Financial performance

Our financial performance for the year was strong. This was due to strong water sales resulting from warm and dry weather conditions and an increase in customer revenue from customer growth.

Instrumental to the federal government's Water for Fodder program was the production of 40 gigalitres of water at the Adelaide Desalination Plant, with operating costs fully recovered from the federal government.

Operating expenditure was well-managed with a continued focus on efficiencies and electricity expenses minimised through volume-managed purchases from the wholesale energy market.

We continue to focus on debt management strategies to manage interest rate risk and minimise expense.

The year-end profit before tax was $315.7 million which is $47.9 million higher than budget and $43.2 million more than the previous year.

Revenue remained strong and was $23.4 million higher than 2018-19 predominately due to:

• growth in the number of customers as a result of new housing development and suburban infill
• strong water sales due to warm and dry weather conditions through the year, albeit lower than 2018-19
• increased revenue funding to run the Adelaide Desalination Plant to produce 40 gigalitres during the year as part of the Water for Fodder program
• increased water and wastewater rates as a result of annual CPI price rises
• increased contributed assets arising from mains extensions contributions, infrastructure assets gifted to us from developers and capital contributions to us for work we perform.

Total expenses were $19.7 million lower than 2018-19 predominately due to:

• interest and finance charges $12.1 million lower due to external interest rate market conditions and prudent refinancing activities
• electricity expenditure dropping $16.1 million primarily from significantly lower electricity wholesale prices. This excludes Adelaide Desalination Plant electricity costs required for the Water for Fodder program which were reimbursed by the federal government. Electricity expenditure in total increased $4.1 million
• services and supplies reducing by $24.5 million, predominately due to the adoption of the new lease accounting standard which saw some accommodation and vehicle leases costs classified as finance leases
• operational and services contracts increasing by $7.6 million, predominately due to increased Adelaide Desalination Plant operating costs which is revenue funded through the Water for Fodder program
• employee benefits expense increasing $3.7 million predominately due to increased wage expense commensurate with CPI and/or existing enterprise bargaining agreements
• depreciation increasing by $1.5 million derived from asset carrying values before the year- end revaluation of infrastructure, plant and equipment assets.

Income tax expense increased by $13 million as a result of increased profit; the effective tax rate of 29 per cent is the same as 2018-19.

As a significant revenue contributor to the South Australian Government, for the broader benefit of the people of South Australia, an amount of $481.6 million was paid in 2019-20. This saw $64.4 million of business operating expenditure contributed to other government agencies and/or councils. Within interest expense, $96.5 million was paid to the South Australian Financing Authority as guarantee fees and margins. Income tax equivalent of $92.6 million and dividend of $228.1 million was also paid.

During the year, we spent $564.9 million on capital expenditure, with $33.7 million spent on information technology and $531.2 million on infrastructure.

Information technology investments continue to focus on improving outcomes for our customers and the business including:

• improved service channels and customer digital experience
• increased technology security and reliability
• increased business efficiency and employee experience.

We continue to focus on improving our water and wastewater infrastructure assets and invest in major infrastructure projects, all of which have a positive impact on our customers and/or the state. In 2019-20 these included:

• Zero Cost Energy Future with $185.5 million spent towards the $385 million project
• Northern Adelaide Irrigation Scheme, continued works and expenditure of $30 million towards the $155.6 million project
• Murray Bridge Wastewater Treatment Plant relocation with $21.7 million spent towards the $53.5 million project
• Kangaroo Creek Dam Safety works were completed with $14.9 million spent as part of the $119.9 million project
• Port Lincoln Sludge Upgrade works continued with $10.7 million spent towards the $18.9 million project.

Capital expenditure has been prudent with efficient expenditure through the year. It was contained within the Essential Services Commission of South Australia’s allowable expenditure and/or state budget approvals.

The following is a summary of external consultants engaged, and the nature and cost of the work undertaken.

See also tenders.sa.gov.au/tenders/index.do for a list of all external consultancies, including nature of work and value. See also the Consolidated Financial Report of the Department of Treasury and Finance at treasury.sa.gov.au for total value of consultancy contracts across the SA Public Sector.