Meeting the challenge of managing Australia s water resources wisely. Water one of the compelling issues of the 21st century

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1 WATER Meeting the challenge of managing Australia s water resources wisely Water one of the compelling issues of the 21st century australia

2 Meeting the challenge of managing Australia s water resources wisely Making better water management and investment decisions Water has been propelled to the forefront of the Australian political, economic and social agenda. Already our governments and private sector have committed billions of dollars of public investment in water infrastructure over the next 10 years to secure water supply for our cities, industry, agriculture and the environment. Significant population growth in urban centres, along with the over allocation of water resources in the rural sectors has now been exacerbated by the growing impacts of climate change on our rainfall patterns. New technologies to increase our water supply will also need to be balanced against our challenges to reduce greenhouse emissions. The significant water challenges Australia faces involves many tasks including: The implementation and ongoing refinement of the National Water Initiative, the Murray-Darling Basin reform program and other federal and state government funding initiatives. The delivery of long term sustainable water allocation regimes. The establishment of pricing signals, market development and water trading. The development of a robust system of national water accounting and reporting to enable data based decision making and auditing. The establishment of robust regulatory regimes to enable cost recovery and transparency in pricing. Institutional reform of water utility governance to enhance water resource management, efficiency, economies, investment and customer service. The development and utilisation of new water products. The involvement of private sector finance and expertise in infrastructure projects. The facilitation of economic growth and transition in regional centres impacted by over allocation. The establishment of robust environmental management regimes accountable for restoring water sources to sustainable levels. Emissions reduction and the impact of future emissions trading regimes in the water and sewage industry. The engagement of communities and stakeholders in decision making. It is against this emerging background that our Water group works with governments, water supply authorities, major water consumers, regulators and the private sector to assist governments in their water reform agenda, and identify and manage public and private investment in water projects.

3 Meeting the challenge of managing Australia s water resources wisely How we can help The Water group and broader professional services practice offers a range of services to help governments, water utilities, industry and private stakeholders deliver on their reform, project management and service delivery objectives. We have an in-depth understanding of the key issues confronting all parties in the water sector and have significant experience to bring to both public and private sectors as they go down the path of water reform. Our senior policy advisers have extensive experience in national and state water reform agendas and are able to assist all levels of government to implement water reform programs and institutional reform, along with helping the private sector understand how government works. Our broader advisory services assist governments in developing regulatory regimes, regulators in applying them and businesses in responding to them in the water industry. Services include providing advice on water allocation regimes, market development, commercial and financial modelling, risk allocation, audit and taxation advice and the financial and economic support for water infrastructure capital projects. Our services are provided in the following three key areas. Water reform Preparation and advice on strategy to water departments and utilities. National Water Initiative implementation advice. Advice on urban and rural water product innovation, and industry trends. Emissions trading and the impacts of future market, accounting and taxation regimes in emissions trading on water and sewage management. Water accounting regimes, metering plans and water allocation frameworks. Institutional reform, including governance frameworks, business establishment and transaction services. Water market arrangements, development and pricing issues. Cost benefit analysis. Cost recovery implementation. Social and economic impact assessments. Board advisory services. Stakeholder management and advice on intergovernmental negotiations. Capital projects Capital delivery business case build and review. Finance, including public private partnerships and alliances. Risk management. Asset acquisition strategies, including valuations, due diligence and compensation advice. Procurement strategy. Alliance contracting audits. Our extensive energy sector experience applied to water issues.

4 Meeting the challenge of managing Australia s water resources wisely Service delivery to the water and sewage industry Business performance. Regulatory reviews, economic modelling and compliance. Financial risk management and mitigation. Water taxation advice. Restructuring and organisational review. Internal and external audit performance services. Information technology and business systems. Recruitment.

5 Meeting the challenge of managing Australia s water resources wisely Why select us Our dedicated Water team, combined with our advisory, financial, audit and tax teams possess in-depth experience from both a government and private sector background in water policy and associated institutional reform as well as reform in other relevant sectors such as energy. We draw on the extensive resources of one of Australia s largest and highly regarded policy, financial and regulatory practices. Our team has advised on: major national water projects state and federal reform and institutional market design water pricing and trading development water regulatory pricing policy water access entitlements water treatment and recycling infrastructure project evaluation and financing design of accounting frameworks contract negotiation economic impact studies. We have an impressive track record of achievement in the relevant areas. Here are just a few of them. Regulatory reform and institutional market design Engaged by a state government agency to assist with restructuring of part of the state s bulk water assets. The assistance included consideration of valuation methodologies available, valuation of the water businesses to be acquired, due diligence (financial, IT and tax) over the water businesses of the relevant entities, separation and integration advice in relation to the businesses being acquired, working with the newly formed entities to establish a consistent IT strategy and providing recommendations for a governance framework for the newly established entities. The project drew on KPMG s water and regulatory experience across the country. Engaged by a state government agency as their water industry adviser in the implementation of a major institutional reform of the state s water authority ownership and governance structure. Water pricing and trading Advising state water authorities on pricing structures and regulatory submissions. Modelling pricing structures and assessing pricing options for major infrastructure and establishing a trading office, including developing policies and protocols. Reforming a state s regulatory framework to liberalise water trading. Water reform Acting as lead adviser on reform of the water entitlements regime for a state government agency, including advice on systems and policy frameworks to enable the unbundling of water rights, securing water entitlements, metering, cost recovery, market development and liberalising trade. Advising on the development of tradeable urban water entitlements for a state water authority.

6 Meeting the challenge of managing Australia s water resources wisely Water treatment and recycling Advising a state government on recycling options during development of a major city s water strategy. Assessing the feasibility of a major recycling and irrigation project for a state government, including the potential for private sector investment in the project. Advising the private sector on the update of wastewater treatment plants and reuse opportunities. Project evaluation and financing Providing cost-benefit analysis of wastewater treatment infrastructure for a city council. Acting as commercial and financial adviser to a large water authority on their desalination project. The engagement involved: the tender process and bidder interaction procurement options risk allocation analysis economic analysis stakeholder management business case development water pricing and regulation taxation and accounting issues funding, financial analysis and modelling. Providing strategic and commercial advice to the board of directors of a water corporation during its corporatisation, including advice on financial modelling, water pricing, tax and accounting issues and presentations to the board. Evaluating alternative options for a corporate approach to an integrated urban water cycle for a municipal council. Economic impact studies Advising a state government on the economics of introducing competition to the water industry. Assisting water businesses on implementing National Competition Policy reforms. Modelling for state water authorities the effects of different structures on promoting water conservation. Accounting frameworks Establishing the infrastructure for a new market participant, including financial settlement processes. Analysing principles and policies involved in national water accounting.

7 Meeting the challenge of managing Australia s water resources wisely Our Water group is headed by Jennifer Westacott, partner, and Robyn McLeod, director. Jennifer Westacott is a partner with KPMG. She is the national lead partner for water reform and the partner in charge of the NSW Government practice. Jennifer joined KPMG in 2005 after a long career in the Victorian and NSW public sectors. She has held a number of senior positions including the Deputy Director General, NSW Department of Housing, the Deputy Director General, NSW Department of Community Services, the Executive Director, NSW Health Council, the Director of Housing in Victoria, the Secretary of Education in Victoria and the Director General of Infrastructure, Planning and Natural Resources in NSW. Jennifer has extensive experience in water reform. She was the Lead Commissioner for NSW for the Murray-Darling Basin Commission, had oversight of the plan for securing Sydney s water supply and was responsible for initiating the National Water Initiative major legislative changes in NSW. She is a fellow of the Victorian Institute Public Administration, she is a Chevening Scholar and a winner of the Centenary Medal. Jennifer is also a Commissioner on the Commonwealth Grants Commission. Jo Beatty joins KPMG with over 20 years experience in public policy. Jo has had senior roles in the water and energy portfolios during times of significant reform and industry restructure. Prior to joining KPMG in May 2008 Jo was Group Director, Water Industry within the Victorian Office of Water. Jo has also held senior roles as Director Water Recycling and Innovation and Director Commercial Projects, Jo s water experience extends across the urban and rural sectors with specialisation in conservation, water use efficiency and alternative supplies. Since joining KPMG Jo has provided advice to a range of public and private organisations on water. Paul Foxlee has extensive experience in advising public and private sector clients on the delivery and regulatory aspects of large-scale water infrastructure projects. Paul s experience includes procurement analysis, business case development, financial modelling, commercial principles development, risk assessment, tender evaluation, contract negotiation and private sector project financing. Paul has worked for state governments on major desalination projects, amalgamation of major water assets and water recycling projects. Brendan Rynne leads KPMG s Economics, Infrastructure and Policy group. He has advised both urban and rural water businesses across a range of regulatory matters and has also worked with regulators on water pricing matters. His group was involved in some of the most substantial and groundbreaking industry reform in the energy sector, as lead advisers to the reform of the electricity and gas sectors in Victoria and South Australia on behalf of both state governments.

8 kpmg.com.au Contact Jennifer Westacott Partner Water group jwestacott@kpmg.com.au Jo Beatty Associate Director Water group jobeatty@kpmg.com.au Graham Brooke Partner Infrastructure Projects group Corporate Finance gbrooke1@kpmg.com.au Paul Foxlee Executive Director Corporate Finance pfoxlee@kpmg.com.au Brendan Rynne Partner Government Advisory Services bjrynne@kpmg.com.au Helen Cook National Executive Director Energy & Natural Resources group hcook@kpmg.com.au Peter Hudson Partner Transaction Services phudson@kpmg.com.au 2008 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in Australia. KPMG and the KPMG logo are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. December VICN02319ENR.