2018 Integrated Report
report of the president
Dear Shareholders,
Following the example of our Chairman, I would also like to first address the water supply situation which has affected our customers in the Manila Concession.
On March 6, 2019, the La Mesa Reserve breached the critical level of 69 meters which prevented us from getting 150 million liters per day (mld) from the La Mesa Reserve, as the level of water went below the lowest opening it could flow into to reach our water treatment plants in Balara. This additional 150 mld is important to augment the 1,600 mld contractual allocation we get from the Angat system. Without this additional 150 mld of raw water from the La Mesa Reserve, we cannot fully serve peak demand at sufficient pressure. To help visualize 150 mld, it is roughly equivalent to the entire daily consumption of a large city like Makati or Taguig.
When the initial service advisories were issued a few days from the time the critical level was breached, and with the high awareness on the declining La Mesa Reserve water level due to published warnings, demand in off-peak hours spiked much more than expected. This unpredictable demand profile upset the planned refilling schedules of our 28 network reservoirs and stressed our 20 pumping stations. This snowball made it difficult for us to be accurate in our subsequent service advisories. Because of the supply deficit and its consequent effect on the treatment and distribution system, your company was unable to provide its usual uninterrupted service to some of its customers. From 100 percent 24/7 service, our service degraded to almost 70 percent at its lowest point. With our various recovery efforts and while still in a supply deficit situation, our service level which we have defined in the meantime as at least 8-12 hours of water availability at the ground floor (or 7 psi), has reached 99 percent as of April 7.
Our inability to provide our usual 24/7 water supply to some of our consumers is because Manila Water’s allocated water supply from Angat Dam is no longer sufficient for the total demand of the East Zone consumers. This raw water allocation has remained unchanged at 1,600 mld since the Concession started in 1997 when the East Zone had a population of only 3 million people. Today, Manila Water serves a population of almost 7 million people whose per capita consumption has significantly increased through over two decades of economic progress in Metro Manila. We cannot source any more from our system losses which has already been brought down to 12 percent from a high of 63 percent when we inherited the East Zone of Metro Manila in 1997.
For many years, Manila Water has strongly advocated for the development of new water sources beyond Angat Dam, both to ensure sufficiency of water supply as well as resiliency in case of any calamity around the Angat Dam system. However, the development of new water sources is, under the Concession Agreement, ultimately the responsibility of MWSS.
Through our continued partnership with MWSS and the key assistance of other government agencies and stakeholders, concrete actions are now underway towards the development of an implementable short, medium and long-term new water sources roadmap.
The current situation in the Manila Concession highlights the criticality and impact of water security more vividly to all stakeholders and how everyone in the water value chain, both the public and private sector, are inextricably linked to each other.
We value the lessons and fresh insights from the supply deficit situation in the Manila Concession. Beyond focusing on recovering our service levels during this summer, we have buckled down to work to update our own plans to integrate new assumptions to prepare us better in the future. The current situation in the Manila Concession highlights the criticality and impact of water security more vividly to all stakeholders and how everyone in the water value chain, both the public and private sector, are inextricably linked to each other.
While your company has been hit hard by this situation in many respects, our tradition of overcoming crisis, innate resilience and genuine desire to be better will make your company stronger after this episode.
At this point, let me now account for the highlights of 2018.
In September last year, we secured approval for our Rate Rebasing business plan. This approved business plan allows us to implement key projects for the Manila Concession in both water and wastewater services to fulfill its service obligations.
Beyond the Manila Concession, Manila Water Philippine Ventures, leveraging the expertise we have nurtured in the core business over the past 21 years, continues to expand your company’s presence in the Philippines. Our presence in diverse and dynamic markets aligns squarely with our objective to become a multi-location organization that addresses gaps in water infrastructure and sanitation services. This, in turn facilitates better service delivery to a broader public, particularly those communities most vulnerable to environmental impacts.
Through Manila Water Asia Pacific, we continue to expand our presence in the ASEAN region and beyond. Backed by the steady performance of our existing operations in Vietnam, we have realized more opportunities in Thailand and Indonesia. These milestones further equip us to become a global water and environmental services company; giving us the opportunity to provide access and improve service to more customers and communities.
To enable our mission and strategy, we have embarked on five key thrusts to sustain us for the coming years.
We will strengthen and update the BASICS which are core and unique capabilities to deliver our services. As a multi-location business, we will accelerate our STANDARDIZATION efforts so our people speak one language and do work more seamlessly. We will augment our homegrown competitive advantage with DIGITAL and analytical capabilities to further sharpen our decision-making and field execution. Building from our strong heritage on sustainability and the triple bottom-line, we will learn more about ESG and progressively embrace and integrate its practices into our business. Lastly, but most importantly, we will evolve our TALENT and CULTURE, our bedrock as an enterprise, to deliver our mission and strategy.
Manila Water was born out of a water crisis. I believe this current crisis will be the catalyst for a new stage and more sustainable era of growth for the enterprise.
I thank the Shareholders, the Board, my Management team, and our tireless employees for their support in our continuing service recovery efforts and in the pursuit of our mission and strategy.
FERDINAND M. DELA CRUZ
President and Chief Executive Officer