Manila Water Concession Case Study

Aura V. Abon

Regional and Sustainable Development Department

Asian Development Bank

24 February 2012

PPP Days 2012

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Outline of Presentation

• Background

• Legal Framework

• Manila Water Concession

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Background

• One of the oldest and the least efficient water systems among major Asian cities

• MWSS was heavily indebted, overstaffed and inefficient

• Three-quarters of the homes in the eastern half of Manila lacked 24-hour service and only 8% had sewerage connection

• Two-thirds of the water produced was being lost to leaks, poor metering, and illegal connections

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MWSS vs. Asian utilities (pre-privatization)

CITY POPULATION

(millions)

WATER

AVAIL-

ABILITY

(hours / day)

WATER

COVERAGE

(% of population)

NON-REVENUE

WATER

(% of production)

STAFF / 1000

CONNECTIONS

Manila 10.6 16 58.7 63 9.8

Singapore 3.0 24 100 7 2.0

Hong Kong 76.3 24 100 36 2.8

Seoul 10.6 24 100 35 2.3

Kuala Lumpur 1.4 24 100 36 1.4

Bangkok 7.3 24 82 38 4.6

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Legal Framework

1990 Build-Operate-Transfer Law enacted

1995 National Water Crisis Law enacted

1996 E.O. 311: MWSS Privatization Framework

1997 Commencement of Concession Period

Water Crisis Act

“The government shall address the issues relevant to the water crisis including, but not limited to, supply, distribution, finance, privatization of state-run water facilities, the protection and conservation of watersheds and the waste and pilferage of water, including the serious matter of graft and corruption in all the water agencies...”

Executive Order 311

• MWSS shall enter into agreements that will result in the involvement or participation of the private sector in any or all of the segments, operations, and/or facilities of the MWSS

• The involvement or participation of the private sector may include but shall not be limited to: (i) franchising, concession, management, or other arrangements; (ii) privatization; or (iii) contracts for projects to be implemented under BOT and/or related schemes

Private Sector Participation

• 25-year concession

• Transfer of the overall responsibility for the operations, maintenance, and investments in the water and sewerage system to the private sector

• Service area was divided into the West and East Zones and the concession was granted to two different private companies to promote competition

Manila Water Concession

• East Zone for a 25-year concession

• Provision of water and sanitation services to about 7 million

• CAPEX of more than PhP32 billion since 1997

• Additional PhP200 billion in CAPEX with the approval of 15-year extension of the concession in 2009

Performance Targets

Year 2001 2006 2011 2016 2021

Water Service 87 98 98 98 98

Sanitation 39 40 36 33 29

Sewerage 7 15 26 38 54

24 hours

13-23 hours

0-12 hours

• In 1997, water was available to 3.1 million people or only 26% of the population in the East Zone

• Today, Manila Water provides water 24/7 to 99% of the population in its service area, mostly in low income communities

1997 2011

99% 26%

Sanitation and Sewerage Program

• 36 sewage treatment plants with a combined capacity of 135 million liters of wastewater per day

• 2 septage treatment plants with capacity of 1,400 cubic meters of septic tank wastes per day

• 200 kilometers of sewer pipelines have been laid