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Manila Water Philippine Ventures

EXPANDING THE REACH

Manila Water Philippine Ventures (MWPV) led the Company’s expansion of the water business in the Philippines. 2017 was marked by several wins with new acquisitions and partnerships across the country in support of the Company’s geographic expansion. The Regional Business Clusters (RBC) ensured business development focus, resource deployment efficiency, and consolidated growth. This expansion leverages on the track record set by the strong operating subsidiary businesses in Clark, Laguna, Boracay, and Cebu. On its third year of operations, total headcount of MWPV has reached 581 talents.

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NORTH LUZON RBC

Making its presence felt by serving large industries and communities in its market, North Luzon RBC’s achievements have continued to make waves beyond its business operations base in the Clark Freeport Zone.

CLARK WATER

Being the exclusive water and used water service provider within the 4,400-hectare Clark Freeport Zone in the province of Pampanga, Clark Water brings Manila Water’s brand of exceptional service to the customers it serves. Clark Water holds a 40-year concession with Clark Development Corporation (CDC) covering not just CDC’s economic hub but also its sub-zone covering a service area which houses industrial, high-end IT corporations, and real estate locators. With its airport poised to become a world-class aviation center, the Clark Freeport Zone is fast transforming to an industrial and urban center, attracting more visitors and investors.

In 2017, Clark Water had a total of 2,050 billed connections comprised mainly of industrial and commercial locators who enjoy 100 percent customer service response and a 24-hour resolution rate. With the Philippines hosting the 2017 ASEAN Summit, Clark Water provided water and used water services at the ASEAN Villas, home of the heads of state while attending business meetings which led to many economic partnerships for the country. Clark Water also inaugurated in 2017 the state-of-the-art Industrial Estate 5 (IE-5) Water Supply Facility to address the needs of major industrial customers in the semiconductor, electronics, manufacturing, and food packaging businesses. The P96-million project has a total storage capacity of five million liters and has an ISO 17025 Quality Management Standard certification on laboratory operation. With IE-5, Clark Water’s three large service coverage areas are assured of uninterrupted water supply, resulting in a significant reduction in pumping operation. It also supports the recent entry and expansion goals of key customers which require long-term operational reliability.

From a high of 17 percent in 2011, Clark Water has maintained a nonrevenue water (NRW) rate of 3.9 percent. This is due to Clark Water’s consistent leak detection, repair, and meter maintenance programs. These efficiencies translate to lower operating costs and better service delivery.

Clark Water has reached 100 percent water service coverage while its used water service coverage steadily rose to 99.2 percent. In 2017, the Company also treated 6.94 million cubic meters (mcm) of used water and diverted 852 tons of organic pollution load. This reduced Clark Water’s emission by 5,366 tons CO2 (eq), which led to an avoidance of 63 percent of Clark Water’s total carbon emission. The Company continues to champion operational excellence in its water supply and used water facilities.

Enhancing its human capital, Clark Water’s managers continuously train in territory and key accounts management in order to efficiently serve its locators. Clark Water’s eight percent increase in billed volume to 14.5 mcm led to a revenue growth of 11 percent to P459 million in 2017. Meanwhile, its capital expenditures totaled P263 million primarily for the expansion of water supply and used water services. To support the Company’s commitment to its customers, Clark Water has submitted its business plan to CDC in line with its ongoing rate rebasing review. Clark Water is supporting its aggressive business growth in the area by ensuring that its residents and tourists are provided with clean and potable drinking water, and the locators have adequate water supply for their operations and expansion.

BULACAN WATER

Situated north of the nation’s capital, Bulacan is steadily becoming highly urbanized due to its proximity to Metro Manila. It is comprised of three cities and 21 municipalities, with an estimated total population of 3.3 million. Looking to gain a successful foothold in Bulacan, MWPV endeavors to close water distribution contracts across its numerous cities and municipalities, consolidating the province’s fragmented water and used water market.

A concession agreement between Obando Water and Obando Water District (OWD) was signed and executed in October 2017, aiming to rehabilitate, manage the water supply system, as well as provide water and sanitation services in the Municipality of Obando for a period of 25 years. Obando Water is a joint venture between Obando Water Consortium Holdings Corporation (OWCHC) and OWD while OWCHC is a consortium of Manila Water and MWPV. With a population of around 60,000, of which nine barangays out of 11 are currently covered by the water utility, the average daily demand in OWD’s service area is six mld. Demand is expected to grow to 14 mld in the latter years, with the contract term until 2041. Estimated capital expenditure for the project is P443 million, to be used for network rehabilitation and expansion to improve current service levels, which stand at 66 percent water supply coverage, 19-hour availability and average pressure of 5 psi.

MWPV also signed an Asset Purchase Agreement with Asian Land Strategies Corporation (Asian Land), to improve the provision of water and used water services in the latter’s 10 residential subdivision developments. These milestones support Bulacan Water as it starts to position itself in becoming a strong player in the province.

CALASIAO WATER

MWPV expanded its coverage in the northern part of Luzon last June 2017 when it closed a 25-year concession agreement with Calasiao Water District (CWD) to develop and operate the water supply system in Calasiao, Pangasinan. With Calasiao having a population of about 95,000, Calasiao Water is expected to deliver three million liters per day (mld) by 2019, expanding up to 21 mld at the end of the contract by 2042. The municipality’s water requirements are currently being served by CWD on a limited basis. Phase 1 of the contract aims to serve 20 percent of the municipality’s total population by the end of Calasiao Water’s second year of operations. Estimated capital expenditure for the project is P456 million, to be used for the installation of pipelines, as well as network rehabilitation and expansion.

SOUTH LUZON RBC

Driving the industrial sector and attracting suburban communities with an increased awareness of environmental standards, South Luzon RBC has a wide array of business opportunities to expand in Laguna’s neighboring provinces in Cavite, Batangas, and Quezon.

LAGUNA WATER

Laguna Water is Manila Water’s first public-private partnership after the Manila Concession by way of the acquisition of Laguna AAAWater Corporation in 2009. Together with the Provincial Government of Laguna (PGL), Laguna Water endeavors to not only build infrastructure, but more so to transform the lives of the communities it serves by bringing improvements in water service delivery.

The strong partnership and cooperation between Laguna Water and PGL paved the way for the amendment of its Concession Agreement with PGL, expanding the territorial scope of its water supply services from the cities of Biñan, Cabuyao, and Sta. Rosa, to all cities and municipalities of the Province of Laguna. This expanded the addressable market from a population of 900,000 to over three million. The amendment, likewise, included the provision of used water services, as well as the establishment of an integrated sewage and septage system in the province. To date, Laguna Water has finalized the takeover of water distribution assets and operations in the municipalities of Calauan and Victoria. The Municipality of Calauan has a population of over 80,000, which is estimated to provide about 3,134 water service connections. On the other hand, the Municipality of Victoria has a population of over 40,000, which is estimated to provide about 4,126 water service connections.

Laguna Water’s revenues grew by 23 percent in 2017 to P1,213 million, resulting from the 12 percent increase in billed volume to 44.1 mcm, and a 14 percent improvement in average effective tariff to P21.06 per cubic meter (cu.m.). Through programs in operational excellence, Laguna Water has continued to decrease systems losses from 21.4 percent in 2016 to 18.2 percent in 2017. This was driven by the total pipe replacement activities in the newly serviced subdivisions, and resulting in improved water service and water potability. As it continued the expansion of water and used water networks within its concession area, Laguna Water spent a total of P955 million in capital expenditures during the year.

For its used water, Laguna Water diverted 194 tons of organic pollution in 2017, up from 160 tons in 2016. Through the innovative integration of technological and operational expertise, the Company contracted Manila Water Total Solutions (MWTS) for the upgrade of the Laguna Technopark Used Water Treatment Plant. Using Integrated Used Water Solutions (IUS) technology, the project, called Organica Greenhouse, makes Laguna Technopark the first industrial park in the country to employ natural ecosystems and useable space for used water treatment. The project achieves a 60 percent reduction in physical footprint, and a 30 percent reduction in operating expense compared with using conventional used water treatment technology. This supports Laguna Water’s commitment to environmental sustainability, as it continues to expand to more areas in the province.

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Tubig Para sa Barangay, Manila Water’s flagship program, replicated in Laguna Water to serve more communities in South Luzon.

Tubig Para sa Barangay (TPSB), the Manila Concession’s flagship water supply program for low-income communities, was successfully implemented by Laguna Water. From 410 water service connections since 2016, the Company has connected an additional 152 in 2017, for a total of 562 water service connections. These TPSB communities used to rely on vended drinking water with its unreliable quality. With TPSB, low-income communities in Laguna now have safe, potable drinking water from the tap in their homes. Laguna Water likewise partnered with non-government organizations in a program called Water Connect, to provide water service connections under an installment plan to 519 households.

To provide sanitation services for the unsewered areas of Laguna Water, a septage treatment facility with a capacity of 70 cu.m. per day was constructed for their desludging needs. Further, in support of its efforts to raise public awareness of used water’s link to family and community health, Laguna Water launched the Tamang Sanitasyon Equals Kalusugan, Kalinisan at Kaunlaran ng Bayan program. Working with PGL, Laguna Water also held information and education sessions for 10 local government units in Laguna. Even beyond its service area, Laguna Water continues to be acknowledged for its contribution to the environmental sustainability of the province. This is evident when the Company received a P30 million grant to support its Portable Toilet Solution (PTS) project, hailed as one of the five projects in the Urban Sanitation Challenge supported by Australian Aid, Grand Challenges Canada, and the Global Innovation Fund. PTS aims to address the lack of proper sanitation services and facilities in low-income communities and will pilot the one-year project to 30 families. It aims to provide toilet facilities to 10,000 households by the end of the Laguna Water concession in 2035. PTS was cited by World Bank Group and the Zicklin Center for Business Ethics Research at the Wharton School as an innovative idea for contributing to the UN Global Goals for Sustainable Development.

VISAYAS-MINDANAO RBC

In the southern regions of the Philippines, there are numerous business development opportunities in the provision of water and used water services. MWPV made waves as it explored opportunities in key tourist destinations and urban centers with potential business and economic growth.

 

5 mld Manocmanoc Sewage Treatment Plant serving Boracay Island

BORACAY WATER

Serving one of the world’s top tourist destinations, Boracay Water supports and strengthens the tourism and hospitality industry by providing reliable water service compliant with the requirements of the Philippine National Standards for Drinking Water. Boracay Water is a joint venture of Manila Water with the national government’s Tourism Infrastructure and Enterprise Zone Authority (TIEZA), holding a 25-year concession to serve potable water and operate the sewerage system on the island. The island is made up of three small communities: Yapak in the north, Balabag at the center, and Manocmanoc in the south, with a resident population of around 32,000. The main driver of Boracay Water’s 13 percent billed volume growth at 5.5 million cubic meters (mcm) is tourist arrivals. With a record-high of about two million tourists in 2017, and growing by 16 percent year-on-year, Boracay’s market viability is wellestablished. Beginning the second quarter of 2017, Boracay Water began supplying to the mainland, selling bulk water to the Malay Water District.

Boracay Water posted revenues amounting to P600 million in 2017, brought about by the increase in its average tariff to P92.86 per cubic meter (cu.m.). In June 2017, Boracay Water received the approval of its new rates from the TIEZA Regulatory Office for implementation beginning July 2017. The approved tariff adjustment will be implemented over three years from 2017 to 2019, with the upward adjustments on the basic charge per cu.m. as follows: 2017 – P30.00; 2018 – P15.33; and 2019 – P15.33.

Boracay Water fulfills its commitment to environmental sustainability and safeguarding health and safety through its investments in used water treatment. Its capital expenditures surged by 61 percent from the previous year to a total of P464 million. Boracay Water treated 2.50 mcm of used water, which resulted in a carbon avoidance even exceeding its carbon emission. This denotes that Boracay Water has avoided its carbon emissions by the volume of used water it treats, and by the organic pollution diverted by the combined capacity of Manocmanoc and Balabag Sewage Treatment Plants.

Enhancing capabilities among its employees, Boracay Water has deployed its managers to various skills training programs, ranging from Mobile Treatment Plant Training, Integrated Management System, Project Management, and Environmental Regulations. To engage the active participation of communities and the local government in addressing the solid waste management issues, Boracay Water launched “Amot-amot Kita Para sa Malimpyong Boracay.” This program encourages each community member to do their part in preserving the cleanliness of their surroundings. With collaboration between Boracay Water employees and the Boracay local administration, the campaign has since involved more than 310 community volunteers, and recovered more than 86 kilos of trash from the seashore and the nearby communities in 2017.

Beyond providing the island community with water and used water services, Boracay Water is strongly committed to contribute and support Boracay’s sustainable development.

CEBU WATER

In partnership with the Provincial Government of Cebu, a 30-year bulk water supply contract was signed in 2013 by Cebu Water to provide 35 million liters per day (mld) of treated water to the Metropolitan Cebu Water District. The water district then distributes the water to its 2.8 million customers particularly in the areas of Metro Cebu, Lapu-Lapu, Mandaue, and Talisay. Cebu Water’s contract includes the construction of a water diversion structure, a water treatment plant, and the laying of a 32-kilometer pipeline from the plant in the town of Carmen to the water district intake. This is the first water treatment facility to draw from surface water in an island that relies heavily on groundwater. The growth possibilities are high in this province, which is evident in Cebu Water’s 2017 reported revenues that grew by 28 percent to P60 million. This is supported by significant growth in its billed volume which rose by 12 percent to 13.0 mcm compared to previous year. Cebu Water continues to be committed to improving its provincial water system, manifested by its P12 million capital expenditures for the construction of two more deep wells to augment its current surface water source. Being the second most populous region in the country, Cebu Water remains steadfast in providing safe and potable drinking water to Metro Cebu and its neighboring areas, as local government opens itself up to more public-private partnerships.

ZAMBOANGA WATER

Manila Water continues to be the benchmark in systems losses management within the Philippine water sector, following its implementation of the first performance-based non-revenue water (NRW) reduction project in Zamboanga City. The 10-year contract by Zamboanga Water District commenced its construction in June 2015, with a target to reduce water losses by 10 mcm over the life of the project. As of end 2017, Zamboanga Water has recovered a volume of 1.61 mcm from 18 District Metering Areas (DMA) since the start of its operations in June 2016. The 18 commissioned DMAs already cover 35 percent of the project area, while an additional four DMAs, upon commissioning, will bring the coverage to 45 percent of the entire project area in terms of number of water service connections.

TAGUM WATER

The aggressive business-building efforts of MWPV in Mindanao was marked by another milestone with the signing of a second project last July 2015. This project is a bulk water supply project in Tagum City, Davao del Norte. It involves the construction of a water treatment plant with a capacity of 38 mld. Once completed, Tagum Water will supply the Tagum City Water District with 26 mld of treated water in the first to third year of operations, 32 mld in the fourth to sixth year and 38 mld for the remaining years of the 15-year delivery period from 2018 to 2032. To date, the ongoing construction of Tagum Water Treatment Plant is now 35 percent completed.

ESTATE WATER

Recognized as a key driver in making waves for MWPV’s portfolio, Estate Water opened in 2015 a new business model that would plan, construct, operate, and manage the water systems of the untapped market of property developers. The growth and expansion of Estate Water aligns squarely with property developers’ plans to develop sustainable communities. Estate Water does this by master-planned water extraction and used water treatment facilities, efficient and effective operations, regulatory and environmental compliance, and high quality customer service. Estate Water has established itself as a bestin- class service provider, with revenues which increased by 41 percent yearon- year, driven by billed volume increase of 117 percent to 4.5 mcm. To effectively serve the various brownfield and greenfield developments of its partner developers, the Company disbursed a total of P481 million in capital expenditures, up by eight percent year-on-year.

In December 2017, MWPV signed a 25-year lease agreement with Philippine Economic Zone Authority (PEZA) to lease, operate, and manage in the Cavite Special Economic Zone. Estate Water will lead the provision of water and used water services to this 275-hectare industrial estate, with 297 locators consuming approximately 0.35 mcm per month.

View of Nuvali, a growing suburban and mixed-use development in Sta. Rosa, Laguna

PARTNERSHIP WITH AYALA LAND

In January 2016, Estate Water signed an agreement with Ayala Land for the exclusive provision of water and used water services to all of its horizontal greenfield and brownfield developments nationwide. To date, Estate Water has already taken over 63 brownfield Ayala Land projects across the country, with 10,153 billed connections. This partnership will bridge Manila Water’s technical expertise and operational excellence to the communities Ayala Land serves.

PARTNERSHIP WITH SM GROUP

In December 2016, Estate Water signed an agreement with the SM Group – comprising SM Prime Holdings, SM Development Corporation, and SM Residences, to form Aqua Centro MWPV. This new entity will manage the provision of SM’s water and/or used water services and facilities. The initial agreement covers five horizontal projects across Luzon in the provinces of Batangas, Cavite, Bulacan, Pampanga, and Nueva Ecija. The contract also identified specific horizontal developments, comprised of midrise residential buildings, low-cost condominiums, and house and lot projects expected to be operational by 2020.