NSW Audit Office - Financial Reports – 2007 - Volume 4 - Sydney Water Corporation

Sydney Water Corporation AUDIT OPINION The audit of Sydney Water Corporation’s financial report for the year ended 30 June 2007 resulted in a qualified Independent Auditor’s Report. The qualification related to assets and liabilities of the Build-Own-Operate (BOO) schemes not being recognised in Sydney Water's balance sheet. The audit report for 2005-06 was similarly qualified. The audits of the financial reports of Australian Water Technologies Pty Ltd and its controlled entity for the year ended 30 June 2007 resulted in unqualified Independent Auditor’s Reports. Unless otherwise stated, the following commentary relates to the consolidated entity. KEY ISSUES Desalination Plant and the Price of Water Sydney Water will need to achieve price increases to fund its future cost of debt. The future cost of debt wil increase as the desalination plant, with an approved cost of $1.8 billion, will be fully debt funded. The debt will alter Sydney Water’s debt profile significantly over the next few years. Refer also to our comment below on Sydney Water’s ability to fund the replacement of its existing system assets given the age and condition of the system and relevant regulatory pricing structures. The desalination plant’s approved budget includes contingencies of $128 million (about 12 per cent of the total project cost) and provision of $64.0 million to cover expenses such as the acquisition of easements, settlement of land ...