:
36 Controlled entities include Aquatec-Maxcon Pty Ltd, Maxcon Industries Pty Ltd, P.T. Aquatec-Maxcon
Indonesia, Aquatec Operations Pty Ltd, and Aquatec-Maxcon (NZ) Pty Ltd.
37 EBIT = Earnings Before Interest & Tax
38 Source: Capability Statement (Aquatec Group), prepared by Aquatec-Maxcon Pty Ltd, July 1996; further
cross referenced with the Aquatec Environmental Annual Report 1996 and half-Year Annual Report 30
December 1996.
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Aquatec Environmental Limited and Controlled Entities Extract from: Profit & Loss Accounts (Consolidated)
Source: Aquatec Environmental Limited - Annual Report 1996 (audited)39
1996 1995 Sales Revenue 24,219,496 25,995,108
Total Operating Revenue 24,556,802 26,266,350
Operating Profit before abnormal items and income tax
405,005 1,206,864
Operating Profit after income tax 526,228 662,60640
Dividend provided (419,500) (417,500)
Retained profits at the end of the financial year 4,515,741 4,409,013
Consolidated Balance Sheets / Profit and Loss Accounts are appended to this Report.
Key Financial Performance Indicators Despite a drop in performance for 1995/96 compared to the previous year, and
given encouraging results for the six months ended 31 December 1995, the underlying strength of the Group may be demonstrated when considering the following key financial ratios:
FINANCIAL RATIOS, ETC.
Audited Consolidated for: Aquatec Environmental Ltd & Controlled Entities
FOR Y/E FOR Y/E
30-Jun-96 01-Jul-95
PROFITABILITY
O.P.B.T./Sales 1.67% 4.64%
Return on Equity (OPAT/SHFunds) 6.45% 13.93%
Return on Assets (OPBT/TA) 2.83% 9.77%
CAPITAL STRUCTURE & DEBT SERVICE
Retained Earnings/Total Assets 0.74% 1.98%
Interest Cover [EBIT/Int.& Fin.exp.] x 18.03 21.85
Gross Cash Flow/Total Financial Debt 1642.27% 290.50%
Surplus/Total Tangible Assets 56.14% 64.66%
Shareholders Funds/Total Assets 56.56% 64.81%
Short Term Debt/Total Financial Debt 100.00% 100.00%
Total Liabilities/Shareholders Funds (:1) 0.8 0.5
Total Liabilities/Total Tangible Assets 43.86% 35.34%
LIQUIDITY / WORKING CAPITAL MANAGEMENT
Current Ratio (CA/CL) 138.11% 152.15%
Days Receivables(Trd Debtors/[Sales/365]) 86 59
Days Inventory (Stock/[Sales/365]) 27 8
39 Persons relying on the above should refer to the Company's Annual Report for full details and
explanatory notes to the above items.
40 Result was significantly affected by an abnormal write off of $457,906 of intangibles.
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A more comprehensive analysis of the Aquatec Group’s Profit & Loss, Balance
Sheets, together with key financial ratios and trends, is attached to this Report.
IPSWICH CITY COUNCIL
Overview Ipswich City Council are responsible for the delivery of water and sewerage
services to the majority of the 47,000 domestic households in the region (population of the Council is currently assessed at approximately 137,000), in addition other commercial and industrial users. As at March 1997, the Council provided 43,811 properties with a water connection (32,059 with water metres) and 40,370 properties with a sewerage connection. Water consumption during
the 1995/96 financial year was 24,479 ML41, with 14,563 ML of sewerage treated
at wastewater centres.42 The above services are provided via a variety of infrastructure, which includes
primary assets as follows:
Water
• 37 storage reservoirs, 31 Pumping stations, 1 water treatment plant (operation of Warrill Creek Water Treatment Centre), and 1,153 km of Water mains
Sewerage
• 69 pumping stations, 6 sewerage treatment plants, 1,038 km of sewerage mains, and 19,202 manholes.
Together with other additional ancillary plant, equipment, land and buildings,
laboratory facilities and other infrastructure, the aggregated asset total equates
to a net written down current replacement value43 of $265.495m44. This excludes those assets which are provided to water and sewerage services by way of support plan charges (e.g. office space, light vehicles, office equipment, office computers), but does include shared facilities (Yamanto office and depot,
Riverview depot, and Thorn Street depot).45 The six sewerage treatment plants vary greatly in size, capacity and technology,
with licenses for each issued by the Queensland Department of Environment.
41 65% of all water sold is consumed by residential premises)
42 Source: Bentleys Chartered Accountants (in Association with Clayton Utz, Kinhill Economics, and John
Larcombe and Associates) Public Benefit Assessment Report to Ipswich City Council (Water & Sewerage
Services), June 1977, p.9
43 Defined in the Local Government Finance Standard (section 39) as the current replacement cost of an
asset that would be replaced or reproduced if the local government was deprived of the asset’s utility,
less any applicable depreciation.
44 The Bentleys Report quotes a net written down current replacement value of $265.495m which equates
to total assets of $30.622m (assets acquired at original cost less depreciation subsequent to 1 July 1994),
the latter figure which is understated - along with depreciation of non-current assets - in accordance
with legislative and other statutory provisions (including the Queensland Local Government Finance
Standard) which allows Queensland Councils not to fully record non-current assets until 30 June 1999.
45 Source: Bentleys Chartered Accountants (in Association with Clayton Utz, Kinhill Economics, and John
Larcombe and Associates) Public Benefit Assessment Report to Ipswich City Council (Water & Sewerage
Services), June 1977, p.9
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Nearly all water for consumption by the community is purchased off the South-
East Queensland Water Board with most treatment provided by the Brisbane City Council whom own and operate a number of water facilities in south-east Queensland (The Council operates a water treatment plant located at Warrill Creek).
The four sections within the Water & Sewerage Branch (Water Operations;
Sewerage Operations; Project [Construction]; and Treatment & Scientific Services) employ a total of 158 personnel, of which 45 are “indoor” and 113 are “outdoor”. Annual revenues of approximately $37m are received with an annual operating surplus in the region of $10m to $13m:
Ipswich City Council Comparative Importance of Water & Sewerage Services
Water & Sewerage Services
Whole Council
% of Services to Council
$ $
Operating Revenue 37,108,000 108,694,000 34.14%
Expenses 23,542,000 82,981,000 28.37%
Operating Surplus 13,566,000 25,713,000 52.76%
Total Assets 30,622,000 142,441,000 21.50%
Total Liabilities 30,684,000 75,024,000 40.90%
Number of Employees (un-audited) 158 1,190 13.28%
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p. 8
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council
0%
20%
40%
60%
% o
f Se
rvic
es
to C
oun
cil
Operating RevenueExpenses
Operating SurplusTotal Assets
Total LiabilitiesNumber of Employees (unaudi
Ipswich City Council
Comparative Importance of Water & Sewerage Services
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p. 8
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council
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Primary Functions of the Water & Sewerage Branch
The functions of the water and sewerage services of the Council is to46:
General
1. to effectively and efficiently treat, store and distribute water to meet social, health, economic and environmental needs of the community, and
2. to effectively and efficiently collect, treat, and dispose of wastewater to meet social health, economic, and environmental needs of the community
Core Functions
3. the purchase and treatment of water
4. water supply maintenance and operation
5. water conservation (water metres, etc.)
6. new capital works, including private works
7. sewerage maintenance and operation
8. waste minimisation (reduction of trade waste)
9. new sewerage capital works, including private works
10. provision of environmental laboratory and field services
11. disposal of sewerage and liquid wastes in a safe and environmentally friendly manner
12. provision of quality customer service.
46 Source: Bentleys Chartered Accountants (in Association with Clayton Utz, Kinhill Economics, and John
Larcombe and Associates) Public Benefit Assessment Report to Ipswich City Council (Water & Sewerage
Services), June 1977, p.7 (and further cross-referenced against the Council’s published Corporate Plan
1997 - 2002)
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Major Assets and Infrastructure - Water & Sewerage Services
Ipswich City Council: Major Assets and Infrastructure - Water & Sewerage Services (Year Ended 30 June 1996) Description No. Value - $
WATER
Storage Reservoirs 37 16,735,000
Pumping Stations 31 3,313,000
Treatment Plants 2 1,605,000
Water Mains 1,153 106,425,000
Land (reserves, depots) 28 1,369,000
Buildings (shared) 3 662,000
Plant, Laboratory, Vehicles, Other n/a 1,198,000
131,307,000
SEWERAGE
Pumping Stations 69 5,000,000
Treatment Plants 6 22,815,000
Sewerage Mains 1,028 86,521,000
Manholes 19,202 16,939,000
Land 46 1,052,000
Buildings (shared) 3 663,000
Plant, Laboratory, Vehicles, Other n/a 1,198,000
134,188,000
Total $ 265,495,000
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p. 10
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council
$106,425,000 (40.1%) Water Mains
$86,521,000 (32.6%) Sewerage Mains
$22,815,000 (8.6%) Treatment Plants (Sewerage)
$16,939,000 (6.4%) Manholes (Sewerage)
$16,735,000 (6.3%) Storage Reservoirs (Water)
$5,000,000 (1.9%) Pumping Stations (Sewerage)
$3,313,000 (1.2%) Pumping Stations (Water)$3,229,000 (1.2%) Other (Water)$2,913,000 (1.1%) Other (Sewerage)$1,605,000 (0.6%) Treatment Plants (Water)
Ipswich City Council
Major Assets and Infrastructure - Water & Sewerage Services
Year Ended 30 June 1996
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p. 10
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Internal Support Charges The Water and Sewerage Department utilises the Councils “Support Plan” which
allows access to various Council staff and resources in the areas of Information Technology, Resources (plant, buildings, purchasing, stores), Executive Services, Finance , Human Resources, Legal Services, Marketing & Media, and Customer Services.
A formal Support Plan is intended to be in force by early 1988 (currently there is
no formal agreement in place). Support Plan charges to Water & Sewerage Services for the year ended 30 June 1996 are as follows:
Ipswich City Council Support Plan Charges to Water & Sewerage Services
Year Ended 30 June 1996 Water Sewerage Total
$ $ $
Information Technology 812,000 1,003,000 1,815,000
Resources 693,000 856,000 1,549,000
Executive Services 430,000 532,000 962,000
Finance 380,000 470,000 850,000
Human Resources 281,000 347,000 628,000
Legal Services 89,000 109,000 198,000
Marketing & Media 71,000 88,000 159,000
Customer Services 37,000 46,000 83,000
2,793,000 3,451,000 6,244,000
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p.15
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council
$0
$500
$1,000
$1,500
$2,000
Tho
usa
nd
s
Year Ended 30 June 1996
Information TechnologyResources
Executive ServicesFinance
Human ResourcesLegal Services
Marketing & MediaCustomer Services
Water Sewerage
Ipswich City Council
Support Plan Charges to Water & Sewerage Services
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p.15
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council
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The above charges, based on expenditures during the relevant year, was
responsible for 37.25% (16.66% for water, and 20.59% for sewerage) of the total support plan budget of $16.763m (1995/96). However, Water & Sewerage Services accounted for 52.76% of the Council’s total operating surplus, and 40.9% of the total liabilities, during the same year.
The Bentley Report comments47 that an analysis of financial records indicates that the water and sewerage business pays internal support charges to Council that are considerably higher than would be needed to maintain the operations of a self-standing commercial entity. The Report estimates that this disadvantage is approximately $4.6m per annum, due to the disproportional burden on the water and sewerage business caused by the Council using expenditure as the basis for allocating costs between each of its functional areas. “With its high capital expenditure, the water and sewerage business is obviously disadvantaged”.
The calculations for these savings are appended to this Report.
Management & Human Resources48 The Water and Sewerage Services branch is managed by Mr Daryl Ross, whom
reports to the Works Manager, Mr Peter Borrows, the latter whom has overall corporate responsibility for water and sewerage programs. Operational responsibility is vested in the Water & Sewerage Manager.
Mr Peter Borrows reports directly to the Council’s Chief Executive Officer, Mr
Jamie Quinn. Mr Andrew Underwood, whom is the Deputy Works Manager, is responsible for managing all infrastructure planning (includes forward planning, design, survey, and asset management functions) which of course includes water and sewerage services.
Whilst the Council has established a Works Committee to consider Reports
relating to operational activities of the organisations various services, the Water and Sewerage Services branch enjoys relative autonomy with written delegations providing relevant guidelines to staff.
There are four sections within Water & Sewerage Services, with each headed by
its own Manager (see chart below). The sections are:
1. Water Operations
2. Sewerage Operations
3. Project (Construction)
4. Treatment and Scientific Services
47 Source: Bentleys Chartered Accountants (in Association with Clayton Utz, Kinhill Economics, and John
Larcombe and Associates) Public Benefit Assessment Report to Ipswich City Council (Water & Sewerage
Services), June 1977, p.19
48 Primary data Source: extracted from: Bentleys Chartered Accountants (in Association with Clayton Utz,
Kinhill Economics, and John Larcombe and Associates) Public Benefit Assessment Report to Ipswich City
Council (Water & Sewerage Services), June 1977, pp. 11-13
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Mr Ross and his staff are also responsible for preparing revenue and capital forward budgets, including comparisons with the previous years performance. The Council, in turn, amends or approves the program budgets - water and sewerage are considered separately.
Organisation & Reporting Structure: Ipswich City CouncilOrganisation & Reporting Structure: Ipswich City Council
Water & Sewerage ServicesWater & Sewerage Services
Stage 1 of the proposedStrategic Allianceessentially involves
corporatisationof this area of theWater & Servicesbusiness activities
Mr Andrew UnderwoodDeputy Works Manager / Manager, Infrastructure Planning
Forward planning, Design, Survey and Asset Management Functions
INFRASTRUCTURE PLANNING BRANCH
Mr Tom BelgroveManager
Treatment & Scientific Services
Manager
Water Operations
Manager
Sewerage Operations
Manager
Project (Construction)
Mr Daryl RossWater & Sewerage Manager
Operational Responsibility: Water & Sewerage Service Delivery
Mr Peter BorrowsWorks Manager
Corporate Responsibility: Water & Sewerage Programs
Mr Jamie QuinnChief Executive Officer
Ipswich City Council
Only 3 employees of the total of 158 personnel working in the Water & Sewerage
Services branch are not members of a Union. The majority of those who are belong to either the Australian Workers Union or the Australian Services Union, however there are a further six Unions having membership from the branch.
The Bentley Report comments that general working conditions and salary / wage
levels of employees in Water & Sewerage Services are broadly comparable to engineering businesses in the private sector, with minimal turnover or identified skills shortages. Staff are employed under one of six relevant Federal or State
Awards49, with incentives provided under two employment arrangements as follows:
1. Continuing performance contracts pertaining to staff at a corporate management level (e.g. Works Manager);
49 Federal Awards: Queensland Local Government Officers Award 1992; Ipswich City Council Enterprise
Agreement 1996); and State Awards: Engineering Award; Building Trades Public Sector Award; Local
Government Employee’s (Excluding Brisbane City Council) Award; Ipswich City Council Enterprise
bargaining Certified Agreement.
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2. Management Incentive Agreements are available to some management personnel from the former Ipswich City Council (such agreements in the course of being phased out).
Wastewater Treatment Centres As stated previously, the Council own and operate six wastewater treatment
plants which represent major asset, infrastructure and functional areas of the Council and the Water & Sewerage Department. The Council also operates the Warrill Creek Water Treatment Centre.
The operation of the Wastewater Centres is also fundamental to the potential
development of the Alliance, and for this reason a reasonably comprehensive coverage of their size, nature and scope is provided in this Report.
The Wastewater Centres represent wide ranging technology and size of
operation. Their size and capacity may be summarised as follows: Ipswich City Council Wastewater Treatment Centres
Plant Location First Commission
Latest Commissioning
Operating Capacity
(EP)50
Current Operation
GOODNA 1973 1996 85,000 Underloaded
TIVOLI 1945 1966 50,000 at capacity
BUNDAMBA 1972 1982 50,000 near capacity
CAROLE PARK 1971 1995 13,300 under capacity
KARANA DOWNS 1982 1988 3,200 under capacity
ROSEWOOD 1969 1969 1,800 at capacity
Total 203,300
With a total estimated population of 137,000 (and not all of the population is
connected to water and sewerage services), the above data infers that plants are operating, in aggregate, below capacity. However, given certain other relevant factors such as changes in demand for different areas, anticipated rises in population growth (e.g. in 2001 population of 149,000 infers a 73.29% capacity utilisation compared to current 67.39%), necessary downgrading of the Goodna Wastewater Centre (Stage 1 and 2), and the probable environmental non-compliance of Centres like Tivoli that do not remove Nitrogen from waste, planning for the expansion of the current and new facilities is required and in train.
The overall position is summarised thus:
50 EP = Equivalent Population
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0
20
40
60
80
100
Underloaded
at capacity near capacity
under capacity
Tho
usa
nd
s
Op
era
ting
Ca
pa
city
(EP
)
GOODNATIVOLI
BUNDAMBACAROLE PARK
KARANA DOWNSROSEWOOD
Ipswich City Council
Wastewater Treatment Centres
Source: Ipswich City Council (Mr Brian Hester, Chemist), January 1998
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Wastewater Treatment Centres - Tabulated Summary Plant
Location First
Comm-ission
Latest Comm-isoning
Operating Capacity
(EP)51
Current Operation
Process Description Effluent Control
ROSEWOOD late 1960’s
1,800 at capacity Imhoff tank and trickling filter followed by four lagoons (three converted to wetlands)
Sludge from the Imhoff tank is directed to an undrained lagoon. Chlorinated effluent either discharged to Western Creek or used for irrigation of the Rosewood Golf Course
KARANA DOWNS
1982 (Stage 1)
1988 (Stage 2)
3,200 (originally 1,800)
under capacity
Pasveer Channel type (Stage 1), involving extended aeration. Stage 2 augmentation: continuous flow type, still utilising the extended aeration (process involved construction of two small secondary sedimentation tanks and associated infrastructure)
Chlorinated effluent enters a detention pond, either discharged into the Brisbane River, or used for the irrigation of the Karana Downs Golf Course. Waste activated sludge stored in an underdrained sludge lagoon
TIVOLI 1945 (“Old Works”)
1966 (“New Works”)
50,000 (originally 26,000)
at capacity Inlet works, primary sedimentation tanks, trickling filters, humus tanks, sludge digestion and drying beds (“Old Works”). Anaerobic digestor and drying beds commissioned in 1962. The 1966 augmentation included the addition of primary sedimentation tanks, trickling filters and humus tanks.
All sludge is anaerobically digested and dewatered on drying beds. Chlorinated effluent is discharged into the Bremer River.
BUNDAMBA 1972 (Plant A) now de-comm-issioned
1982 (Plant B)
50,000 (originally 20,000)
47,900 (current load growing at the rate of about 3.2% per year)
Originally a conventional activated sludge system, Plant B is now a Carousel-type extended aeration system, with mechanical aerators, gravity sludge thickening, sludge drying beds, and a small mobile belt press (belt press dewaters about one third of the waste activated sludge from the plant)
Chlorinated effluent is discharged to the Bremer River.
CAROLE PARK
1971 (Stage 1) 1978 (Stage 2)
1995 (Stage 3)
13,300 (originally 6,650)
Under full capacity (Stages 1 and 2); Full capacity (Stage 3)
Stage 1 comprises conventional activated sludge system with mechanical aeration, primary and secondary sedimentation. Stage 2 almost identical in operation and capacity to Stage 1. Stage 3 utilises the extended aeration process, and diffused air aeration, removing nitrogen biologically.
Sludge is partially anaerobically digested and dewatered by belt press. Chlorinated effluent is either discharged to the Brisbane River, or is used for the irrigation of the Goodna and Wolston Park Golf Courses.
GOODNA 1973 (Stage 1) 1985 (Stage 2)
1996 (Stage 3)
85,000 (originally 25,000 upgraded to 50,000 overall for Stages 1 and 2 - to be downgraded to 45,000. Stage 3 is 35,000
Due to underload-ing, Stage 1 and half of Stage 2 have been temporarily de-comm-issioned.
Stage 1 comprises conventional activated sludge system with mechanical aeration, primary and secondary sedimentation. Stage 2 is almost identical in operation and capacity as Stage 1. The future addition of baffles and mixed liquor recycle in the aeration basins will reduce Stages 1 and 2 overall capacity to 45,000. Stage 3 utilises the extended aeration process, and diffused aeration, with biological removal of nitrogen. All raw influent is currently being directed through Stage 3.
The waste activated sludge from Stage 3 is settled in one of the Stage 2 primary sedimentation tanks with the effluent from this tank feeding one of the Stage 2 aeration tanks. Sludge is anaerobically digested and dewatered on drying beds. Chlorinated effluent is discharged to the Brisbane River.
Rosewood Wastewater Centre
51 Equivalent population
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The Rosewood Wastewater Centre was commissioned in the late 1960’s and consists of an Imhoff tank and trickling filter followed by four lagoons, three of which have been converted to Wetlands. Sludge from the Imhoff tank is directed to an undrained lagoon.
This facility has a capacity of 1,800 equivalent persons (EP), and is presently
operating at capacity. Chlorinated effluent is either discharged to Western Creek or used for irrigation of the Rosewood Golf Club.
Karana Downs Wastewater Centre Stage 1 of the Karana Downs Wastewater Centre was commissioned in 1982 and
was of the Pasveer channel type. The process involved extended aeration, with waste activated sludge being stored in an undrained sludge lagoon and chlorinated effluent entering a detention pond. The capacity of this facility was 1,800 equivalent persons (EP).
The Stage 2 augmentation of the Karana Downs Wastewater Centre was
completed in 1988, and consisted of the construction of two small secondary sedimentation tanks, and associated infrastructure. This allowed the facility to be operated as a continuous flow type, whilst still utilising the extended aeration process. The Stage 2 augmentation has given this facility its present operating capacity of 3,200 equivalent persons (EP). Waste activated sludge is still stored in an underdrained sludge lagoon. Chlorinated effluent after entering a detention and is either discharged to the Brisbane River or used for irrigation of the Karana Downs Golf Course.
Tivoli Wastewater Centre The Tivoli Wastewater centre was developed in two separate stage, commonly
referred to as the “old Works” and the “New Works”. The “Old Works” were commissioned in 1945 and consisted of inlet works, primary sedimentation tanks, trickling filters, humus tanks, sludge digestion and drying beds. The Works had an operating capacity of 26,000 equivalent persons (EP). In 1962, an additional anaerobic digestor and drying beds were commissioned.
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The Tivoli Wastewater Centre
In 1966, a major augmentation of the works was completed. The augmentation
included the addition of primary sedimentation tanks, trickling filters and humus tanks, and is commonly known as the “New Works”.
Currently, the Tivoli Wastewater centre has a total operating capacity of 50,000
equivalent population (EP). All sludge is anaerobically digested and dewatered on drying beds. The Chlorinated effluent is discharged to the Bremer River.
Primary Sedimentation Tank at Tivoli
Bundamba Wastewater Centre
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The Bundamba Wastewater Centre was developed in two separate stages. Plant
A was commissioned in 1972 and comprised of a 20,000 equivalent population (EP) conventional activated sludge system. This plant was decommissioned in 1982 when the present Plant B was commissioned.
Extended aeration system with mechanical aerators - Bundamba
Plant B has an operating capacity of 50,000 equivalent persons (EP) and is a
Carousel-type extended aeration system, with mechanical aerators, gravity sludge thickening, sludge drying beds, and a small mobile belt press. Presently this belt press dewaters about one third of the waste activated sludge from this plant. Chlorinated effluent is discharged to the Bremer River. The current load on this plant is around 47,900 equivalent population (EP) and is growing at a rate of about 3.2% per year.
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Chlorinated effluent is discharged to the Bremer River - Bundamba
Originally a conventional activated sludge system, the Bundamba Wastewater Centre is now a 50,000 EP Carousel-type extended aeration system, with
mechanical aerators, gravity sludge thickening with sludge drying beds and a small mobile belt press.
Carole Park Wastewater Centre The Carole Park Wastewater Centre was developed in three separate stages. The Carole Park Wastewater Centre was developed in three separate stages.
Stage 1 was commissioned in 1997 and comprises of a 6,650 equivalent population (EPO) conventional activated sludge system with mechanical
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aeration, primary and secondary sedimentation. Stage 2 was commissioned in 1978 and is almost identical in operation and capacity to Stage 1. Neither Stage 1 or Stage 2 are running at full capacity.
Stage 3 was commissioned in 1995 and has operating capacity of 13,300
equivalent population (EP). This plant utilises the extended aeration process, and diffused air aeration, It is also designed to remove nitrogen biologically. It is currently operating at full capacity.
Sludge from the Carole Park Wastewater Centre is partially anaerobically
digested and dewatered by belt press. Chlorinated effluent is either discharged to the Brisbane River, or is used for irrigation of the Goodna and Wolston Park Golf Courses.
Goodna Wastewater Centre The Goodna Wastewater Centre was developed in three separate stages. Stage
1 was commissioned in 1973 and comprises of a 25,000 equivalent population (EP) conventional activated sludge system with mechanical aeration, primary and secondary sedimentation. Stage 2 was commissioned in 1995 and is almost identical in operation and capacity to Stage 1. Stage 1 and 2's overall operational capacity of 50,000 equivalent population (EP) is to be downgraded to 45,000 equivalent population (EP)) with the future addition baffles and mixed liquor recycle in the aeration basins. It should be noted however that due to underloading, Stage 1 and half of Stage 2 have been temporarily decommissioned.
Stage 3 was commissioned in 1996 and has operating capacity of 35,000
equivalent population (EP). This plant utilises the extended aeration process, and diffused aeration. It is also designed to remove nitrogen biologically. All raw influent is currently being directed though Stage 3. The waste activated sludge from Stage 3 is settled in one of the Stage 2 primary sedimentation tanks, with the effluent from this tank feeding one of the Stage 2 aeration tanks.
Sludge from the Goodna Wastewater Centre is anaerobically digested and
dewatered on drying beds. Chlorinated effluent is discharged to the Brisbane River.
Water Treatment Centres The Council currently operate one water treatment plant representing an
additional functional area of the Council and the Water & Sewerage Department.
Located at Warrill Creek, the Water Treatment Centre, whilst a minor activity of
the Council’s W & S Operations, nonetheless accounts for annual operating
expenditure in the order of $342,000 (1998/99 Budget)52.
Performance of the Water & Sewerage Services Branch Existing Profitability & “Balance Sheet” Strength
52 Source: Mr Tom Belgrove, Treatment Manager, Ipswich City Council.
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The Water & Sewerage Services branch of the Council currently generates an
annual operating surplus in the order of $10m to $13m (budget for 30 June 1997 is $10.3m compared to actuals of $14.7m and $13.6m in 1994/95 and 1995/96
respectively)53. This is defined in the appended “Profit & Loss / Operating Statements” of the Services as “Increase in Operating Capability”, however it should be borne in mind the differences that exist in the accounting standards adopted compared to Accounting Standard AAS27, i.e. annual depreciation expense would be understated in analysing the Council’s performance.
There is also the imputation of the Support Services Plan costs which represents
expenditure on the basis of a pre-defined basis only, and not necessarily a commercial equivalent (refer comments previous). The financial reporting and audit requirements are also far less onerous than would be the case for an equivalent large proprietary company.
In addition, a real company tax obligation is not imposed on local governments,
therefore understating the equivalent “after-tax” position. Nonetheless, the Profit & Loss Statements can provide a guide as to trends in the
performance of the Water & Sewerage Services, which is summarised as follows:
$0
$10
$20
$30
$40
$50
Actua lActua l Revised Budget
Mill
ion
s
Yea
r to
30
June
1995 1996 1997
TOTAL REVENUE TOTAL EXPENSES Increase in Operating Capability
Ipswich City Council
Water & Sewerage Services - Profit & Loss Statements
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), Appendix One
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council
Nonetheless, it may be stated that the Water & Sewerage Services branch is a
significant contributor to Council revenues, accounting for only 28.3% of the total
53 Annual revenues of between $37m - $40m are received
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Services costs of the Council, yet contributing 52.7% of the Council’s total operating surplus.
We have provided comments previous on the Balance Sheet of the Water and
Sewerage Operations, and particular the effect of the Local Government Act and the Local Government Finance Standard (e.g. the ability to not fully record
non-current assets until 30 June 1999, and the impact of depreciation54). Therefore the stated asset value of $30.622m (as at 30 June 1996) must be viewed with extreme care, and should be compared to the estimated net written down
current replacement value55 of $265.495m. as at May 1997. The Council’s Profit & Loss and Balance Sheets for Water & Sewerage Services are
appended to this Report.
Comparable Performance Against Other Municipalities
Despite the limitation of record-keeping alluded to in the sub-section above, it is possible to benchmark operations of the Ipswich Council against other major providers of urban water whom are members of the Water Services Association of
Australia (WSAA)56. However, because of further differences in accounting methodology between WSAA members, performance measurement must be viewed with caution.
The Bentley Report has compared Ipswich with another 5 municipalities based on
similar size (the Victorian regions of Central Gippsland, Central Highlands and Colivan) or geographic / climatic zone (Brisbane and the Gold Coast). The following table and graph compares the size of each of these water businesses:
Comparison of Ipswich With Other Similar Council Water Businesses 1995-96 Selection Based on Size, Geography and / or Climate
PROPERTIES CONNECTED (No.)
Water Connections
Sewerage Connections
Total Water Supplied (Ml)
Water Supplied Per Property (Kl)
Ipswich 43,800 40,000 24,479 559
Brisbane 334,000 325,000 185,615 556
Gold Coast 160,000 150,000 56,439 353
Central Gippsland 54,000 46,000 65,069 1,205
Central Highlands 51,000 39,000 15,960 313
Coliban 54,000 41,000 33,371 618
Average 116,133 106,833 63,489 601
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p.20
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council Primary Data Sourced from: WSAA Facts 1996, The Australian Urban Water Industry
54 This standard, in its transitional provisions, allows Councils to only record those assets acquired
subsequent to 1 July 1994 in the accounting records, although all assets, regardless of the date of
acquisition, must be so recorded by 30 June 1999. The Bentleys Report states that Council officers have
indicated that they expect to have all pre-1 July 1994 assets identified, measured and included in the
accounting records of the Council prior to 30 June 1999.
55 This is referred to in the Local Government Finance Standard (section 39) as the current replacement
cost of an asset that would be replaced or reproduced if the local government was deprived of the
asset’s utility, less any applicable depreciation.
56 Membership of the WSAA is limited to those businesses that provide water supplies to 50,000 or more
customers (i.e. service connections), being 17 major water providers in Australia.
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0
100
200
300
400
0
200
400
600
800
1,000
1,200
1,400
24,479
185,615
56,439
65,069 15,960 33,371
63,489Tho
usa
nd
s
P
RO
PERT
IES
CO
NN
ECTE
D (
No
.)
Wa
ter S
upp
lied
Pe
r Pro
pe
rty (
Kl)
IpswichBrisbane
Gold CoastCentral Gippsland
Central HighlandsColiban
Average
Water Connections Sewerage Connections
Water Supplied Per Property (Kl) Total Water Supplied (Ml)
Comparison of Ipswich With Other Similar Council Water Businesses 1995-96
Selection Based on Size, Geography and / or Climate
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p.20
Primary Data Sourced from: WSAA Facts 1996, The Australian Urban Water Industry
Whilst definitive conclusions are difficult to be drawn, due to varying operating
structures, combination and use of outsourced resources, climatic zones, and size of operation, the following trends or patterns are evident:
• Ipswich Council has higher revenues and operating costs per property than
other businesses57 (higher operating costs may be due to more significant use of outsourcing by other businesses)
• The Council has a relatively low number of connections per employee (may also be due to less use of outsourcing, and higher local staffing costs)
The above trends are more evident when the following data is taken into
account:
57 Historical data presented in the WSAA Report shows that, in real terms, average revenues for WSAA
water businesses have been trending downwards in recent years due to a variety of factors such as
below CPI increases, water restrictions / initiatives to reform pricing and cross subsidy removal.
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Comparison of Ipswich With Other Similar Council Water Businesses 1995-96 Selection Based on Size, Geography and / or Climate
Average Annual Bill
Average Annual Bill
Combined W & S
Revenue
Combined W&S
Operating Costs
Net Revenue (W&S)
Council Workforce
FTE
Properties Connected for Water Per Employee
Water Revenue
Sewerage Revenue
$ per property
$ per property
$ per property
$ per property
$ per property
Ipswich $268 $270 $842 $527 315 158 277
Brisbane $303 $183 $793 $336 457 892 374
Gold Coast $266 $335 $678 $254 424 387 413
Central Gippsland $184 $279 $650 $443 207 147 367
Central Highlands $246 $222 $501 $364 137 193 264
Coliban $252 $278 $631 $306 325 145 372
Average $253 $261 $683 $372 $311 320 345
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p.21
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council Primary Data Sourced from: WSAA Facts 1996, The Australian Urban Water Industry
For clarity, the above information is graphed thus:
$0
$200
$400
$600
0
100
200
300
400
500
Rev
enue
/ Cost
s Per
Pro
per
ty
Pro
per
ties
Connec
ted fo
r W
ater
/ Em
plo
yee
IpswichBrisbane
Gold CoastCentral Gippsland
Central HighlandsColiban
Average
Water Revenue Sewerage Revenue Combined W&S Operating Costs
Net Revenue (W&S) Properties Connected for Water / Employe
Comparison of Ipswich With Other Similar Council Water Businesses 1995-96
Selection Based on Size, Geography and / or Climate
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p.21
Primary Data Sourced from: WSAA Facts 1996, The Australian Urban Water Industry
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Legislation & Compliance58 The operations of Water & Sewerage Services are governed by the following
primary legislation:
(a) Sewerage and Water Supply Act
(b) Local Government Act
(c) Environmental Protection Act and Regulations (the Queensland Department of Environment is responsible for overall regulation compliance
for environmental matters with particular emphasis on wastewater
treatment and disposal)
(d) Health Act and Health Regulations (the Queensland Department of Health performs the oversight role)
Other principal legislation which must enforced and / or complied with by the Water & Sewerage Services of the Council include:
(e) Trade Practices Act
(f) Competition Policy Reform (Queensland) Act 1996
(g) Equal Employment Opportunity Regulations
(h) Freedom of Information Act
(i) Workplace Health and Safety Act Under the above legislation, Water & Sewerage Services must ensure compliance
with the following matters:
• compliance of building and development applications with Council standards for both private and public water and sewerage infrastructure
• ensure developers contribute equitably to the provision of water and sewerage infrastructure
• ensure consumers contribute equitably through enforcement of sprinkler and other water conservation regulations (including reading of water meters)
• other matters (e.g. health risk exposure, environmental management standard compliance, and control of trade waste discharges to the sewerage system and the environment).
The Bentley Report comments that, in economic terms, they are not aware of any
regulatory responsibilities / constraints which would materially influence Water and Sewerage Services as program activities of the Council, when compared to a corporatised or commercialised entity.
58 Primary Source for data in this sub-section is - Bentleys Chartered Accountants (in Association with
Clayton Utz, Kinhill Economics, and John Larcombe and Associates) Public Benefit Assessment Report to
Ipswich City Council (Water & Sewerage Services), June 1977, pp 16-17, and 22-23
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8. A COMPARISON OF THE CORPORATE STRATEGIES OF
AQUATEC-MAXCON PTY LTD AND IPSWICH CITY COUNCIL
AQUATEC-MAXCON (Information as provided by Aquatec-Maxcon)
Mission Statement Our Company is committed to:
• Building on our position as the leading provider of water and wastewater technologies in Australasia to become Australia’s leading water company providing a complete range of services including:
◊ Development and provision of a broad range of treatment technologies and equipment
◊ Operation of water and wastewater municipal and industrial treatment plants
◊ Ownership of assets operated as appropriate
• Use our Australasian base to develop our business in countries with an emerging demand for our technologies and expertise.
• Expanding our technology base through research and development or where this is not appropriate through strategic licensing and synergistic business alliances
• Provision of excellent value to our customers, a rewarding career and opportunities for our staff and superior long term return on investment for our shareholders.
Strategic Direction The Strategic direction of the Aquatec Group may be best summarised from
extracting portion of the Chairman’s Review contained in the Aquatec Environmental Ltd’s Annual Report 1995/96 as follows:
“Our challenge is to achieve an acceptable rate of return on our shareholders
funds. Over the last few years this has proven difficult with increased competition
from multinational water companies and new local competition in the form of
Project Managers whom operate from rented premises and have no
manufacturing facilities. Our strategy has been to maintain a strong
manufacturing division to build our intellectual property base. We are now in the
only specialised water industry manufacturer of a broad range of equipment in
Australia. This strategy in the short term carries cost disadvantages compared
with the project manager approach.”
and further...
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“The year just completed can perhaps be summarised as one in which the
company achieved milestones in a technical and strategic sense but failed to
make a satisfactory return for shareholders.
In 1996/97 we will be concentrating on increasing our Australian revenue with
matching profit improvement”.
Aquatec Environmental Pty Ltd have also published their overall strategic
direction in their 1995/96 Annual Report (Shareholder Information)59, which has been later reinforced in their “Strategic Directions (1996-2006)” supplement within the Aquatec Group’s 1997/98 Budget:
STRATEGIC DIRECTIONS - OVERVIEW
(a) To be the leading mechanical/electrical contractor in Australia and New Zealand in the Water Industry.
(b) To be a competitive specialist design and construct contractor in Australia and New Zealand in the Water Industry
(c) To be the leading mechanical/electrical contractor for Asian AusAid work in the Water Industry.
(d) To be a competitive mechanical/electrical contractor in S.E. Asian Region in the Water Industry for large municipal works funded by World Bank/ADB etc. with emphasis on Indonesia.
(e) To provide technical leadership for overseas subsidiaries for their local market.
STRATEGIC DIRECTIONS - DETAIL
The company began life as a high quality steel fabricator in 1970. It used these
skills plus some new municipal wastewater equipment design skills (1972) to become a mechanical/electrical contractor in municipal waste water. It progressively added more skills to evolve from municipal waste water to a contractor in industrial waste water (1986) municipal potable water (1988) and process water (1989). These skills continue to expand and the original metal skills have been retained and enhanced.
In more recent times the company has been forced to add process design skills
to compete overseas and now has "design and construct" skills in a number of water industry market segments. The company also now operates a number of small plants (1993) in S.E. Qld. & Jakarta,
In parallel the company has expanded geographically, Originally the focus was
on Queensland and New South Wales expanding first to other states then to New Zealand (l987) and PNG (1990) Indonesia (1992) Singapore (1994) Vietnam and India (1996).
Behind these parallel sets of evolutionary changes were implied changes in
"strategy". For example, from a metal fabricator with some municipal waste water products to a metal fabricator with products for the water industry, the concrete batching industry and the materials handling industry.
59 Aquatec Environmental Pty Ltd - Strategic Directions (1996 - 2006)
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More recently (1994) the decision has been made to concentrate on the water
industry and only venture into other activities if they augment the core business in an ancillary product sense or to even our fabricating loads.
It has become obvious that a specialist contractor or design and construct
company in the water industry has little ability to avoid large fluctuations in revenue and the low market valuation ratios of listed contracting companies.
The only way I can see to overcome this perceived problem which in the
extreme must result in heavy retrenchments one day and resultant loss of skill base, is something similar to a strategy with the following elements of a "water utility" company.
1. A core business of "build own operate" in the water industry to try to make
profits predictable to attract a superior price/earnings ratio. Predictability of earnings may require BOO profits up to 70% of total profits. Time will tell.
2. A selection of a market niche of $0.5 million to $10 million per plant so as not
to compete head to head with the few established world players (North West Water, C.G.E. etc.).
3. A continuing effort to attain technical competitiveness in a "design and
construct" division as a necessary element for success in item 1, above. This does not mean we need to design or manufacture or construct all aspects of every plant but it is believed that competitive technology is an imperative for success and must be kept "in house".
4. To succeed in our core business as per item 1. we must continue to expand
overseas to create opportunities. To do this at an acceptable risk we must have a strong home base in Australia as a leading company in the water industry.
5. Listing when demanded by requirement for capital in Australia or overseas
or both seems the inevitable consequence. An evolution of strategic direction or change of focus always means higher risk in
the short term at least and some "business development" expenses which lower profit in the short term. The board must be willing to accept these risks and costs if we wish to alter our focus over the next decade.
Another Way to Look At It
We need:
1. A continuing emphasis on technology evolution to keep Aquatec-Maxcon as the leading equipment contractor/supplier in the Australasian water industry, and for AusAid overseas projects.
2, Where appropriate, use of experience in item 1. to expand design and
construct skills in Australasia which is necessary for many S.E. Asian markets such as Indonesia.
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3. Where appropriate, use of knowledge from item 1. to generate contract operations revenue.
4. Where appropriate, use of knowledge from items 2. & 3 . to generate
build/own/operate/transfer project revenue. 5. Where appropriate, projects from item 3. & 4. will expand into catchment
operations. To survive and succeed will require selection of market niches to avoid direct
confrontation with the international water companies. The project size that should be less competitive may be between $05 mill and $10 mill and may be in the industrial market as well as in smaller local authorities.
If a strategy such as this, which builds on our strengths, is successful we end up
with a small to medium size water utility which has far less dependence on volatile contracting profits than currently.
The capital requirements are very large and beyond the capability of current
shareholders. A public listing with or without an early mezzanine financing is indicated. The longer we can self finance, the greater the percentage of non-contracting revenues. This should result in a higher price earnings ratio with reduced dilution of founding shareholders.
Major Business Initiatives60
The Aquatec Group consider the following Projects / activities as their major
business initiatives:
1. Reach agreement with Ipswich City Council
2. Reach agreement for a material BOOT scheme in Australia and Indonesia
3. Hire Senior Process Engineer
4. Hire Senior Design Manager
5. Strive for Break Even in Indonesia
6. Launch advanced diffuser products
7. Increase presence in the large end of the industrial wastewater segment
8. Research the potential of the smaller industrial segment for supply and service
9. Carry out a small demineralisation project.
60 Source: Aquatec Group 1997/98 Budget
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IPSWICH CITY COUNCIL (Information as provided by Ipswich City Council from their Corporate Plan
documentation and Internet site at http://infoservice.gil.com.au/icc/)61
Ipswich City's Corporate Plan 1997-2002 Ipswich City Council has a commitment to community involvement in the future
of the City of Ipswich. The Corporate Plan sets the direction for the City.
Introduction to the Ipswich City’s
Corporate Plan Quality lifestyle is Ipswich’s inheritance,
our enjoyment for the present and our gift to future generations. The Corporate Plan 1997-2002 will guide us in preserving and enhancing the lifestyle of this rich and diverse City so that our gift to Ipswich’s future generations will be a source of pride and enjoyment. The last five years witnessed more change than the previous fifteen years. The next five years will see more change than the previous thirty years. This five year corporate plan is critical for the future of the City of Ipswich.
The Corporate Plan 1997-2002 has been
developed through an extensive year long process of general community, business community, Councillor and employee consultation. It sets the strategic direction for the City of Ipswich and will guide the City into the next century, while marketing our strengths to Australia and the world.
Ipswich is one of Queensland’s most progressive, beautiful and rapidly
developing regions. This new local government is now Queensland’s fourth largest with an area of 1779 sq. km and 135 000 residents.
The Corporate Plan lays the foundation for the Ipswich Seasonal Showcase which
will profile our community, where we live and what we do well, by offering experiences, benefits and achievements for those who choose to visit, live or invest in Ipswich. The Corporate Plan is implemented through three year rolling budgets and more detailed annual Operational Plans and annual budgets. Strategic land use plans and detailed land use planning instruments also help facilitate many aspects of the Corporate Plan. Each year the Annual Report will report to the community on the performance of the Corporate and Operational Plans.
61 Relevant information only has been extracted from these sources
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Ipswich is undergoing the most remarkable period of growth and modernisation in its long and colourful history, as evidenced by the development of the University of Queensland Ipswich Campus adjacent to the Ipswich CBD and the Springfield development in Ipswich’s eastern suburbs. Springfield is the largest master planned residential development in Australia.
The modern City of Ipswich is at the centre of South East Queensland, the fastest
growing region in Australia. Population, services and infrastructure are expected to double by 2020. Through the SEQ2001 study, Ipswich has emerged as a key regional centre in South East Queensland. The challenge is to maintain growth in a way that protects our environment and lifestyle and still maintain the unique city/rural/natural environment mix that is the basis of the quality lifestyle enjoyed by our communities.
The implementation of the Federal Government's National Competition Policy in
local government will dramatically and irreversibly change this sphere of government. It will be the greatest change undergone by local government in its history in Australia. The five year term of this Corporate Plan will encompass that dramatic and irreversible change. It is a change that must be managed with a sensitive understanding of the aspirations and needs of the communities of Ipswich. It is a change that must be moderated by the principles of social justice.
Through this Corporate Plan for the next five years Ipswich City Council will
provide efficient, cost-effective service and guide and encourage investment and growth in the best interests of residents and businesses, in a way that ensures preservation and enhancement of quality lifestyle in Ipswich. We are confident the expertise and dedication of our Councillors and employees, in partnership with the community, will help make Ipswich an even better place to live in the future.
Jamie Quinn, AIMM. CHIEF EXECUTIVE OFFICER Councillor John Nugent, OAM. MAYOR OF IPSWICH
Vision for Ipswich Quality Lifestyle in the globally recognised and progressive City of Ipswich.
Mission for Ipswich City Council Consulting, leading, planning and working to achieve the Vision for Ipswich
through:
• ensuring that our quality lifestyle inheritance is enhanced for future generations
• recognising that quality lifestyle is dependent upon the complex relationship between the social, economic, natural and built environments
• promoting the Ipswich CBD and Ipswich generally as a key regional centre of South East Queensland, Australia’s fastest growing region
• recognising and promoting the unique identity of Ipswich and its natural and cultural attributes
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• encouraging growth and learning, investment, local employment, and maximising resultant opportunities
• maintaining an affordable lifestyle through the delivery of efficient, cost-effective and integrated customer focused services
• a commitment to community well-being through participation, equity, access and justice
• recognising and responding to community aspirations and customer needs
• sensitive, integrated and progressive planning for social, environmental, economic, land use and infrastructure issues
• the creation of a local and regional environment that assists individuals and the general and business communities to reach full potential in any field of human or commercial endeavour and
• bench-marking and best practice in all aspects of service delivery.
Statement of Objectives and Strategies The Vision for the City of Ipswich will be achieved through consultation with the
community, leading the community, sensitive, integrated and progressive planning and hard work.
The efficient and cost-effective delivery of the essential services and community,
environmental and economic services in a framework of managed development and growth as identified in this statement of objectives and strategies for the achievement of the Vision, is a practical measure of this achievement.
The other major measure of achievement of the Vision for the City is how the
people of Ipswich feel about themselves and their City. The services are delivered through programs and identified by themes.
Themed Programs
Those Theme Programs having direct impact to this Project are highlighted thus.
Essential Services Theme
• Waste Management Program • Water Program • Sewerage Program • Roads and Traffic Program • Flooding and Drainage Program • Counter Disaster Program • Development and Growth Management Theme
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Planning and Development Program • Heritage Program • Community Lifestyle Theme
Sport and Recreation Program • Community Services Program • Cultural Services Program • Parks and Reserves Program
Environment Theme • Health and Environmental Protection Program • Conservation Program
Economic Development Theme • Economic Development Program • Information Services
City Management Theme
The delivery of services through the programs is supported by plans which are grouped under categories set out below. The net costs of these support plans are charged to the programs and included in the program service delivery expenditure in order to show the true cost of the delivery of each service. The support plans are grouped under three categories: • Resources - supplying resources such as buildings, depots, plant, trades
services, purchasing and stores services. • Information Technology - supplying information technology and
telecommunications services and records management. • City Management - incorporating support plans for finance, human
resource, public relations, executive services, customer services and legal services.
Waste Management Program
Objectives To provide an efficient and effective waste service and minimise waste by
providing education, incentives and encouragement to the community.
Strategies Waste Collection
Ensure that all domestic, commercial, industrial, liquid, pathological, recyclables and other various wastes are collected and transported in a cost-efficient, safe and environmentally sound manner.
Waste Disposal
Ensure the disposal of solid and liquid waste is performed in a cost-effective, safe and environmentally sound manner.
Transfer Station Network
Develop and maintain a network of solid waste transfer stations which provide disposal facilities for residents and business before the closure of existing landfill sites.
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Waste Minimisation and Regulation Investigate and promote methods of waste minimisation while enforcing regulatory standards for the storage, collection and disposal of waste.
Litter Management
To maintain the aesthetics and cleanliness of roads, reserves and malls under Council’s responsibilities.
Program Administration
To administer the Waste Management Program in a cost effective and customer focused manner.
Water Program
Objective To effectively and efficiently treat, store and distribute water to meet social,
health, economic and environmental needs of the community, while encouraging water conservation.
Strategies Water Supply Planning
To ensure that water supply infrastructure provision matches the community's existing and future needs.
Water Supply Operation/ Maintenance
To ensure that all treated domestic water is treated, distributed, stored and delivered in a safe, healthy and environmentally sound manner, while encouraging water conservation.
Water Private Works
To deliver water supply private works in a customer focused, cost efficient and effective manner.
Water Capital Works
To extend, augment and refurbish the water supply system in an effective and efficient manner.
Program Administration
To administer the Water Program in a cost effective and customer focused manner..
Sewerage Program
Objective To effectively and efficiently collect, treat and dispose of wastewater to meet
social, health, economic and environmental needs of the community.
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Strategies Sewerage Planning
To ensure that sewerage infrastructure provision matches the community's existing and future needs.
Sewerage Operation and Maintenance
To ensure that all domestic sewage and liquid trade wastes are transported, treated and disposed of efficiently and in an effective, safe and environmentally sound manner.
Sewerage Private Works
To deliver the sewerage private works in a customer focused, cost effective and efficient manner.
Sewerage Capital Works
To extend, augment and refurbish the sewerage system in an effective and efficient manner.
Program Administration
To administer the Sewerage Program in a cost effective and customer focused manner.
Economic Development Program
Objective To promote sustainable economic development in order to create employment
in the Ipswich Region and to ensure that all economic development projects are co-ordinated in a timely and effective manner.
Strategies Economic Leadership
To provide strong leadership in the economic development of the Ipswich Region.
Stimulate Investment
To stimulate investment and strengthen local, national and international networks in order to create employment in the Ipswich Region.
Modernise Economic Infrastructure
To strengthen and modernise the economic infrastructure of the Ipswich Region. Property Development and Administration
To develop and administer Council's property portfolio in order to maximise the long term value of such assets for the city.
Promote Tourism in Ipswich
To promote the Ipswich Region as an attractive destination for visitors and tourists. Program Administration
To administer the Economic Development Program in a cost effective and customer focused manner.
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9. S.W.O.T. ANALYSIS
Workshop held62 with the client has resulted in the identification of the Alliance's perceived "Strengths, Weaknesses, Opportunities and Threats" (SWOT) as follows:
LIST OF PARTICIPANTS
Name Position Company
Mr Tom Belgrove Treatment Manager Ipswich City Council
Mr Daryl Ross Water & Sewerage Manager Ipswich City Council
Mr David Spearritt Manager, Finance Department
Ipswich City Council
Mr Peter Borrows Works Manager Ipswich City Council
Mr Greg Johnston Director Aquatec-Maxcon Pty Ltd
Mr Peter Hollingsworth (FACILITATOR) Hollingsworth Project Consultant
Mr Gary Garner (FACILITATOR) Gary O Garner & Associates
STRENGTHS
1. Positioning: changes occurring in the water sector (market and other changes)
2. Both parties have an existing 27 year relationship and have already undertaken joint projects / activities: BOTH PARTIES HAVE SOMETHING TO GAIN
3. Commercial strength to be gained
4. Range of technologies already held by both parties
◊ ICC have been operating water systems since the 1800’s
⇒ not new players
⇒ experienced - operate a variety of waste water centres (WWC’s)
◊ Aquatec bring technologies: recognised major component suppliers
5. Excellent industrial relations (both parties)
• Experience in Quality Assurance accreditation program
• Introduces competitive environments (ICC) - helps drive internal efficiency reforms
• Political nouse (locally)
• ICC recognised as a leader in the water treatment community (e.g. Tom Belgrove V/P of the AWWA Qld)
• Mutual interest in city / local regional development
• Australian owned - ability to capitalise on this
• Availability of finance - through Aquatec and ICC
62 Venue: Aquatec-Maxcon, 119 Toongarra Rd, Leichardt. 22 December 1997
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• Labour force management - demonstrated skills
• Management - demonstrated effective “style”
• Corporate structure
• Alternatives in product delivery
• Potentially, a vehicle to protect position from other water authorities
• Capitalises on other local “entrepreneurial” activities, e.g. Airport, GIL, University
• Organisations are very compatible - Aquatec has firmly established itself in the Ipswich region and provides infrastructure / major labour force, etc.
• ICC’s knowledge of environmental requirements
• Comfort (to potential clients) due to having a government as a major shareholder
• Opportunity to increase R & D effort
• Able to potentially obtain cost savings to customers
WEAKNESSES
1. Council’s decision-making process (particularly time)
◊ Timing: not having a good structure to expand internal ➱➱➱➱ external operations (e.g. contracting out staff may send “mixed messages”)
2. Political environment
3. Lack of numbers for reasonably significant water treatment plants in Ipswich / breadth of available business
4. Must be able to effectively communicate strategy to staff (particularly ICC)
• Labour force management
• Corporate Structure
• Trade waste: may be a conflict of interest?
• ICC - W & S Department currently under significant pressure for change
• Perceived impression that a “semi-government” entity is somehow less efficient than a “private firm”.
OPPORTUNITIES
1. Human Resources:
◊ Labour force able to be re-deployed
◊ Employment generation in the city
◊ The first “Australian owned and operated” - will have a competitive “window of opportunity”
◊ Training in the city for overseas operations
◊ Council able to take active role in employment generation
◊ Staff - expanded career path
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◊ CULTURE: is different within each organisation, e.g. service orientation
⇒ Cross cultural benefits
2. Profit ownership / profit sharing ➱➱➱➱ return on Intellectual Property
3. Ability to expand services regionally, state-wide, nationally, internationally
4. Public listing - Ipswich the headquarters of a major public company
• Political environment
• Graduated staging: running up to joint plant operation, e.g. upgrading or building of new plant
• Enterprise powers available (now) to local government
• Corporate structure
• Able to “take on” the increasing overseas / international competition
• Vehicle for effective enterprise agreements, e.g. could include profit sharing
• Subsidy arrangements already exist (State Government)
• Growing market base
• Aimed at D.B.O.’s where there is already an operating content
• Cheaper purchasing power due to greater economies of scale (an example is noted in the de-regulated power industry)
• Increased learning due to increased industry activity
• Attractiveness to Australian customers as a viable alternative
• Increased ability to obtain higher quality expertise as the business grows
THREATS
1. Risk:
◊ Risk and ownership - profit
◊ Perceived project risk held - depending on structure
2. Perceptions:
◊ Perceived potential for loss of services or increased costs, or lower quality
◊ Potentially adverse customer perceptions
3. Competitive purchasing requirements
4. Other Councils / bodies throughout Australia seeking Joint Venture opportunities
5. Legal issues / legislative e.g. impact of possible boundary changes of local government areas; constraints under the Local Government Act.
• Corporate structure
• Purchasing requirements - “Chinese walls”
• Concept requires effective marketing to key stake-holders
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• Third parties:
◊ Third party access
◊ Major customers ability to undertake projects themselves
• Potential industrial relations issues
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10. STATEMENT OF BUSINESS OBJECTIVES
STRATEGIC MANAGEMENT OBJECTIVES ARISING OUT OF
SWOT ANALYSIS The following business objectives have been developed with the Alliance and
are recommended for adoption:
1. To jointly build a commercially astute business that neither party can achieve individually (in a reasonable time-frame)
2. To build on the historical working relationships (between Ipswich City Council and Aquatec-Maxcon)
3. To jointly capitalise on existing technologies and expertise currently held separately by both parties
4. To continue good industrial relations practices
5. To generate local employment opportunities through Australia’s first Australian-owned integrated water company, including the development of training opportunities and skills development
6. To obtain an appropriate return on existing and developing intellectual property
7. To expand the business regionally, nationally and internationally
8. To derive maximum benefits from cross cultural relationships
9. To encourage timely decision-making ensuring that the current window of opportunity is not missed
10. To develop a communications strategy to ensure that mixed messages are not received
11. To develop a partnership that has maximum local community support
12. To investigate how to broaden the business due to lack of potable water treatment plants
13. To develop an appropriate corporate structure that provides an equitable distribution of risk / reward sharing
14. To ensure that customer service and value to the customer are maintained
15. To recognise that the establishment of the business will require the Council to take a strategic business decision in relation to its purchasing arrangements
16. To examine all relevant legal issues
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11. MISSION STATEMENT
The following "Mission Statement" is recommended for adoption:
A NATIONALLY AND INTERNATIONALLY
RECOGNISED BUSINESS UNIT IN THE
OPERATION, MAINTENANCE AND
MANAGEMENT OF WATER AND WASTE-
WATER TREATMENT PLANTS.
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12. ACTION PLANS
1. To jointly build a commercially astute business that neither party can achieve individually (in a reasonable time-frame)
Action: Present Feasibility Study to Project’s proponents for sign-off
Action: Develop Business Plan for proposed Alliance.
Action: Comprehensive Marketing Plan to be developed and incorporated into Business Plan - to include the identification of suitable export and domestic markets and their potential, proposed timing and costs of market entry, regulatory requirements
2. To build on the historical working relationships (between Ipswich City Council and Aquatec-Maxcon)
Action: Progress Feasibility Study and gain in principle approval from both parties
Action: Alliance members to further consider ways in which co-operation might result in commercial and / or social gain
3. To jointly capitalise on existing technologies and expertise currently held separately by both parties
Action: Undertake comprehensive analysis / audit of Alliance member capabilities
Action: Interview selected personnel for key job / management positions
4. To continue good industrial relations practices
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Action: Written job descriptions to be developed for all staff positions (new and existing positions) by the end of 1998.
Action: Adoption of Alliance (company) mission statement as provided. This should be clearly communicated to all staff of the proposed Alliance.
Action: Obtain a clear commitment by all staff to the Company's "Mission Statement". This should ideally be done on an individual basis, with the Company's business objectives providing a platform for the overall company goal.
Action: Written transcript of the Company's Mission Statement to be provided in full view of clients and staff alike. Consideration should also be given for its circulation to key clients and its inclusion on company marketing material.
Rationale: Communication and promotion of the Company's image, and improved employee and customer relations.
Action: Management to consider obtaining professional help to assist in the change process and its effect on human resources, e.g. conducting and ‘‘Improvement Through People Audit’’, development of Self-Managed Teams, and / or conducting an ‘‘Australian Communications Audit’’
Action: Written job descriptions to be developed for all staff positions
5. To generate local employment opportunities through Australia’s first Australian-owned integrated water company, including the development of training opportunities and skills development
Action: Utilise local employment wherever possible
Action: Undertake training skills / needs analysis
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6. To obtain an appropriate return on existing and developing intellectual property
Action: Analyse intellectual property assets for the purpose of progressing through to commercialisation
Action: Liaise with the Regional Office of DTSBI to access further AusIndustry programs where required and appropriate
7. To expand the business regionally, nationally and internationally
Action: Implement Marketing Plan
Action: Consider lodgement of QTAS application to be progressed for the purpose of conducting appropriate overseas market research, product testing, and/or other activities.
8. To derive maximum benefits from cross cultural relationships
Action: Capitalise on existing relationships held with overseas customers through secondment, training, employment, and other activities (develop plan)
9. To encourage timely decision-making ensuring that the current window of opportunity is not missed
Action: Ensure in principle agreement of the proposed Alliance is reached by the beginning of the new Financial Year 1998/99
10. To develop a communications strategy to ensure that mixed messages are not received
Action: Develop communications strategy (internal)
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11. To develop a partnership that has maximum local community support
Action: Develop communications strategy (external), incorporating appropriate community consultation
12. To investigate how to broaden the business due to lack of potable water treatment plants
Action: Undertake further market research for potential business development / expansion of proposed activities
13. To develop an appropriate corporate structure that provides an equitable distribution of risk / reward sharing
Action: Implement proposed corporate structure
Action: Put in place management succession program.
14. To ensure that customer service and value to the customer are maintained
Action: Implementation of Quality Assurance to commence as soon as possible to ISO9002
Action: Implementation of Total Quality Management to commence upon substantial implementation of Quality Assurance.
Action: Sunshine Water to commit itself to abiding by the proposed Consumer Charter of Ipswich Water
15. To recognise that the establishment of the business will require the Council to take a strategic business decision in relation to its purchasing arrangements
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Action: Council to consider all aspects relating to the findings of the Feasibility Study
16. To examine all relevant legal issues
Action: Confirm legal advice related to various aspects related to the Project.
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13. MARKET ANALYSIS
INDUSTRY DESCRIPTION The Alliance would be involved in a number of related industries, which may be
broadly described as follows:
Activity
Industry ASIC
Code63 1. Wastewater treatment Sewerage Treatment Plant Construction
Sewerage Drains or Systems Construction Water supply distribution or construction
4122
1. Consulting Consultant engineering service n.e.c.
6336
1. Sewerage Plant Operation
Sewerage Systems Operation Sewage treatment plant operation
3702
1. Waste management Waste Collection & Disposal service
8495
1. Water supply services Water supply systems operation
3701
1. Water equipment manufacturing
Water treatment equipment, mnfg. (except household) 3369
There are currently approximately over 600 business units64 in Australia operating within the Industry Division that provides electricity, gas and water supply, with the market dominated by a small number (around 50 only) of very large businesses. For example, large businesses (over $200m in assets) account for approximately 91% of the sales of goods and services, and 70% of the
employment65.
THE SUPPLY OF WATER & SEWERAGE SERVICES IN
AUSTRALIA The main source of water for households is mains/town water, with 93% of
households, followed by water from rainwater tanks with 15%. Of those households connected to the mains/town supply 64% are satisfied with the quality of the water supply for drinking purposes. Residents of South Australia were
63 Australian Standard Industry Classification Code, as used by the Australian Commonwealth Statistician.
64 the term 'business' is taken to mean a legal entity such as a registered company, partnership, sole
proprietor, government enterprise or any other legally recognised organisation which provides goods or
services. The term 'business' refers to the 'management unit'. This is defined as the highest level
accounting unit in a business for which accounts are maintained, provided that the unit does not
include too wide a range of activities. For the majority of businesses, the management unit coincides
with the legal entity (that is, company, partnership, trust, sole operator, etc.). In the case of large diverse
businesses, however, there may be more than one management unit, each coinciding with a 'division'
or 'line of business' for which separate accounts are kept.
65 Primary data source: Government Finance Statistics, Australia (5512.0), and 1996 Year Book Australia
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the least satisfied with their mains water quality (47%) while the Northern Territory
and the Australian Capital Territory were the most satisfied66.
Sources of water by households(a), June 1994 Source of water NSW Vic. Qld SA WA Tas. NT ACT Aust.
'000
Mains/town 2,036.9 1,501.2 1,014.1 541.2 571.8 154.9 44.1 103.6 5,967.7
Rainwater tank 196.0 203.1 202.2 272.2 68.5 32.2 1.2 1.0 976.4
Spring 12.6 7.3 6.2 13.9 3.9 7.4 0.2 - 51.5
Bore 48.1 31.7 86.2 25.1 127.9 3.5 3.5 - 326.0
Bottled 54.5 21.1 24.5 52.6 21.5 1.1 0.8 1.3 177.4
Other 59.8 35.7 38.6 7.2 17.0 8.4 - 0.3 167.1
Total households
2,157.7 1,606.4 1,142.7 567.3 610.6 179.9 46.2 103.6 6,414.5
%
Mains/town 94.4 93.4 88.7 95.4 93.6 86.1 95.4 100.0 93.0
Rainwater tank 9.1 12.6 17.7 48.0 11.2 17.9 2.6 0.9 15.2
Spring 0.6 0.5 0.5 2.4 0.6 4.1 0.4 - 0.8
Bore 2.2 2.0 7.5 4.4 20.9 2.0 7.5 - 5.1
Bottled 2.5 1.3 2.1 9.3 3.5 0.6 1.8 1.3 2.8
Other 2.8 2.2 3.4 1.3 2.8 4.7 - 0.3 2.6
(a) Totals do not equal the sum of water sources in each column as more than one combination may be specified. Source: Environmental Issues: People's Views and Practices, June 1994 (4602.0).
0
500
1,000
1,500
2,000
2,500
3,000
000
NSW Vic. Qld SA WA Tas. NT ACT
Mains/town
Rainwater tank
Spring
Bore
Bottled
Other
Sources of water by households(a), June 1994
Australia
(a) Totals do not equal the sum of water sources in each column as more than one combination may be specified.
Source: Environmental Issues: People's Views and Practices, June 1994 (4602.0).
Australia has a very limited supply of water compared to many countries of the
world. Its supply is a critical environmental consideration. The following table
66 Source - 1998 Year Book Australia
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shows selected data having environmental significance. The data have been prepared by the OECD and show a comparison of Australia with some selected
countries67.
OECD environmental data Indicator Australia Canada USA Netherla
nds Sweden UK World
Estimated renewable fresh water resources,
long-term annual average (billion m3)
343 2,740 2,460 11 167 71 274,900
Total water abstraction (million m3)
1980 n.a. 37,864 525,000 14,794 4,106 13,912 600
1990 n.a. 46,878 468,000 n.a. 2,932 14,237 22,300
Population served by waste water treatment
plants (%)
1980 n.a. 64 70 73 82 82 n.a.
1990 n.a. 70 n.a. 93 95 87 n.a.
Population (million)
1981 14.9 24.4 230.1 14.3 8.3 56.4 4,513.5
1991 17.3 27.0 252.7 15.1 8.6 57.6 n.a.
Population density (persons/km2)
1981 1.9 2.4 24.6 381.7 18.5 230.2 33.7
1991 2.2 2.7 27.0 403.7 19.2 235.4 n.a.
1991 114.8 112.7 111.9 117.4 108.8 114.3 n.a.
Source: OECD, Environmental Data Compendium, 1993.
The population served by waste water treatment is very high by world standards,
but on the lower end compared to other OECD countries. The population that is serviced by sewerage are “secondary” services, with nearly
all towns / cities with as population above 20,000 persons having some form of service provided, as follows:
67 Source - 1998 Year Book Australia
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(0.1%) Untreated
(38.2%) Primary
(57.0%) Secondary
(4.8%) Tertiary
Population Served by Sewerage
Australia
Source: Australia: State of the Environment 1996
Extrapolated from DPIE 1991
0%
20%
40%
60%
80%
100%
Population Size
Pro
po
rtio
n o
f Po
pul
atio
n (%
)
5,000 - 20,00020,000 - 100,000
100,000 - 500,000>500,000
Untreated
Primary
Secondary
Tertiary
Population Served by Sewerage
Australia
Source: Australia: State of the Environment 1996
Extrapolated from DPIE 1991
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Although variable on a state-by-state basis, the water resources of Australia are still under-developed, as shown in the following graph:
0
10
20
30
40
0
1
2
3
Tho
usa
nd
s
Mill
ion
s
Ava
ilab
le /
De
velo
pe
d R
eso
urc
e (
gig
alit
res)
Are
a (
KM²)
NSW Vic. Qld SA WA Tas. NT ACT
Developed Resource Major divertible resource Area (KM²)
Surface water resources of States/Territories
Comparison of Divertible and Developed Surface Water Resources
Source: Australian Water Resources Council, 1987.
Primary Source - 1998 Year Book Australia
The Role of Local Government & Other Authorities68 Local government authorities govern areas typically described as cities, towns,
shires, boroughs, municipalities and district councils. Although the range of functions undertaken by local governments varies between the different jurisdictions, their powers and responsibilities are generally similar and cover such matters as:
• the construction and maintenance of roads, streets and bridges; • water, sewerage and drainage systems; • health and sanitary services; • the supervision of building; and • the administration of regulations relating to items such as weights and
measures, slaughtering, and registration of dogs. Local governments' own-source revenue is derived mainly from property taxes.
They also rely on grants from the Commonwealth and their parent State/Territory governments (except for the Australian Capital Territory, which has no separate
68 Primary source for data in this section: 1998 Australia Year Book
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local government).
A considerable proportion of Local Government outlays are expended on the provision of water and sewerage services, which are aggregated within “General Public Services” as shown on the table below:
LOCAL GOVERNMENTS CONSOLIDATED OUTLAYS, By purpose 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96
Purpose $m $m $m $m $m $m
General public services 1,475 1,552 1,495 1,479 1,441 1,384
Public order and safety 116 120 127 190 225 251
Education 36 38 45 31 34 36
Health 157 162 157 174 215 195
Social security and welfare 311 358 409 450 485 572
Housing and community amenities 1,331 1,263 1,379 1,362 1,489 1,781
Recreation and culture 1,137 1,144 1,338 1,424 1,545 1,629
Fuel and energy(a) 405 324 393 25 3 -539
Agriculture, forestry, fishing and hunting 16 17 16 12 13 16
Mining, manufacturing, construction etc. 117 115 112 96 128 98
Transport and communications(b) 1,906 1,944 2,116 2,000 1,894 10,150
Other economic affairs 61 64 73 71 10 -10
Other purposes 1,265 1,028 1,015 672 623 601
Total 8,332 8,128 8,675 7,989 8,106 16,163 (a) Negative outlays in this category in 1995-96 are due to electricity asset sales during that year. (b) The large 1995-96 figure is due to the transfer of roads from the State Government sector. Source: ABS, unpublished Government Finance data. (from: Australian Year Book, 1998)
Sewerage
Latest available data for sewerage only, depicting the split between “capital” and “current” expenditure, and is shown below:
$0
$200
$400
$600
1993-94
$m
Commonwealth State Local
Current
Capital
Outlays on Sanitation and Protection of the Environment
SEWERAGE
Environment Protection Expenditure, Australia (1992-93 and 1993-94)
Australian Bureau of Statistics Cat 4603.0
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State-by-state, the position is as follows:
($100)
$0
$100
$200
$300
$400
1993-94
$m
NSW Vic Qld SA WA Tas NT ACT
Current
Capital
Environment Protection Outlays, By State
SEWERAGE
Environment Protection Expenditure, Australia (1992-93 and 1993-94)
Australian Bureau of Statistics Cat 4603.0
Capital expenditure outlays for sewerage also varies, sometimes considerably,
from year to year, as demonstrated thus:
$0
$200
$400
$600
$800
$1,000
All Expenditure (Commonwealth, State and Local)
$m
Current Capital
1991-92
1992-93
1993-94
Outlays on Sanitation and Protection of the Environment
SEWERAGE
Environment Protection Expenditure, Australia (1992-93 and 1993-94)
Australian Bureau of Statistics Cat 4603.0
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The National Water Quality Management Strategy. In association with the States and Territories, the Federal Government is
developing the National Water Quality Management Strategy which covers fresh and marine waters, reclaimed water, and rural water management. The objective of the Strategy is to achieve sustainable use of the nation's water resources by protecting and enhancing their quality while maintaining economic and social development. The Strategy provides a nationally consistent approach through the National Water Quality Management Guidelines which have a shared national objective but provide the flexibility to respond to local and regional circumstances.
The Strategy also encompasses the development of guidelines for urban storm
water and sewerage systems addressing in particular the following issues: effluent management, acceptance of trade (industrial) wastes, the reuse of reclaimed water, and sludge management.
Water Management69
Australia's water resources are managed by a large number of resource
management agencies, irrigation authorities, metropolitan water boards, local government councils and private individuals. State authorities dominate the assessment and control of water resources as, under the Commonwealth Constitution, primary responsibility for management of water rests with the individual State Governments. The Commonwealth Government is responsible for matters relating to the Territories, and participates indirectly through financial assistance or directly in the coordination or operation of interstate projects through bodies such as the Murray-Darling Basin Commission.
Financial assistance is provided primarily through the Federal Water Resources
Assistance Program. The Australian Water Resources Council (AWRC), consisting of the
Commonwealth, State and Territory Ministers with portfolio responsibilities for water resources, is the peak forum for the water industry. AWRC and the Australian and New Zealand Environment and Conservation Council (ANZECC) are working together to develop the National Water Quality Management Strategy. Included as part of the National Strategy will be matters for priority attention such as:
• development of a policy framework for water quality management; • review of drinking water guidelines; • management of sewerage systems; • guidelines for ground water protection; • water quality management in the rural environment; and • guidelines for water quality including:
- national criteria - effluent guidelines.
69 Source: Year Book Australia, 1995 (ABS Catalogue No. 1301.0), and Year Book Australia 1998
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Engineering Construction Activity in Australia - Water Supply,
Sewerage & Drainage (An Overview)70 The total value of engineering construction work done during 1996-97 was
$15,215m, a $629m (4%) rise on the 1995-96 estimate of $14,586m. Engineering construction work done for the public sector rose by $58m (1%) to $9,527m and work done for the private sector increased by $571m (11%) to $5,688m.
Overall, the highest expenditure occurred on Roads, highways and subdivisions
(30% of the total value of engineering construction work done), Telecommunications (18%), Heavy industry (16%) and Electricity generation, transmission and distribution (10%). In terms of work done for the public sector, engineering construction activity centred on Roads, highways and subdivisions (32% of total public sector activity, compared with 34% in 1995-96), Telecommunications (27%, down from 28% in 1995-96), Railways (13%, up from 10% in 1995-96) and Electricity generation, transmission and distribution (11%, up from 10% in 1995-96).
For the private sector, major construction activity was undertaken in Heavy
industry, which rose by $192m to $2,348m (41% of total private sector expenditure in 1996-97), and Roads, highways and subdivisions, which rose by $360m to $1,463m (26%). Expenditure on Roads, highways and subdivisions accounted for a smaller proportion and Railways an increased proportion compared with 1995-96.
Nonetheless, engineering construction work completed for the two categories of
Water Storage and Supply, and Sewerage and Drainage, was significant. Consider the following:
Value of engineering construction work done ($ MILLION) 1993-94 1994-95 1995-96 1996-97
For the For the For the For the For the For the For the For the
private public private public private public private public
sector sector Total sector sector Total sector sector Total sector sector Total
Roads, highways & subdivisions
1,145 3,103 4,248 1,106 2,998 4,104 1,103 3,221 4,324 1,463 3,068 4,530
Bridges 10 329 339 6 268 274 37 193 230 34 188 222
Railways 39 694 732 29 932 961 61 994 1,055 80 1,239 1,317
Harbours 69 131 200 26 81 107 24 82 106 80 173 253
Water storage & supply 145 598 741 267 455 722 253 371 625 121 309 336
Sewerage & drainage 109 532 641 73 535 608 148 482 629 75 409 484
Electricity generation transmission & distribution
152 1,341 1,493 175 1,286 1,461 443 922 1,365 411 1,089 1,500
Pipelines 140 120 260 171 129 300 271 323 594 235 101 335
Recreation 223 155 377 325 138 463 389 178 567 641 194 835
Telecommunications 83 1,630 1,713 73 2,202 2,275 194 2,626 2,820 166 2,617 2,783
Heavy industry 1,604 106 1,710 1,644 62 1,706 2,156 67 2,222 2,348 128 2,476
Other 7 14 22 12 9 21 37 12 50 36 12 48
Total 3,725 8,753 12,478 3,907 9,095 13,002 5,117 9,469 14,586 5,688 9,527 15,215
Source: Engineering Construction Activity, Australia (8762.0.40.001). and Engineering Construction Activity, Australia (8762.0). Source - 1998 Year Book Australia, and Year Book Australia,1995 (ABS Catalogue No. 1301.0)
70 Source - 1996 Year Book Australia, and Year Book Australia, 1995 (ABS Catalogue No. 1301.0)
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0
500
1,000
1,500
($ M
ILLI
ON
)
1991-921992-93
1993-941994-95
1995-961996-97
Water storage & supply
Sewerage & drainage
Value of engineering construction work done
Australia
Source: Engineering Construction Activity, Australia (8762.0.40.001). and Engineering Construction Activity, Australia (8762.0).
Source - 1998 Year Book Australia, and Year Book Australia,1995 (ABS Catalogue No. 1301.0)
The vast majority of work being undertaken, in relation to the provision of water
storage and supply, and sewerage and drainage, is for the public sector. However, the proportion of work being undertaken for the public sector is increasing, as the following graph shows:
0
500
1,000
1,500
($ M
ILLI
ON
)
1991-92 1992-93 1993-94 1994-95 1995-96 1996-97
Private Sector
Public sector
Value of Engineering Construction Work - AustraliaWater Storage & Supply, Sewerage & Drainage
Source: Engineering Construction Activity, Australia (8762.0.40.001). and Engineering Construction Activity, Australia (8762.0).
Source - 1998 Year Book Australia, and Year Book Australia,1995 (ABS Catalogue No. 1301.0)
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The majority of work undertaken for capital works programs is undertaken by
private contractors (see graph below):
$0
$10
$20
$30
Waste Handling Expenses
$m
1992-93 1993-94
Paid to Government
Paid to Private Contractors
Selected Service Industries Waste Removal Expenses, By Industry
Water Supply, Sewerage and Drainage
Environment Protection Expenditure, Australia (1992-93 and 1993-94)
Australian Bureau of Statistics Cat 4603.0
MARKET OVERVIEW (BOO / BOOT PROJECTS & EQUIPMENT
SUPPLY) - INTRODUCTION As would be expected there are two main markets:-
• National Market • Export Market
NATIONAL MARKET
Overview Mr Tony Wright of Wright Corporate Strategy Pty Limited & President of the EMIAA
(Ref 14) looks at the past and the future of the Australian Water industry:-
"Government Domination of Markets”
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Government agencies purchase the great majority of the goods and services in the Australian market, and also supply a major portion of the market for services through various authorities and business enterprises. This market domination has had a major impact on the structure and capabilities of the environmental management industry in Australia.
The dominant position of government within the industry has historically led to:
• A large proportion of industry expertise within government
• An immature private sector in comparison to major overseas players
• The "locking up" of the government business sector's economic and technical strength which cannot be used in international (or even interstate) markets
• Inflexible domestic markets
• A severe shortage of private sector demonstration sites, which can display capability to supply fully integrated solutions for major environment management infrastructure."
"Micro-Economic Reform”
With micro-economic reform, the dominate market position of government
monopoly agencies is being broken down - as has been the case overseas in other mature economies. The withdrawal of government from the business sector, coupled with the current market drivers, is creating new and expanding opportunities for the private sector.
However, the pace of micro-economic reform in government is not being
matched by a corresponding pace of reform in industry. As a result, gaps are being created between demand requirements of government agencies, and the supply capabilities of industry. The gap creation results in an imbalance in the relative competitiveness between domestic and international suppliers.
A number of large and commercially mature countries have already been
through these reforms and have created highly competitive internationalised corporations. These corporations now roam the world markets looking for the emergence of similar market gaps to those which resulted in their own creation. The Australian market under the influences of COAG, competition policy, increasing community and political desire for environmental amenity plus general market deregulation, presents such an opportunity for these international suppliers."
This increased competitiveness has encouraged the emergence of a number of
alternative models to the traditional methods of infrastructure and service delivery which is leading to a very competitive market place in the water industry. However there has been a reluctance by government to adopt some of these new delivery solutions.
Micro-economic reform has led to outsourcing becoming the main method for
agencies to withdraw from the direct provision of infrastructure and procure the designing, the building, the operating and the owning of water infrastructure from the private sector. This leads to the potential for a higher level of public - private collaboration rather than the adversarial attitude in the past.
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As the micro-economic reform proceeded in Australia through 1994 problems developed between suppliers and purchasers in relation to the processes being used to implement outsourcing contracts. The EMIAA investigated the problems through two National workshops on Suppliers Perspectives and Purchasers Perspectives which identified processes to address the problems. It also provided a realistic reflection of the National Market and its future direction which is reported in "Improving the Outsourcing Process" EIR Autumn 1997 Issue Number 4 (Ref.27)
Relevant outcomes from these workshops are summarised in the following
section. The goals of the of the purchasers of water and waste water treatment services is
for a higher quality service at lower cost. There is a view that outsourcing will achieve these goals. The expectation is that this will result from :-
• The application of business rather than engineering perspective
• Financial benefits to agencies - lower costs and reduced burden on balance sheet
• Value for money and less 'fat in the system'
• A safer environment
• Greater investment in Australian infrastructure
• World class and world competitive solutions
• Keeping up to date with technology
• Enhanced export capability of Australian industry
• A longer term commitment and perspective from contractors Important issues for purchasers are seen to develop from a new market with an
expectation of imperfections and transitional problems such as :-
• Lack of market depth due to newness and lack of players in some segments.
• Risk identification and allocation
• Slow rate of understanding and experience
• Structural imperfections -subsidies and differing tax treatments Internal bids are seen to be a transitional issue and associated issues are seen to
be:-
• Identification and allocation of risk
• The need for careful management
• Their usefulness in creating competition
• The financial distortions from Public Sector costing which does not include accrual accounting , taxation differences, subsidies from state, and cost of funds
A cooperative approach between suppliers and Government agencies is
expected to overcome market imperfections and transition problems, leading to benefits to water agencies:-
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• Less daunting exploration of different project deliver methods
• Assistance in considering , adopting and implementing the right outsourcing solution
• The creation of a market with more depth
• More efficient and effective contract negotiations
• Ability to demonstrate probity and accountability. Commercial principals and practices and model contracts are considered
desirable for dealing with the broader outsourced packages and should include:-
• Disclosure about whether there is a go / no-go bench mark
• Risk allocation
• Evaluation criteria and whether they, and their weighting, should be published
• The handling of internal bids
• Probity rules
• Tender periods
• Interaction between agencies and suppliers before and after tender submission
Australian States The status of outsourcing on a generalised basis for water authorities in NSW`
Victoria, Queensland, South Australia, and Western Australia is indicated roughly in the Attached Table to this Report: WATER INDUSTRY OUTSOURCING (Source: "Water Industry Outsourcing" Tony Wright EIR Fourth Edition Autumn 1997).
This information highlights the fact that a number of functional areas are being
“outsourced” by water authorities in NSW, Victoria, Queensland, South Australia and Western Australia. However, it is noted that the “picture” is constantly changing as initiatives are undertaken by water services organisations.
It is clear that these functions, ranging from policy and planning, to infrastructure
creation, community and customer liaison, are under review with many areas being outsourced according to situation.
New South Wales and Victoria
The primary authorities here are:
1. Sydney Water Corporation 2. Hunter Water Corporation 3. Dept. of Land and Water Conservation 4. NSW Local Councils 5. Melbourne Water Corporation 6. Melbourne Retail Corporations 7. Victorian Water Authorities
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Whilst the NSW Department of Public Works and Services undertake most of the functions on behalf of Local Councils in NSW, they, like all other authorities listed above, outsource all their major infrastructure creation. Water distribution operations are outsourced by the Dept. of Land & Water Conservation, and the Victorian Water Authorities, with water treatment operations and maintenance being outsourced by Sydney Water Corporation, and the Melbourne Water Corporation. At the moment, all authorities conduct their wastewater treatment operations “in-house”, representing a potential business potential once NCP and other factors are considered.
Queensland, South Australia, and Western Australia. The primary authorities here are:
1. Brisbane City Council 2. Queensland Water Boards 3. Queensland Local Councils 4. SA Water Corporation 5. WA Water Corporation
Similar to New South Wales and Victoria, all authorities listed above outsource all
or at least part of their major infrastructure creation. Water distribution operations are outsourced by the SA Water Corporation and the WA Water Corporation, with water treatment operations and maintenance being outsourced by the SA Water Corporation only at this stage. At the moment, with the one exception of the WA Water Corporation, all authorities conduct their wastewater treatment operations “in-house”: similar to News South Wales and Victoria, this represents a significant potential business potential given the implications of NCP and other factors.
The SA Water Corporation in fact outsource nearly all of their functional areas,
with the exception of planning and policy, and commercial operations.
Queensland There is further anecdotal evidence supporting the potential for market
development of water / waste water treatment plants. The Consultant reports
that at a recent seminar71, during a discussion led by the Local Government Association of Queensland Executive Director, Mr Greg Hallam, it was stated that “there are a considerable number of small local authorities looking for operators
of water and waste water treatment plants”. The purpose of this seminar was in
fact to assist in building an internationally competitive water industry in Queensland through public and private sector collaboration, including the realisation of the State Government’s vision for the ongoing development of the water industry and its expansion into the Asian region.
The afore-mentioned seminar was designed to encourage leaders in the water
industry (including Aquatec-Maxcon, and the Ipswich City Council) to work with government to explore ways to turn various opportunities into successful business outcomes. These opportunities were categorised as follows:
71 “Queensland’s Water Industry: Doing Business Together”, held 15 April 1998, hosted by the Queensland
Government (Dept. of the Environment), Department of Economic Development and Trade, and EMIAA
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1. Opportunities for the water industry are being generated as the result of
global and local forces. These include the recognition that protection of
the environment is not an optional extra but an integral part of
development which reflects the principles of ecologically sustainable
development, and;
2. Another force is the National Competition Policy, which will change the
way many organisations in the water industry do business.72
As a guide to the order of magnitude of the market an assessment of the
expenditure on water supply and sewage treatment construction for Local Government 1998 to 2000 is set out the table below
Local Government Queensland Assessment of Expenditure on Water Supply & Sewerage Treatment Plant Construction 1998 to 2001
Water Supply Sewage Treatment
High Low Median High Low Median
Bowen 1,000,000 2,000,000 1,500,000 n/a n/a
Caboolture n/a n/a 15,000,000 16,000,000 15,500,000
Cairns 8,000,000 9,000,000 8,500,000 n/a n/a
Cooloola 2,000,000 3,000,000 2,500,000 14,000,000 15,000,000 14,500,000
Douglas 3,000,000 4,000,000 3,500,000
Gold Coast 14,000,000 15,000,000 14,500,000 55,000,000 56,000,000 55,500,000
Ipswich 11,000,000 12,000,000 11,500,000 20,000,000 21,000,000 20,500,000
Kingaroy n/a n/a 3,000,000 4,000,000 3,500,000
Logan 12,000,000 13,000,000 12,500,000 9,000,000 10,000,000 9,500,000
Maroochy 22,000,000 23,000,000 22,500,000 16,000,000 17,000,000 16,500,000
Pine 9,000,000 10,000,000 9,500,000 32,000,000 33,000,000 32,500,000
Redcliffe n/a n/a 9,000,000 10,000,000 9,500,000
Redlands n/a n/a 8,000,000 9,000,000 8,500,000
Toowoomba 11,000,000 12,000,000 11,500,000 n/a n/a
Townsville 20,000,000 21,000,000 20,500,000 12,000,000 13,000,000 12,500,000
Torres Strait n/a n/a 6,000,000 7,000,000 6,500,000
Total $110,000,000 $120,000,000 $115,000,000 $202,000,000 $215,000,000 $208,500,000
Grand Total (Water & Sewerage) $323,500,000
Source: Undisclosed sources and Consultants estimates
Estimate of additional resources required for Local Authorities
72 Quotation from the material distributed in relation to the “Queensland’s Water Industry: Doing Business
Together” Seminar, held 15 April 1998
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$0
$20
$40
$60
$80
Mill
ion
s
Local Authority
Exp
end
iture
Esti
ma
te (
Me
dia
n)
BowenCaboolture
CairnsCooloola
DouglasGold Coast
IpswichKingaroy
LoganMaroochy
PineRedcliffe
RedlandsToowoomba
TownsvilleTorres Strait
Water Supply Sewage Treatment
Local Government QueenslandAssessment of Expenditure on Water Supply & Sewerage Treatment Plant Construction 1998 to 2001
Source: Undisclosed sources and Consultants estimates
Estimate of additional resources required for Local Authorities
The data for this table does not differentiate between construction for the
distribution / collection systems and the treatment plants.
THE WATER MANAGEMENT INDUSTRY IN THE UNITED STATES The Water Management Industry in the United States, whilst not a good potential
market for the Alliance, due to barriers for entry, can nonetheless provide a guide to trends occurring in the industry for the more advanced, industrialised nations world-wide.
Revenue generation in the country has been relatively stable for the last decade,
with waste water treatment service experiencing a steady increase (refer table below and subsequent graph).
The enormous size of the industry may be appreciated by considering revenue
generated in the following selected segments (1996 data):
• Wastewater Treatment Services $24.0 billion • Water Utilities $26.4 billion • Water, Equipment & Chemicals $17.5 billion
Water and waste water treatment accounts for over 40% of the total revenue
distribution for selected environmental sectors listed below, with 13.2% of the total revenue distribution attributed to wastewater treatment centres. The average growth rate over the last decade has ranged from 1.2% per annum to over 4%, with 2.2% growth experienced in 1996 (latest available data).
Revenue Generation in the US Environmental Industry 1991 - 1996
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$US Billions
Environmental Industry Segment 1991 1992 1993 1994 1995 1996
Analytical Services 1.6 1.4 1.4 1.3 1.2 1.2
Wastewater Treatment Services 21.1 21.5 22.0 22.7 23.4 24.0
Solid Waste Management 27.0 28.2 29.4 31.0 32.5 33.9
Hazardous Waste Management 6.4 6.6 6.5 6.4 6.2 6.0
Remediation / Industrial Services 7.3 7.6 8.1 8.4 8.6 8.6
Consulting & Engineering 13.5 14.3 14.6 15.3 15.5 15.2
Water, Equipment & Chemicals 14.1 14.7 15.0 15.6 16.5 17.5
Instrument Manufacturing 2.3 2.6 2.7 2.9 3.0 3.1
Air Pollution Control Equipment 13.5 13.8 14.1 14.5 15.0 15.7
Waste Management Equipment 10.8 11.1 10.9 11.2 11.7 12.0
Process & Prevention Technology 0.5 0.6 0.7 0.8 0.8 0.8
Water Utilities 21.0 21.9 23.1 24.2 25.3 26.4
Resource Recovery 12.0 12.2 13.3 15.4 16.9 14.3
Environmenmtal Energy Sources 1.9 2.0 2.1 2.2 2.3 2.4
Total All Segments 153.0 158.5 163.9 171.9 178.9 181.1
Services 76.9 79.6 82.0 85.1 87.4 88.9
Equipment 41.2 42.8 43.4 45.0 47.0 49.1
Resources 34.9 36.1 38.5 41.8 44.5 43.1
Total All Segments 153.0 158.5 163.9 171.9 178.9 181.1
Source: Environmental Business Journal, Annual Industry Overview 1997
Original Source: Environmental Business International Inc., San Diego CA.
$0
$50
$100
$150
$US
Bill
ion
s
1991 1992 1993 1994 1995 1996
Wastewater Treatment Service Solid Waste Management Consulting & Engineering
Water, Equipment & Chemicals Waste Management Equipmen Water Utilities
Revenue Generation in the US Environmental Industry 1991 - 1996
Selected Sectors Only
Source: Environmental Business Journal, Annual Industry Overview 1997
Orignal Source: Environmental Business International Inc., San Diego CA.
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$0
$20
$40
$60
$80
Environmenta l Industry Segment
$US
Bill
ion
s
AirWater / Waste Water
Hazardous WasteRemediation
Solid WasteMulti
Wastewater Treatment Service Solid Waste Management Consulting & Engineering
Water, Equipment & Chemicals Waste Management Equipmen Water Utilities
Revenue Distribution in the US Environmental Industry By Media
Selected Sectors Only
Source: Environmental Business Journal, Annual Industry Overview 1997
Orignal Source: Environmental Business International Inc., San Diego CA.
(9.9%) Air
(40.6%) Water / Waste Water
(7.4%) Hazardous Waste
(7.8%) Remediation
(31.7%) Solid Waste
(2.6%) Multi
Revenue Distribution in the US Environmental Industry By Media
Selected Sectors Only
Source: Environmental Business Journal, Annual Industry Overview 1997
Orignal Source: Environmental Business International Inc., San Diego CA.
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(0.6%) Analytical Services
(13.2%) Wastewater Treatment Services
(18.7%) Solid Waste Management
(3.3%) Hazardous Waste Management
(4.7%) Remediation / Industrial Services
(8.4%) Consulting & Engineering
(9.7%) Water, Equipment & Chemicals
(1.8%) Instrument Manufacturing
(8.7%) Air Pollution Control Equipment
(6.6%) Waste Management Equipment (0.4%) Process & Prevention Technology
(14.6%) Water Utilities
(7.9%) Resource Recovery
(1.3%) Environmenmtal Energy Sources
Revenue Distribution in the US Environmental Industry By MediaAll Sectors
Source: Environmental Business Journal, Annual Industry Overview 1997
Orignal Source: Environmental Business International Inc., San Diego CA.
Revenue Growth in the US Environmental Industry 1991 - 1996
$US Billions
Environmental Industry Segment 1995 1996 1997 1998 1999 2000
Analytical Services 1.2 1.2 1.2 1.2 1.2 1.2
Wastewater Treatment Works 23.4 24.0 24.9 25.9 26.8 27.8
Solid Waste Management 32.5 33.9 34.9 35.8 36.6 37.4
Hazardous Waste Management 6.2 6.0 5.8 5.6 5.4 5.1
Remediation / Industrial Services 8.6 8.5 8.8 8.9 8.9 8.8
Consulting & Engineering 15.5 15.2 15.4 15.6 15.7 15.8
Water, Equipment & Chemicals 16.5 17.6 18.3 19.0 19.7 20.4
Instrument Manufacturing 3.0 3.1 3.3 3.4 3.6 3.7
Air Pollution Control Equipment 15.0 15.7 15.9 16.2 16.4 16.5
Waste Management Equipment 11.7 12.0 12.1 12.3 12.3 12.5
Process & Prevention Technology 0.8 0.8 0.9 1.1 1.1 1.3
Water Utilities 25.3 26.4 27.3 28.2 29.0 29.9
Resource Recovery 16.9 14.3 15.0 15.6 16.1 16.6
Environmenmtal Energy Sources 2.3 2.4 2.6 2.7 2.9 3.1
Total All Segments $178.9 $181.1 $186.4 $191.5 $195.7 $200.1
Services $87.4 $88.8 $91.0 $93.0 $94.6 $96.1
Equipment $47.0 $49.2 $50.5 $52.0 $53.1 $54.4
Resources $44.5 $43.1 $44.9 $46.5 $48.0 $49.6
Total All Segments $178.9 $181.1 $186.4 $191.5 $195.7 $200.1
Average Growth Rate 4.2% 1.2% 2.8% 2.7% 2.4% 2.2%
Source: Environmental Business Journal, Annual Industry Overview 1997
Original Source: Environmental Business International Inc., San Diego CA.
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$0
$50
$100
$150
$200
4.2% 1.2% 2.8% 2.7% 2.4% 2.2%
$US
Bill
ion
s
1995 1996 1997 1998 1999 2000
Wastewater Treatment Works Solid Waste Management Consulting & Engineering
Water, Equipment & Chemicals Waste Management Equipmen Water Utilities
Revenue Growth in the US Environmental Industry 1991 - 1996
Selected Sectors Only (Average Growth Rates Shown)
Source: Environmental Business Journal, Annual Industry Overview 1997
Orignal Source: Environmental Business International Inc., San Diego CA.
AQUATEC - MAXCON OUTLOOK FOR 1997/1998 (Primary reference is made to the AQUATEC GROUP 1997/98 BUDGET and
associated papers)
Municipal Market
QUEENSLAND
M$15 ➱ M$11
State subsidy of 40% applies and should lead to activity but agonising over competition policy could prolong current slowdown. (Prediction - less than prior year.)
NEW SOUTH WALES
M$2 ➱ M$6
Treasury worry of Olympic costs dominates even though SWB has yet again announced a large program. (Prediction - some increase but show material increase in 1998/99)However there is considerable backlog which may be addressed
VICTORIA
M$3 ➱ M$7
There is considerable backlog particularly in capacity for producing potable water. ( Prediction should be well above prior year)
SOUTH AUSTRALIA
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M$0 ➱ M$1
Considerable backlog at United Water. ( Prediction - should well above prior year )
WESTERN AUSTRALIA / TASMANIA / NORTHERN TERRITORY
Minor Action
Marketing Plan
General If a Geelong project is considered abnormal growth stalled at around $ 20 million
till 1996/97 To maintain a $30 million annual turnover greater marketing effort is needed.
Market Segments
MUNICIPAL WASTE WATER
Customers
The main customers are:-
• Local Authorities or Water Authorities in most States with Public Works Departments or Department of Land and Water Conservation in States such as NSW.
• Civil construction contractors
• Owners of newly privatised existing plants
• Consulting engineers
Competitors
In diffused air: • Water Treatment (Australia ) Pty Ltd • FLYGT • Market share and margins have fallen
Surface Aerators
• Warman • Our market share Is 40 to 50%
Screens/Clarifiers • Contrashear • Aquaclear • Epco • Aquatec have possibly around 30% of the market.
Major General competitors:
• E.S,I.and A.N.I. for nutrient removal • C.G.E • Lyonnaise des Eaux • ANI-Kruger-Thames • Tubemakers Water - Henry Walker • U.S. Filters
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MUNICIPAL POTABLE WATER
Customers
• Similar to Municipal Waste Water
Competition
• Water Treatment (Australia)-dominant market share, at very low margins. Big opportunity if this company fails.
• Aquaclear • Purac • Tema • Mentec
INDUSTRIAL WASTE WATER
Customers
• Food processors, drink manufactures and tanneries. • Numerous customers but jobs small.
Competition
• SEPA • ESI • Hybractor
PROCESS WATER
Customers
• Big jobs in power station boiler water supplies. • ABB • Consultants, civil contractors/project managers
Competition
• NEI John Thompson • Other boiler suppliers
Target Markets
Target Markets and estimated value (turnover) from each of these market segments are depicted on the graph below:
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$0
$10
$20
$30
Mill
ion
s
Municipal WW & Pot WIndustrial WW
Process WaterBoiler Feed Water
Mineral Ind. Dewatering
Equipment Supply / Install Design & Construct Projects
BOOT
Aquatec Environmental Limited and Controlled Entities
TARGET MARKETS 1997/98
Source: Aquatec Group 1997/98 Budget
EXPORT MARKET General
Aquatec-Maxcon commenced exporting in 1987: the key milestones are -
• New Zealand 1987 • PNG 1990 • Indonesia 1992 • Singapore 1994 • Vietnam & India 1996
The Company intends to make further inroads into the SE Asian market. This is a large market (within Asia generally), as may be seen from the following table, however Australia remains a significant market by comparison to other countries within the Asian region:
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The Asia Pac ific Water & Wastewater Industry (1996)Source: Asia Environmental Business Journal, May / June / July 1997Taken from: EBI Inc. ex quoted source.
$US 000
WaterEquipment &
Chemica l
WaterTeatment
Works
Water Utilities Other Tota l
Japan 5,610 9,690 12,240 800 28,340Australia 820 1,220 1,430 200 3,670South Korea 510 750 910 100 2,270Taiwan 390 430 530 70 1,420China 290 330 510 80 1,210India 230 240 440 60 970Thailand 200 240 380 30 850Hong Kong 100 210 450 40 800New Zealand 130 210 240 30 610Indonesia 140 110 300 50 600Singapore 70 110 300 40 520Malaysia 120 110 160 20 410Phillipines 70 50 110 20 250Other 40 60 90 30 220Tota l 8,720 13,760 18,090 1,570 42,140
Other" includes water revenues in C & E, analytical services and insruments
$0
$1
$2
$3
$4
Tho
usa
nd
s
$US
000
AustraliaSouth Korea
TaiwanChina
IndiaThailand
Hong KongNew Zealand
IndonesiaSingapore
MalaysiaPhillipines
Other
Water Equipment & Chemical Water Teatment Works
Water Utilities Other
The Asia Pacific Water & Wastewater Industry (1996)Excludes Japan
Source: Asia Environmental Business Journal, May / June / July 1997
Taken from: EBI Inc. ex quoted source.
An appreciation of the size of the Japanese market is clearly shown in the graph
below:
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(67.3%) Japan
(8.7%) Australia (5.4%) South Korea(3.4%) Taiwan
(2.9%) China(2.3%) India(2.0%) Thailand(1.9%) Hong Kong(1.4%) New Zealand(1.4%) Indonesia(1.2%) Singapore(1.0%) Malaysia(0.6%) Phillipines(0.5%) Other
The Asia Pacific Water & Wastewater Industry (1996)
Water Equipment, Chemicals, Water Treatment Works, Utilities & Other
Source: Asia Environmental Business Journal, May / June / July 1997
Taken from: EBI Inc. ex quoted source.
Aquatec-Maxcon: Outlook for 1997/98
New Zealand
There is considerable backlog and large projects out to pre-qualification. (Prediction - should be above prior year )
Ausaid
Our reputation directly and indirectly via prime contractors (like OPCV ) is growing. (Prediction - should be above prior year )
Australian Industrial
Modest economic growth does bring new factories and rebuilds. Our visibility is probably a little better. (Prediction - should be above prior year )
Standard Products
Considerable investment has now been made in ozone and Trojan. (Prediction - should be large increase )
ADB / World Bank
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These projects have long gestation periods and heavy marketing costs. No new projects likely this year.
Indonesia
GENERAL The Indonesian market is serviced by PT AQUATEC-MAXCON INDONESIA which is
a Indonesian company 80% owned by Aquatec Maxcon. (Refer Appendix F - Aquatec Group: Organisation Chart )
The recent Indonesian currency crisis will have significantly changed the situation
contained the budget papers for several years. It is understood that the emphasis may move from waste water treatment to the provision of potable water supplies.
MILESTONES
June 1992 First Freeport Irian Jaya order. JULY 1994 Board of Investment approval. Sept. 1994 Approval for first AIDAB job (Cengkareng). Dec. 1994 Sign first order with PD Pal Jaya - No. 3 Agro. Dec 1994 Sign M.O.U with PD Pal Jaya for Melati, Danayasa. June 1996 Order for Taman Dayu. July 1996 Order for Karang Pilang ll, Surabaya. May 1997 M.O.U.'s for Lamongan, Jambi, Cirebon
MARKETING PLAN
Aquatec has planned to operate only in two of the numerous Indonesian market
segments. These are the government and the multinational markets. The municipal market is primarily a potable market with existing plants generally
being run down. This presents an opportunity for 'joint operation' and refurbishment.
Finance is a major problem with large jobs being financed by international
agencies like the World Bank who require international tendering. Finance will also be provided by BOOT schemes. In the short and medium term
this market has significant potential and significant risk because :-
• Many projects are too small for big multinational water utilities.
• Water authorities are not yet corporatised and 'bankable' so big multinationals find it difficult to commit.
LOCAL AUTHORITY MARKETING
The company has direct contact at high level with:-
• PD Pal Jaya (only municipal waste water department)
• 37 East Java authorities
• Cirebon and surrounds
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• Other West Java including PADM South Jakarta, Bogor, Cilegon etc.
• Central Java. Ganang is to continue to win work directly in Semerang. Also the support of the Queensland office and BCC Enterprises will be used
MULTINATIONAL MARKETING
Australian and multinational companies in Indonesia are to be given priority as
are water recycle projects, which offer better potential to exclude small low quality local contractors.
GOALS FOR THE YEAR
• Win at least two small contract jobs.
• Sign Jamba BOOT agreement.
• Sign contract for one other 'joint operation' BOOT project.
• Begin contract fabrication at Parung
Overseas Expansion At present resources are concentrated on Indonesia until it is firmly established.
Possibly enquiries from other countries in the region could lead to a permanent presence in say 5 years time.
• MALAYSIA problem with privatised municipal sewerage system being near bankrupt.
• VIETNAM possible flow on from AusAid reputation
• INDIA have conditional agreement to set up affiliate if next Mumbai tender is won.
• PHILLIPINES at present two spotters wanting to become affiliated
IPSWICH CITY COUNCIL - WATER & SEWERAGE SERVICES
The Market, & Future Prospects73
Primary Customer Base The delivery of water and sewerage services to the majority of the 47,000
domestic households in the region (i.e. approximately 44,000) together with a number of other commercial and industrial users, accounts for approximately 95% for water services and 88% for sewerage services of the population of the Council. The major commercial and industrial users include CSR Timber Products, Cosco Holdings, James Hardie & Co., QMeat Ipswich, Australian Meat Holdings, Swanbank Powerstation, and the RAAF Base Amberley.
73 Primary Source for data in this sub-section is - Bentleys Chartered Accountants (in Association with
Clayton Utz, Kinhill Economics, and John Larcombe and Associates) Public Benefit Assessment Report to
Ipswich City Council (Water & Sewerage Services), June 1977, pp 7 - 19
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The above market is dominated by the residential (premises) sector which accounts for 65% of all water being consumed. Annual revenue for these types of properties is $470 for water and $372 for sewerage per property. Consumers are without any real alternate choices between alternate suppliers to their properties, however this may change where large developers might seek the right to purchase wholesale water and sewerage services for their developments from the Council.
With regard to large corporate customers and developers, the Bentley Report
provides some insights to their views on commercialisation / corporatisation which are summarised thus:
• A corporatised water and sewerage business would enable a more market focussed supply response in the provision of service and a closer commonality of interest between supplier and customer
• A corporatised entity would have more incentive to design combinations of service quality and price that met market requirements
• A corporatised entity would have a vested interest, with developers, in facilitating development in the region the corporatised entity served.
Pricing Pricing policy of the Council is based on the “broad” achievement of cost
coverage74, with the “equitable treatment” of residents in the two former Council areas (i.e. the inclusion of the residents of the former Moreton Shire Council which is now included in the Ipswich City Council area) as follows (broad outline only):
WATER CHARGES 1996/97
Base Charge per annum
Consumption Charge per annum
Metered Properties $170 $0.25/KL for first 400 KL
$0.57/KL for next 200 KL
$1.02 for all additional KL
Consumer Category
Un-metered Properties
$490 Residential
$1065 - $9340 Commercial/industrial
$490 - $960 Other Uses
Sewerage charges are also levied on a per property basis, with water for flushing
charged in the price structure for the water business where properties are water metered. Those residential properties which are serviced by a septic tank but are nevertheless capable of being connected to the sewerage system are charged $300 per annum ($260 for vacant land). Trade waste services are charged on a volumetric basis differentiated according to substance.
For both water services and sewerage services, the Bentley Report comments that the Council has not yet identified the degree of cross subsidy which might be contained in its structure, and has not yet moved to ensure that full allowance for depreciation is included.
74 Cost coverage includes overhead and administrative costs incurred to support provision of services.
Revenue sources include developer contributions in respect of headworks, user charges, and benefited
area rates.
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Planned Capital Expenditure
Council assess that an additional 3,300 domestic / residential households will be established by the year 2001, representing an overall population growth of 12,000 persons (equivalent to an annual growth of 2%). Current planning to allow for this and other factors such as maintenance and upgrading of existing facilities, are reflected in the planning for infrastructure, with capital expenditure estimates as follows:
Ipswich City Council Actual and Planned Capital Expenditure (Water & Sewerage)
Actual to 1995/96; Others are estimates
Water $
Sewerage $
Total
1992/93 Actual 595,000 1,805,000 2,400,000
1993/94 Actual 2,310,000 3,285,000 5,595,000
1994/95 Actual 2,519,000 4,754,000 7,273,000
1995/96 Actual 1,168,000 9,633,000 10,801,000
1996/97 Estimated 6,194,000 8,335,000 14,529,000
1997/98 Estimated 8,146,000 12,858,000 21,004,000
1998/99 Estimated 7,031,000 7,800,000 14,831,000
1999/2000 Estimated 8,450,000 6,500,000 14,950,000
2000/01 Estimated 6,848,000 12,095,000 18,943,000
2001/02 Estimated 5,300,000 13,420,000 18,720,000
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p.16
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council
$0
$5
$10
$15
$20
$25
ActualActual
Actual
Estimated
Estimated
Estimated Estimated
Estimated Estimated
Mill
ion
s
$
1992/931993/94
1994/951995/96
1996/971997/98
1998/991999/2000
2000/012001/02
Water Sewerage
Ipswich City Council
Actual and Planned Capital Expenditure (Water & Sewerage)
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), p.16
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council
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INFRASTRUCTURE PROJECTS IN QUEENSLAND PROJECTS COMPLETED DURING 1996/ 1997
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14. BUSINESS DEVELOPMENT OPPORTUNITIES FOR THE
PROPOSED ALLIANCE - MAJOR INFRASTRUCTURE PROJECTS
IN QUEENSLAND
The following information provides details of major infrastructure Projects that
represent potential business opportunities, able to be exploited by the proposed Alliance.
Source for data in this section75: Project Queensland Australia, Issue No. 17
(1997/98), Department of Tourism, Small Business & Industry76.
PROJECTS COMPLETED DURING 1996/ 1997 This section outlines details of projects which became operational during 1996 or
early 1997.
Eungella - Moranbah Water Pipeline Eungella Water Pipeline Pty Ltd This $60 million project involved the construction of 120 km of pipeline and pump
station to supply water from Eungella Dam to Moranbah in the Central Queensland Coalfields. The pipeline has an inside diameter of 711 mm and the capacity to transport 15000 ML of water per annum.
Noosa Coastal Sewage Treatment Plant
The $23 million Noosa Coastal Sewage Treatment Plant has been constructed to accommodate increased flows up to 18 ML per day, due to urban growth, and to deliver a significant increase in the standard of treatment. The facility is subject to very stringent effluent license standards for nutrients. It utilises biological nutrient removal technology plus tertiary sand filtration and advanced disinfection.
North West Queensland Water Pipeline North West Queensland Water Pipeline Pty Ltd
This $55 million project involved the construction of a pump station and 133 km of pipeline to supply water from Lake Julius to the Ernest Henry Mine (see Project 45). The pipeline has an inside diameter of 600 mm and a capacity of up to 15,000 ML per annum.
Wetalla Sewage Treatment Works - Stage 4 Augmentation Toowoomba City Council
75 DTSBI advise that “whilst every care has been taken in the compilation of information and every
endeavour has been made to ensure that the information provided is updated and accurate at the
time of publication, the Department of Tourism, Small Business and Industry and its officers do not
accept any responsibility for any errors, omissions or inaccuracies whatsoever. Readers are advised to
seek advice from the companies concerned before acting upon information contained in this
publication.”
76 Data has been extracted from the electronic document Project Queensland Australia, Issue No. 17
(1997/98), Department of Tourism, Small Business & Industry, as published on the internet at http://www.dtsbi.qld.gov.au/dtsbi/projects.
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This $24 million project will increase the capacity of the Toowoomba Sewage Treatment Works by 60,000 equivalent persons (EP), to 150,000 EP. The new design of the works will enable the ultimate capacity of the site to be increased to 240,000 EP. The augmentation uses the latest biological nutrient removal (BNR) process. The process biologically removes nitrogen and phosphorus from the waste-water stream preventing the possible proliferation of algal growths. In the process, the waste-water is treated under a range of controlled conditions through the use of concentrated naturally occurring bacteria.
PROJECTS COMMITTED This section includes projects on which development is proceeding or where
developers have announced, as at the date of publication, a definite
commitment to proceed with a project. As such, this category may include
projects which may be virtually completed, as well as those which may not have
commenced.
Golden Vegetable Plant Upgrade Location
Northgate, Brisbane
Local Authority Brisbane City Council
Estimated Cost $50 million
Developer Golden Circle Limited
Timetable The upgrade program is ongoing over the next two years.
Current Status All projects undertaken as part of the upgrade are on schedule.
Details Golden Circle Limited, Australian-owned fruit and vegetable manufacturer
operates one of Australia’s largest processing plants covering a 16.5 hectare site. The project involves upgrading of factory technology to improve profitability and competitiveness. Total project expenditure is estimated at $50 million with around $27 million to be invested during the next 12 months.
Projects underway or completed:
■ Installation of can supply system ($7 million) ■ Automation of pineapple processing lines ($8 million) ■ Upgrading carrot and beetroot processing ($2.5 million) ■ Modern food preparation facility ($11.5 million) Projects due for completion in next 12 months: ■ Upgrading waste water treatment plant ($2 million) ■ Replacing coal boilers ($5.4 million)
Principal Consultants ■ John Thompson Package Boilers ■ Construct ■ Heat and Control ■ IFBS (International Food and Beverage Service)
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■ Wiley and Co
Atherton Tablelands Water Infrastructure Project Location North Queensland
Local Authority Mareeba Shire Council Atherton Shire Council
Estimated Cost $19.3 million
Developer Department of Natural Resources
Timetable The project commenced in June 1996 and is expected to be completed by June
1999.
Current Status The project received initial approval by Government on 13 May 1996 and is
currently in the planning phase. An impact assessment study for the Stage II developments (raising Tinaroo Falls Dam and construction of a weir at Bilwon) was commenced in September 1996. Completion of the study is being delayed pending completion of hydrologic modelling for the Burran water allocation and management plan. Installation of the water management system has been completed and the first parcel of 10,000ML of additional allocations resulting from increased distribution efficiencies was auctioned in December 1996 for an average of $230/ML.
Details It is proposed to implement the project in two stages. The first stage will entail the
installation of a water management system for the Mareeba -Dimbulah Irrigation Area as well as the refurbishment of weirs, channels and pipelines within this area. The second stage will involve raising the crest of Tinaroo Falls Dam and the construction of a new water storage facility in the Bilwon/Biboohra area. Funding of this second stage is subject to satisfactory outcomes from Impact Assessment
Gladstone Water Supply Augmentation
Location Gladstone - Calliope Region, Gladstone
Local Authority Calliope Shire Council and Gladstone City Council
Estimated Cost $190 million
Developer Gladstone Area Water Board
Timetable Augmentation of water delivery system from existing Awoonga Dam to
Gladstone and the industrial areas is planned for completion by early 1999. Completion of new major water storage and delivery systems is required by 2001/2002.
Current Status Detailed feasibility studies including flow management and impact assessment
studies are continuing. These are expected to be completed in late 1998.
Details
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An upgrade of the delivery system for raw water from the Awoonga Dam to Gladstone and the Yarwun/Fisherman’s Landing industrial areas to make full use of the yield from Awoonga Dam is proposed at an estimated cost of $44 million. Planning has commenced for a new pump station, pipelines and reservoirs to be completed by early 1999. A major new source of water for the Gladstone Region will be required by about 2001/2002. The preferred strategy is to construct a new 45,000 ML/yr dam at Castle Hope on the Calliope River to be followed in the future by raising the Awoonga Dam, possibly in two stages when future water demand justifies further water head-works. The estimated costs of providing a 45,000 ML/yr yield dam, relocation of infrastructure services and pump stations/pipelines is $162 million for a raised Awoonga (30.0 m to 43.5 m) and $146 million for Castle Hope. Flow management studies, Impact Assessment Studies and detailed feasibility studies on Awoonga Dam and Castle Hope Dam sources will determine a final strategy for the long-term provision of water supply for the Gladstone Region.
PROJECTS UNDER STUDY This section lists projects on which a considerable effort has recently been or is
currently being directed to detailed feasibility evaluations. Although projects
included in this category may not be proceeding in the immediate future,
substantial project evaluation has been completed to enable fairly rapid
movement to implementation should an investment decision be made.
Comet River Dam Location Near Rolleston in Central Queensland
Local Authority Bauhinia Shire
Estimated Cost $150 million
Developer Department of Natural Resources
Timetable Construction could commence mid 1998 and be completed by the end of 2000.
Current Status Investigations on technical feasibility, environmental and social impacts,
economic performance and financial aspects are in progress. The decision to proceed is not expected before late 1997. Impact assessment consultants are yet to be appointed.
Details The proposal involves the construction of a dam with a capacity of up to 1.48
million ML to meet large existing water demands for mining and agricultural development. This site has been shown to be the only one in the vicinity with potential for economical development. However a decision to proceed is dependent on favourable outcomes of the current feasibility studies.
Dawson Valley Water Infrastructure Location Central Queensland
Local Authority Taroom/Banana/Duaringa Shires
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Estimated Cost $150 million
Developer Department of Natural Resources
Timetable Investigations are expected to be completed late 1997. Construction could
commence mid 1998 if approvals are given. The construction work may take three to four years.
Current Status The preferred site for the construction of a dam in the Dawson Valley is 315.3 river
kilometres upstream of the Dawson River junction with the Fitzroy River. Studies have revealed that this site will minimise environmental impacts while producing a large volume of water at an economic cost. Currently the Government is investigating a range of height levels for the dam which will give the maximum volume of water with the least social and environmental impact.
Details Over the past 3 years, the Department of Natural Resources has undertaken
detailed studies into potential water storages in the Dawson Valley. A water demand survey has demonstrated that there is a very great need for additional water supplies. Only a large dam will be able to meet much of this demand economically.
Principal Consultants ■ Snowy Mountains Engineering Corporation ■ Hyder Environmental Ltd
St George Off-stream Water Storage Location St George
Local Authority Balonne Shire
Estimated Cost $15 million approximately
Developer Department of Natural Resources (DNR)
Timetable The project is due to commence after studies have been completed by late
1997.
Current Status A detailed feasibility study and impact assessment is currently being undertaken.
Details An off-stream storage has been proposed to improve the reliability of supply to
allocation holders from Beardmore Dam and to store compensation water for release during dry periods. It is also proposed that landowners with existing water harvesting entitlements could participate in a joint venture and achieve economies of scale. Studies of the impact of the proposal on downstream water users and the environment are included in the IAS.
Principal Consultants ■ Snowy Mountains Engineering Corporation (IAS) ■ DNR Engineering Services (feasibility study)
Ella Bay Ecotourist Resort Location Ella Bay, approximately 4 km north of Flying Fish Point near Innisfail
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Local Authority Johnstone Shire
Estimated Cost $30 million
Developer Ella Bay Resort Pty Ltd
Timetable Preliminary site-works and services installations are expected to commence in
late 1998.
Current Status Rezoning to special facilities (Tourist Resort) has been approved by Johnstone
Shire Council and forwarded to the State Government for Gazettal.
Details The Ella Bay Eco Tourist Resort is to comprise a central facility complex surrounded
by 30 suites. This facility will be on one title and situated adjacent to the coast and the Ella Bay National Park. Also to be developed will be a total of 70 resort residential modules each of which will be on a separate title. It is intended that a significant portion of this accommodation will go into the hotel letting pool. The facility will be largely self-sufficient, with all services such as water, power and sewerage obtained, generated or treated on site. Television and communications will be provided via satellite connection.
Principal Consultants Planning Far North Pty Ltd Consultants (Cairns) Schutz Consultants Pty Ltd (Sunshine Coast)
Rainbow Harbour Resort Development Location On the seafront, 7 km north of Cairns Airport
Local Authority Cairns City Council
Estimated Cost $759 million (ultimate project development)
Developer Burchill Strategic Projects (equity partners to be included)
Timetable The project will be developed in six stages. A commencement date is yet to be
determined.
Current Status Preliminary design has been completed. Local and state government approvals
have been obtained. Equity funding is currently being sought.
Details It is proposed to develop an integrated urban and resort town on a total site of
250 hectares. The ultimate project would feature over 1000 residential dwellings with 3.75 hectares of commercial and retail shopping development. In addition, over 350 tourist accommodations will be established in a tourist village. It is also planned to develop four tourist resorts ranging from five star to two star standard. The combined accommodation of the resorts would be 1400 rooms and 700 apartments. The project site is adjoined by an unstable creek mouth. By means of training works, it is intended to create a unique safe harbour and associated tidal waterfront real estate environment. These works will form the basis of a marina comprising 206 floating berths with a yacht club that will cover an area of 0.13 hectares.
Principal Consultants
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■ Burchill Partners Pty Limited (Consulting Engineers and Planners for Approvals and the land Master Development phase).
Whitsunday Peninsula Project Location Whitsunday Peninsula, 35 km north of Proserpine
Local Authority Whitsunday Shire Council
Estimated Cost $100 million for Stage 1.
Developer Whitsunday Peninsula Pty Ltd is owned by: ■ Kumagai Australia Pty Ltd—1 66.66% ■ Wardley Australia Limited—2 33.33%
1 a subsidiary of Kumagai Gumi Co. of Japan
2 a subsidiary of Hongkong Bank of Australia Limited
Timetable It is possible that construction of Stage 1 could commence in late 1997.
Development of further stages could occur over a 5 to 10 year time-frame.
Current Status Development approvals have been concluded with the Queensland
Government and Whitsunday Shire Council for a major resort and residential community.
Details The 14.4 km development site for this project is set among scenic forested hills
and valleys adjacent to the Great Barrier Reef and is almost entirely surrounded by National Park. The site has frontage to three bays, including Woodwark Bay, and contains hilltops with views over the Whitsunday islands, waterways and mainland coastal wilderness areas. It is proposed to develop the site in several stages that will balance natural beauty, residential communities and recreational tourist facilities. Stage 1 will include a golf course, a hotel, houses and house sites, condominiums, 150 marina berths, a ferry terminal, the first stage of the Resort Town Centre, a 12 km scenic drive and other facilities and infrastructure. The ultimate development will include three golf courses, over 3900 dwellings, 810 hotel rooms and 600 marina berths, two town centres and other facilities. Approximately 43 per cent of the site will be retained in its natural state.
Principal Consultants ■ Philip Cox Richardson Rayner & Partners (Architects and Planners) ■ Sinclair Knight Consulting Engineers (Environmental) ■ Reynolds Consulting Pty Ltd (Engineers) ■ Mallesons Stephen Jacques Solicitors and Attorneys (Lawyers)
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15. PROPOSED CORPORATE STRUCTURE OF THE ALLIANCE
OVERVIEW
In structuring any corporate enterprise, the primary matters to consider are usually determined by the financial, legal, accounting and taxation constraints and objectives of the participants.
In this case, specific consideration needs to be given to how best will income streams be distributed based on the most tax effective structure given the profile of the participants / potential participants. In addition, there are special considerations to be given in relation to the individual liability of the proposed owners. The most effective structure to meet operational needs (including ability to borrow / invest money; etc.) also needs to be taken into account.
From that point, an appropriate corporate structure can be developed that best
fits the criteria applying in the individual circumstances. In this instance, there are also a number of other special restrictions that need to
be taken into account. This primarily relates to constraints found within the “Enterprise Powers” of Councils as described and defined in Sections 410 and 411 of the Local Government Act 1993.
However, it should be pointed out that the Enterprise Powers now available to
Councils through the legislation have in fact freed up the possibilities for local government involvement in private enterprise.
de Chastel77 states that “...The provisions of Part 4 - Enterprises, is a classic example of freeing up the options available to local government to allow them
to show entrepreneurial flair, with appropriate checks and balances”. Whilst the legislation prohibits certain forms and structures (e.g. purchase of
shares in a company listed on the stock exchange is disallowed), it does allow participation where there is a limited liability for government, i.e. limited long term governmental risk. In short, Council’s liability (if any) will need to be clearly demonstrated to be capped at “x” dollars. de Chastel further states that “the
underlying philosophy is to limit the risk for the government in the long term”.
LEGISLATIVE CONSIDERATIONS RELATING TO CORPORATE
STRUCTURE & LIABILITY
Allowable Corporate Structures The Local Government Act 1993 will allow the following forms of corporate
structure as a consequence of Council exercising their “Enterprise Power”78:
77 de Chastel, Brett, City Solicitor, Ipswich City Council, Implications of the Local Government Act -
Contracting and Enterprise Powers, paper delivered to the Q.E.L.A. Seminar 5 December 1994, pp. 5-6
78 Local Government Act (Qld) 1993, Section 411.(1) (a)
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1. Unlisted private company: “Permissible company” - a company limited by shares that are not listed in a stock exchange
2. Partnership (only as a limited partner)
3. An association of persons - does not include a company. With the demise of the incorporated trading association some years ago, which
would have allowed the formation of an entity established for the purpose of profit and distribution of income streams, the available options therefore become restricted to “permissible company” or “partnership”.
de Chastel79 states that a local government can only exercise its Enterprise Power “...by resolution after taking the advice of persons who have the relevant competence and who provide advice on matters including the lawfulness of the
exercise of the power...”
Other Restrictions Applying Under the Local Government Act /
Regulations Other restrictions now applying where Council decides to exercise its enterprise
power include:
• Monetary limit imposed (the amount the Council can commit towards the exercise of enterprise powers). This is currently 5% of the local government’s own source revenue (e.g. revenue received from general rates, differential
general rates, exgratia receipts, fines, general charges and interest)80
• Borrowing, or providing a guarantee for borrowing, is prohibited81
• An agreement must restrict the liability of the local government to the extent committed by the local government under that agreement.
• Council will need to keep a register of the enterprise detailing such things as a description and purpose of the enterprise, value of property committed to it, and details of the Project’s identity. This register must be
kept open to public scrutiny.82 All these restrictions are designed to foster greater accountability, which is
balanced against the greater flexibility provided by the Enterprise Powers available.
Allowable Purposes Under the Local Government Act - “Good Rule
and Government”
79 de Chastel, Brett, City Solicitor, Ipswich City Council, Implications of the Local Government Act -
Contracting and Enterprise Powers, paper delivered to the Q.E.L.A. Seminar 5 December 1994, pp. 5-6
80 Section 24 of the Local Government Regulations, with local government’s own source revenue specified
in Schedule 2 of the Regulations
81 Section 413 of the Act
82 Section 415 of the Act
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The Local Government Act 1993 states that in the exercise of Enterprise Power, the matter must be conducive to “good rule and government of its territorial
unit”83. A number of examples defining those matters which may be of benefit to a local government area are provided thus:
• promoting or contributing to economic development of a part of the area
• promoting or attracting commerce, industry or tourism in or to a part of the area
• promoting or providing opportunities for employment in a part of the area
• promoting or helping the supply of services to a part of the area
• helping the finances of the area’s local government
• helping the exercise of the jurisdiction of local government in the area In this instance, the proposed Alliance will directly address all but the last point
denoted above. Particular emphasis will need to be given to the aspect of “helping the finances of the area’s local government” if the Project is to be attractive to the Council.
Certain other matters may be deemed as being an “exempt enterprise” (e.g.
land development, quarrying, accommodation services, buses, etc.), provided they are not undertaken as a joint venture with another party, unless that party is another government entity. If the “exempt enterprise” is undertaken as a joint venture with such an external (non-government) third party then the “good rule and government” area benefit test applies.
Other Matters to be Considered From the Council’s point of view, the matter of risk is a paramount consideration
when assessing the “commerciality” of any proposal. de Chastel points out that “...The greater the potential risk, the greater the benefit in operating the enterprise through the auspices of a permissible company”. He suggests that the
following matters should also be considered:-84
(a) Directors Liability:- Councillors of a local government are afforded a
statutory indemnity where they act honestly and without negligence (see
section 188 of Local Government Act). A similar provision applies in relation
to local government employees (section 718). Given the recent inclination
of the Courts to look beyond the corporate veil, there may be some
reluctance for Councillors or employees to accept positions as directors
without an appropriate indemnity from the Council.
(b) Future Control:- The creation of a permissible company would probably
result in less direct control of the enterprise by the Council. To properly
undertake their functions as directors, Council representatives would need
to independently exercise their minds in their capacity as directors of the
company. This problem would be exacerbated if the permissible company
was operated by more than one entity.
83 Local Government Act 1993, Section 408(1)
84 de Chastel, Brett, City Solicitor, Ipswich City Council, Implications of the Local Government Act -
Contracting and Enterprise Powers, paper delivered to the Q.E.L.A. Seminar 5 December 1994, pp. 7-8
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(c) Taxation Issues:- Local Governments receive certain exemptions on
taxation issues e.g. sales tax, payroll tax, income tax. These may not accrue
to a permissible company which may radically affect projected cash flows.
Unless these issues are addressed before the local government makes its
decision to establish a permissible company, the expected profitability
may not flow through to the Council.
(d) Trade Practices Act:- Any doubt as to whether the Trade Practices Act
would apply to the activity would be removed once the enterprise is
conducted pursuant to a permissible company. A full discussion on the
relationship between the Trade Practices Act and local governments
exercising their power is beyond the scope of this paper, although it is
noted that fee Hilmer Report may blur the distinction between traditional
local government activities (e.g. water supply, sewerage) and purely
commercial activities which are generally the focus of the enterprise
provisions.
The matter of the Trade Practices Act and relationship with this Project has been
extensively dealt with in the Section of this Report entitled “The National Competition Policy and the Hillmer Report”. The other three issues noted above are addressed as follows:
1. Directors Liability: Councillors or employees accepting positions as directors
should have an appropriate indemnity from the Council. There will still need to be a “duty of care” exercised by such appointees, and naturally these persons would need to act in a lawful manner at all times (they must act honestly and without negligence in spite of any indemnification).
2. Future Control: Whilst the proposed Alliance will inevitably result in less direct
control of the activities currently undertaken by Council, a number of safeguards are proposed to be put in place. This includes the Alliance’s commitment to the Consumer Charter of Ipswich Water, and certain other community obligations covered elsewhere in this Report. There is also the commercial reality of the need to meet agreed performance requirements, and greater accountability through the mechanisms proposed.
Whilst Council representatives will need to “independently exercise their minds” in their capacity as directors of any company, several precedent examples can be provided. These include a recent joint limited partnership involved in land development, and the Global Info Links / University project which might be considered to be a “straight” commercial venture.
3. Taxation Issues: Council will need to weigh up any advantages accruing
through Local Government exemptions on taxation, as against the anticipated income streams resulting from projected cash flows as shown in this Report. Importantly, account should be taken of additional income potentially earned by the venture as a direct result of linkages established with Aquatec-Maxcon, as compared to potential income streams likely to result from a straight “sub-contracting” arrangement or simply commercialising / corporatising the existing Council business unit.
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COMPARISON BETWEEN POSSIBLE CORPORATE
STRUCTURES, & CONCLUSIONS As stated in a previous sub-section above, the available options are restricted to
“permissable company” or “partnership”. Whilst “an association of persons” can no longer be formulated along the lines of
an incorporated trading association (for reasons covered earlier), there is the possibility of structuring the entity along the lines of a co-operative. This can be achieved, however, utilising the limited-liability company as a vehicle. Under the Co-operative structure, profits made are usually ploughed back into the entity or used for ongoing developmental works, or divided among members under an agreed plan.
We have therefore simplified the options to “partnership” or the “limited liability
company”, however certain other derivations of these may be possible subject to legal opinion outside the scope of this Study.
We have also avoided suggesting more “fancy”, complicated structures that are
likely to be not well understood by the Project’s proponents and therefore unattractive as suitable corporate vehicle for a brand new venture.
We also comment that the restrictions imposed under the Local Government Act
1993, as it relates to the Enterprise Powers of the Council, prohibit the possibilities of forming a public company having limited liability, or the unlimited liability company. A company limited by guarantee (where the liability is limited to the amounts guaranteed by shareholders in the event of the company becoming insolvent when it is wound up) is unsuitable since this type of entity cannot pay
dividends85 and do not have a share capital. Our understanding is that it would not be possible for the creation of a “no liability” company because of the special confines of law.
The following table summarises the possible advantages and disadvantages of
each type of entity (where possible, the information has been made specific to the Project concerned, however some generalisations have also had to be made in terms of whether or not the issue is categorised as an “advantage” or “disadvantage”):
85 All surpluses must be applied to the furtherance of the Company’s object.
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Type of Entity Advantages Disadvantages
Partnership • Suitable vehicle where a limited life is
anticipated (but can be long-continued)
• Can be created without legal formalities
• Relative ease of entry / exit of partners
• Can be ended at any time upon the
withdrawal of any member
• Profits earned may be divided among
the partners in any agreed ratio
• Formation is generally easier and less
expensive than a company
• May be income tax advantages:
partnership itself does not pay income
tax86
• Greater flexibility and freedom of action
compared to company87
• Unlimited liability (liability can however
have a ceiling “capped” / specified)
• Personal liability of members
• Each member bound by the act(s) of any /
all partners (“mutual agency”)
• Retiring partner remains liable for
partnership debts existing at time of
withdrawal88
• Personal right to assets is lost to joint
ownership when invested in the partnership
• Generally, a less effective device
(compared to company) for fund raising.
• Limits applying on the number of partners
able to be admitted
• Relatively unstable: legal existence is
indistinct from individual shareholders
(In corporated) Limited liability, non-exempt proprietary company
• Shareholders limited in their liability to the
amount of unpaid capital on their shares
(company creditors have a claim against
the assets of the company only)
• Shareholders do not owe the debts of the
company (shareholder has no personal
liability)
• Stability / continuous existence: separate
legal existence apart from individual
shareholders (may sue and be sued in its
own name)
• Less formality on formation / less cost in
administration compared to public
company
• Two shareholders only acceptable
minimum
• Capable of owning property in its own
name, borrowing money and making
contracts in its own right
• Centralised authority: operating decisions
able to be vested in the Managing
Director - permits rapid decisive action
avoiding arguments / conflicts typified
within partnerships
• Owners do not need to participate in the
management function / ability to employ
as executives the best managerial talent
• Ability of shareholder(s) to have
preferential rights through the issue of two
or more share classes.
• Extensive financial and other reporting
requirements may be advantageous to
local government involvement
• Company must pay income tax at the
prescribed rate (can be advantageous
depending on circumstances)
• Can be less flexible: e.g. need for formal
meetings / legalistic procedures to
implement funds withdrawal or certain
business decision-making.
• Legislation governing companies is
complex and subject to frequent change
• Companies subject to greater regulation
than partnerships (and most other entity
types)
• Number of shareholders is limited
• Rights of shareholders to transfer their
shares is limited
• Public subscription of shares / debentures
prohibited
• Separation of ownership and control /
management may be disadvantageous in
some cases (and advantageous in others)
• Onerous duties and responsibilities of
Directors
• Much more costly to effect formation
compared to the partnership
• Shareholders have no direct claim on
profits earned without declaration of
dividend
86 Unlike a company, the partnership itself is not a legal entity - individual partners pay taxes (if applicable)
on their share of the firm’s net income
87 For example, funds withdrawal and business decision-making without the necessity of formal meetings
or legalistic procedures
88 Unless creditors agree for release
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Conclusions The partnership, and the limited liability non-exempt proprietary company, both
offer viable alternatives, with each alternative having various advantages and disadvantages.
As a longer term option, the company route appears to offer the most stable
alternative. It has relative flexibility, sharpness in defining shareholder liability, better formal accountability, and allows clear separation of proprietorship and management functions. It can be a convenient way to provide separately calculated income streams to the owners, given the ability to offer differing rights attached to differing share classes. The only real disadvantages relate to the onerous responsibilities and duties of company Directors (though in the case of Council representatives appropriate indemnification may provide a solution to this), and implications arising from income tax liability. The limitation of shareholder numbers and restrictions applying in transferring shares is not an issue in this instance. Similarly, inability to acquire further capital via public subscription is not an issue because this is not allowable under the Local Government Act given the Council’s possible participation.
On the other hand, a partnership that provides for a capping of the Council’s
liability may provide a good short term alternative. Whilst this presumably increases the liability of the other partner (Aquatec-Maxcon), the real advantage lies in the ease of entry / exit of partners. This aspect might have particular appeal to Council whom may be hesitant to commit to a relatively long term relationship “up front”. Thus, inherent “instability” of the partnership option may not necessarily present itself as a disadvantage in the shorter term. The partnership also provides a way for income to be channelled to either party without taxation burden prior to distribution - each party will be able to incorporate income earned on their share within the scope of their own particular arrangements. It is likely that the major disadvantages of this option lie in the area of “mutual agency”, in addition to issues related to asset ownership and general liability. Whilst these aspects can in general terms be forecast and subsequently their treatment written into a partnership agreement, because of the large number of possible contingencies arising out of normal “day-to day” and ongoing operations it might be argued that the waters can sometimes become a little “muddied” .
RECOMMENDED STRUCTURE Option 1 (Preferred)
Weighing up the pro’s and con’s of each option it is recommended that the
Alliance proceed on the basis of forming a limited liability non-exempt proprietary company. It offers the best alternative for a flexible, yet relatively stable structure. It also addresses the issue of shareholder liability in a more clearly defined way.
We would propose a joint operating company essentially along the lines outlined
in the draft “Heads of Agreement” documentation prepared by Aquatec-Maxcon as follows:
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1. To enable progression of the Alliance, creation of a new entity (limited liability, proprietary company), to be known for the purposes of this discussion as Sunshine Water Pty Ltd (“Sunshine”).
2. Aquatec Maxcon, through their parent company Aquatec Environmental (“AE”), to provide $500,000 in Capital to Sunshine in the form of 500,000 Class A shares of $1.00 per share.
3. Sunshine in turn will issue 450,000 Class B shares to Ipswich City Council (“ICC”). Class B Shares will be entitled to earn a payment equivalent to 10% of dividends paid to ordinary shareholders. This would be the “Preference Share Payment (Entitlement)”.
4. ICC will earn a Concession Fee from Sunshine, calculated yearly as follows:
450,000 Concession Fee = Earnings before Interest and taxes X ------------------------------------ (EBIT) Total Class A and Class B
Shares on Issue
(The above calculation is equivalent to a payment equalling 47.37% of
EBIT). For taxation reasons, “true” accounting EBIT will include deduction of the Concession Fee.
5. Two Directors will be appointed by AE to Sunshine, and one Director plus one observor appointed by ICC at its election.
6. The Operation Fee paid monthly, one month in arrears by ICC to Sunshine for the operation of its plants will be calculated as follows:
FEE IN YEAR ONE = 95% of independently audited average adjusted costs89 for
1996/1997.
FEE IN YEAR TWO AND SUBSEQUENT
YEARS =
Fee in Previous Year PLUS (Fee in Previous Year x Inflation
Index90 X [1 + % volume91 increase])
6. AE will provide all clerical, accounting and reporting functions for 23.46% of revenue earned from the operation of the Council’s plants. This is the Administration Fee, and is broadly equivalent to, and will cover all items
currently included within ICC’s Support Plan Charges92. (Currently, the Treatment Section are paying the equivalent of 36.1% of their total expenditure in Support Plan Charges. The recommended 23.46% is equivalent to 65% of current Support Plan charges being paid).
The above structure is based upon the following premise:
• ICC to grant Sunshine a concession to operate the plants owned by ICC for 10 years (plus further 10 year option at the discretion of AE), i.e. operating the six waste water treatment plants, and the Warrill Creek Water Treatment centre.
• Sunshine will be responsible for taking over the operation of existing plants currently operated by AE (or its subsidiaries including Aquatec Operations Pty Ltd) in S.E. Queensland (i.e. Numinbah Correctional Centre, Ansett
89 1995 and 1996 costs adjusted for inflation in costs and expansion in volumes
90 Published CPI Index by the Australian Bureau of Statistics, calculated on a yearly basis
91 As measured by plant monitoring
92 That is, Support Plan Charges applying to the Treatment Section only of the Water & Sewerage Services
Department of ICC.
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Maintenance Workshops Brisbane, Caboolture Caravan Park, Idemitsu - Ebenezer Mine, ANI Bradken - Ipswich, STP, Swanbank Power Station and
Woodford Prison).93
• Within three years from commencement ICC and AE will discuss in good faith the extension of their agreement to include the inclusion of the ICC water and / or waste water distribution / collection systems. In principle, Aquatec and ICC will be treated in a similar manner for any other concessions - options for extensions to be included as part of extensions for those contracts and not necessarily incorporated into this agreement.
• Primary assets (treatment plants) currently owned by ICC will remain owned by them. Similarly, treatment plants owned by AE (or its subsidiaries including Aquatec Operations Pty Ltd) - if any - will be retained by that entity.
• ICC will be responsible for all planning and capital works requirements. However, Sunshine would provide an annual report with recommendations for any required upgrades based on a 2 year planning horizon.
• If ICC builds additional plants in Ipswich, ICC and Sunshine will negotiate in good faith to add operation of these plants to this agreement.
• Sunshine will be the “Bidding arm” for the operations of both parties for operations contracts.
Operating and Other Details
a) Sunshine will commit to all appropriate sections of the Consumer Charter of Ipswich Water, currently being developed.
b) Sunshine to gain Quality Assurance accreditation to AS3900 within the first two years of operation.
c) Sunshine will operate the plants to satisfy all existing legal requirements up to the agreed plant capacity
d) Sunshine and ICC will re-negotiate details of this proposed agreement in the event effluent quality requirements are altered.
e) Sunshine will obtain insurance for plant operations equivalent to best industry practice.
f) Sunshine will be responsible for all fines imposed on the plant operation by the Queensland Government as long as inflow Characteristics to the plant do not exceed agreed plant parameters in which Case ICC will be responsible.
g) Sunshine will offer all existing ICC plant operations staff the alternative of working directly for Sunshine or on secondment from ICC on no less than Current terms and conditions.
h) ICC will have right of termination in the event of:
• Sunshine becoming insolvent • The Head office of AE is moved from Ipswich • There is a change in the control of AE • Sunshine fails to operate the Ipswich plants in accordance with this
agreement and commits a serious breach.
93 That is, AE will use Sunshine as a subcontractor to execute its existing operating contracts in SE
Queensland.
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i) ICC and AE will co-operate in any training programme of Sunshine (or ICC) to attract SE Asian students or business to Ipswich
j) The primary target market for the operations would be cities and towns of less than 150,000 EP plants (i.e. medium to large sized plants).
Option 2 (Alternative) The Alliance could proceed on the basis of forming a limited liability non-exempt
proprietary joint operating company formed in a similar way as for Option #1 above, but with equal capital contribution coming from both parties, rather than from Aquatec-Maxcon solely, as follows:
1. As for Option #1, to enable progression of the Alliance, creation of a new entity (limited liability, proprietary company), to be known for the purposes of this discussion as Sunshine Water Pty Ltd (“Sunshine”).
2. Both Ipswich City Council (“ICC”), and Aquatec Maxcon through their parent company Aquatec Environmental (“AE”), to provide $250,000 each in Capital to Sunshine in the form of 500,000 Ordinary Class A shares of $1.00 per share.
3. Sunshine in turn will issue 250,000 Ordinary shares to ICC, and 250,000 Ordinary Shares to AE. Accordingly, there will be no Preference Share Payment Entitlement applicable to any party.
4. ICC will earn a Concession Fee from Sunshine, calculated yearly as for Option #1 above.
5. Two Directors will be appointed by AE to Sunshine, and two Directors appointed by ICC. One “independent” Director will be appointed by joint agreement.
6. The Operation Fee paid monthly, one month in arrears by ICC to Sunshine for the operation of its plants will be calculated as for Option #1 above.
7. AE will provide all clerical, accounting and reporting functions in return for an Administration Fee, and is calculated in the same way as for Option #1.
Operating and other details will be as for Option #1.
Option 3 (Alternative) An alternative to the Preferred Option, or Option #2, is the creation of a
partnership in terms mentioned under “Conclusions” above, with a further option
to incorporate94 after say, one years successful operation. Whilst this is a less straight forward approach, it may offer more flexibility to Council in the shorter term. It also allows the opportunity for each party to assess the ability of the Alliance to achieve their own objectives prior to committing to a longer term relationship. However, from the perspective of Aquatec-Maxcon, there may be no particular advantages in pursuing this route.
The terms and conditions of the partnership agreement would be based upon
detail contained in either Option 1 (preferred) model, or Option 2 above.
94 That is, incorporate to a limited liability non-exempt proprietary company
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At this point in time, under any of the above alternatives, acquisition of Council assets by the Alliance is not proposed, however this could be an option worthy of consideration in the future.
Treatment Plant Operationsin S.E. Queensland
AQUATEC OPERATIONS PTY LTD
Waste Water, & WaterTreatment Plant Operations
1 x Director1 x Observor
500,000Class "A"
Ordinary Shares@ $1.00
Treatment plant operationstaken over by
Sunshine Water Pty Ltd
WATER & SEWERAGE SERVICES
AQUATEC ENVIRONMENTAL LTD
Unlisted public company
2 x Directors
Treatment plant operationstaken over by
Sunshine Water Pty Ltd
CAPITALISATIONEqual to$500,000
($1.00 Class AShares)
IPSWICH CITY COUNCIL
ADMIN. FEEEqual to
23.46% of revenueearned from ICCplant operation
OPERATION FEEEqual to
95% audited costsindexed to
CPI and volume
PROPOSED CORPORATE STRUCTURE & CAPITALISATION OF THE PROPOSED ALLIANCEBETWEEN AQUATEC-MAXCON & IPSWICH CITY COUNCIL
CONCESSIONFEE
Equal to47.37%
of E.B.I.T.
PREF. SHAREPAYMENT
Equal to 10% ofdividends paid
to OrdinaryShareholders
450,000Class "B"
Preference Shares
$500,000
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Treatment Plant Operationsin S.E. Queensland
AQUATEC OPERATIONS PTY LTD
Waste Water, & WaterTreatment Plant Operations
1 xIndependent
Director
Treatment plant operationstaken over by
Sunshine Water Pty Ltd
WATER & SEWERAGE SERVICES
AQUATEC ENVIRONMENTAL LTD
Unlisted public company
2 x Directors
Treatment plant operationstaken over by
Sunshine Water Pty Ltd
CAPITALISATIONEqual to$500,000
($1.00 Class AShares)
IPSWICH CITY COUNCIL
ADMIN. FEEEqual to
23.46% of revenueearned from ICCplant operation
OPERATION FEEEqual to
95% audited costsindexed to
CPI and volume
PROPOSED CORPORATE STRUCTURE & CAPITALISATION OF THE PROPOSED ALLIANCEBETWEEN AQUATEC-MAXCON & IPSWICH CITY COUNCIL
CONCESSIONFEE
Equal to47.37%
of E.B.I.T.
250,000Class "A"
Ordinary Shares@ $1.00
250,000Class "A"
Ordinary Shares@ $1.00
$250,000$250,000
2 x Directors
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16. MANAGEMENT OF THE ALLIANCE ENTITY
KEY MANAGEMENT One of the strengths of the proposed Alliance is the availability of experienced,
credible management. Both Aquatec-Maxcon and Ipswich City Council have senior personnel with proven track records. Taking this into account, the “Key management” functions could be structured as follows:
Management Level
Function Position(s) responsible
Top Level (non-executive)
• Vision, direction, policy decision-making
◊ Board
Senior Management (executive)
• Oversight of policy implementation • Day-to-day general operational
management • Business Development (interim)
◊ Managing Director
Middle Management
• Treatment Plant management and supervision
• Business Development (ongoing) • Engineering (technical) • Accounting, Legal & Administration
◊ Treatment Plant Superintendent
◊ Manager, Business Development
◊ Engineer (Treatment) ◊ Aquatec-Maxcon (existing
personnel)95
With the possible exception of the appointment of an independent Director (if
required), all the above positions could - and probably should - be filled from existing staff / personnel.
Consideration should be given towards the advertising of more senior
management positions, however this should be carefully weighed against the need to provide at least a modicum of security for existing personnel. Further, it is likely that Council will require some sort of guarantee in relation to take-over of their existing staff, in addition to considerations relating to non-management “Unionised” positions.
In the view of the Consultant, resulting management is a relatively strong team,
capable of strong leadership, with a wide variety of skills that are complementary to each other.
QUALITY ASSURANCE (QA) & TOTAL QUALITY MANAGEMENT
(TQM) Management will need to recognise the need for proceeding with the
implementation of a formal Quality Assurance program as soon as possible. The Alliance entity should proceed to full implementation a formal program of Quality Assurance, in line with a Quality System fulfilling the requirements of Australian
95 This is to be provided By Aquatec-Maxcon as part of the equivalent of the existing Support Plan
arrangements undertaken by Ipswich City Council.
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(TQM)
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Standards AS3901 or AS3902 as may be applicable - the AS3900 Series Standards required by the Clever Country Policy of the Federal Government and the State Government Purchasing Policy 1991. This will be sufficient to meet the expectations and demand of clients both domestic and international, and the industry in general.
The future success of the Company's direct market penetration to both domestic
and export markets in particular could well depend upon the Company's commitment to QA accreditation, and should be addressed with some priority after an initial “settling in” period. Progression to TQM is an option further on, however will capitalise and strengthen a formal commitment to QA principles.
Quality Assurance - Government Requirements Suppliers tendering to government agencies are required to understand the
quality assurance requirements and satisfy those requirements where applicable. The government takes two major factors into account:
1. The size of the goods or services requirement (either below or above $10,000 in value)
2. If over $10,000, the “level of risk” associated with the use of the goods or services (depends on the likelihood and consequences of something going wrong with either the purchased product or service or the purchasing transaction).
The following table summarises these requirements96:
Value of Product / Service
QA Requirement Proof
Below $10,000
No QA Required, except by Ministerial direction
N/A
Value of Product / Service
Level of Risk
QA Requirement Proof
Low No QA required N/A
$10,000 and over
Moderate Selected elements from: • industry association QA, or • industry specific QA, or • professional accreditation, or • Quality System standard (e.g.
ISO9001)
Evaluation by Registered Evaluators or formal recognition by audit or industry accreditation
High • industry association QA, or • industry specific QA, or • professional accreditation, or • Quality System standard (e.g.
ISO9001)
Formal QA certification or industry accreditation
96 Source: Department of Public Works & Housing, Quality Assurance for Government Suppliers - Quick
Guide, January 1997 (reference may be made to the “QA Hotline”, Phone 1800 628 901
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17. ORGANISATION & PERSONNEL
OBJECTIVES The challenge for management is
• HOW TO MANAGE THE TEAM?
• HOW TO MANAGE CHANGE, ESPECIALLY CHANGE ENGENDERED BY CREATION OF THE PROPOSED ALLIANCE.
The matter of change will need to be handled very sensitively, and the
Consultant recommends that professional assistance be sought to assist in this process. There are several programs that may be appropriate, viz.:
1. Conducting an “Improvement Through People Audit” 2. Development of Self-Managed Teams 3. Conducting an “Australian Communications Audit”
Particularly during the start-up phase, the primary objective should strongly relate
to the matter of change management. This will need to be achieved in the context of a minimum of disruption to the ongoing management of Aquatec’s and ICC’s obligations in relation to the operation and maintenance of their various Treatment Plants.
ORGANISATIONAL STRUCTURE The proposed organisation structure has been designed as “flat” as possible, in
order to encourage more effective communication amongst the team. The proposed structure meets the key management functions outlined in the previous section of this Report, and wherever possible attempts to engender minimum disruption to the existing reporting lines and structures applying to the existing Alliance organisations.
STAFFING LEVELS It is proposed to retain existing staffing at their current level. Essentially, this means
takeover of existing personnel attached to the current Treatment & Scientific Services section of the Water and Sewerage department of Ipswich City Council, and personnel attached to Aquatec Operations Pty Ltd.
The exceptions to the above relate to two areas of the existing Treatment &
Scientific Services section as follows:
1. Trade Waste This cost centre was not currently included in the Treatment & Scientific Services
section budget supplied (as appended to this Report). It is assumed that personnel involved in this partly regulatory activity (i.e. Trade Waste Inspector, and Trade Waste Officer) will be retained by Council and directly employed by them.
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All income and expenses associated with Trade Waste are not included in the budgets attached (refer Schedules 3 and 3a appended to this Report), however it is important to note that “Trade Waste” represents a significant potential income stream. Its effectiveness may also affect the performance of the Wastewater Centres. Therefore, consideration towards inclusion of personnel here should be considered as a possible option.
2. Chemist / Laboratory
There are currently five (5) personnel associated with this sub-section of Treatment
& Scientific Services, including a Supervising Chemist, Chemist, and Laboratory Assistant and Technicians.
Personnel in this section are NOT INCLUDED in the proposal, however costs for
relevant contracting activities are included (inclusion as employees is an option). The current Treatment Manager advises that this section operates as a “break
even” scenario97, therefore its inclusion would have a minimum financial impact
upon the Project98.
Other Staff Issues The attached budgets also include expenditure associated with the operation
and maintenance of Effluent Disposal Schemes (Council have $54,697 expenditure budgeted for 1997/98). This includes the application of treated effluent to golf courses in the Ipswich City, and similar activities. This area of business, similar to Trade Waste, also represents good potential to become a
income stream, however this has not yet been realised by Council.99 Council advise that the current level of complaints received vary in the order of
between 40 and 80 per annum. Whilst there is no reason to expect and increase in the above level of complaints,
the situation here will need to be closely monitored as further administration support may be required if, for any reason subsequent to commercialisation, the level of complaints increase.
ORGANISATIONAL CHART The above matters are summarised in the Organisation Chart below:
97 Treatment Manager Mr Tom Belgrove advises that expenditure here is in the order of $400,000 per
annum plus Support Plan charges.
98 Please note that costs associated with process monitoring and compliance of EMP environmental
licenses are included in the budgets appended, as per Schedule 3 and 3a.
99 The operation and maintenance of Effluent Disposal Schemes accounts for expenditure of $30,697
(operations) and $24,000 (maintenance). Income from this activity has not been provided in any of the
forward estimates for Sunshine Water Pty Ltd.
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SUNSHINE WATER PTY LTDSUNSHINE WATER PTY LTDPROPOSED ORGANISATIONAL STRUCTUREPROPOSED ORGANISATIONAL STRUCTURE
Personnel in this sectionare NOT INCLUDED inthe proposal, however
costs for contracting areincluded (inclusion as
employees is an option)
Personnel in this sectionare NOT INCLUDED inthe proposal: income /
expenses for Tradewaste are not included
(inclusion as employeesis an option)
LABORATORYASSISTANT
LABORATORYTECHNICIAN
TRAINEELABORATORYTECHNICIAN
CHEMIST
SUPERVISING CHEMIST
TRADE WASTE OFFICER
TRADE WASTEINSPECTOR
ENGINEER (Treatment) MANAGER, BUSINESSDEVELOPMENT
TREATMENTPLANT
OPERATORSX 5
PLANTOPERATOR
LOADER
IPWICH CITY COUNCILTEAM (EXISTING)
TREATMENTPLANT
OPERATOR
PAQUATECOPERATIONS PTY LTD
TEAM (EXISTING)
TREATMENT PLANTSUPERINTENDENT
PAQUATEC MAXCON(EXISTING PERSONNEL)
ACCOUNTING &ADMINISTRATION
MANAGING DIRECTOR
BOARD OF DIRECTORS
GENERAL COMMENTS Position Job Descriptions
In view of immediate changes brought about through commercialisation, and
the likelihood of expected company growth and the changes this will bring about, the matter of job definition will require urgent attention. This should be done with the definition of all staff proposed to be employed by Sunshine Water
Pty Ltd. Resolution of this can be largely achieved through the development of written
Job Descriptions, defining the nature, scope and job function, along with relevant authority levels. It is emphasised that a key factor in bringing about an efficiently managed organisation will be the clear definition of job functions and reporting lines. This becomes of even greater significance as employee numbers increase, and where the available time to spend with employees becomes less. For this reason it is strongly recommended that job descriptions be developed for all existing and proposed positions, providing - in a written form - clear delineation of job duties/responsibilities and reporting lines. Ideally, this should be completed in conjunction with each employee.
The major features of worthwhile and meaningful job descriptions are:
• Results and duties are both stated (the result expected and the duties needed to accomplish the result)
• Accomplishment is emphasised over "doing" (employees need to first know
where they are going - only then can it be explained "how you get there")
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• The focus is on results (including how the job fits into the overall scheme of the organisation, and how the job fits into the organisations' mission)
• Clear writing style, with job descriptions simple and easy to understand. • Job Descriptions must be changed when job requirements change. • Linkage should be established here possible with QA Procedures
documentation.
Use of Contract Labour and Enterprise Bargaining The Alliance may be interested in following up prospects of enterprise bargaining;
from its point of view, in an effort to improve productivity (it may also have the
potential to increase effective staff utilisation of Treatment Plant operations.). Should the Alliance wish to progress this matter, or in order to assist in identifying
the training requirements of the enterprise, the Consultant recommends that the
Company engage the services of a specialist consultant100. The primary purpose of this program should be to effect improvements in productivity.
100 One such consultant, recommended is Dr Catherine Norton of the Norton Consulting Group,
Brisbane.
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18. FINANCIAL PLAN & ANALYSIS
OBJECTIVES In overall terms, the major financial objectives for the new company Sunshine
Water Pty Ltd, with regard to financial management should, include:
• To have the ability to readily conduct product / services gross margin
analysis. • To be able to conduct close monitoring of cash flow, and comparison of
monthly actuals to budget.
• To ensure there is adequate funding to implement proposed enterprise program (as per cash flow)
• To reduce costs wherever possible.
MAJOR ASSUMPTIONS The primary target market for the operations would be generally cities and towns
of less than 150,000 EP plants (i.e. medium to large sized plants). For primary major assumptions, please refer to the attached Schedules, in
particular:
• Schedule 1 (Primary Base Assumptions)
• Schedule 5 (Cash Flow Budget Assumptions) A summary of major assumptions follows:
1. Assume Project commencement July 1998 (month 0 of cash flow budgets attached)
2. Zero debt funding of the Project. $500,000 capital funding by way of equity contribution (see “Equity” sub-section below).
3. Fee Structures (Concession fee, Operation Fee, Administration Fee): refer section 15. “PROPOSED CORPORATE STRUCTURE OF THE ALLIANCE”
4. Average annual volume increase: Ipswich City Council Waste Water Treatment Centres = 2% per annum.
5. Consumer Price Index: Increase of 3% per annum (calculation a basic
component of the Operation Fee calculation).101
6. Corporate income tax rate = 39% flat
7. Sales tax on material purchases: 20% flat, applying in relation to 50% of total material purchases
101 CPI increases have not been factored into forward budgeted expenses, in keeping with first
principles of financial planning
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8. Assume Sunshine will obtain one new contract for operating a Treatment Plant commencing 12 months after business start up. Subsequently, assume two new plants operated annually commencing 24 months after business start up, with an average 15% gross margin earned from each plant in revenue of $20.00 per E.P. (average size of plant operated being 35,000 E.P.)
9. Average sales revenue growth rate for existing Aquatec Operations Pty Ltd business: 15% p.a. Assume 20% gross margin obtained on additional revenue.
10. Assume consulting activity generates fee income after month 5 of cash flow, with an average of 3 consulting jobs p.a. @ average gross revenue of $50,000 each, with a 10% p.a. sales growth rate.
11. 3% p.a. increase in sundry income generating activities related to existing Ipswich City Council operations (i.e. residence rental, and Treatment & Disposal: Brisbane City Council)
CAPITAL INVESTMENT REQUIREMENTS The acquisition of new plant and / or equipment is nil / nominal, however the
cash flow budgets provide for an allowance of 0.25% of total revenue earned for this purpose.
EQUITY Refer section on Proposed Corporate Structure (refer Page 144):
Under the (preferred) “Option #1”, it is proposed that Aquatec Maxcon, through their parent company Aquatec Environmental (“AE”), to provide $500,000 in capital to Sunshine in the form of 500,000 Class A shares of $1.00 per share.
Sunshine in turn will issue 450,000 Class B shares to Ipswich City Council (“ICC”). Class B Shares will be entitled to earn a preference share payment entitlement equal to 10% of dividends paid to Ordinary Shareholders.
Under the alternative (Option #2), The Alliance could proceed on a basis similar to Option #1 above, but with equal capital contributions coming from both parties, rather than from Aquatec-Maxcon solely. In this instance, both ICC and AE would provide $250,000 each in Capital, with Sunshine in turn issuing 250,000 Ordinary shares to ICC, and 250,000 Ordinary Shares to AE.
PROFIT & LOSS / CASH FLOW STATEMENTS Five year projected monthly cash flow budgets and Profit & Loss Statements for
Sunshine Water Pty Ltd are appended to this Report. This information may be summarised as follows:
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C:\123\FILES\ACQMAX50.WK4 28-Apr-98 Yearly Total Yearly Total Yearly Total Yearly Total Yearly Total Yearly Total
YEAR 1 2 3 4 5 Y.I.Y.O.
SUNSHINE WATER PTY LTD BASE MODEL BASE MODEL BASE MODEL BASE MODEL BASE MODEL BASE MODEL
Overdraft Interest Rate % pa 7.50 $ $ $ $ $ $
ESTIMATED INCOMERESIDENCE RENTAL - ICC 1,036 1,164 1,199 1,235 1,272 1,272TREATMENT & DISPOSAL BCC 73,333 82,400 84,872 87,418 90,041 90,041OPERATION FEE - IPSWICH CITY COUNCIL PLANTS 3,822,002 4,286,410 4,417,574 4,552,752 4,692,066 4,703,704OPERATION FEE - AQUATEC OPERATIONS PROJECTS 141,058 162,217 186,549 214,532 246,711 246,711OPERATION FEE - NEW PROJECTS 0 700,000 2,100,000 3,500,000 4,900,000 4,900,000CONSULTING FEES 87,500 165,000 181,500 199,650 219,615 219,615SUNDRY INCOME 0 0 0 0 0 0EQUITY (CAPITAL INTRODUCED) 500,000 0 0 0 0LOANS (CAPITAL INTRODUCED) 0 0 0 0 0
TOTAL ESTIMATED INCOME 4,624,929 5,397,190 6,971,694 8,555,586 10,149,705 10,161,343
ESTIMATED OUTGOCONCESSION FEE Paid to ICC 0 24,694 63,607 153,813 244,960 325,437ADMINISTRATION FEE Paid to Aquatec 896,750 1,005,713 1,036,488 1,068,204 1,100,891 1,125,047ICC - Expense
Contract / Services Budget 374,201 385,651 397,452 409,614 422,148 422,148Consultants 12,500 12,883 13,277 13,683 14,102 14,102
Electricity 594,700 612,898 631,652 650,981 670,901 670,901Direct Labour - Federal 64,602 66,578 68,616 70,715 72,879 72,879
Direct Labour - State 547,404 564,154 581,417 599,209 617,544 617,544Payroll Allowance 1,583 1,632 1,682 1,733 1,786 1,786
Overtime Labour - Federal 7,064 7,280 7,502 7,732 7,969 7,969Overtime Labour - State 99,171 102,206 105,333 108,556 111,878 111,878
Materials budget 586,089 604,023 622,506 641,555 661,187 661,187Materials - Other 70,788 72,955 75,187 77,488 79,859 79,859
ICC - Internal ChargesInternal Parks Expense 8,133 8,382 8,639 8,903 9,175 9,175
Internal Laboratory Expenses 207,805 214,164 220,717 227,471 234,432 234,432Internal Service Provision - Carpenter 2,833 2,920 3,009 3,101 3,196 3,196
Internal Service Provision - Painter 11,267 11,611 11,967 12,333 12,710 12,710Internal Plant Branch Expense 8,331 8,586 8,848 9,119 9,398 9,398
Internal ICC Water Rates Expense 124,000 127,794 131,705 135,735 139,889 139,889Internal ICC Waste Rates Expense 31,400 32,361 33,351 34,372 35,423 35,423
Oncost Expense 349,706 360,407 371,435 382,801 394,515 394,515Internal Plant Hire Expense 126,270 130,134 134,116 138,220 142,450 142,450
COSTS - AQUATEC OPERATIONS PROJECTSMaterials 30,277 36,468 43,588 51,776 61,192 61,192Salaries 31,000 37,339 44,629 53,012 62,653 62,653
On Costs 6,200 7,468 8,926 10,602 12,531 12,531Motor Vehicle - Running Expenses 5,702 6,868 8,209 9,751 11,524 11,524
Administration Fee 6,000 7,227 8,638 10,260 12,126 12,126MATERIALS, STAFF & OTHER ONCOSTS- NEW PROJECTS 49,583 694,167 1,884,167 3,074,167 4,165,000 4,165,000General Charges (Not Covered Elsewhere)
Advertising 10,312 13,493 17,429 21,389 25,374 25,403Consultants Charges (Sundry) 10,114 514 1,234 1,957 2,683 5,081
Corporate Fees 5,200 1,200 1,200 1,200 1,200 1,200Debt Collection / Bad Debts 412 540 697 856 1,015 1,016
Directors Fees 36,000 36,000 36,000 36,000 36,000 36,000Gov't taxes & Charges 2,400 2,400 2,400 2,400 2,400 2,400
Sales Tax 61,637 64,049 66,609 69,333 72,238 80,224Research & Development 1,143 5,136 12,340 19,571 26,832 26,832
Sundry Expenses 299 3,538 9,508 15,478 20,952 22,516Staff Costs - Additional to ICC Contract 0 0
Salaries & Wages 100,000 100,000 100,000 100,000 100,000 100,000Seminars & Conferences 5,000 5,000 5,000 5,000 5,000 5,000
Staff - Amenities, Clothing, Training, etc 2,000 2,000 2,000 2,000 2,000 2,000Staff - Superannuation 5,000 5,000 5,000 5,000 5,000 5,000
Travelling & Accommodation 3,428 15,408 37,021 58,713 80,495 1,500Workers Compensation 3,000 3,000 3,000 3,000 3,000 3,000
Payroll Tax 5,000 5,000 5,000 5,000 5,000 5,000TAXATION (Income) 0 10,701 27,563 66,652 106,149 141,023CAPITAL EXPENDITURE 10,312 13,493 17,429 21,389 25,374 25,403
Sub-Totals 4,514,617 5,433,033 6,876,094 8,399,844 9,833,031 9,905,549
INTEREST: Bank O/D 0 0 0 0 0
TOTAL ESTIMATED OUTGO 4,514,617 5,433,033 6,876,094 8,399,844 9,833,031 9,905,549
Net Income This Year: 110,312 (35,843) 95,600 155,742 316,674 255,794
For convenience, the monthly position is graphed as follows:
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14
612
16 20 24 2832 36
40 4448 52
56 59INCOME
EXPENSES
CLOSING BANK BALANCE
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
MONTH
SUNSHINE WATER PTY LTDMONTHLY CASH FLOW BUDGET SUMMARY
A summary of each year’s Profit and Loss follows:
PROFIT & LOSS SUMMARY Year 1 2 3 4 5 Y.I.Y.O.REVENUE
Earnings from ICC Contract 4,250,789 4,380,815 4,514,817 4,652,919 4,795,017 4,795,017Earnings (Other) 314,159 1,147,286 2,588,560 4,035,194 5,366,326 5,366,326
TOTAL REVENUE 4,564,949 5,528,101 7,103,378 8,688,113 10,161,343 10,161,343
EXPENSESICC Contract Expenditure 4,124,596 4,332,331 4,464,900 4,601,526 4,742,333 4,745,064Aquatec & NEW Projects 128,762 789,536 1,998,156 3,209,568 4,325,026 4,325,026
Other Expenditure 250,946 262,278 304,439 346,896 389,189 389,219Depreciation 8,513 9,674 11,167 12,985 15,096 15,000
TOTAL EXPENDITURE (ex Concession fee) 4,512,817 5,393 ,819 6,778,662 8,170,976 9,471,643 9,474,309
EARNINGS BEFORE INTEREST & TAX & CONCESSION FEE 52,1 31 134,281 324,715 517,137 689,700 687,034Concession Fee 24,694 63,607 153,813 244,960 326,700 325,437
EARNINGS BEFORE INTEREST & TAX 27,438 70,674 170,903 272,177 363,000 361,597Less Interest 0 0 0 0 0 0
EARNINGS BEFORE TAX 27,438 70,674 170,903 272,177 363,000 361,597
Tax Payable = $10,701 $27,563 $66,652 $106,149 $141,570 $141,023
EARNINGS AFTER TAX: 16,737 43,111 104,251 166,028 221,430 220,574
NOTE: The ICC Contract Expenditure includes the ADMINISTRATION FEE paid to Aquatec - the CONCESSION FEE paid to ICC is separated prior to EBIT
The Year-by-Year position is provided thus:
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PROFIT & LOSS SUMMARY Year 1 REVENUE
Earnings from ICC Contract 4,250,789 Earnings (Other) 314,159
TOTAL REVENUE 4,564,949
EXPENSES ICC Contract Expenditure 4,124,596 Aquatec & NEW Projects 128,762
Other Expenditure 250,946 Depreciation 8,513
TOTAL EXPENDITURE 4,512,817
EARNINGS BEFORE INTEREST & TAX & CONCESSION FEE 52,131 Concession Fee 24,694
EARNINGS BEFORE INTEREST & TAX 27,438 Less Interest 0
EARNINGS BEFORE TAX 27,438 Tax Payable = $10,701
EARNINGS AFTER TAX: 16,737
PROFIT & LOSS SUMMARY Year 2 REVENUE
Earnings from ICC Contract 4,380,815 Earnings (Other) 1,147,286
TOTAL REVENUE 5,528,101
EXPENSES ICC Contract Expenditure 4,332,331 Aquatec & NEW Projects 789,536
Other Expenditure 262,278 Depreciation 9,674
TOTAL EXPENDITURE 5,393,819
EARNINGS BEFORE INTEREST & TAX & CONCESSION FEE 134,281 Concession Fee 63,607
EARNINGS BEFORE INTEREST & TAX 70,674 Less Interest 0
EARNINGS BEFORE TAX 70,674
Tax Payable = $27,563
EARNINGS AFTER TAX: 43,111
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PROFIT & LOSS SUMMARY Year 3 REVENUE
Earnings from ICC Contract 4,514,817 Earnings (Other) 2,588,560
TOTAL REVENUE 7,103,378
EXPENSES ICC Contract Expenditure 4,464,900 Aquatec & NEW Projects 1,998,156
Other Expenditure 304,439 Depreciation 11,167
TOTAL EXPENDITURE 6,778,662
EARNINGS BEFORE INTEREST & TAX & CONCESSION FEE 324,715 Concession Fee 153,813
EARNINGS BEFORE INTEREST & TAX 170,903 Less Interest 0
EARNINGS BEFORE TAX 170,903
Tax Payable = $66,652
EARNINGS AFTER TAX: 104,251
PROFIT & LOSS SUMMARY Year 4 REVENUE
Earnings from ICC Contract 4,652,919 Earnings (Other) 4,035,194
TOTAL REVENUE 8,688,113
EXPENSES ICC Contract Expenditure 4,601,526 Aquatec & NEW Projects 3,209,568
Other Expenditure 346,896 Depreciation 12,985
TOTAL EXPENDITURE 8,170,976
EARNINGS BEFORE INTEREST & TAX & CONCESSION FEE 517,137 Concession Fee 244,960
EARNINGS BEFORE INTEREST & TAX 272,177 Less Interest 0
EARNINGS BEFORE TAX 272,177
Tax Payable = $106,149
EARNINGS AFTER TAX: 166,028
PROFIT & LOSS SUMMARY Year 5
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REVENUE Earnings from ICC Contract 4,795,017
Earnings (Other) 5,366,326 TOTAL REVENUE 10,161,343
EXPENSES
ICC Contract Expenditure 4,742,333 Aquatec & NEW Projects 4,325,026
Other Expenditure 389,189 Depreciation 15,096
TOTAL EXPENDITURE 9,471,643
EARNINGS BEFORE INTEREST & TAX & CONCESSION FEE 689,700 Concession Fee 326,700
EARNINGS BEFORE INTEREST & TAX 363,000 Less Interest 0
EARNINGS BEFORE TAX 363,000
Tax Payable = $141,570
EARNINGS AFTER TAX: 221,430
Cash Flow Summary - By Project
CASH FLOW SUMMARY - Yearly Summary YEAR ICC CONTRACTAQUATECPROJECTS
NEWPROJECTS OTHER TOTAL
INCOME 1 3,896,371 141,058 0 587,500 4,624,9292 4,369,974 162,217 700,000 165,000 5,397,1903 4,503,645 186,549 2,100,000 181,500 6,971,6944 4,641,405 214,532 3,500,000 199,650 8,555,5865 4,783,378 246,711 4,900,000 219,615 10,149,705
EXPENSE 1 3,227,846 79,179 49,583 1,158,008 4,514,6172 3,326,618 95,370 694,167 1,316,878 5,433,0333 3,428,413 113,989 1,884,167 1,449,526 6,876,0944 3,533,322 135,402 3,074,167 1,656,954 8,399,8445 3,641,442 160,026 4,165,000 1,866,563 9,833,031
NET INCOME 1 668,525 61,879 (49,583) (570,508) 110,3122 1,043,356 66,847 5,833 (1,151,878) (35,843)3 1,075,232 72,560 215,833 (1,268,026) 95,6004 1,108,083 79,130 425,833 (1,457,304) 155,7425 1,141,937 86,685 735,000 (1,646,948) 316,674
MARGIN ON SALES 1 17.16% 43.87% ERR -97.11% 2.39%2 23.88% 41.21% 0.83% -698.11% -0.66%3 23.87% 38.90% 10.28% -698.64% 1.37%4 23.87% 36.88% 12.17% -729.93% 1.82%5 23.87% 35.14% 15.00% -749.93% 3.12%
NOTE: The ICC Contract Expense does not include the CONCESSION FEE paid to ICC and the ADMINISTRATION FEE paid to AquatecThe Concession fee and the Administration fees are included in the "OTHER" category.
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Cash Flow Summaries - Graphical
$0
$2
$4
$6
$8
$10
$12
Milli
ons
YEAR
INC
OM
E
1 2 3 4 5
ICC CONTRACT
AQUATEC PROJECTS
NEW PROJECTS
OTHER
SUNSHINE WATER PTY LTD
CASH FLOW SUMMARY - Yearly Summary
INCOME
$0
$2
$4
$6
$8
$10
$12
Milli
ons
YEAR
EX
PE
NS
E
1 2 3 4 5
ICC CONTRACT
AQUATEC PROJECTS
NEW PROJECTS
OTHER
SUNSHINE WATER PTY LTD
CASH FLOW SUMMARY - Yearly Summary
EXPENSE
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($2)
($1)
$0
$1
$2
$3
Milli
ons
YEAR
EX
PE
NS
E
1 2 3 4 5
ICC CONTRACT
AQUATEC PROJECTS
NEW PROJECTS
OTHER
TOTAL
SUNSHINE WATER PTY LTD
CASH FLOW SUMMARY - Yearly Summary
NET INCOME
-100%
-50%
0%
50%
100%
2.39% -0.66% 1.37% 1.82% 3.12%
YEAR
MAR
GIN
ON
SAL
ES
1 2 3 4 5
ICC CONTRACT
AQUATEC PROJECTS
NEW PROJECTS
OTHER
TOTAL
SUNSHINE WATER PTY LTD
CASH FLOW SUMMARY - Yearly Summary
MARGIN ON SALES
(%' s shown are for the Total of all Projects)
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($2)
$0
$2
$4
$6
$8
$10
$12
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
Milli
ons
YEAR
Inco
me
/ E
xpen
se
Mar
gin
on S
ale
s
1 2 3 4 5
INCOME EXPENSE NET INCOME MARGIN ON SALES
SUNSHINE WATER PTY LTD
CASH FLOW SUMMARY - Yearly Summary
CASH FLOW SUMMARY
(All Business Components)
BREAK EVEN / SENSITIVITY ANALYSIS
A 5% sensitivity analysis102 on each of the five-year "base Model" cash flow indicates a deficit situation in each case - refer right hand column on the cash flow appended). This underscores the relative sensitivity of the Company's cash flow to price / cost fluctuations. The margin for “error” is therefore relatively small, underlining the need for tight monitoring and control especially over the initial years of establishment.
To examine the impact of various scenarios, “What-If” / sensitivity analysis has
been conducted utilising the following primary variables :
1. Volume Increase (Ipswich City Council Treatment Plant Operations)
2. Consumer Price Index
3. Income Tax rate
4. Number of New Projects (operating of Treatment Plants) undertaken annually
5. Gross Margin on New Projects (Treatment Plant operation)
6. Sales revenue growth applying to existing operations of Aquatec Operations Pty Ltd
7. Consulting fees: average annual increase It is clear that the most significant impact on profitability is both the number and
gross margin achieved, in relation to the operation of new plants.
102 This analysis assumes 5% lower income, and 5% higher variable costs.
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The above data has been graphed as follows (in each case the “Base model” point is shown for reference):
$0
$200
$400
$600
$800
$1,000
BASE MODEL
Thou
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0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00%
CONCESSION FEE - Paid to ICC EARNINGS AFTER TAX:
Y.I.Y.O. PROFIT & LOSS SUMMARY
SENSITIVITY / BEAK EVEN ANALYSIS - SUNSHINE WATER PTY LTD
VOLUME INCREASE (ICC PLANT OPERATIONS)
$0
$200
$400
$600
$800
$1,000
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0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%
CONCESSION FEE - Paid to ICC EARNINGS AFTER TAX:
Y.I.Y.O. PROFIT & LOSS SUMMARY
SENSITIVITY / BEAK EVEN ANALYSIS - SUNSHINE WATER PTY LTD
CONSUMER PRICE INDEX
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$0
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$1,000
BASE MODEL
Thou
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19.00% 23.00% 27.00% 31.00% 35.00% 39.00% 43.00% 47.00% 51.00% 55.00% 59.00%
CONCESSION FEE - Paid to ICC EARNINGS AFTER TAX:
Y.I.Y.O. PROFIT & LOSS SUMMARY
SENSITIVITY / BEAK EVEN ANALYSIS - SUNSHINE WATER PTY LTD
INCOME TAX RATE
$0
$200
$400
$600
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$1,000
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0 1 2 3 4 5 6 7 8 9 10
CONCESSION FEE - Paid to ICC EARNINGS AFTER TAX:
Y.I.Y.O. PROFIT & LOSS SUMMARY
SENSITIVITY / BEAK EVEN ANALYSIS - SUNSHINE WATER PTY LTD
NUMBER OF NEW PROJECTS (PLANTS OPERATED) P.A.
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$0
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$1,000
BASE MODEL
Thou
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5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00% 55.00%
CONCESSION FEE - Paid to ICC EARNINGS AFTER TAX:
Y.I.Y.O. PROFIT & LOSS SUMMARY
SENSITIVITY / BEAK EVEN ANALYSIS - SUNSHINE WATER PTY LTD
GROSS MARGIN ON NEW PROJECTS (PLANTS OPERATED)
$0
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$1,000
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0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00%
CONCESSION FEE - Paid to ICC EARNINGS AFTER TAX:
Y.I.Y.O. PROFIT & LOSS SUMMARY
SENSITIVITY / BEAK EVEN ANALYSIS - SUNSHINE WATER PTY LTD
AQUATEC OPERATIONS - sales revenue growth
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BASE MODEL
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CO
NC
ES
SIO
N F
EE
/ E
ARN
ING
S
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00%
CONCESSION FEE - Paid to ICC EARNINGS AFTER TAX:
Y.I.Y.O. PROFIT & LOSS SUMMARY
SENSITIVITY / BEAK EVEN ANALYSIS - SUNSHINE WATER PTY LTD
CONSULTING FEES: Average P.A. Increase
FUNDING OPTIONS OR ASSISTANCE AVAILABLE In consideration of funding options or assistance available, the Consultant
assumes a base premise that the Project must be (and is) commercially viable without a demonstrated need for propping up by Government or other 'artificial' assistance measures.
Overall Funding Requirements The cash flow demonstrates that the Company will be able to proceed on the
basis of equity contribution of $500,000, as per details provided under the sub-section “Equity” above.
Other Funding / Assistance Available Having first made the previous comment concerning commercial viability, there
are however a number of programs available for which Sunshine Water Pty Ltd may be considered eligible. Clearly, management must give appropriate priority for actively canvassing such assistance in order to enhance best prospects for success.
Attachment to this Report (BIZLINK REPORT - GOVERNMENT ASSISTANCE
AVAILABLE) details the primary programs potentially available to assist Sunshine Water Pty Ltd in their endeavours.
AQUATEC-MAXCON PTY LTD & IPSWICH CITY COUNCIL FEASIBILITY STUDY TO IDENTIFY THE BENEFITS OF A STRATEGIC ALLIANCE Page 176 Section SUMMARY OF MAJOR RECOMMENDATIONS & IMPLEMENTATION SCHEDULE
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19. SUMMARY OF MAJOR RECOMMENDATIONS &
IMPLEMENTATION SCHEDULE
Action: Present Feasibility Study to Project’s proponents for sign-off............................... 102
Action: Develop Business Plan for proposed Alliance. ...................................................... 102
Action: Comprehensive Marketing Plan to be developed and incorporated into
Business Plan - to include the identification of suitable export and
domestic markets and their potential, proposed timing and costs of
market entry, regulatory requirements.................................................................. 102
Action: Progress Feasibility Study and gain in principle approval from both parties..... 102
Action: Alliance members to further consider ways in which co-operation might
result in commercial and / or social gain ............................................................. 102
Action: Undertake comprehensive analysis / audit of Alliance member
capabilities ............................................................................................................... 102
Action: Interview selected personnel for key job / management positions ................... 102
Action: Written job descriptions to be developed for all staff positions (new and
existing positions) by the end of 1998.................................................................... 103
Action: Adoption of Alliance (company) mission statement as provided. This
should be clearly communicated to all staff of the proposed Alliance........... 103
Action: Obtain a clear commitment by all staff to the Company's "Mission
Statement". This should ideally be done on an individual basis, with the
Company's business objectives providing a platform for the overall
company goal. ........................................................................................................ 103
Action: Written transcript of the Company's Mission Statement to be provided in
full view of clients and staff alike. Consideration should also be given for its
circulation to key clients and its inclusion on company marketing
material. .................................................................................................................... 103
Action: Management to consider obtaining professional help to assist in the
change process and its effect on human resources, e.g. conducting and
“Improvement Through People Audit”, development of Self-Managed
Teams, and / or conducting an “Australian Communications Audit” .............. 103
Action: Written job descriptions to be developed for all staff positions .......................... 103
Action: Utilise local employment wherever possible.......................................................... 103
Action: Undertake training skills / needs analysis ............................................................... 103
Action: Analyse intellectual property assets for the purpose of progressing through
to commercialisation............................................................................................... 104
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Action: Liaise with the Regional Office of DTSBI to access further AusIndustry
programs where required and appropriate......................................................... 104
Action: Implement Marketing Plan ...................................................................................... 104
Action: Consider lodgement of QTAS application to be progressed for the purpose
of conducting appropriate overseas market research, product testing,
and/or other activities. ............................................................................................ 104
Action: Capitalise on existing relationships held with overseas customers through
secondment, training, employment, and other activities (develop plan)....... 104
Action: Ensure in principle agreement of the proposed Alliance is reached by the
beginning of the new Financial Year 1998/99...................................................... 104
Action: Develop communications strategy (internal) ....................................................... 104
Action: Develop communications strategy (external), incorporating appropriate
community consultation ......................................................................................... 105
Action: Undertake further market research for potential business development /
expansion of proposed activities ........................................................................... 105
Action: Implement proposed corporate structure............................................................. 105
Action: Put in place management succession program. ................................................. 105
Action: Implementation of Quality Assurance to commence as soon as possible to
ISO9002...................................................................................................................... 105
Action: Implementation of Total Quality Management to commence upon
substantial implementation of Quality Assurance. .............................................. 105
Action: Sunshine Water to commit itself to abiding by the proposed Consumer
Charter of Ipswich Water ........................................................................................ 105
Action: Council to consider all aspects relating to the findings of the Feasibility
Study .......................................................................................................................... 106
Action: Confirm legal advice related to various aspects related to the Project. .......... 106
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20. DISCLAIMER & QUALIFICATION BY CONSULTANT
It should be noted that much of the base data and material presented in this
Feasibility Study, including financial data, has been sourced from client records. Our report is prepared on the basis that full disclosure of all information and facts which may affect our report and / or advice has been made, and therefore the Consultant cannot accept any liability or responsibility whatsoever for the report and / or any advice contained therein unless such full disclosure has been made.
In accordance with the normal practice of Gary O Garner & Associates, I confirm
that this report103 is confidential to Aquatec-Maxcon Pty Ltd and the Ipswich City Council, subject to its provision to the Department of Tourism, Small Business & Industry (as instructed). No responsibility is accepted to any third party who relies on the whole or any part of our report.
Finally, neither the whole of the report nor any part or reference thereto, may be
published in any document, statement or circular nor in any communication with third parties without the prior authorisation and written approval by Gary O Garner & Associates of the form and context in which it will appear.
GARY OWEN GARNER B.Bus., A.V.L.E.(Val.), Assoc.Dip.Val., P.Ag., Dip.Ag., A.I.M.M., M.A.A.A.C. Registered Valuer (Qld) No. 1959 on behalf of GARY O GARNER & ASSOCIATES, & HOLLINGSWORTH PROJECT CONSULTANT
103 The majority of financial information has been prepared from information provided by the client
utilising data contained in published financial statements of Aquatec-Maxcon (Annual Reports) and
Ipswich City Council (including Bentleys Public Benefit Assessment Report to Ipswich City Council), and
whilst every care has been taken with its preparation no responsibility is accepted by Gary O Garner &
Associates or its employees for the accuracy of any data contained herein.
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21. APPENDICES
APPENDIX A - POTENTIAL SAVINGS THROUGH COMMERCIALISATION
/ CORPORATISATION
Ipswich City Council Water & Sewerage Management - Corporate Overheads Source: Public Benefit Assessment Report to Ipswich City Council (June 1997) - Bentleys Chartered
Accountants: Report on Water & Sewerage Services to Ipswich City Council, Appendix Six.
Item Staff No. $
IT - Salary 1 55,000
Equipment 15,000
Records 15,000
Finance - Payroll 1 35,000
Debtors / Other / Rates 1 35,000
Creditors / Purchasing 1 35,000
Finance Manager 1 60,000
Insurance 50,000
Superannuation ($455K x 11.5%) 52,325
Bank Charges 4,000
HR Training, conferences 60,000
Industrial Relations, personnel 2 80,000
Workers Compensation 30,000
Recruitment 10,000
Public Relations - media and advertising 10,000
Executive Services - General Manager 1 90,000
Secretarial 2 65,000
Directors Fees 40,000
Customer Services - General 20,000
Entertainment 10,000
Legal Services - general / legislative 25,000
Internal Audit / Management Development 0
Resources - FBT 20,000
Buildings (rent, cleaning, power)104 256,000
Repairs / maintenance 25,000
telephone / postage 45,000
Travel / Motor Vehicle (35 vehicles) 200,000
Stationery 20,000
Subscriptions / Publications 10,000
Audit 15,000
Buildings, depots (shared) 100,000
1,487,325
Say 1,600,000
1996 Support Plan Charges 6,244,000
Potential Savings $4,644,000
104 21.2 sq. metres x 55 indoor staff x $220 pa
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APPENDIX B - PROFIT & LOSS (IPSWICH CITY COUNCIL
WATER & SEWERAGE SERVICES)
Ipswich City Council 1995 1996 1997
Year to 30 June Actual Actual Revised Budget
$ $ $
Rates & Utility Charges 33,313,000 32,737,000 35,606,000
Sewerage / Trade Waste Charges 0 942,000 1,116,000
33,313,000 33,679,000 36,722,000
Less: Discounts & Remissions (2,940,000) (2,937,000) (3,486,000)
Net Rates, Utility & Sewerage / Trade Waste Charges
30,373,000 30,742,000 33,236,000
Charges (Goods and Services) 1,432,000 620,000 366,000
Private Works 281,000 509,000 605,000
Regulatory Fees 0 104,000 0
Grants 2,282,000 2,420,000 0
Cash Contributions (Assets) 5,542,000 1,690,000 1,696,000
Other Asset Acquisitions 996,000 1,250,000
Other Revenue 175,000 27,000 668,000
TOTAL REVENUE 40,085,000 37,108,000 37,821,000
Wages & Salaries - Recurrent / Overheads 4,840,000 5,205,000
Materials 1,269,000 1,410,000
Contracts & Services 17,960,000 8,225,000 10,886,000
Internal Plant Hire 883,000 957,000
Other Internal Charges (911,000) 0
Support Plan Charges 3,856,000 6,244,000 6,562,000
Depreciation 18,000 460,000 0
Finance & Interest Costs 3,535,000 2,532,000 2,504,000
TOTAL EXPENSES 25,369,000 23,542,000 27,524,000
Increase in Operating Capability 14,716,000 13,566,000 10,297,000
Source: Public Benefit Assessment Report to Ipswich City Council (June 1997), Appendix One
Bentleys Chartered Accountants: Report on Water & Sewerage Services to Ipswich City Council
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APPENDIX C - BALANCE SHEET (IPSWICH CITY COUNCIL
WATER & SEWERAGE SERVICES)
Ipswich City Council
Water & Sewerage Services - Balance Sheet as at 30 June 1996
1996
Actual
$
Current Assets
Rates, Utility Debtors 1,625,000
Other debtors 133,000
Investments 226,000
1,984,000
Non-Current Assets
Property, plant and equipment - gross 29,111,000
Accumulated depreciation (473,000)
28,638,000
TOTAL ASSETS 30,622,000
Current Liabilities
Accruals, unearned revenue 1,122,000
Accrued Wages & Salaries 129,000
Loans 4,410,000
5,661,000
Non-Current Liabilities
Loans 25,023,000
25,023,000
TOTAL LIABILITIES 30,684,000
NET ASSETS (62,000)
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APPENDIX D - PROFIT & LOSS (AQUATEC ENVIRONMENTAL
LTD & CONTROLLED ENTITIES) Aquatec Environmental Limited and Controlled Entities Profit & Loss Accounts (Consolidated) Source: Aquatec Environmental Limited - Annual Report 1996 (audited)
1996 1995
Sales Revenue 24,219,496 25,995,108
Other Operating Revenue 337,306 271,242
Total Operating Revenue 24,556,802 26,266,350
Less: Operating Expenses incl. depreciation /amortisation
24,151,797 25,059,486
Operating Profit before abnormal items and income tax
405,005 1,206,864
Abnormal items before income tax 0 (457,906)
405,005 748,958
Income tax (expense) / benefit attributable to operating profit
121,223 (86,352)
Operating Profit after income tax 526,228 662,606
Retained Profits at the beginning of the financial year
4,409,013 4,163,907
Total available for appropriation 4,935,241 4,826,513
Dividend provided (419,500) (417,500)
Retained profits at the end of the financial year 4,515,741 4,409,013
Persons relying on the above should refer to the Company's Annual Report for
full details and explanatory notes to the above items.
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APPENDIX E - BALANCE SHEET (AQUATEC ENVIRONMENTAL
LIMITED AND CONTROLLED ENTITIES) Aquatec Environmental Limited and Controlled Entities Balance Sheet as at 30 June (Consolidated) Source: Aquatec Environmental Limited - Annual Report 1996 (audited)
1996 1995
Current Assets
Cash 1,008,352 1,616,263
Receivables 5,679,323 4,223,958
Inventories 1,787,924 601,731
Other 90,347 119,987
Total Current Assets 8,565,946 6,561,939
Non-Current Assets
Investments 39,000 39,000
Property Plant & Equipment 5,684,258 5,752,746
Intangibles 10,000 10,000
Other 128,344 43,886
Total Non-Current Assets 5,861,602 5,845,632
Total Assets 14,427,548 12,407,571
Current Liabilities
Creditors & Borrowings 5,314,417 3,363,022
Provisions 887,855 949,752
Total Current Liabilities 6,202,272 4,312,774
Non-Current Liabilities
Provisions 64,884 53,133
Total Non-Current Liabilities 64,884 53,133
Total Liabilities 6,267,156 4,365,907
NET ASSETS 8,160,392 8,041,664
Shareholders Equity
Share Capital 1,674,000 1,670,000
Reserves 1,970,651 1,962,651
Retained Profits 4,515,741 4,409,013
Total Shareholders Equity 8,160,392 8,041,664
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APPENDIX F - AQUATEC GROUP - AUSTRALIAN ORGANISATION CHART
AQUATEC GROUPAQUATEC GROUP
AUSTRALIAN ORGANISATION CHARTAUSTRALIAN ORGANISATION CHART
INTERSTATE
OFFICES
QUALITY OFFICER
CHIEFDRAFTSPERSON
PROJECTMANAGERS
PROCESSENGINEERS /PRODUCTMANAGERS
SALES ENGINEERS
MANAGER
IPSWICH OFFICE
AQUATEC MAXCON PTY LTD
BOARD OF DIRECTORS
QUALITY MANAGER
(GROUP)
CLERICAL STAFF
ACCOUNTANT
(GROUP)
SITE CREW STOREPERSON
TRADESPERSONOPERATORS
MACHINE SHOPFOREPERSON
TRADESPERSONOPERATORS
LEADING HANDS WORKSHOPINSPECTORS
TRADESPERSONOPERATORS
WELDINGSUPERVISOR
TRADESPERSONOPERATORS
YARDFOREPERSON
SAFETY OFFICER
WORKSHOPMANAGER
MATERIALSHANDLINGMANAGER
ESTIMATOR PURCHASINGOFFICER
MANAGER
MAXCON INDUSTRIES PTY LTD
MAXCON INDUSTRIES PTY LTD
BOARD OF DIRECTORS
AQUATEC OPERATIONS PTY LTD
BOARD OF DIRECTORS
MANAGING DIRECTOR
(GROUP)
AQUATEC ENVIRONMENTAL LTD
BOARD OF DIRECTORS
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APPENDIX G - ACKNOWLEDGMENTS & BIBLIOGRAPHY The Consultants appreciate and acknowledge the support of the following
persons / organisations whom have assisted in the preparation of this Report:
1. Belgrove , Mr Tom Treatment Manager, Ipswich City Council
1. Borrows, Mr Peter Works Manager, Ipswich City Council
1. Cole, Dr John Chief Executive Officer, Environmental Management Industry Association of Australia Limited (EIMIAA)
1. de Chastel, Mr Brett City Solicitor, Ipswich City Council
1. Gilchrist, Mr Peter Chairman, Aquatec-Maxcon Pty Ltd
1. Johnston, Mr Greg Director, Aquatec-Maxcon Pty Ltd
1. Ross, Mr Daryl Water & Sewerage Manager, Ipswich City Council
1. Spearitt , Mr David Manager, Finance Department, Ipswich City Council This Report has been prepared with material derived or referenced from the
following sources (due acknowledgement is hereby given):
1. Bentleys Chartered Accountants (in association with Clayton Utz, Kinhill Economics, and John Larcombe Associates), Public Benefit Assessment
Report to Ipswich City Council - Water & Sewerage Services, June 1997.105
2. Aquatec Maxcon Pty Ltd, Capability Statement (Aquatec Group), July 1996.
3. Australian Bureau of Statistics, Year Book Australia 1998, ABS Catalogue No. 1301.0.30.001, Commonwealth of Australia 1998.
4. Australian Bureau of Statistics, Year Book Australia 1996, ABS Catalogue No. 1301.0.30.001, Commonwealth of Australia 1996.
5. Australian Bureau of Statistics, Year Book Australia 1995, Commonwealth of Australia 1995.
6. Hester, B., History & Process Descriptions (Ipswich City Council Wastewater Centres), Ipswich City Council (unpublished memorandum) January 1998.
7. Pender, A., Transforming Government Business Enterprises, Water, March / April 1995
8. Australia - State of the Environment 1996.
9. Tashan Institute (edited by Moran A., Chisholm A., and Poter M.), Markets & Sewerage, (Chapter 7), Markets, Resources and the Environment, National Priorities Project 1991.
10. Strategic Information for a Changing Industry, Environmental Business Journal (Annual Industry Overview 1997).
11. The Asia Pacific Water & Wastewater Industry (1996), Asia Environmental Business Journal, May/June/July, 1996.
12. Bainbridge D., Wastewater - A Strategic Review of the Wastewater Treatment Industry, Water, July / August 1997.
105 Commonly referred to as the “Bentley Report” throughout this document.
AQUATEC-MAXCON PTY LTD & IPSWICH CITY COUNCIL FEASIBILITY STUDY TO IDENTIFY THE BENEFITS OF A STRATEGIC ALLIANCE Page 186 Section APPENDICES Appendix G - Acknowledgments & BIBLIOGRAPHY
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13. Gilchrist, P (Chairman Aquatec-Maxcon), South East Asia: Experiences and Prospects, Water, October 1994.
14. Gilchrist P., (Aquatec-Maxcon Pty Ltd), The Need for an Australian-Owned Water Company, Change and Opportunity in the Water Industry, (undated)
15. Wright, T., (Wright Corporate Strategy Pty Ltd), The Future of the Australian Water Industry, Change and Opportunity in the Water Industry, (undated)
16. Australian Bureau of Statistics, Environment Protection Expenditure, Australia (1992-93 and 1993-94), ABS Catalogue 4603.0, March 1997
17. Australian Bureau of Statistics, Cost of Environment Protection, Australia, Selected Industries (1991-92), ABS Catalogue 4603.0, June 1995
18. Aquatec-Maxcon Water Treatment Technology & Equipment - Brochure
(undated)
19. Ipswich City Council, Ipswich City Council Corporate Plan 1997-2002, (undated) - partially extracted from this document and Web Site - http://infoservice.gil.com.au/icc/
20. National Competition Policy Steering Committee, Implementation of Commercialisation of the Council’s Water and Sewerage Services and Waste Services, Ipswich City Council Internal Memorandum to the Chief Executive Officer, 24 November 1997.
21. Aquatec Environmental Ltd 1996/97 Half Year Financial Report (includes Annual Report, Budget, Discussion Papers and Other Issues), December 1996.
22. Aquatec Environmental Limited Annual Report 1997.
23. Brisbane River & Moreton Bay Wastewater Management Study, Summary Discussion Paper on the Brisbane River & Moreton Bay Water Quality Management Study, Brisbane River & Moreton Bay Water Quality Management Strategy, September 1997.
24. Heads of Agreement - Partnership Agreement Between Ipswich City Council and Aquatec Environmental Ltd, June 1997 (DRAFT)
25. Ipswich City Council, National Competition Policy Public Benefit Assessment Test - Review of Significant Business Activities - Water & Sewerage Services / Waste Services, Stakeholders Information Kit, April, 1997.
26. Metcalfe J., Governments Outsource More Activities, Environment Industry Review, Autumn 1997, Issue Number 4, Cooperative Research Centre for Waste Management and Pollution Control (CRC) and the Environment Industry Development Network (EIDN), with further support from Environment Management Industry Association of Australia Ltd (EMIAA), and the Australian Environment Management Export Corporation Ltd (Austemex).
27. Howlett P., Infrastructure Outsourcing, Environment Industry Review, Autumn 1997, Issue Number 4
28. Improving the Outsourcing Process, Environment Industry Review, Autumn 1997, Issue Number 4
29. Cole, Dr J., Putting the Environment Back into Perspective, Environment Industry Review, Autumn 1997, Issue Number 4
30. Wright, T., NSW Water Industry Outsourcing, Environment Industry Review, Autumn 1997, Issue Number 4
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31. Wright, T. Case Study - Prospect Water Filtration Plant, Environment Industry Review, Autumn 1997, Issue Number 4
32. Metcalfe, J., Outsourcing Case Studies - Noosa and Coliban, Environment Industry Review, Autumn 1997, Issue Number 4
33. Garman, D., Outsourcing R & D to Meet Business Needs, Environment Industry Review, Autumn 1997, Issue Number 4
34. Garman D., and Borton G., Exporting Environmental Technologies into Asia, Environment Industry Review, Spring 1997, Issue Number 5, Cooperative Research Centre for Waste Management and Pollution Control (CRC) and the Environment Industry Development Network (EIDN), with further support from Environment Management Industry Association of Australia Ltd (EMIAA), and the Australian Environment Management Export Corporation Ltd (Austemex).
35. Bergman, I., Collaboration: The Key for Australia’s Environmental Management Overseas, Environment Industry Review, Spring 1997, Issue Number 5
36. Howlett, P. Increased Scope, Scale and Technology Needed for Asia, Environment Industry Review, Spring 1997, Issue Number 5
37. Metcalfe, J., Relationships Important to Asian Markets, Environment Industry Review, Spring 1997, Issue Number 5
38. Free, M., Case Study - Water Treatment in Indonesia, Environment Industry
Review, Spring 1997, Issue Number 5106
39. Free, M., Making the Most of Asian Opportunities, Environment Industry Review, Spring 1997, Issue Number 5
40. Howlett, P. Networking Waste Management in China, Environment Industry Review, Spring 1997, Issue Number 5
41. The State of Queensland (Queensland Treasury): NCP Help, Queensland Government Version 1 (Electronic), NCP Unit, May 1996 (Implemented by GoWrite [Yenlo Pty Ltd]
42. de Chastel, Brett107: Implications of the Local Government Act 1993 - Contracting and Enterprise Powers, QELA Seminar, 5 December 1994.
43. Project Queensland Australia, Issue No. 17 (1997/98), Department of Tourism, Small Business & Industry.
106 This article deals exclusively on Aquatec-Maxcon’s building of a thriving water business in Indonesia,
built on the “Indonesian saying of make friends first, do business later”.
107 Brett de Chastel is the City Solicitor for Ipswich City Council
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22. ATTACHMENTS
PROJECT IMPLEMENTATION & ACTION (“ENTERPRISE
DEVELOPMENT”) PLAN
PROPOSED ALLIANCE - PROFIT & LOSS / CASH FLOW DETAIL,
SUMMARIES & ASSOCIATED SCHEDULES
AQUATEC ENVIRONMENTAL LTD & CONTROLLED ENTITIES -
BALANCE SHEET ANALYSIS & KEY FINANCIAL RATIOS
WATER INDUSTRY OUTSOURCING (NSW & VIC.; QLD., S.A. &
W.A.)
SEPARATE BOOKLET: BIZ-LINK REPORT (GOVERNMENT
ASSISTANCE AVAILABLE)