2% of the population, 38% of the assets', with George Theo, Tas Water

2025-02-18 Episode 18 - '2% of the population, 38% of the assets', with George Theo, Tas Water

[00:00:00] Piers Clark: Welcome to the exec exchange 15-minute podcast in which a leader from the water sector shares a story to inspire, educate, and inform other water sector leaders around the world. My name is Piers Clark and today my guest is George Theo, Chief Executive at TasWater in Australia. George, it's wonderful to have you with us.
[00:00:17] George Theo: Thank you, Piers. It's great to be with you.
[00:00:19] Pier Clark: Now, George we're going to get to it in this podcast because it's around the complexity of TasWater and how you brought together many councils with lots of infrastructure. But actually, your background is one that you've done this before in that you were the chief exec at Unity Water, which itself was a combination of a number of water utilities. Can you start by telling me a bit about what you did before you came to TasWater?
[00:00:44] George Theo: I guess the first thing, if I go right back Piers, I'm a civil engineer. I'm a water guy. I've been in the water industry for almost 39 years. And the irony of it, Piers, is I never wanted to work in the water industry. But I found myself in the water industry. I thought I'd figure it out after 12 months and 39 years later, I'm still in it. And I think it just goes to show what a hold the water industry has on individuals. So, I've loved my journey to date. I've had the privilege of working in three different states in Australia. Victoria, you mentioned Unity Water, which is based in Queensland. I also worked for Urban Utilities in Queensland and now I'm at TasWater. Prior to joining TasWater two and a half years ago as the CEO, I was the CEO of Unity Water for the best part of a decade. And Unity Water was a merger of, I think, six council water businesses. But TasWater is an amalgamation of 29 council water businesses.
The challenges are no different. There might be more of them, but in terms of the challenges themselves, whether it's 29 or six or some other number is always a challenge. But just a little bit on TasWater. TasWater is a water and sewage business. It's vertically integrated from water catchments to tap to sewer outfall. But we don't manage the catchments themselves. They're unprotected and there's, farming and recreational activities within the water catchments. TasWater was established in 2013. So, it's a young business. It's 12 years old. But it has a hundred-year legacy, which came across through the amalgamation of the council water businesses. We have seven independent skill-based directors, which is really important for TasWater because there's no political interference, there are no politicians on our board, it's an independent board, set strategy, and we get on with things. I mentioned we have 30 shareholders, 29 of which are council, and our 30th shareholder is the state government of Tasmania.
The 29 councils get a dividend, but the state government does not. And so there's a little bit of a difference there.
[00:02:44] Pier Clark: Do all the councils have the same proportion, or are some councils bigger than others?
[00:02:48] George Theo: Each of the council’s equity in TasWater is different. And it depends on the value of the assets that they brought into the merger. So, in terms of the size of the business, just to put some context, we're a state-based utility, we're an island off the mainland for the continent of Australia, we're south of Victoria, and for those who can picture Australia, we operate across 68,000 square kilometers. In that expanse, we have about 470,000 customers, but we also serve about 1.3 million tourists that come into the state annually.
[00:03:19] Pier Clark: Let's just pause for a second there because, that's one of the critical features you've got, an enormous area, but actually a relatively low population, and then lots and lots of distributed infrastructure, more I think than the rest of Australia put together, is that correct?
[00:03:36] George Theo: If you take the 16 largest water utilities in the country, we operate 38 percent of the treatment plants amongst those 16 large water utilities for 2 percent of the population. That is a sign of historical failure because everyone built their own. When it comes to intercatchment transfers, when it comes to long term planning... don't worry about where the boundaries are... It's not just symptomatic of what occurred in Tasmania. I'm sure that's happened all over the world.
[00:04:00] Pier Clark: Absolutely. And you've got to go through the rationalization process. You had 39 councils and 39 councils had their own asset plans and plans to build sewage treatment works and pumping stations, as you said, irrespective of how close they might have been to their neighbor's sewage treatment works.
[00:04:14] George Theo: And I think it's really important to emphasize the reason why TasWater was established. I said it was established back in 2013. Up until then, there were 24 towns in Tasmania that had either a permanent boiled water notice or I do not consume notice. Those 24 towns ended up being more like 28 towns. TasWater has fixed that problem. It had to fix it by essentially building 30 treatment plants in 6 years.
And one of the reasons for it is the disparity of the customer base across the state. So, water's been fixed to a large extent. Which was the underlying driver, if you like. Because individual councils, given their size, did not have the capacity to be able to fund these sorts of investments. So that's been one of the strong points and one of the success stories in having a state-based utility where it could actually bring its balance sheet, if you like, to different parts of the state to fix issues that hadn't been fixed for decades.
[00:05:08] Pier Clark: That fact: 24 towns had do not consume notices...
[00:05:13] George Theo: It was outside of the major cities like Hobart for example, and Launceston. But certainly, many other regional towns. And the last boiled water notice was lifted in 2000. It's really important for us as we go into our next economic regulatory period and we're pulling together our pricing submission as we speak. It's really important for us to not forget that it's only, best part of six or seven years ago that the last boiled water notice was lifted because equally we have challenges in the sewage network and in the sewage treatment plant where we have 110 sewage treatment plants to serve a population of 470,000 people.
[00:05:46] Pier Clark: You're writing your business plan, which I think is submitted the middle of 2025. You've got your next regulatory cycle. You had a proven track record at Unity where you brought together the six or so former organizations and created Unity.
You've got this bigger challenge again here. Are the challenges resolvable, and over what time frame, and how are you building that into your business plan?
[00:06:08] George Theo: Our challenges here are quite different and the difference is that we've got a large number of assets. So, you can look at it in two ways: either you have too many assets for the customers you serve, or you don't have enough customers for the assets that you have. So, I think it's one or the other. From our perspective, we're trying to do a couple of things. One is we're working with councils to look for opportunities to put more assets on existing infrastructure where we have spare capacity. But also, the flip side of that is looking at rationalization of assets across the state. So, if you take examples like Launceston we're going from seven sewage stream plants to one over 10 years. It might spill out to 11 or 12 years, but in essence, we've already made that decision that creates an opportunity to have one treatment plan servicing about 70 to 90,000 people. Enters the circularity environment where we can look at recycled water and other opportunities that comes with the largest scale treatment plant in the city of Hobart where we're servicing about 200 thousand people. Depending who you talk to and on what given day you've got either 14 sewage stream plants or 19 sewage stream plants, I've got to go and count them all. But the point is, if you've got 14 or 19 sewage stream plants servicing a population of, 200 odd thousand people, it just doesn't make sense. So, we're on a journey of rationalizing our treatment plants, but Piers, it's really important for us to do it at end of life or when we have to make an investment in a treatment plant. So instead of making an investment in upgrading a treatment plant, we're actually making an investment in decommissioning it and transferring the sewage to a neighboring plant. So that's our challenge. The other challenge that we have at the moment is almost 25% of our sewage treatment plants that are regulated by the Environment Protection Agency are non-compliant with the effluent that it discharges into the environment. All these things are fixable. It's a function of time and money. And the challenge for us with our next pricing plan that you mentioned, is to get the balance right between how much we can do over the next four years. Because these legacy issues that need to be addressed that have been around for decades are going to take multiple pricing submission periods to address. Now, if we don't get the right outcome, instead of addressing these issues over 12 years, it might be 24 or 30 years if we can't get the right pricing outcomes. And that's also symptomatic of the communities and the regulators appetite to address these longstanding issues. They're the conversations we're going to be having over the next 12 months.
[00:08:25] Pier Clark: It's a question: can you do this in three regulatory cycles or can you do it in 10 regulatory cycles. And that's one for the policymakers and the politicians who've got to work out what's affordable on people's bills?
[00:08:37] George Theo: Yeah, absolutely. And one of the things we're very mindful of is we need to support families; we need to support individuals that might find themselves in a vulnerable state when it comes to paying their bills. So, the support will always be there for those people. But equally, we also have to address these longstanding legacy issues because it's something that community is expecting of us.
[00:08:55] Pier Clark: I talk to leaders of water utilities around the world and there's often this issue of, " how am I going to rationalize my plants? I've got variety of assets, all at different stages in their life cycle." And it's exactly as you described, you're trying to map out, "when is the right time to write off that asset?" You don't want to do it early because you're, leaving money on the table that you shouldn't. And likewise, people have always got some assets that are non-compliant. The challenge you've got in Tasmania is you've got it on multiple fronts. I haven't heard of anyone dealing with it at that scale, that number of councils coming together, that many plants need to be rationalized down.
[00:09:29] George Theo: We think the long-term solution is going to be anywhere between probably 60 and 70 plants, but that's going to come over decades. There's a bit of science in all of this, but there's a bit of art involved as well in how you arrive at the final decision.
[00:09:41] Pier Clark: And tell me about your team. Tell me about the motivation, the capability... You're two years into the role, have you been able to bring in the resources that you need to address these challenges?
[00:09:51] George Theo: Five sevenths of the executive team are new to TasWater and really proud of the executive team that we have. We've also had a significant turnover at the senior leadership team. Really proud of the team that we've pulled together to actually establish our corporate strategy endorsed by our board, which is setting our direction. I think we've got technical strength within the organization. I think there's a healthy appetite to make the changes that we need to make. And people are really keen to address what has been these decades longstanding issues. And we're saying, "hey, we're going to fix them. We're not going to be the victims of what we've inherited. We're actually going to fix these things and we're going to have a bold ambition to actually address them in a timely manner.
[00:10:30] Pier Clark: The reason I asked the question is because people do flip into two camps. There's either the camp of, " I'm up for this challenge. Bring it on! I'm going to fight my way through this and it's going to be my legacy. I'm going to be proud of what I've done!" And other people feel overwhelmed by it. And you've got to create the team and lead the team that are going to do that.
[00:10:46] George Theo: I look at it from the simple perspective that it's the right thing to do. And our community has an expectation that the people they pay in TasWater gets on and does the right thing. And I'm really pleased to say that, we've got momentum that's been generated and we're just going to get on and do the things we need to do. And it's for someone else to slow us down. We're not going to slow ourselves down.
[00:11:07] Pier Clark: Good luck with your regulatory submission. Now, we finish with a bit of a personal question. What do you owe your parents?
[00:11:14] George Theo: When I reflect on that question, it's the value of work and a strong work ethic. I've come from a working-class background. I still think I'm working class, even though people laugh at me when I say that. But I don't forget, my parents worked in factories, the value of work; earn your dollar. And doesn't matter what you do, do it as well as you can. And if you can do that, everything else falls into place.
[00:11:37] Pier Clark: You have been listening to the Exec Exchange with Piers Clarke. My guest today has been George Theo, Chief Executive at TasWater in Australia.
Thank you very much. Join us next time.