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17

April 2020

MANILA WATER 2020 ANNUAL STOCKHOLDERS’ MEETING MESSAGE FROM THE PRESIDENT

MANILA WATER ASM SPEECH
2020 ANNUAL STOCKHOLDERS’ MEETING
MESSAGE FROM THE PRESIDENT JOSE RENE GREGORY D. ALMENDRAS
APRIL 17, 2020

Dear Shareholders,

To say that we are in the middle of unusual times may be an understatement. Addressing you in this manner is just one unmistakable proof of the situation. We have worked around all obstacles as it is paramount for us to make this report at this time of the year. It is, after all, our avowed commitment to be of Genuine Service to our customers, partners and stakeholders.  On a personal note I acknowledge the difference of 2007 to 2010, my first stint in Manila Water and what it is when I rejoined in September 2019.

Perhaps we can say that these extraordinary times begun in 2019. Thus, the 2019 Integrated Report of Manila Water is unlike any other we have produced in the past. On top of our compliance to the standard reportorial requirements as with previous years, we feature a Special Reports section which provides you, our shareholders, a direct and objective view into the significant events which transpired in. We have taken this new direction for the Integrated Report because clearly, 2019 was not a normal year, by any measure. Allow me to recount several of these significant events, the details of which will be extensively discussed in the pertinent sections of the Integrated Report, as distributed.

For our East Zone Concession, 2019 will be remembered as the year of the water supply shortage. There was drastic decline of water levels in the raw water dams, namely Angat  and La Mesa Dam.  This caused water service availability to drop drastically in the first half of 2019, thus underscoring the need to develop long-term water sources to ensure water supply sustainability.

Our response was immediate. We had to shift to new network operations regimen to adapt to a markedly reduced water supply allocation regime. We shifted operations protocols like we have never done before, all these aligned squarely towards customer requirements.

Pending new medium- to long-term water sources, we likewise ramped up our development of water supply augmentation projects for the East Zone. The production at our Cardona Plant reached 98 million liters per day (MLD) as of December 2019. Furthermore, our recommissioning and development of new deep wells continues, with a total capacity of 55 MLD as of year-end. These initiatives, along with our continued proactive network management and optimization programs, keep water availability within regulatory levels for our customers despite lower raw water supply allocation.

While we are able to manage our supply challenges, 2019 likewise required us to face considerable challenges on our commitment to provide and expand wastewater services in the East Zone. In September, the Supreme Court ordered each of the MWSS concessionaires, jointly and severally with MWSS, to pay more than Php921 million in fines for non-compliance with the Clean Water Act.  We affirmed that we would exercise all legal options in relation to this case, including the filing of a Motion for Reconsideration which we timely submitted to the Supreme Court on October 2, 2019. We firmly maintain our position that, as Concessionaires of MWSS, we have fully complied with our obligations under the Concession Agreement and the guidelines under the Clean Water Act.

Based on the original Concession Agreement, the wastewater coverage commitment for the East Zone was targeted at 55% by 2022. When the Philippine government approved the extension of the Concession Agreement in 2009,  one of the reasons for the extension is the increase of our obligation to 100% East Zone wastewater coverage by 2037. The extension of the Concession Agreement for an additional 15 years allows us to expand wastewater coverage to more communities but at the same time mitigating the price of services from spiking up too fast. This new coverage target and 2037 deadline was duly acknowledge by a Supreme Court Mandamus promulgated in 2008 for the clean- up and preservation of Manila Bay.

Consistent with our mandate as the MWSS concessionaire for the East Zone, we have invested close to Php43.56 billion in wastewater capital expenditures since the concession began in 1997, and plan to invest over Php38 billion more until 2022. Notably, we have spent more than what we have collected as sewer and environmental charges from the start of the concession until now.  When Manila Water started in 1997, only 45,000 people were connected to a sewer system, today we cover a population of 1.08 million.  At the end of last year we are happy to report 30% sewer coverage well on our way to the 32% target for 2022.

These challenges on water and wastewater provision have opened up queries and assailed the integrity of the current Concession Agreement to the point that such was allegedly laden with onerous provisions. It will be recalled that in 1997, it was government who invited the private sector to help address the looming water crisis in Metro Manila. Manila Water had nothing do with the drafting of the Concession Agreement as terms of the agreement had already been drafted and pre-determined. Manila Water was one of the 70 participants during the 1997 bid pre-qualification who had to accept the draft of the Concession Agreement on a “take-it or leave-it basis.

As the government continues the review of the Concession Agreement, we assure you that we are working closely with them to arrive at a solution that will be beneficial not only our customers but also balance the interest of our shareholders.

Even with these challenges, it is with the same firm resolve that we look forward to further strengthening our foothold on our non-East Zone ventures. While our domestic and regional businesses experienced its own set of obstacles, Manila Water remained resilient. Even in the face of operating and business development setbacks, our domestic subsidiaries under Manila Water Philippine Ventures significantly increased income contribution to the group, with the good performance of the core domestic operating subsidiaries providing a solid foundation. For our international operations under Manila Water Asia Pacific, the performance challenges in our Vietnam investments served to underscore the importance of managing our costs better, as well as in taking a more focused approach in business development.

Looking back at the year that was, the core which held us together and helped us weather the seemingly insurmountable challenges were our people. Manila Water’s strength lies in its unique mix of seasoned pioneers who provide experience and wisdom, coupled with young, dynamic leaders who inject energy, innovation and spirit. I commend the entire Team Manila Water for all their hard work and sacrifices that stem from a genuine desire to serve. Whether young or old, the common thread which runs through every Manila Water employee is our commitment to our service mission. This is what defines us – a heart for Genuine Service which takes precedence above all else.

The Manila Water brand of Genuine Service is not confined to within the company alone. This dedication to service extends outward – from our employees, flowing through to our customers, partners and to government as we support their thrust towards national development. Even with all the challenges we faced in 2019, we helped where ever disaster we were needed.  From Earthquakes and storms to the Taal Volcano eruption, Manila Water was there to help. I am always amazed by the overwhelming number of volunteers from our team members who are willing to help in disaster operations.  Only in working together with our stakeholders can we rise above the obstacles and find better ways to fulfill our service mission.

As Manila Water looks to the future, we draw strength from the challenges we have faced.  We do so because we know this is where we will find the solutions that will make us better equipped to meet the challenges to come. Equally, we draw inspiration from the confidence entrusted to us by our customers, partners and stakeholders. I thank our customers for their continued trust and support for the company. I thank our partners and stakeholders for their continued faith in the  organization, support for the projects and the initiatives that enable us to provide consistent, reliable service to our customers. Finally, I thank my fellow Manila Water employees for their resilience and unwavering dedication to our mission – to render Genuine Service, in all that we do.

Thank you and Good morning.