The Manila Water Experience

by:

Noel O. Julao

External Relations Manager

Manila Water Company, Inc.

The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

OUTLINE
Background – The MWSS Privatization Performance Management Corporate Transformation Business Results Conclusion

Manila Water Company, Inc.

Background – The MWSS Privatization

Background - The MWSS Privatization
MWSS vs. Asian Utilities
NonRevenue Water
(% of prodn)

City

Population
(million)

Water Availability
(hrs/day)

Water Coverage
(% of pop)

Staff/1000 Connections

Manila Singapore HongKong Seoul K. Lumpur Bangkok

10.6 3.0 6.3 10.6 1.4 7.3

16 24 24 24 24 24

58.7 100 100 100 100 82

63 7 36 35 36 38

9.8 2.0 2.8 2.3 1.4 4.6

Source : ADB 1996 Data

Manila Water Company, Inc.

Background - The MWSS Privatization
August 1, 1997 Takeover

West Zone
3,100 employees

East Zone
2,200 employees

Metropolitan Waterworks and Sewerage System (MWSS)

25-Year Concession

Manila Water Company, Inc.

The MWSS Privatization
The Regulatory Environment
Metropolitan Waterworks & Sewerage System (MWSS)

Board of Trustees

Department of Environment & Natural Resources (DENR)

REGULATORY OFFICE
Prices, Service Standards

Department of Health (DOH)

Pollution Control Standards

Drinking Water Quality

Concessionaires

Manila Water Company, Inc.

Tariff Setting
Tariffs are set to allow full cost recovery including appropriate returns

Concessionaires are entitled to earn an Appropriate Discount Rate (ADR) on allowed expenditures
Manila Water is entitled to recover all eligible expenses and to earn a rate of return Manila Water is measured against a set of KPIs and BEMs

Agreed Service Obligations

Agreed expenditures required to meet Service Obligations
Opex Capex Concession fee Income taxes Return (ADR)

Resulting tariff to yield ADR

Manila Water Company, Inc.

Tariff Setting
Mechanism for Tariff Adjustments Formula-driven adjustments, subject to MWSS review Rate Rebasing Inflation Foreign Currency Differential Adjustment Extraordinary Price Adjustments
♦ Every five years with full review of business plan ♦ Annual adjustment for inflation ♦ Quarterly review and adjustment, covers eligible loans in foreign currency ♦ Annual adjustment for events beyond control of Manila Water

Orderly and transparent mechanism for tariff adjustments

Manila Water Company, Inc.

Performance Management

Performance Management
Drilling down of Targets

Key Performance Indicator / Business Efficiency Measures (KPI / BEM)

1,000 985 970 955 940 925 910 895 880

Company KPI + BEM / Goals

865 850 Jan '06

Feb

Mar

Apr

May

Jun

Jul

Aug

Sept

Oct

Nov

Dec '06

Actual

Plan

36.00% 35.00% 34.00% 33.00%

Group / Department Goals

32.00% 31.00% 30.00% 29.00% 28.00% 27.00% 26.00%

Individual Goals / KRAs

25.00% 24.00% Feb

Mar

Apr

May

Jun Actual

Jul

Aug

Sept Plan

Oct

Nov

Dec

Manila Water Company, Inc.

Performance Management
Territory Management Concept

BUSINESS AREA

SUPPLY ZONE 1 DMZ 1

SUPPLY ZONE 2
1 3 4 9 12 2 9 10 5 7 11 13

SUPPLY ZONE 3

DMZ 2

SUPPLY ZONE MANAGER

TERRITORY BUSINESS MANAGER

DISTRICT OFFICER

Manila Water Company, Inc.

Performance Management
Decentralization

Marikina
Balara Balara

Antipolo

Cubao Cubao

San Juan/ Mandaluyong Mandaluyong

The Eight Business Areas

Makati Makati

Pasig
/ Taguig

Manila Water Company, Inc.

Corporate Transformation

Corporate Transformation
Trust and Confidence

Full use of former public sector employees

Business Area concept Partnership
Corporate Program Coordinators (CPC) Clusters

Service Providers /Contractors

Manila Water Company, Inc.

Corporate Transformation
Development of Future Leaders - Cadetship Program
Classroom and leadership training On-the-job training at the Business Area and Operations Continuous training at the Business Area before being cross posted in other areas of the company
Number of Graduates = 182

14 Batches

Manila Water Company, Inc.

Corporate Transformation
Program for Talent Exchange and Training (ProTExT)
Three (3) months training to United Utilities (UU) operations – United Kingdom (UK), Australia, Bulgaria, Estonia) Receive and host talents from the same companies / countries

Manila Water Company, Inc.

Corporate Transformation
Upgrading of Standards - Service Providers

Vendor Program Extended financing

Manila Water Company, Inc.

Corporate Transformation
Company-wide Recognition Program

Huwarang Manggagawa for staff

President’s Pride due to Performance (P3) for middle management

Chairman’s Circle (C2) for senior management

Manila Water Company, Inc.

Corporate Transformation
Social & Environmental Commitments aligned with Business Goals

O IR V EN S / AL TIVE I C C SO BJE O

NM

L TA EN

N SI BU

SS E

O G

LS A

PERFECT ALIGNMENT

Manila Water Company, Inc.

Business Results

Manila Water’s Accomplishments
Laying of mains and distribution mains
in kilometers
3000
2,566

2,708

2500

2000

1,877

1500

1,274

1000
424 174 0 0 5 30 235

793

500

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q2 2008

Manila Water Company, Inc.

Manila Water’s Accomplishments
Reduction of water losses (NRW)
in % Non-Revenue Water (NRW)
65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q2 2008 20.2% 63.0%

Manila Water Company, Inc.

Manila Water’s Accomplishments
Access to 24 hours water supply
1997 Q2 2008

26%

99%

24 hours

13-23 hours

0-12 hours

Manila Water Company, Inc.

Manila Water’s Accomplishments
More water delivered to customers
in Million Liters per Day
1,100 1,000
864 825 758 706 751 767

1,077
1,040

948

900 800 700
594

645

600

500 400

440

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Q2 2008

Manila Water Company, Inc.

Manila Water’s Accomplishments
Significant growth in customer base
number of Households in Thousands
1100 1000 900 800 700
595 663 767 870 985

1,010

600 500 400 300 1997 1998 1999 2000 2001
325
352 383 457 413

526

2002 2003

2004

2005

2006

2007

Q2 2008

Manila Water Company, Inc.

Manila Water’s Accomplishments
Public assessment of water services
37 Barangays

2001

188 Barangays

2003

308 Barangays

2006

307 Barangays

2008

SOURCE:

PAWS Performance Ratings Phase II UP National Engineering Center

VERY GOOD

GOOD

Manila Water Company, Inc.

Manila Water’s Accomplishments
Solid Financial Performance
In Million Pesos
8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 -1,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Revenues

EBITDA

Net Income

Manila Water Company, Inc.

Business Results
Growth in Shareholder Value
Pesos per Share
18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0

16.00

Initial Public Offering (IPO)
6.50 4.75 2.71 1.00
1997

1.09
1998

1.11
1999

1.18

1.32

1.41

2000

2001

2002

2003

2004

2005

2008

Manila Water Company, Inc.

Manila Water’s Accomplishments
Recognitions/Awards received
SPONSOR NAME OF AWARD Best Workplace Practices

2005 Best Managed Company – Small Cap
EMPLOYERS CONFEDERATION OF THE PHILIPPINES PERSONNEL MANAGEMENT ASSOCIATION OR THE PHILIPPINES

KAPATID AWARD

2006 Employer of the Year

Client Leadership Award 2007 Best Managed Company – Small Cap

Manila Water Company, Inc.

Summary
Manila Water . . . . .
● a solid example of a successful public-private
partnership model;

● Incentive based regulation

● Alignment of social / environmental objectives with
business goals;

Manila Water Company, Inc.

THANK YOU!