Manila Water

WHO WE ARE
Manila Water is an operator and business builder of water, wastewater, and related assets across the Philippines and in Southeast Asia. The company has over two decades of experience and expertise which is leveraged to provide access to water and sanitation services in a way that considers key impacts on the environment and advocates responsible practices at every stage of its operations.

Manila Water’s portfolio includes the Manila Concession which is the original concession business, providing water and wastewater services to over seven million people in the eastern part of Metro Manila. Manila Water’s vehicle for domestic businesses outside the East Zone is Manila Water Philippine Ventures, with operations in key cities across the country. Internationally, Manila Water Asia Pacific was established to take advantage of new opportunities and partnerships in the ASEAN region. Lastly, Manila Water Total Solutions serves as an incubator of new business opportunities across the water value chain, driven by business and technological innovation.

MARKET OUTLOOK
Climate change has significantly altered every aspect of the water space – a reality that nations continue to address along with challenges concerning increasing population and density in highly urbanized areas. Competition in the space has been redefined by those who have access to this limited resource; communities, in their pursuit for growth, demand more to the expense of the environment’s ability to replenish. This has created a vicious cycle of development being impeded by the lack or absence of water supply to support development. The challenge for governments and service providers is striking the delicate balance between the provision of sufficient water supply for economic growth and social development, and allowing the environment to naturally replenish water sources to ensure sustainability. Such balance has highlighted the importance of proper wastewater treatment, which supports raw water supply replenishment in the environment.

Manila Water acknowledges the primary importance of water security, which became particularly apparent during the onset of the water supply shortage in Metro Manila. The experience has underscored the key risks in relation to water security, and the company has taken measures to align its operations with the new realities it now faces. These measures support Manila Water’s commitment to the United Nations Sustainable Development Goals on clean water and sanitation.

Manila Water continues to improve access to clean water and sanitation services across all its domestic business units as a response to the needs of the country. In the Philippines, 90 percent of the rural population already has access to at least basic drinking water services. However, this is still behind the 98 percent access in urban areas. Meanwhile, in terms of Sanitation, the country has yet to gain traction in significantly improving and expanding access to sanitation facilities. At the national level, only 52 percent of the population has access to safely managed sanitation facilities. Through the company’s wastewater and sanitation programs, the company directly contributes towards narrowing these gaps.

Manila Water remains focused on its mission to provide sustainable solutions to its customers. The company continues to strengthen its key operating principles, even in the midst of adversity brought about by social, environmental and institutional challenges.

In response to the water supply shortage in the Manila Concession, the company exerted efforts to further attain network efficiencies. Manila Water’s business and technical teams learned to effectively provide water to its customers despite lower raw water supply allocation. Equally important is the provision of wastewater services. Manila Water is committed to continue its expansion of sewer coverage while maintaining existing service levels of its sanitation services. This enhanced focus on improving service levels despite prevailing challenges is grounded upon the company’s thrust towards creating exceptional customer experience.

Outside Metro Manila, the different subsidiaries focused efforts to standardize its key operating processes, with the Manila Concession as benchmark. Improvements in transitioning and integrating new businesses, such as introduction of relevant operating and financial systems aligned with Manila Water’s principles, are cascaded to business units across the enterprise and will likewise continue as the company pursues other projects.

BUSSINESS REVIEW
Manila Water’s net income decreased 16 percent to ₱5.5 billion in 2019, with business performance dampened by the impact of the MWSS penalty, voluntary one-time Bill Waiver Program and additional expenses in relation to the water shortage in the Manila Concession during the year. These challenges were coupled with the continued management of the constrained raw water supply and additional expenses for potential exposures.

Manila Concession
Manila Concession’s revenues grew four percent to ₱16,842 million, driven by the seven percent increase in average tariff. This was, however, offset by the decline in billed volume to 493.9 million cubic meters from 503.3 mcm in 2018 and the implementation of the one-time voluntary bill waiver to ease the inconvenience of affected customers during the water shortage in March 2019.

Coming from the water supply shortage, Manila Water continues to improve and stabilize operations to provide reliable service to its customers. Focusing on its water supply augmentation projects, production at the Cardona Plant reached 98 MLD as of December 2019. The recommissioning and development of new deep wells continues, with a total capacity of 55 MLD as of the same period. These initiatives, along with the continued proactive network management and optimization program, has enabled water availability for customers to be kept within regulatory levels despite lower raw rater supply allocation. The 2019 level of water losses in the system or non-revenue water, was stable at 10.4 percent, an improvement of 1.0 percentage point from the previous year’s 11.4 percent. This improvement was attained even under a still significantly reduced raw water supply allocation.

Net income of the Manila Concession declined 22 percent to ₱5.1 billion.

Manila Water’s pipelaying activities ensure efficient water distribution in all its serviced areas.

Manila Water Philippine Ventures
Helping develop local economies and improving quality of life is at the forefront of Manila Water Philippine Ventures’ expansion and operating principles. MWPV continues to strengthen the social responsibility of its operating subsidiaries and incorporates this philosophy in more partnerships across the country. In doing so, MWPV supports the transformation of areas to sustainable and dynamic areas.

On a consolidated MWPV level, revenues grew 45 percent to ₱4.8 billion in 2019. A significant contributor to this improvement was the higher revenues of MWPV’s business-to-business arm, Estate Water coming mostly from supervision fees for design and project management services in the development of water and wastewater facilities, as well as similar fees for the provision of water and wastewater services. In addition, portions of the increase in revenues are due to higher average tariff levels in operating subsidiaries Boracay Water and Laguna Water. Several subsidiaries also saw increases in billed volume during the year, namely Boracay Water and Estate Water, with the re-influx of tourists and the takeover of more property development projects, respectively.

Laguna Water’s billed volume increased four percent to 44.1 mcm in 2019 from 42.4 mcm in 2018 on the back of additional new water service connections and subdivision takeover, but was offset by the lower consumption of several LTI locators due to lower production levels and increased water conservation efforts. Meanwhile, Boracay Water recovered from the mandatory closing of the island in 2018, with billed volume growing 23 percent to 4.8 mcm driven by the influx of more than two million tourists in 2019. Clark Water’s billed volume slightly increased by 2 percent to 14.5 mcm due to the higher consumption of its commercial accounts. Lastly, Estate Water posted an 18 percent increase in billed volume to reach 10.5 mcm, as it operates newly taken over developments.

MWPV more than doubled its net income in 2019 to ₱450 million.

Manila Water Asia Pacific
Establishing Manila Water’s growing presence in the ASEAN region, Manila Water Asia Pacific gears up to take advantage of new acquisitions and partnerships internationally, particularly in countries which encourage foreign investments in the water industry.

On a consolidated MWAP level, equity share in net income of associates decreased by 7 percent to ₱654 million, primarily due to the lower performance of Vietnam investments and the recognition of impairment losses in one of its Vietnam businesses, Saigon Water. This reduction was partially offset by the full year recognition of the share in net income from East Water.

MWAP’s consolidated net income ended at ₱168 million, 41 percent lower than the previous year.

Manila Water Asia Pacific
Centered on providing innovative water supply and sanitation products and services, Manila Water Total Solutions has served as an incubator of new business opportunities throughout the water cycle. It develops both end-consumer and system solutions in the water and used water value chain, which are then delivered at scale and with a commitment to protect the environment. Specifically, these include the provision of network and technical services under its corporate accounts management business, and the sale of packaged purified water through the Healthy Family brand.

In 2019, the sale of packaged purified water through the Healthy Family brand saw a decline in bottle sales to 5.7 million bottles from 7.9 million bottles in 2018. This resulted in lower revenues to ₱336 million from ₱436 million last year. MWTS also recognized an additional impairment driven by the difference between the book value and actual or assessed value of inventory of assets.

These developments led to MWTS posting a net loss of ₱169 million for the year.