Concessions: The Experience of Manila Water Company

OECD Global Forum on Sustainable Development “Public-Private Partnerships in Water Supply and Sanitation – Recent Trends and New Opportunities”

Paris, France November 29-30, 2006

Discussion Points

6 MWSS Concession Framework

6 Performance of Manila Water Company

6 Manila Water’s Growth Strategy

6 Conclusion

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1 MWSS Concession Framework

MWSS Concession Framework The Problem

6 25-year concession with 6 Decades of under- price review every 5 years investment

6 Operator is responsible for 6 High system losses O&M and investments 6 Very poor service level 6 Service obligations (water and sanitation) 6 Servicing of MWSS debt

6 Reward/Penalty linked to KPIs

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Profile of Manila Water Company Manila Water Stockholders

30.5%

11.8%

Bank of the Philippine Islands Capital 3.9%

7.4%

7.9%

EmployeesEmployees 2.7% 100% 100% 100% PUBLIC 35.8%

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2 Manila Water’s Performance Improved access to 24-hour water supply

1997 Q2 2006

26% 97%

24 hours 13-23 hours 0-12 hours

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Manila Water’s Performance Public Assessment of Water Services (PAWS)

2001 2003 2006

3% 2%

28%

72% 97% 98%

37 Barangays 188 Barangays 187 Barangays

Source: PAWS Performance Rating Report Phase II, October 2006 University of the – National Engineering Center Very Good Good

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3 6-point Strategic Framework to Deliver Results

Organizational Decentralization and empowerment of former public Transformation employees

Customer Service Improvement of service level with bias for the urban poor

Territory Zonal approach to address system losses and service Management improvement

Manage Regulatory Establish transparent and professional relationship with Risks and regulator. Ensure success of 2003 price review. Forge partnerships with CBOs and NGOs Stakeholder relations Creditor Support Gained support of creditors which resulted in steady inflow of debt to fund capital investments

Commitment to Alignment for corporate, social and environmental goals Sustainable to ensure sustainability of concession Development

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Manila Water’s Growth Strategy

Strategy Market

ƒ Philippines ƒ Projects having ƒ Invest in bulk water / strategic fit with MWC concession projects shareholders’ interests ƒ Acquire existing East projects Zone As Core ƒ Key cities in the Philippines and ƒ Asian Region emerging economies in Asian region ƒ Bid for O&M contracts preferably supported by MFIs

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4 Conclusion

6 Stable and efficient concession framework which effectively addresses the WS&S problems of Manila

6 In partnership with the Philippine Government, Manila Water has successfully improved service to 5.5 million people

6 Key strengths of Manila Water: Š Strong shareholder base Š Organizational capability and flexibility Š Management capability and track record of operating efficiency Š Financial strength and ability to raise financing at competitive rates

6 Manila Water is exploring new opportunities in WS&S in the Asian region

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