Doing more with what we have delivers best value for our customers, says chief financial officer Marlon Bridge
A key advantage, and one of the reasons our customer pricing is well below the international average, is that we do not operate to make a profit. We do not receive any funding from Auckland Council or the Government, nor do we pay a dividend to Auckland Council. Our focus is, and will always be, to run our operations cost-effectively and deliver value for money through our services.
All of the money we receive from our customers goes into operating, maintaining and expanding our infrastructure. Any difference is financed through borrowing.
At present, we serve 1.5 million Aucklanders, and over the next 30 years, this figure is forecast to grow by another one million people. We align our work with Auckland Council’s development priorities – this means our projects are being implemented where and when they will be needed most.
Over the next 10 years, we’re investing $5.8 billion in upgrading and expanding our infrastructure – $1.9 billion for water and $3.6 billion for wastewater.
However, Auckland is growing fast, so the financial challenge is to fund operational expenditure and expensive, long-life infrastructure while also maintaining service affordability.
To maintain affordability and to enable a smoother and more predictable future price path, we plan funding 30 to 50 years ahead for major pieces of infrastructure, strive to achieve ongoing cost efficiencies, and borrow conservatively.
As outlined in Auckland Council’s 2018–2028 10-year budget, our long-term price increases are: for water, an average of 2.5 per cent per annum, and for wastewater, an average of 3.3 per cent per annum (note there is a greater capital works programme for wastewater over the next decade).
Everything in our sights is budgeted for.
The cost of the Central Interceptor for example, included in Watercare’s asset management plan since at least 2010, is already built into the price path.
In anticipation of increased total water demand from a growing population, we are already searching for additional supply, while also encouraging water efficiency. This would enable us to delay investment in new water infrastructure.
With the likely impact of changing weather patterns, we are also proactively planning and budgeting for adjustments to our network.
Financially we have tracked more or less as expected this year.
As usual, the weather played its part. A hot summer was largely responsible for the 1.7 per cent increase in revenue (up $10.6 million to $641.6 million), but then some extreme weather events impacted unplanned maintenance which came in at $4 million above budget.
Total Watercare assets grew from $8.95 billion to $10.09 billion.
Net debt increased by $9.2 million during the year, funding the difference between operating cash flows and capital expenditure. The increase in net debt was lower than budget, reflecting better operating cash flows, proceeds from the sale of surplus land and lower capital expenditure throughout the year.
Looking ahead, we will be continuing our strategy of, essentially, doing more with what we have – seeking out inherent inefficiencies to maintain affordability and delivering more for less.