Ms O’CONNOR – Thanks Chair. We just had TASCORP in here for some questions. On page 55 of the TASCORP annual report is client advances to their customers and TasWater’s 2024 client advance which is a borrowing, is that correct?
Mr YOUNG – Yes.
Ms O’CONNOR – It is about $833 million, but the borrowings in your annual report are $866 million. Who else does TasWater borrow from?
Mr INGHAM – Only TASCORP, so I don’t understand the discrepancy there. I have to –
Ms O’CONNOR – So, the discrepancy for 2024 is $34 million and the discrepancy for 2023 is $41 million between TASCORP’s client advances and what is detailed as borrowings in the TasWater annual report.
Mr INGHAM – Sometimes within the financial statements there’s – it’s stated what facility is available, so it might be what’s available to us and what we need – haven’t necessarily taken up. I’d need to understand that a bit more to be able to answer it, but to be clear, we don’t borrow from anyone else but TASCORP.
Ms O’CONNOR – Okay, but, so to be clear, in this year, TasWater has borrowed $866.2 million – no, sorry, on top of last year’s borrowings, the extra borrowings of TASCORP are what – this year through – TasWater are what, sorry?
Mr THEO – Our debt as of 30 June this year is $866 million.
Ms O’CONNOR – Okay and have there been conversations with TASCORP about financing capacity –
Mr THEO – Yes.
Ms O’CONNOR – Because they’ve just announced they’re going to undertake a review of TT-Line’s capacity?
Mr THEO – Yes.
Ms O’CONNOR – So what’s the conversation with TASCORP? Because this is, you know, I mean, nudging a billion dollars worth of borrowings.
Mr INGHAM – It can – look it’s significant and it’s going to grow, you know, with our capital program, we expect it to more than double over the next five years. So, we think it’s – it will, you know, by the end of 2028-29, be around $1.9 billion.
Ms O’CONNOR – And TASCORP’s aware of that?
CHAIR – Yes.
Mr INGHAM – Yes. We share our planning with them and you know, one of the key conversations that we have with them is about our ability to service the debt and be able to generate, you know, operating cash flows, to be able to continue to fund that level of debt. We get an annual increase in our debt limits. So, every February, March, we present our projections to them and request an increase and they consider that and consider our projection and approve that. So, it’s reviewed on an annual basis. Yep.
Ms O’CONNOR – And in terms of the company’s planning, what’s the end game? Is the debt just going to keep increasing or is there a body of capital works –
Mr INGHAM – Yeah.
Ms O’CONNOR – That once they’re complete, you won’t have this debt for carrying it?
Mr INGHAM – It certainly won’t increase to the same level that it’s increased in the last couple of years and what we think it will increase over the next five years. As George mentioned in his opening, we’re investing really heavily in particular in sewer over the next five to 10 years. So, we think it’s likely that it will flatten out at some point. Probably the one thing I would mention is our gearing. So, you know, we do constantly look at our level of debt to our total net assets and the percentages around that and we benchmark that against our peers and make sure also that it’s within the ranges that TASCORP allows us to have it. We are again in conversation with them about that consistently and our debt to equity ratio is about 30 per cent at the moment. When you compare that to our peers on the mainland, that’s very low. On average, their debt to equity ratio is around 47 per cent. A lot of our peers are a lot higher and very highly geared. What that means is there’s room for us to further borrow against our assets. Our projections say by the time we get to the end of 2028‑29 it will be around 45 per cent, which will be comparative to some of those mainland counterparts.
Ms O’CONNOR – Do you expect that to be something close to a peak for borrowings?
Mr INGHAM – The range we aim for is around 45 to 55 per cent. It might increase, but we wouldn’t want to see it go higher.
Ms O’CONNOR – That’s a debt to equity ratio you’re talking about?
Mr INGHAM – Yes.
Ms O’CONNOR – That is 45 to 50 per cent.
Mr INGHAM – Yes, 55 per cent.
Ms O’CONNOR – Fifty‑five per cent.
Mr INGHAM – Forty‑five to 55 per cent. At the moment our projections are saying around that 45 per cent by the end of 2028‑29.
Ms O’CONNOR – The obvious question from the average Tasmanian water and sewerage user will be, given the level of debt the entity will be carrying within five years, what does that mean for the prices they pay for their water and sewerage services?
Mr THEO – That’s the purpose behind independent economic regulations. We’re working through that process as we speak. Our board will consider what prices would look like from 1 July 2026 in about April next year. We will then submit a proposal – that’s what it is, a proposal – to the economic regulator. The economic regulator will then engage in dialogue with TasWater and the community. We welcome that dialogue. That dialogue will run for the best part of 12 months. The economic regulator will make a decision prior to 30 June 2026 for adjustments to prices come 1 July 2026. Any borrowings we make go back into water and sewerage infrastructure to deliver services for the community, address environmental issues and improve water security. Depending on where you live in the state, you could be having water restrictions on a more frequent basis than in other parts of the state. One of the questions we need to answer is how often communities in Tasmania should be going into water restrictions. That’s a conversation we’ll be having with our community as part of this process.
The money we borrow goes into water and sewerage infrastructure. If the economic regulator turns around and says you can only have so much, we then have to retrofit our capital works program to align with what we are allowed to generate in terms of revenue and what we are allowed to borrow. It means the issues that need to be addressed, particularly in sewage treatment, and we have had many conversations with the EPA, we would have to go back and realign how quickly we can address many of those issues on the back of sewage treatment plants not being compliant. In the end, there’s a balancing act between price increases, how much you can borrow, how much you can fix and how quickly you can fix these things. Remember, we are still in catch-up mode. We’re hopeful that in six- or seven-years’ time, post‑prices and services plan 5, we are in a maintain CapEx mode, not a catch-up CapEx mode. It’s really important, as Kane said earlier, there is an acceleration of investment over the next five years, but we are hopeful beyond that it will be a maintained environment, not a continued catch-up environment.
Ms O’CONNOR – Thank you for that. When TasWater presents to the economic regulator in preparation for the 1 July 2026 decision, all financial information is put before the regulator, including for example, the projection of the debt the company will be carrying within five years’ time. That clearly must form part of the regulator’s determination on pricing. I gather what you’re saying is it’s not a simple equation, but the more the company has to borrow to invest in capital, ultimately there has to be a flow‑on effect on prices and bills, is that correct?
Mr THEO – That is correct. One hundred per cent correct.
Ms O’CONNOR – How do you restrain that? I guess it is the regulator’s task, isn’t it?
Mr THEO – The regulator’s job is to ensure TasWater is prudent and efficient in the work it sets out to do. Their job is not to second guess the objectives of our community. The expectations and obligations we have to the dam’s regulator, Department of Health and also to the EPA. That’s why it’s a balancing act. We are very mindful of what increases mean for Tasmanians. That’s why we have a TasWater Assist program. For those individuals, those families who are finding it tough, we’re there to support them. And our TasWater Assist program is exactly for that purpose, and we’re very mindful of it.
CHAIR – The regulator does give you a cap that you can charge; you don’t have to charge the full amount.
Mr THEO – That is correct. The regulator will say you can price up to X percent. But I was just going to say, whether you choose to price at X percent, which is what the regulator would determine, or a lower number, the implications of whatever decision you make mean you can’t invest in addressing a number of issues we have before us.
If I keep on the example of sewage treatment, instead of addressing issues over the next 10 to 15 years, it might be 20 to 30 years. And if we’re saying that’s okay, that’s okay.
What I can tell you is our 45 customers who were on the panel that provided me with a report two Saturdays ago have actually said we need to do more in the environment. And we’ll be responding to that, but it’s up to the economic regulator in the end to determine what price will look like on the back of a proposal, and linking that proposal to what do you get for that money.
Ms O’CONNOR – TasWater will put a proposal to the economic regulator and that proposal will say our costs have increased, our borrowings have increased, necessarily, there will need to be an increase in water and sewerage prices?
Mr THEO – Correct.
Ms O’CONNOR – I have two areas I’d like to ask some questions about. The first is in relation to the sewerage tanks at Macquarie Point. The annual report says that ‘early works and planning have been underway this year’, and the budget next to that is $30.4 million. The state contributed, according to the annual report, $20 million in November last year. What early works and planning have led to – well, how are the early works and planning going and what is the timeline for completion of this project?
Mr WILLMOTT – Yes, I’m really pleased to advise that we’re not just in early works any more, we’re in construction. So, we’ve commenced around eight weeks ago at Selfs Point with the new sewage treatment plant construction works there. Around six weeks ago, we commenced on Mac Point itself. I don’t know if you’ve noticed a big crane that’s in the air down there at the moment. That’s us. We have started drilling the secant piles for the pump station. We’ve got around 12 of the 120 completed so far and we’ve done around 600 of the piles out at Selfs Point of the 5000 we have to do on that site. So, here we are in construction.
Ms O’CONNOR – Thank you so much for that. So, the total cost, according to the annual report, will be around $314 million. To date, the state has contributed $20 million of the $224 million it’s committed towards the project. What is TasWater’s understanding of the rollout of those funds from the state?
Mr WILLMOTT – Each year we’ll receive around $20 million – off the top of my head – and we’ll see the balance of that at the end of the project. So –
Mr INGHAM – It’s linked to milestones.
Mr WILLMOTT – and linked to milestones, of course. Yes, that’s right.
Ms O’CONNOR – Oh, I see. So, the state government will –
Mr INGHAM – Progressively pay it.
Ms O’CONNOR – Progressively pay it. What’s the projected completion date for the closure of the tanks at Macquarie Point?
Mr WILLMOTT – Yes, we’ve planned to be completed treating at Mac Point by the end of 2026, so, we’re seeing currently that the Selfs Point treatment plant be finished around mid-2026. So, we’ll start to cut over the flows from Mac Point to Selfs Point then and, by the end of the year, we’ll be finished treating at that site. It’ll be decommissioned by then. That’ll be just the demolition to happen there. It won’t take very long.
Ms O’CONNOR – Just to clarify, the balance of the remaining of the state government’s commitment is expected to be paid to TasWater on completion of the project.
Mr WILLMOTT – Correct.
Ms O’CONNOR – My next question relates to water restrictions. One recent summer we had water restrictions on drinking water in and around Hobart. No restrictions on irrigators, I note. Are we still irrigating in the south of southeast with potable water?
Mr THEO – Yes, we are. I think there’s two questions in that. The first question, as I understood it, is there’s been no water restrictions in the last couple of years. That’s as a result of the upgrade at Bryn Estyn that occurred and completed just over a year ago.
You would recall that Hobart was in a situation historically where it’d be raining and would have to place some people on water restrictions because the old treatment plant could not cope with the raw water quality coming down the river. That’s now a thing of the past.
In terms of Tasmanian Irrigation and irrigators having water from Bryn Estyn, that is correct. That is about 10 per cent by volume. We are in the process – and Kane can talk to it – to execute a contract, if you like, which will progressively take TI off Bryn Estyn over the next 10 years at best. The first five years, they’ll be covering cost of production, then five years after that the long run marginal cost, but essentially that time frame has been put in place to allow the scheme to be expanded and, you know, the federal government money was made available recently to expand that scheme. So, we are expecting, through the commercial arrangements we’ve put in place, for TI to be less reliant on Bryn Estyn.
One of the spin-off benefits that comes from upgrading Selfs Point is that once that’s done and, potentially with a further investment on the back end, we can create nine billion litres of class A water: climate-independent water source for irrigation purposes. I’m pretty excited about that, and we’ll be having those conversations with the relevant stakeholders in the coming months and, hopefully, there’ll be some interest in that because that is a true circular economy where, instead of putting nutrient-rich water into a river, we could actually be piping it down to irrigators for growing crops and growing production.
Ms O’CONNOR – That leads me to my next question. TasWater is a member of the Rural Water Use Strategy Roundtable, which in part came out of some science that was undertaken in the former Department of Primary Industries, Parks, Water and the Environment, which was a temporal and spatial patterns of river health report which showed that all our major river systems are under enormous stress and in decline. What has TasWater been able to bring to the table for the Rural Water Use Strategy and the need to better look after our rivers so that we can have a number of the objectives that you describe in the annual report, which is like water forever. You would recognise that we need to treat our rivers better.
Mr THEO – Yes. Matt, would you like to take that?
Mr DERBYSHIRE – With the Rural Water Roundtable, there’s a lot of information sharing going on, there’s a lot of stakeholders in catchments around Tassie that take water from rivers. Hydro, TasWater, TI, there’s a number of participants, including EPA, the NRMs around the state. All the stakeholders’ catchments are getting around the table, sharing information but also having input into government.
On your question around how do we reduce our impact on rivers and waterways, part of our 2050 goal is to actually use all our effluent as recycled water across the state. We’re driving down nitrogen and phosphorus, we want to grow recycled water for irrigation and also potentially commercial customers around the state. That’s our contribution to trying to maintain healthy waterways. We can drive down our extraction.
The other part of it is driving down leaks. George talked about the 28 per cent coming down to 24.5 per cent leakage. We’re on a journey to around 13 per cent by 2030. Those types of things. Educating customers around being water efficient, water wise, driving down their consumption because we do use more water in Tassie. I think it’s because we’re having longer showers, probably because we’re trying to warm up in winter. They’re the types of things that we can do to reduce our reliance on actually extracting water from riverways.
Ms O’CONNOR – Thank you. That’s good to know. How does TasWater plan to deal with some of the issues that have been experienced by other water entities in using recycled water that has PFAS chemicals in them? There are whole areas in the United States where they’ve used recycled water and basically poisoned farm lands because they haven’t properly taken the PFAS chemicals out of them. Is TasWater aware of that issue and does it have tech or plans in place to deal with it?
Mr THEO – We certainly are aware of the issue. I’m very pleased to say that we undertook, I think in the last few months we did 1960 tests of raw water quality for PFAS. I think it’s about 5 or 6 compounds within that PFAS family that are nasties. I’m happy to say we did not detect it, but we will.
Ms O’CONNOR – It’s in make-up and all sorts of things people put on and in their bodies.
Mr THEO – Yes.
Ms O’CONNOR – Presumably it’s there.
Mr THEO – It’s in sewage, yes. I was referring to drinking water. In terms of the raw water quality that comes into the treatment plant that we then treat and put out as drinking water, I can say that in the raw water quality as of maybe a month or two months ago when we concluded our testing we did not detect any PFAS, but we expect to detect it. I think we’ve got to be open to that.
Once we do detect it, you just introduce another treatment train to actually remove that compound from the drinking water. That comes at an expense. The National Health and Medical Research Council as we speak has a full public consultation on what PFAS level should be. They adopted the US standards, which is about four parts per trillion, not billion. To put into context, four parts per trillion is the equivalent of one drop of PFAS in five Olympic‑size swimming pools. That’s the level of testing we’re doing.
Ms O’CONNOR – It’s still toxic.
Mr THEO – Then there’s exposure and how much you have to drink for it to cause a health implication and all those sorts of things. But, once we detect it, we will respond in accordance with whatever limits the National Health Medical Research Council sets, which are also enforced by the Department of Health in Tasmania.
In terms of sewerage, we’re mindful of that and the National Environment Management Plan (NEMP 3). Did you want to talk to that, Matt? I seem to be doing all the talking. I know it’s in your backyard.
Mr DERBYSHIRE – As George said, NEMP 3 comes into effect, at the end of this calendar year. It’s not far away, and then regulators in the states will adopt a timeframe for utilities to come into line with NEMP 3. It won’t be at the end of the year and all of a sudden, we have to comply.
To your question on technology. There are technologies emerging that can deal with PFAS in the sewerage treatment plant. Also, we have a biosolids road map at the moment which we are looking at. This is a solution for sludge from treatment plants where we would likely end up building a facility that essentially burns the sludge and turns it into Biochar, which can be used as a fertiliser in agriculture. It knocks out the PFAS and other biological hazards in the sludge.
Ms O’CONNOR – Thank you for that. My last question on this line of questioning.
Just upstream from Bryn Estyn, there are two salmon hatcheries, which have had an impact on water quality in Hobart, in the past. And as I understand it from previous questions across the table to TasWater, sort of scrubbers, have been put in at Bryn Estyn in part, to deal with hatchery solids. Is that correct? How does TasWater mitigate for the upstream effects of those hatcheries?
Mr THEO – Irrespective as to whether they’re hatcheries or just general activity within the catchment as all our catchments are open, there’s activity that occurs. What we focus on is what’s the raw water quality coming down. We have documented procedures and processes which depending on the raw water quality, determines our response. Whether it’s current treatment process or increasing carbon activated carbon to remove some of those compounds, it just depends on what’s coming down the river and we respond appropriately.
We take the view that irrespective of what’s happening upstream, we’ve got to be able to cope with what’s coming into the treatment plant. What comes out of the treatment plant is a compliant drinking water.
Mr DERBYSHIRE – I add too, there’s a risk assessment done on all the catchments around Tasmania based on urban development, what type of agriculture is going on in the area. And then in alignment with the Australian Drinking Water Quality Guidelines, that dictates the number of barriers we need to have in place to make sure the water is safe for our customers. Regardless of whether it’s agricultural or aquaculture, urban development, the Australian Drinking Water Quality Guidelines guide that the treatment processes that were installed at Bryn Estyn.
Ms O’CONNOR – Does TasWater test for any agricultural chemicals in its drinking water? Simazine, atrazine, any of the triazine family, or any other commonly used agricultural chemicals?
Mr DERBYSHIRE – Yes.
Mr THEO – I was going to say if my chief scientist was here, he’d be able to tell you straight away.
Matt, you said yes, but I’m happy to take that on notice and come back to you.
Mr DERBYSHIRE – They’re done monthly.
Mr THEO – It’s done monthly.
Ms O’CONNOR – Testing for a range of agricultural chemicals is undertaken monthly?
Mr THEO – Is that right, Matt?
Mr DERBYSHIRE – Yes.
Ms O’CONNOR – Can I put that question on notice and ask what chemicals you test for?
Mr THEO – We can do that. I’m just trying to recall whether it’s published in our Annual Drinking Water Report.
If there’s a particular chemical you have in mind, please let us know. Otherwise, we can tell you the list of chemicals we test for.
Ms O’CONNOR – Thank you.
Mr DERBYSHIRE – While there’s a pause, can I go back to the pesticide question. We test for 20 pesticides quarterly.
Ms O’CONNOR – Okay.
Mr YOUNG – That’s in HLMC guidelines that we use.
Ms O’CONNOR – That is really good to hear. I did put the question on notice, however.
Mr YOUNG – We’ll come back to you with a list of the 20 that we test for. It’s very rare for us to get a detection, very rare.
Ms O’CONNOR – Oh really?
Mr YOUNG – Yes.
Ms O’CONNOR – Things have changed, then. Ten or 15 years ago, my former colleague, Tim Morris, used to have lots of evidence of triazines found in water supplies. Well, rivers.
Ms O’CONNOR – I wanted to ask about climate and your projections around future climate impacts, because we’re seeing water levels dropping or being precarious in hydro catchments. We’re seeing impacts on the rivers that run into water treatment systems. We’ve had water restrictions. What kind of planning is there for the impacts of climate, which is going to dry out the island, particularly on the west coast and in the central highlands?
Mr THEO – I’ll ask Matt to talk to that in a second. I made reference earlier about our water security plan, and that takes a long-term view, and we’ll be engaging community in those conversations.
Matt, you might want to talk to some of the detail that’s gone behind being in a position to have those conversations. What I will say is that it’s not raining where it used to rain and we are very mindful of that. We are very aware that we need to be in a position to respond to climate changes that are occurring and be in a position to provide a secure source of water to community in perpetuity.
Matt, you might want to talk to some of the details and the work that we’ve been doing.
Mr DERBYSHIRE – Essentially, we use an adaptive planning approach with a 50-year planning horizon that considers everything in climate change. Not just the amount of precipitation falling on Tasmania but also sea level rise, wind events that we saw a couple of months ago that knocked out power to more than 50 of our sites, extreme temperature days. Those things are factored in. I’m eagerly awaiting part of the work that the Rural Water Roundtable is doing, which is to update the climatic model for Tasmania that is very out of date. I think that’s due next calendar year. Then we will feed that into our catchment yield analysis, and then respond accordingly.
The other approach that we take is all options on the table. That doesn’t mean just building more dams around Tasmania. It considers everything from desalination to purified drinking water and everything in between.
So, everything’s on the table. Obviously, it has to make sense financially. But, it’s not just a financial question. It’s about how do we ensure that our customers have water when they need it, when they turn their tap on or flush their toilet around Tassie. That water security strategy will be consulting with our customers further on to make sure that we’ve got it right,
At the moment, the draft water security strategy talks about no more than one water restriction every 10 years; no more than three months of a water restriction; and the last one is – going to evade me right now.
At the moment, we know we’ve got work to do – that only about 50 per cent of our customers could satisfy all three of those water security measures. But, that adaptive planning approach that we take over 50 years will essentially move all of our customers to that required level of service in the water security strategy.
Mr THEO – I want to add one thing. I know before you said, look, in the next five to 10 years we’ll have a peak, you know, we’re catching up on under investment of the past and then we’ll flatten off. I think that’s true. But what we don’t know in that 10 years-plus is the adaptive approach to climate change and how hard it will hit and what that will mean.
Depending on that could mean that we need to invest. We are so fortunate that in Tasmania we’re living off the assets that were built by our parents and grandparents. They built those after the First and Second World Wars, and they’re still the majority of assets that we’re using. They built them at a time, I think, when they didn’t have as much money, but they invested in infrastructure that we’re living off now.
Ms O’CONNOR – They built them very well.
Mr THEO – They built them very well, and we owe them a debt of gratitude. We need to do the same and not say we will pass this on to our grandchildren for the future to say, ‘Well, you pick up the tab, then.’ There’s a balance to be achieved there.
CHAIR – We might need to wrap it up unless there is anything really pressing and urgent.
