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In Pursuit of the Legacy

Metropolitan Waterworks and Sewerage System

ANNUAL REPORT

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In Pursuit of the Legacy


This Annual Report of the Metropolitan Waterworks and Sewerage System (MWSS) is our 2012 story of how from little ripples in 2011, our plans have turned into waves gaining momentum towards the transformation of this Corporation into the

prime mover and guardian of water security.

The Water Security Legacy Plan (WSLP) is our chosen course - not only towards providing adequate water and sewerage services to the people of Metro Manila and all its contiguous areas in Rizal and Cavite- but also towards ensuring that our water resources are long-term and sustainable, especially in the face of the massive effects of climate change. There are two underlying currents in this passionate pursuit. First is to achieve a delicate balance between delivering such objectives at an affordable and fair price to the public, while at the same time ensuring private sector business sustainability. Second is about our public advocacy, that we will be able to infect each and every Filipino in MWSS’ area with a deep reverence for water, and infuse in him the desire to do his part in its preservation and intelligent use as a life-critical resource.

On the second year of this Administration’s management and operation of the Corporation, MWSS paved the way for the approval of various water and sewerage infrastructure studies and projects. Even as these projects gathered steam, management took the necessary steps to transform this government Corporation - people, process, systems and culture - into a more effective, accountable and transparent organization, ready to take on a more meaningful role.

The 2012 Annual Report highlights some milestones we have achieved, be they conducting

implementing and completing of projects that are all meant to gain the much needed momentum. With its Water Security Legacy Plan and its seven areas of focus, it is MWSS’ goal to bequeath to this generation a set of legacies meant to help secure lifetimes. If these

deliverer of life.

Our History of Transformation

Vision, Mission and Corporate Identity

Chairman’s Message

Administrator’s Message

The Water Security Legacy Plan

2011-2016 Corporate Commitments

2012 Corporate Performance

Infrastructure Projects

The Water Pricing Strategy – Rate Rebasing

Organization Excellence

Our Partnerships and Alliances

Forging Ties with Our Stakeholders

Communication and Knowledge Management

MWSS Board of Trustees

2012 Preliminary and Unaudited Financial Statement

2011 Audited Financial Statement

2013: The Legacy Continues

Bid Box

2

3

4

6

7

9

10

11

16

26

28

33

34

37

38

39

40

42

43

72

Table of Contents


2 Metropolitan Waterworks and Sewerage System

2012 Annual Report 2012 Annual Report

3Metropolitan Waterworks and Sewerage System

Major FacilitiesWatersheds and Dams Managed: Umiray, Angat, Ipo, La Mesa, Marikina

Tunnels (Capacity): T-1 (760 mld) T-2 (1,890 mld) T-3 (2,000 mld)

Aqueducts (Capacity): AQ-1 &2 (380 mld) AQ-3 (830 mld) AQ-5 (2,000 mld) AQ-6 (2,000 mld)

Treatment Plants: La Mesa Treatment Plant, Balara Treatment Plan

Angat Hydro-electric Power Plant Auxiliary Turbines (Capacity): AU-4 (10 MW) and AU-5 (18 MW)

Service Area East Zone – 1,400 sq. km. West Zone – 540 sq. km.

The 135 year old Metropolitan Waterworks and Sewerage System (MWSS) is one of the oldest waterworks systems in Asia. The evolution of MWSS as a government owned and controlled corporation dates back to 1878. It has a

proud and commendable tradition of serving the water supply and sewerage needs of its customers, albeit episodes of very challenging periods.

Throughout the MWSS history, the government’s desire to give the best water supply and sewerage services to the citizenry is most apparent, as it boldly introduced and implemented novel approaches and models in the management of the MWSS’s infrastructure, organization and people.

From its origins, characterized by facilities build-up, through the subsequent periods of stabilization, expansion, and privatization, MWSS now embarks on a transformation of its core processes and systems, governance and culture that is unprecedented in its long history. For the past two years, the current MWSS Administration has earnestly pursued its Water Security Legacy Plan.

Our History of Transformation

Period 1878 to 1918 1919 to 1954 1955 to 1970 1971 to 1997 1997 to 20102011 to Present

CompanyCarriedo Waterworks

Metropolitan Water District

National Waterworks and Sewerage Authority (R.A. No. 1338)

Metropolitan Waterworks and Sewerage System(R.A. No. 6234)

MWSS

MWSS Regulatory

Manila Water Company, Inc.Manilad Water Services, Inc.

MWSS

MilestoneOrigin/Facilities Build-up

StabilizationNational Coverage

Metro Manila Coverage

Privatization

Transformation towards a Water Security Legacy

R.A. 6234 of June 19, 1971 created MWSS “to ensure an uninterrupted and adequate supply and distribution of potable water for domestic and other purposes at just and equitable rates.” Based on its original Charter, MWSS has jurisdiction, supervision and control over all

waterworks and sewerage systems within Metro Manila, the entire province of Rizal and a portion of Cavite. R.A. 8041 or the National Water Crisis Act of 1995 and implemented by Executive Order No. 286 in December 6, 1995 and Executive Order No. 311 in March 20, 1996 allowed MWSS to enter into arrangements 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.

On February 21, 1997, MWSS was privatized through the Concession Agreement entered into with Manila Water Company Inc. (East Zone) and Maynilad Water Services Inc. (West Zone).

Population Served (as of June 2011) East Zone – 6.1 million people West Zone – 8.17 million people

Water Supply Coverage (as of December 2012, in Domestic Connections) East Zone – 181,369 West Zone – 315,770

Sewerage Connections (as of December 2012) East Zone – 52,737West Zone – 6,816

Sanitation Connections (as of December 2012) East Zone – 232,351West Zone – 198,903

MWSS Complex, 489 Katipunan Road, Balara, Quezon City

1105 Philippines

Contact Nos.





Our Values (SQuIRT)

Service Excellence

Quality

Integrity

Results-Orientation

Transparency

Our Corporate Philosophy

We pursue water security with profound respect for the environment and the resources we utilize, fully cognizant of the truth that in their continuous use lies the future of the country’s successful and sustainable economic growth and the very life and livelihood of our countrymen now and for generations to come.

Our Corporate Policy

We institute these beliefs and values in our way of life, through leading by example and by making them an integral part of our performance management system.

We, at the Metropolitan Waterworks and Sewerage System commit to the following vision and mission which guides every aspect of our organization and operations.

This provides the framework for the mission we have set for ourselves, the values we espouse, the goals we have established, the strategies we have put into action and the principles we stand for. As the country’s chief agency on water and sewerage services in the areas we serve, we seek to ensure that all our stakeholders share the relevant aspects of the same vision and mission and are ever mindful of our values in all their operations.

Our Vision

MWSS is the prime mover and guardian of water security providing adequate, safe, reliable and affordable water and sewerage services to Metro Manila and its existing and future coverage areas, while ensuring the sustainability of its water resources and the intelligent and right use of water.

Our Mission

For Metro-Manila and its adjacent towns:

infrastructure

those we accomplish through our agent concessionaires, and in doing so, deliver affordable water tariffs that will support the long term water security program for Metro Manila and all covered areas.

For our Employees:

building to the inter-generational legacies being pursued by the Corporation


With all the members of the Board of Trustees, I am privileged to

report to you an outstanding performance of the MWSS for 2012. We made good on all our major operations and organization commitments and successfully instituted reforms, unprecedented and unheard of in the Corporation, in scope and impact, in all its long and eventful history.

The MWSS success story for the past two years (2011 and 2012) was largely due to the early

the present Administration for a long-term strategy on water security, immediately setting a

the very start of its incumbency.

the performance targets for each year were established, driving performance and charting the needed action plans. These were complemented by organization and management changes to support the requirements of these major infrastructure projects. The more critical changes are now in place and this year, 2013 will see more accelerated implementation of this Administration’s strategies.

Let me take this opportunity to congratulate the present Administration of MWSS for its tenacity and determination in forging ahead with all its projects of the Corporation to make good on all its commitments. It made a bet on a corporate strategy of Water Security Legacy to achieve our vision of being the true prime mover and guardian of water security in the MWSS service area and ensuring that

and sustained by creating a capable and strong organization. The numbers and narratives included in this Annual Report tell the whole story of successes

I sincerely express my gratitude and admiration to each of the members of the Board of Trustees for the full support and active participation in transforming this Corporation into one that we can all be proud of. We have just started and the work ahead is still daunting, but with your support and the resolve of the present MWSS Administration, I remain

legacy will be achieved.

2012 was a relentless pursuit of our Water Security Legacy Plan. While our core business

remains in the assurance of continuous supply of safe and reasonably-priced water and the development and maintenance of adequate sewerage service, the reality of Climate Change has challenged our organization to see this role through a whole new lens and level.

The delivery of water goes beyond the pipes laid by our concessionaires Manila Water and Maynilad, in neighborhood roads to reach each household. That these pipes connect to 9,600 meters of secondary lines and 550 meters of mainlines that stem

are connected to 6,260 meters of three meter-wide aqueducts beneath Metro Manila’s highways and road networks is unknown to many. Furthermore, these decades-old aqueducts, spout from a re-regulation-reservoir dam that receives water from the 45-year old Angat dam in Bulacan.

interconnectivity represent an untold system of development, management and protection now needing radical review. In all of these, the underlying imperative today is to develop the sense of urgency to propel immediate action towards mitigating the effects of Climate Change and sustainably providing water for the future.

In more concrete terms, the challenge to MWSS lies in a solutions orientation and a step up, in both pace and intensity, not just of our infrastructure development, but also in the simultaneous activities of our networks activation and our stakeholder management. Proactively working with government partners, private companies, including our concessionaires, and concerned

become increasingly aware of the escalating costs of investments in

affected hosts of our natural water sources, and getting them all behind MWSS in its urgent pursuit of water security – this is the new milieu of parallel responsibilities that we now face. Organizationally, our only choice is to speedily get ahead in knowledge, knowhow, skill and relationships in water that will enable us to better plan and implement our legacies.

In line with this challenge, we kicked

preparatory work for infrastructure project feasibility studies, investment packaging, funding strategies and

from infrastructure, we included the critical area of watershed revitalization and protection and developed business continuity plans. We involved the necessary partners to push studies, approvals, bidding preparations, and local community and public




RAMON B. ALIKPALA GERARDO A.I. ESQUIVELGERAGERAGERAGERAGERAGERAGERARDO RDO RDO RDO RDO RDORDORDO A.I. ESQUIVEL

Chairman’s Message

Administrator’s Message


engagement to completion. The infrastructure and watershed protection projects are currently in various stages and are described in detail in this report.

2012 also saw the full implementation of major reforms affecting the organization, which included the rationalization of compensation

institutionalization of a new set of required skills, knowledge and

the competencies that make for a

adoption of a new performance-based management system. All these were done not without pain and tension, but we took bold and critical steps, and hope to see through their fruition.

year as we will be able to pay off our tax balance and we are projected to declare our second cash dividend on the second year of our operations initially amounting to Php 100 million. This was made possible by the full-year implementation of

and instituting a tight rein on related maintenance and operating expenses coupled with prudent capital investment programming.

2013 will witness the rise of infrastructure projects promised

in the Water Security Legacy Plan towards the second semester, and the implementation of all other major efforts aimed at strengthening the organization. Another key endeavor

Rebasing Process which is conducted

pricing for our water and sanitation

with the limits imposed by existing

there are avenues we can explore to adequately represent our publics by protecting their rights to safe and affordable water while ensuring fairness and continued sustainability to our Concessionaires. In all of these, we commit to keep the process as transparent and above board. I congratulate all the men and women of MWSS for their contribution to all that we report to you here – direct or indirect – for they served to put together a year that was both

you and I look forward to working more closely with you through 2013 and beyond. My deep appreciation and gratitude goes to our Chairman and Board of Trustees, for their

and, to President Aquino, for his

his ever constant reminder that our responsibility is to our bosses, the 15 million people in our service area.




In June 6, 2011, just six months into his appointment, Administrator Gerry Esquivel launched a series of

discussions and dialogues within MWSS, along with the two MWSS Concessionaires and other stakeholders in government, with the primary objective of identifying the priority strategic focus areas for Metro Manila and some municipalities of Rizal and Cavite over the next 3-5 years. Apart from understanding and prioritizing issues, said dialogues resulted in two critical gains for

assessment of the MWSS organization, its

and second is a better understanding of the context of current agreements with and commitments of its Concessionaires. These numerous discussions provided the impetus leading to the design and implementation of this Administration’s basic strategy – the MWSS Water Security Legacy Plan.

The Water Security Legacy Plan’s (WLSP) seven focus areas, discussed in detail in the MWSS Water Security Legacy Plan, bring together a comprehensive set of programs to help ensure a more wholistic, long-term and sustainable approach to water for Metro Manila and its adjacent provinces. While each focus area has its own unique purpose, knitted together, they ensure the attainment of the overall goal of water security now and in the future.

The Water Security Legacy Plan

9 Syste Syste Systemmm

WaterDistribution

Sewerage&

Sanitation

Water

Development

Review&

Rationalization

Organization

PartnershipDevelopment

&Knowledge

Management

steps towards the realization of these legacies. The basic information update and the progress report of the major infrastructure projects that constitute the core of this Annual Report are testament to the Corporation’s ability and commitment to deliver the legacies for water security to the millions of people in Metro Manila and other service areas.





2011-2016 Commitments 2012 Corporate Performance

2011 Revitalized MWSS Organization

2012 Comprehensive Water Security Legacy Roadmap

2013 Bid Out of Key Infrastructure Projects

2014 Ensuring the Structural Integrity of Angat Dam

2015 Start of New Water Source Construction

2016 Fully-protected and Healthy Ipo, Angat and La Mesa Watersheds

In March 2011, the current Administration of MWSS outlined the yearly self-imposed commitment

responsibility over the six years of incumbency in the Corporation. These annual self-imposed goals are threshed out into numerical and annual targets, which are cascaded down to all departments and employees of MWSS, as well as to its partner agencies and groups, to facilitate the Corporation’s accomplishment of its targets for the year. This was the rough beginning of the water security legacy. After two years of managing the MWSS, this Administration is more encouraged than ever to pursue these commitments to their fruition, with the 2011 commitment fully-delivered and 2012 gains and accomplishments positively paving the way towards a smoother pursuit of the 2013-2016 commitments.

To ensure that all aspects of MWSS’ operations are given the

engine, we present here our performance in four perspectives:

and monitoring scheme in 2012.

2012 Corporate Performance: Financial Perspective

(Note: In our desire to forge deeper understanding and gather continuous support through a timely report of the Corporation’s annual accomplishments and future plans, goals and targets, we can only include in this 2012

Key Performance Indicators2012

Target Actual

Net Income PhP 366.3 Million PhP 1.98 Billion

Dividend Declaration Php 150 Million PhP 190 Million

Internal Fund Generation PhP 63 Million PhP 225 Million

MWSS’ 2012 consolidated net income is at PhP 1.98 billion, based on the preliminary and unaudited

income level of Php 366.3 million reported in 2011. This was due to the maintenance and sustenance of the fees billed/collected/received from the Concessionaires, which are treated as operating revenues. For the internally-generated funds, apart from business income and disposal of assets, gains in foreign exchange accounted for the biggest increase, which made possible the more than doubling of the net income.

We are happy to report to you that for 2012, MWSS delivered a truly commendable performance, hitting our targets in most key performance indicators and even exceeding in some of them.

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MWSS,

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2012 Corporate Performance: Customer Perspective

Water supply and sewerage services delivery to households is the core responsibility of the two

concessionaires, the Manila Water Company Inc. (MWCI) for the east zone and the Maynilad Water Services Inc. (MWSI) for the west zone. However, MWSS fully recognizes that this is a shared responsibility with these two major private partners. MWSS exercises control and supervision over these two concessionaires through the regulatory mechanism being administered by the

pricing of water and sewerage services, and

investment programs.

To ensure that all the targets on water supply and sewerage services in the Concession Term Extension Agreements in 2009 and the latest

the CO and the RO, are closely working on the evaluation of their accomplishment.

It appears from the accomplishment reports of these two Concessionaires that there are improvements in their levels of service. We are however, looking more closely at these performance indicators and the target performance levels for their accuracy, value to the consumers, and long-term implications. Further, it is noticeable from the table above that there does not seem to be a uniform or standard set of performance indicators for the same performance areas for the two Concessionaires as set in the original Concession Agreement. In view of setting a reasonable water tariff, MWSS is now reviewing the accomplishment reports and business plans of these Concessionaires for better understanding and monitoring, deeper analysis and more productive benchmarking.

From the expenses side, the tempering of the increases in all major expense items, especially on personnel expense,

and any additional personnel that may be needed to manage the accelerated implementation of our infrastructure projects.

2010-2012 MWSS Comparative Financial Position

Key Performance

Indicators

East Zone West Zone

Target Actual Target Actual

Water Supply Coverage

(In no. of connections)13,518 33,761 31,822 56,713

24-hr availability

Water Pressure (7 psi)

Water Quality

Non-Revenue Water Reduction

Sewerage (In no. of connections/ 106,000 109,677

(500,000,000.00)

-

500,000,000.00

1,000,000,000.00

1,500,000,000.00

2,000,000,000.00

2,500,000,000.00

3,000,000,000.00

3,500,000,000.00

4,000,000,000.00

4,500,000,000.00

2010 2011 2012

Gross Revenue

Total Expenses

Income





People management is the other composite indicator consisting of all the activities affecting people and the other fundamental

aspects of organization such as reorganization, institution of a strategic performance management system and development of new employees’ competencies.

the Governance Commission on GOCCs (GCG),

With this level of performance in the critical organization transformation process, the Corporation was able to rationalize the compensation packages of all employees, design a new organization structure, emphasize a performance-based merit system, and started instituting very deliberately a values system fully-supportive of the objectives of good corporate governance.

Process management is the performance

Corporation in managing its core processes of water source development and infrastructure construction as well as in the operations and maintenance of its existing waterworks systems for water supply and sewerage. We chose the management and level of accomplishments of the new water sources under the WSLP and the operations and maintenance of the existing water sources and sewerage infrastructure systems as the principal indicators for this key performance area for 2012, being those that have direct impact on the level and quality of customer service.

These are all composite indicators where the project accomplishments for each area were averaged to come up with a single performance target and actual accomplishment level. It is to the credit of the Engineering and Operations Department of MWSS that we reached the pre-feasibility study phase for new water source management and reached the

bidding phase for some of the operations and maintenance waterworks system projects as planned.

A more detailed accomplishment report on these infrastructure projects is presented in the following section, not to mention that the same constitute the Engineering and Operations Department’s 2012 key

Governance Commission for Government-Owned and Controlled Corporations (GCG).

Based on these reports and the latest project updates of the WSLP, the Corporation attained

for all projects under the new water source

for the operations and maintenance projects for existing waterworks systems and sewerage systems.

process management, to include for example, the

thorough reporting and analysis are made available.


Target Actual

Process Management (Composite)

New Water Source Management

Procurement of PPP Transaction Advisor - New

Centennial Water Source Project

Procurement of PPP Transaction Advisor - Bulacan Bulk

Water Supply Project

Operations and Maintenance

Waterworks System

Bidding for ADDSP

Bidding for ROM of Auxiliary Turbines 4&5

Grant Technical Assistance - AWUAIP

Phase 3 and 4

Common Purpose Facility-Funding of UATP and Sumag

River Diversion

Sewerage System

2012 Corporate Performance: Process Management

2012 Corporate Performance: People Management


Target Actual

People Management (Composite)






Infrastructure Projects

Existing Waterworks System

1. Angat Dam and Dyke Strengthening Project (ADDSP)

RationaleThe Angat Dam and Dyke Strengthening Project (ADDSP) is deemed to be the most critical and urgent among the infrastructure projects as it involves the remediation of the most important water supply source of Metro Manila. Considering the dam’s importance and its relatively old age, the MWSS, together with the Power Sector Assets and Liabilities Management Corporation (PSALM) and the National Power Corporation (NPC) and through the consulting services of Engineering and Development Corporation of the Philippines (EDCOP) and Tonkin and Taylor (T&T) Philippines, conducted a safety study to assess the structural integrity of the Angat Dam and its appurtenant dykes. This planned

The ADDSP was formulated based on this study as it aims to ensure the safety of the Angat

rehabilitation works on the main dam and dyke through the establishment of contingency measures and the formulation of long-term strengthening and stabilization schemes.

In 2011, MWSS formulated its infrastructure strategy under the Water Security Legacy Plan. Four major strategies that put rationale on past commissioned studies and the recently updated analysis of Metro Manila’s water supply and demand are as follows:

1. Securing and maximizing Angat Dam, Metro Manila’s only water source

2. Development of a long-term, redundant water source to Angat Dam

medium-term demand and provide buffer for water security

4. Non-revenue water (NRW) reduction, exploration of new technologies and groundwater management.

These four major strategies are discussed in detail in the Water Security Legacy Plan.

into three categories:

(a) existing water and waterworks system (all aqueducts and conveyances, reservoirs, trans-basins, dams, spillways and bulk supply to other coverage areas

(

Security Legacy Plan

(c) watershed management.

Technical AspectThe ADDSP will involve widening the embankment of the main dam and dyke as it will

curve, wherein the construction of a second spillway is seen to accommodate the 2011 updated Probable Maximum Flood (PMF) level that will help manage the water level of the

cost is budgeted at Php 5.7 billion.

Status UpdateIn March 2012, the Draft Final Report was presented to MWSS, the members of the Technical Working Group for the Angat Dam Protocol and other stakeholders. Project approval was obtained from the NEDA Board on 04 September 2012. However, the publication and advertisement of the Invitation to Bid was postponed by MWSS to a later date, in view of the Supreme Court’s 16 December 2012 Decision declaring the validity of the K-Water Resources Corporation’s winning bid on the operations of the Angat Hydro-electric Power Plant (AHEPP), the bidding of which was spearheaded by PSALM.





2. Rehabilitation, Operation and Maintenance (ROM) of the Angat Hydro-electric Power Plant (AHEPP) Auxiliary Turbines (AU) No. 4 & 5

RationaleMetro Manila’s increased demand for water prompted the expansion of the Angat Dam through the Angat Water Supply Optimization Project (AWSOP) in , wherein MWSS funded the construction of Auxiliary Turbine (AU) No. 4 (10MW capacity) and Auxiliary Turbine (AU) No. 5 (18MW capacity) in order to maximize the use of

AU No. 4 and 5 Project aims to extend the economic life of AU No. 4 and 5 by another 30 years as well as to increase the energy output and load capacity from

equipment. 3. Special Project Report: Angat Water Utilization and Aqueduct Improvement Project (AWUAIP), Phase 2

The Angat Water Utilization and Aqueduct Improvement Project (AWUAIP) Phase II is

under the WSLP. The PhP 5.3 billion project ensures the conveyance of raw water from Angat Dam to La Mesa Dam all the way to the water treatment plants in La Mesa and Balara by rehabilitating and repairing the leaking Aqueduct (AQ) No. 5. The estimated 394 million liters of water lost daily due to pipe leaks can now be used to augment water supply and availability, especially in expansion areas in Rizal, Cavite and Bulacan provinces.

Funded by the Chinese government thru the Preferential Buyer’s Credit Loan Agreement from the Export-Import Bank of China, the

project management and advanced construction methodology. Based on the original plan, the target completion date was March 2013.

However, a fast-tracked implementation plan was contrived, which reset the target date six months in advance or a new target completion date of September 2012. As it turned out, the project

of September and was inaugurated in July 2012. The MWSS project team determined that the following factors largely contributed to the fast implementation of AWUAIP Phase 2:

plant of 3.3 meter diameter steel pipe for the aqueduct (Package No.1) and the steel liners (Package No.2) for the 5,400-meter Aqueduct No. 5 rehabilitation. The plant was strategically positioned mid-way along the

aqueduct route that facilitated the transport of

aqueducts, which enabled open excavation instead of the boring method of excavation that enabled ease in excavating works.

collapsible steel forms in lieu of conventional

increased number of equipment without additional costs, wherein the increase in manpower complement and number of equipment used was offset and balanced off by

started in 17 March 2010, which was even

date of 9 May 2010.

symbolizes the new management of MWSS. No less than President Aquino took notice of the positive changes and major reforms at the MWSS. During the July 2012 inauguration ceremonies of the AWUAIP Phase II, President Aquino mentioned in his speech:

“Hindi lang ninyo pinapaunlad ang kapasidad ng MWSS, ibinalik din ninyo ang integridad sa inyong tanggapan. Noong 2010, 34 million pesos and nalugi sa inyong tanggapan, pero dahil sa maigting na pagpapatupad ng mga reporma, umabot ng 330 million pesos and kita ng MWSS nitong 2011. Nabayaran na rin po ninyo ng kabuuang 236 million pesos para sa mahigit isang libong retirees noong nakaraang taon. 150 million pesos ang ibinahagi ninyong dibidendo sa gobyerno na magsisilbing pondo sa ating serbisyo-publiko.”

Technical AspectThis project involves the rehabilitation, operation and maintenance of AU No. 4 and AU No. 5, with the objective of increasing the plant load factor (PLF) from

installation of equipment, the AUs are estimated to generate a net annual electricity production of 145.7 GWh. The estimated total project cost is budgeted at Php 1.15 billion.

Status UpdateIn 10 April 2012, MWSS requested for grant Technical Assistance in the form of a Transaction Advisor (i.e., Rebel Group International) through the Project Development and Monitoring Facility (PDMF) of the PPP Center of the Philippines. The project was approved in 29 November 2012.

was held following the publication of the Invitation to Bid in 3 major newspapers

10 private corporation consortiums such as SN Aboitiz Power, Marubeni

Trans-Asia Oil and Energy Development Corporation, K-Water Resources Corporation, Sta. Clara Power, EEI Corporation, Meralco Power Generation, Kaltimex Energy Philippines and First Gen Northern Energy. Submission to bid for this project is until 04 March 2013.

fromfromfromfromfrom





4. Angat Water Utilization and Aqueduct Improvement Project (AWUAIP), Phase 3 and 4

Rationale About 15 years ago, MWSS recognized the need to rehabilitate the aqueducts. In order to match the 2025 demand, it is essential to rehabilitate to full capacity all its aqueducts to ensure that the true water yield from Angat reservoir (4,000 mld) can be conveyed optimally, with minimal transmission losses to the treatment plants. To rehabilitate the aqueducts, MWSS built a new parallel aqueduct (AQ-6), which was completed in 2006. Besides restoring the conveyance capacity of the aqueducts, other potential bottlenecks will need

Status UpdateA grant Project Preparatory Technical Assistance (PPTA) for AWUIAP Phase 3 has been given by Asian Development Bank (ADB). The PPTA will engage international and local experts (i.e., Asia Halcrow Inc., Engineering and Development Corporation of the Philippines (EDCOP) Philippines and Halcrow Group Limited United Kingdom) to provide specialized services, such as preliminary structural, hydraulic and geologic assessments as well as the preparation of the Feasibility Study. The PPTA Consultants commenced their services in 07 January 2013 and will end by 02 September 2013.

MWSS made a separate request from ADB for another PPTA to cover AWUAIP Phase 4, which will include the conduct of investigation and preparation of Feasibility Study for the conveyance system between Ipo to Bigte. ADB hired a single consultant to determine the scope of works for Phase 4.

5. Umiray-Angat Transbasin Rehabilitation Project (UATP), Phase 2 and Sumag River Diversion Dam Project

RationaleIn October 21, 2010, the MWSS Board of Trustees released Resolution No. 2010-149 delegating the project implementation of UATP Phase 2 thru the Common Purpose Facilities (CPF). The Umiray-Angat Transbasin Rehabilitation Project (UATP), Phase 2 aims to repair

the damaged facilities in Umiray during the November 2004 typhoon and to upgrade these facilities to ensure the raw water supply availability. The upgrading works at Umiray aims to strengthen the existing facilities by providing more permanent structures that could

Through the MWSS Board Resolution No. 2010-149, the implementation of this project was transferred to the Common Purpose Facility. The Sumag River Diversion Dam Project has an estimated yield of 200 mld at an estimated cost of PhP 744 million and is part of the UATP.

Status Update

the member agencies’ representatives to the CPF.





New Water Sources Development

1. New Centennial Water Source Project (NCWSP)

Rationale

a single source—the Umiray-Angat-Ipo river systems through the Angat Dam. Climate change and progressive economic development have continuously affected the reliability and predictability of water supply to match the increasing demand for

of water supply, a key objective being pursued is the immediate and long-term water redundancy in an area that complements rainfall patterns of Angat and is distant and large enough to ensure water supply should the Angat system meet any temporary inadequacy. Another objective is the maximization of power generation whose potential revenues may serve to help fund our water supply and sanitation requirements. If achieved, this will truly be a legacy in water security.

MWSS and its concessionaires commissioned UP-NEC to undertake a detailed demand study of its entire service area in order to provide long-term

water projections until the end of the Concession period in 2037. A range of estimates puts demand in 2037 at about 6,000 mld (already considering a level of redundancy) or 34 cubic meters per second more than the existing total water supply system of about 4,100mld. This study became the basis of the new water sources study prepared by the World Bank, which reviewed and considered other past recommendations of JICA and other entities. The World Bank proposed a series of large-scale water source road map in the Kaliwa-Kanan-Agos River Basin and JICA’s proposal coincides with this recommendation. From these studies, the UP-NHRC’s hydrological study on the Kaliwa-Kanan-Agos River Basin optimized water and power generation in the basin.

Technical AspectThis project will involve the construction of the Laiban Dam at the upper Kaliwa River and the Kaliwa Low Dam at the downstream of Kaliwa River, which traverses the municipalities of Tanay,

Rizal and General Nakar, Quezon. The NCWSP will also involve the following components:

Status UpdateOn 06 November 2012, the MWSS engaged its Transaction Advisor, a consortium among the Rebel Group International BV, Allen & Overy,

Crisil Risk and Infrastructure Solutions, Royal HaskoningDHV and Puyat Jacinto & Santos Law, to develop the Feasibility Study and PPP structuring of the NCWSP through the Project Development and Monitoring Fund (PDMF) of the PPP Center of the Philippines. On 26 November 2012, the Rebel Group presented their Inception Report. The TA is now conducting their ground surveys in the municipalities of Tanay in Rizal, Infanta, Gen. Nakar and Real in Quezon. Target bidding date for the project is by 2nd quarter of 2013.





2. Bulacan Bulk Water Supply Project (BBWSP)

RationaleThe Province of Bulacan has been host to Metro Manila’s water supply system since the 1920’s with the establishment of the Angat Water Supply System. The said system was further expanded with the inclusion of the water supply component in the Angat Hydro-electric Power Plant Dam, which was completed in 1968, located in Norzagaray, Bulacan.

Technical Aspect The project will provide some 230 MLD of

22 water districts of Bulacan and consists of the construction of a water treatment plant, treated water reservoir, booster pump Stations, treated water transmission mains and, interconnection to the water districts’ trunk lines.

The project aims to address the water supply requirements of the municipalities of the Bulacan Province through the most appropriate scheme involving, but not limited to, the following components:

to the MWSS’ existing Bigte-Novaliches raw water conveyance system, as a source for

including raw water conveyance system to the New Water Treatment Plant/s

mains, including line appurtenances, from the WTP/s to the agreed delivery/interconnection points of the

the WTP/s, pumping stations, transmission branch points, and at the agreed delivery/

monitoring stations.

The Project has two phases: (a) Phase 1 will cover 14 municipalities (Balagtas, Bocaue, Bulakan, Calumpit, Guiguinto, Hagonoy, Sta. Maria, Marilao, Malolos, Meycauyan, Obando,

will cover 9 municipalities (Angat, Baliuag, Bustos, Pandi, Norzagaray, San Miguel, Dona Remedios Trinidad, San Ildefonso and San Rafael). The phasing and prioritization of the covered municipalities will be validated during the pre-feasibility study phase upon consultation with the water districts serving the Province of Bulacan.

Status UpdateOn 10 January 2013, the MWSS engaged its Transaction Advisor, a consortium led by the IMC Worldwide Limited in association with Sinclair Knight Merz Pty Ltd. (Australia), Project Management Group (Ireland), Capital Fortunes Limited Engineering Corp. (Phils.), CEST Incorporated (Phils.), CVC Law (Phils.), Santiago Law (Phils.), and Philip Santos & Co. Private Limited (India), to develop the Feasibility Study and PPP structuring of the BBWSP through the Project Development and Monitoring Fund (PDMF) of the PPP Center of the Philippines. On 21 January 2013, the IMC Worldwide Ltd. presented their Inception Report and the draft Feasibility Study is scheduled to be submitted by end of February 2013. Target bidding date for the project is by January 2014.

Watershed Management

An integral component of the water supply mandate of the MWSS is the protection of the watersheds that affect

the continuous supply of water to MWSS’ service area. Although the Department of Environment and Natural Resources (DENR) has the general responsibility of maintaining the watersheds all over the country, the MWSS has a

Angat, Ipo, La Mesa and Marikina - as their environmental condition directly impinge on the quality and amount of potable water supply to its constituents.

The management of the Ipo and La Mesa watersheds was previously shared between MWSS and Bantay Kalikasan (BK) Group. With the mutual cessation of the partnership and driven by the urgency of rehabilitating

President Aquino’s public expression of an environmental agenda, the MWSS took the challenge of creating a watershed priority program that encompasses the maintenance

this, MWSS is now gearing towards the direct handling of the watershed rehabilitation and protection, following a watershed road map. This watershed road map in 2012 is designed as the transitional period culminating in a new facade for MWSS in Watershed Management. As part of the Water Security Legacy Plan, the Integrated Watershed Management Program (IWMP) is set to lessen the period of rehabilitation of the watersheds from the

Retired Supreme Court Chief Justice Reynato S. Puno has signed on as the principal legal adviser to the task force creating an Integrated Watershed Management System (IWMS) for MWSS. Chief Justice Puno is the author of

work of rehabilitating and protecting MWSS’ watersheds as “within the purview of human rights” as he relates such work to the third generation of human rights or the right of the people to live in a healthy environment. The Writ of Kalikasan serves as the strongest possible legal weapon for environmentalist interventions to guarantee the health of ecosystems for present and future generations.

A was created to implement the program which includes a continuous reforestation and forest protection program starting with the Ipo and La Mesa dams. For the Ipo watershed, 4,500 hectares of forest are set to be rehabilitated in 5 years through the planting of some 400 seedlings per

cross breaks on the established plantations. The program will also see through the maintenance of the existing seven look-out towers in the area. For the La Mesa watershed, some 1,825 hectares are targeted for protection in 2012 and management of the remaining 225 hectares by 2013. About 1,300 lineal meters of damaged perimeter fence will be rehabilitated and some 46 illegal settlers in the area will be relocated. These reforestation initiatives are done in collaboration with the two concessionaires, MWSI and MWCI.





The Water Pricing Strategy – Rate Rebasing

Rate rebasing is the technical term used for setting the price of water for all our customers. It is a

highly technical process governed strictly by the original Concession Agreements between the MWSS and its two water concessionaires, MWCI and MWSI in 1997 and the Term Extension Agreement in 2009. Per the Concession Agreement, Rate

years 2012 and 2013 witness the third rate rebasing exercise since MWSS’ privatization in 1997.

The rate rebasing mechanism ensures that the capital investment plans of these three Corporations are synchronized towards the assurance of security of water sources and adequacy of sewerage services, through compliance with set targets from year to year. Financial prudence and technical standards are the topmost considerations in the application of the rate rebasing formula and in the evaluation of all investment projects being implemented and proposed by these Corporations.

There are two major components of rate rebasing for the two Concessionaires:

a. the evaluation of the performance of the Concessionaires in the last

period’s targets and business plans

b. he formulation of the targets and

into account the results of the performance evaluation and the business plans submitted by the two Concessionaires.

This process is most challenging this time around as basic changes have been instituted in the organization of MWSS giving more focus on the overall management of the process and conducting a surgical audit on this water pricing mechanism.

The appointment of a new Acting Chief Regulator and new Regulators, albeit delayed, was a most welcome development.

MWSS’ arm in exercising its regulatory function, also substantially mirrored the organization changes implemented in

installation of a more performance-based management system, which as expected has affected the working environment and the overall performance of the RO. We are however optimistic that 2013 will see a more productive, cohesive and transparent regulatory team with the implementation of a number of improvement measures such as:

principles of the supremacy of public and consumer welfare in

in managing a utility through the

the development and design of

Concessionaires, the treatment of assumptions and the assessment of

review of concessionaires’ targets and accomplishment reports and business plans, where its partner

the MWSS, is now more directly and

Committee to the Board for rate rebasing, to lead discussions and dialogues with all concerned parties, and to take up, line up

make recommendations on long

protocols to guide discussions with the concessionaires during the rate rebasing process.

We will report to you the progress of this 2012 – 2013 Rate Rebasing Process as it progresses in the coming months. We are

will meet the prescribed timetable for this process, even as we encounter several issues and hurdles along the way. We further assure all of you that we will give our all to negotiate and get the best terms on quality, delivery, service and pricing of water supply and sewerage for all our customers.





The new MWSS Management, which took the helm of the Corporation in January 2011 immediately launched a program of

transformation instituting major reforms in the organization, people and processes and put together its major corporate strategy to deliver on its Water Security Legacy Program.

The transformation process tested everyone’s understanding and determination to push through with the much-needed and oftentimes painful changes, which predictably created tension and anxiety throughout the Corporation.

There were four major thrusts towards propelling this organization into excellence:

1. Institutionalization of the MWSS Strategic Management System2. Building a New MWSS Culture3. MWSS Reorganization4. Institutionalization or Strengthening of Other Key Systems or Programs

1. Institutionalization of the MWSS Strategic Management System

meant to provide a framework for direction and overall management of the organization. The major components are as follows:

a. Transforming an organization and building an identity require clearly articulated aspirations. In 2012, MWSS crafted its new vision, mission, values, philosophy and policy of the Corporation. These corporate beliefs, as included in the early part of this Annual Report, were captured and put together as discussions among Top Management, the employees, partners in various agencies and our Concessionaires progressed during the Strategic Planning process. These have been shared with all our employees through our staff meetings, orientation and training sessions, and are used as the foundation of our strategic performance management system.

b. Strategic Planning. The WSL is a result of an initially informal series of intense discussions introduced in

the middle of 2011 and continued into 2012. Such approach to planning was utilized given the pervading organizational uncertainty as well as the yet-to-be cemented relationships with partner Concessionaires with the entry of new management. It was felt that with a number of unclear directions in the organization, varying interpretations of existing agreements and the lack of a tight and comprehensive trail of documented historical information, issues could only be resolved if in depth discussions based on complete information could be accomplished. To arrive at comprehensive directions, the underlying objectives of the process were thus to achieve clarity, gain an understanding of issues, make an assessment of the organization’s strengths,

open communications with the Concessionaire partners.

Moving forward, the Strategic Planning Process will be

required inputs and formats for each year.

c. . The Corporation’s strategic planning sessions were reinforced with the incorporation of the Governance

and Controlled Corporations) Major Final Outputs (MFOs). The MFOs are GCG’s requirements on the annual deliverables of MWSS as a GOCC. Several sessions with various levels of the Organization were

commitment on MFOs and priority programs or project

result areas (KRAs) following President Aquino’s Social Contract as espoused in the Philippine Development

change adaptation and mitigation.

MWSS contributes directly to two of these KRAs on economic development and climate change. As reported in the Corporation’s performance scorecard included in this Annual Report and submitted to the GCG, MWSS

d. Performance Management. MWSS is one of the

Management System (SPMS) last November 2012. Its timely test run was aligned with the strategic planning initiatives of the Corporation, and is being implemented with diligence and with the necessary training for all participants. The main emphasis of the exercise is to ensure a fair process to measure performance with a

Performance Commitment Rating (OPCR) System and Individual Performance Commitment Rating (IPCR) System are the fundamental components of the Corporation’s performance scorecard, which we will implement fully in 2013. The preparatory work to ensure that the next stages of SPMS, such as the 360-degree feedback and the Individual Development Plans are now being implemented.

2. Building a New MWSS Culture

The second element is about creating a more receptive organization to the change program. There is no single winning formula for change or culture management across organizations but a number of basic elements, when put together, can contribute tremendously to an organization’s transformation. For MWSS’ own journey, the most effective elements were the following:

a. Rallying towards a Meaningful Cause. Management recognized the meaningful role of the organization not only in Metro Manila’s development, but to the country’s as a whole and utilized this to full advantage. Working with a handful of willing engineers, a single-minded and earnest pursuit of cornerstone projects- such as the new water source or the remediation of the Angat dam- was launched and persistently followed through. Beside these projects, petty organizational roadblocks or other external issues paled by necessity. Almost magically, these cornerstone projects gathered steam – and in the process – enough inspiration to infect many more in the organization.

b. . Even as the many projects now continue to progress, there is a genuine, continuing and conscious effort in the leadership to live out and walk the talk as far as the MWSS values of integrity, Service Excellence, Quality,






help ensure compliance with government policies and

and prepare positions in support of new initiatives or required policy changes. In doing all these, it is hoped that employees will be able to work with a renewed pride in and awareness of their being public servants.

While MWSS will continue to pursue its mandate as

also underscores the required related support functions that will enhance organizational ability to deliver its core mandate. These include the following:

a) Overall Policy Formulation and implementation in the Water Sector

b) Strengthened property managementc) Strengthened partners managementd) Funds Sourcing and Management e) Information Technologyf) Knowledge Management

The above functions, viewed to be critical to the MWSS charter over the long term were all factored into the design of the new organization. The details of this

reorganization are contained in a separate report. These

responsibility areas by function, the implementation plan, timetable and communication plans. These will not be summarized in this report owing to the highly

this plan.

4. Institutionalization or Strengthening of Other Systems and Programs

As a critical and necessary support to the new organization, the development and/or improvement of key systems must be a priority in tandem. The following systems are being improved or introduced:

a) Financial systems – particularly in strengthening controls, ensuring accuracy of input and output of systems and reports, facilitating ease of use for management analyses, ensuring requirement-timely reports and analyses for managerial decision making and regulatory compliances, and the completeness and integrity of historical data bases

b) ISO - Facilitating smooth and logical operational

systems and the rationalization and connectivity of data bases

c) Training and Career Development - Enhancing knowledge and capabilities of employees in their respective functions and equipping the organization with the necessary skills that will enhance the delivery of their work.

As noted, many of these traditionally weak focus areas

new MWSS organization were instituted in 2011 and

organization is put in place. Aside from these, MWSS

Four Conditions of Good Governance established by the GCG.

Integrity, Results-Orientation and Transparency are concerned. In every decision and action, these values are given life.

c. . To further improve the relationships among the various groups and levels in the organization, an open door policy is being practiced by all managers and supervisors of the Corporation. An environment where the employees are encouraged to be able to ask questions and challenge management decisions or actions constructively serves to clarify the roles and responsibilities within the Organization. The Administrator’s door and the many walls around

or knocked down are an invitation to openness for employees who need to take up their concerns or share their ideas.

d. . Apart from the Open Door Policy, a bet

was made on certain personnel, giving them direct responsibility and accountability in managing a key project and reporting progress straight to Top

empowerment on next level management to in turn

deliver results.

3. MWSS Reorganization

With an estimated PHP 100B projects to be handled and led by MWSS, there is a need for a stronger, more focused yet nimble organization with knowledgeable, well trained and experienced leaders who can adjust to the demands of this industry.

As a result of the WSL, a review of the organization showed that there is a need to strengthen MWSS’ role in

the following areas in support of Legacies 1, 2, 3, and 5, where capital projects are concerned:

a) Watershed management and water and water treatment technologies

b) Climate Change Management and Technologies

c) Strategic Planning and Project Monitoring that will address the long term needs of the

the conduct of studies, researches on new water sources and sewerage construction trends

d) Program and/or project management especially for dam construction and aqueduct construction

e) Liaising with foreign and local agencies of

standards requirements

f) Determining the best and highest use of all our assets

In line with Legacy 4, or the Water Rates Review and Rationalization, the reorganization will strengthen MWSS’ capability in the following:

a) Policy formulation for both water and sewerage technology and assets management

b) Standards setting for use of the concessionaires, partners and agents

c) Regular monitoring of progress on key infrastructure

d) Evaluation of business plans and their viability

To support Legacy 7 on Communications and Knowledge Management, the reorganization plan builds the internal capability within MWSS to keep employees, the public, the government agencies and

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Our Partnerships and Alliances

Idesired relationship with all its stakeholders and partners in the water sector.

With our primary partners in delivering water and sewerage services, the two Concessionaires, Manila Water Company Inc. and Maynilad Water Services Inc., we maintain and enhance disciplined professionalism, transparency and objectivity.

With our principal, the national government, including the executive and the legislative branches, we are increasing our dialogues and consultations for better understanding of the water and sewerage issues towards a more relevant set of water legislation and appropriate restructuring of the water sector.

With our associates in the National Water Regulatory Board (NWRB), the National Commission for Indigenous People (NCIP), and the Department of Public Works and Highways (DPWH), we are forging a cooperative alliance that ensures timely planning, clear protocols in raw water allocation and management, and immediate and timely decisions and action on water rights and indigenous people’s issues.

We fully appreciate the cooperation and understanding of the local government units (LGU) who are both hosts of water sources, facilities and watersheds and therefore are our major partners in ensuring the continuous supply of water now and in the long-term.

With the non-government and civil society organizations (NGOs and CSOs) and associations, we remain consistent and more persistent in our efforts to build a common understanding of the water issues and water targets, for a more constructive and mutual relationship in full consideration of all interests and concerns of these stakeholders.

of mutual trust and respect, to be able to plan and build water projects, naturally

With our customers, who are our reason for being, we are slowly but surely creating an environment of mutual trust so that we can better serve the Metro Manila communities.

Special Areas of Focus in 2013

The year 2013 will see the accelerated efforts towards achieving organization excellence, with the following major activities:

1. Alignment of all Expectations and Elevation of Performance Expectations

The Strategic Planning Management System (SPMS) can now more directly align the targets, plans and activities of the Millennium Development Goals

Performance Commitments through a deliberate cascade process and more open discussions. The institutionalization of the SPMS will be so pervasive that renewed energy is foreseen to be felt within the Organization. Apart from looking at the individual contribution, competency development will be pursued. All these will be validated with the 360-degree feedback process. The performance management tool of the so-called Corporate Balanced Scorecard will be formally introduced and employed in 2013. We believe that the Corporation will reap the rewards of transformation only when the desired change occurs at the level of the individual employee. All of these will further ensure that employees will be more attuned to customer needs.

2. Information Systems will be Stronger

Coordination and discussions with the National Computer Center (NCC) are on-going to install a three-year long Information System Strategic Program (ISSP).

reduction efforts will improve dramatically.

3. Implementation of Reorganization

approval of the GCG, a new organization structure. Simultaneously, MWSS is heavily involved in the GCG’s drive to improve the overall Compensation

In 2013, it is envisioned that the same review of the organization will be done for





MWSS Participates in World Water Day 2012 (3/22/2012)

MWSS once again manifested its support for the World Water Day initiatives by participating in its 2012 celebration. This year’s theme is “Katiyakan sa Tubig, Katiyakan sa Pagkain”, a localized adaptation of their international theme “Water and Food Security”. Some 20 employees of MWSS met at Luneta on March 22, 2012 to join other participants from government and non-government agencies like Maynilad, DENR, DPWH, LWUA and Sagip Ilog Pilipinas Movement. The group proceeded to the Quirino Grandstand and walked around the Grandstand once before forming a human water droplet.

MWSS Administrator visits Gen. Nakar, Quezon

MWSS Administrator Gerry Esquivel and his team have paid several visits to Mayor Leovegildo Rozul

planned Sumag River Diversion Project and the permanent works for the Umiray-Angat Transbasin Project

NDDRMC (9/21/2012)

MWSS hosts an exercise by the NDRRMC held at the Ipo Watershed area on September. MWSS is ably represented in the NDRRMC by Engrs. Jun Escoto and Jojo Dorado.

Operation Habagat (8/10/2012)

the disastrous torrential rain Habagat. A mobile water treatment plant was lent by MWSS in the area.

Forging Ties with Our Stakeholders





We renewed our efforts towards enhancing the respect and appreciation for water and water resources. It is quite easy for everyone to take water for granted, given its seeming availability and the nature of this resource – easily reached and tapped

in a tropical country like ours. Towards this end, we crafted and have started an aggressive water sourcing strategy with an accompanying communication and knowledge management plan to gather support and ensure cooperation among all concerned.

We aggressively pursued programs to renew and re-generate the sense of trustworthiness and dependability of MWSS and our partners. We cleansed our ranks and completed major reforms, the results of which are becoming more and more apparent.

We have started programs to install the proper management and sharing of water information and skills through our participation in major water events, presentation of papers and in actively pursuing dialogues with our partners and stakeholders in the water sector.

Most importantly, we are now implementing a stakeholder-based communication strategy targeting both external and internal audiences to put forward the importance of water conservation or the intelligent use of water. In addition, we are continuously rationalizing data-gathering efforts through a review of all reports and their analyses especially those coming from our Concessionaire-Partners, to enable stricter and more accurate performance reviews and assessment.

With better and shared knowledge on water and water issues, as partners, we can further ensure the long-term supply of adequate, reliable, quality and reasonably-priced water.

Gen. Nakar Teachers Hold Symposium at the La Mesa Guesthouse

Elementary and high school teachers from the various public schools of

the La Mesa Guesthouse, which was lent to them for free by MWSS on December 2012.

MWSS Donates to Typhoon Pablo Victims

The MWSS thru the efforts of the Corporate Planning Department launched a donation campaign drive for

donations came in cash and in kind with total cash collected amounting to Php 19,500 and an assortment of handed over to the Kapuso Foundation

Communications and Knowledge Management


MWSS – CORPORATE OFFICE MANAGEMENT TEAM




MWSS BOARD OF TRUSTEES

Ramon B. AlikpalaChairman

Atty. Florendo B. Batasin, Jr.Manager, Administrative and General Services Department

Arch. Gerardo A.I. Esquivel

Vice ChairmanAtty. Lourdes M. Naz

Manager, Board Secretariat

Engr. Leonor C .CleofasDeputy Administrator - Engineering

and Operations

Cecilia G. Soriano, Ph.D.

Trustee

Fr. Jose Ramon T. Villarin, SJ

Trustee

Benjamin J. Yambao

Trustee

Atty. Emmanuel L. Caparas

Trustee

Bienvenido A. Sarmiento, CPAManager, Internal Audit

Department

Atty. Nathaniel C. SantosSenior Deputy Administrator

Arch. Gerardo A.I. EsquivelAdministrator

Ronald S. AbrigoManager, Corporate

Planning Department

Justice Raoul C. Creencia

Trustee

Atty. Darlina T. UyManager, Legal Department

Vicente ElefanteManager, Property

Management Department

Hermogenes R. Fernando

Trustee

Estrellito L. Polloso, CPAManager, Finance Department

Atty. Zoilo Andin, Jr.Deputy Administrator,

Finance and Administrative Services





MWSS – REGULATORY OFFICE TEAM MWSS – REGULATORY OFFICE TEAM

ATTY. VINCENT PEPITO F. YAMBAO, JR.Customer Services Regulator

Atty. Yambao holds a Bachelor of Laws (LL.B.) degree from the University of the Philippines, Diliman in 2001 and passed the Bar Examinations given in September of the same year. Prior to his appointment to the MWSS Regulator

Administrative Register (ONAR) at the University of the Philippines Law Center. His work experience includes stints at the Philippine Supreme Court, UP College of Law and a private practice. He is a member of Libertas, a voluntary group of lawyers and law reform advocates, where he served in various capacities in dealing with issues relating to election dispute resolution and to the accessibility of the electoral processes to the vulnerable sectors, including the elderly, persons deprived of liberty, internally displaced persons, persons with disabilities and the indigenous peoples.

OUR NEW REGULATORS

appointment of a new Chief Regulator and three new Regulators.

ATTY. EMMANUEL L. CAPARASActing Chief Regulator

Atty. Caparas is an IT professional with particular expertise in knowledge management and information systems. An alumnus of the University of the Philippines School of Economics and the College of Law, he began his law career as a research attorney at the 1986 Constitutional Commission and subsequently as a legal clerk for a Justice of the Supreme Court. In 1989,

excelled in litigation practice and commercial transactions.In 1994, Atty. Caparas put his law practice on hold and proceeded to organize an IT business. He was the principal founder, Chairman and President of the company that designed and created LexLibris, the most recognized and successful electronic research database on Philippine law. Pioneering forays into interactive media and knowledge management ventures followed.He returned to the Supreme Court in 2008 and served as the Chief of the

Technology Department of the Philippine Judicial Academy. Mr. Caparas is currently an accredited mediator at the Court of Appeals and mediation trainer of the Academy.

ATTY. ESTRELLA T. DECENA-ZALDIVARAdministration and Legal Affairs Regulator

Atty. Zaldivar of Ibanag descent worked her way through college as a full-time

Bachelor of Laws in 1982 at the Far Eastern University and graduated as Cum Laude. Her almost 30 years in the practice of law has been purely devoted to public

(PAO) wherein she led the Manila District and supervised more than 50 lawyers. Her exemplary service in government earned her the recognition as the 1998 Outstanding Public Attorney in the nationwide search for Judicial Excellence, jointly conducted by the Supreme Court and the Foundation for Judicial Excellence. In 2005, she

of Deputy Administrator for Administration and Legal Affairs. Her 5-year term as a Regulator which ended last July 2010 was renewed for another 5 years.

ENGR. GERARDO A. SULLANOTechnical Regulator

his Bachelor of Science (B.S.) in Civil Engineering from the Mapua Institute of

Master of Science in Municipal Engineering from the University of Toronto, Ontario,

sewerage including drainage and sanitation where he was involved in all project phases including planning, feasibility studies, design, cost estimates and technical

water supply, sewerage and wastewater treatment system projects locally and abroad. His work experience includes engineering project implementation and management roles in the Land Bank of the Philippines, Subic Bay Metropolitan Authority, and Development Bank of the Philippines for World Bank-funded projects. He was a former Division Manager of the Local Water Utilities Administration (LWUA) and Municipal Engineer for SNC Lavalin, Inc. of Canada, responsible for the water supply system and sewage treatment plant design and implementation.

SAMUEL B. CRUZFinance Regulator

from University of the Philippines, Diliman and has completed the Management Development Program of the Asian Institute of Management. He has conducted hundreds of corporate studies on business expansions, supply chain planning, risk management, and

years and held senior managerial positions at San Miguel Corporation and Li & Fung Logistics (a HK-based multinational).


2012 PRELIMINARY/UNAUDITED FINANCIAL

STATEMENT




2011 AUDITED FINANCIAL STATEMENT

The Board of TrusteesMetropolitan Waterworks and Sewerage SystemKatipunan Road, BalaraQuezon City

Republic of the PhilippinesCOMMISSION ON AUDIT

Commonwealth Avenue, Quezon CityPhilippines

Report on the Financial Statements

accordance with generally accepted state accounting principles in the Philippines and for such internal

free from material misstatement, whether due to fraud or error.

our audit in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation





The validity of the Property, Plant and Equipment amounting to Php 14.74 Billion as of December 31, 2011 could not be ascertained due to non-submission of Physical Inventory Report and non-reconciliation of the Accounting and Property records.

Various assets and liability accounts amounting to PhP 370.83 Million and PhP 473.86 Million, respectively,

that could overstate or understate the assets and liabilities accounts at year end.

these reciprocal accounts (i.e., intra-agency receivables of PhP 1.13 billion and intra-agency payables of PhP 637.98 Million, as two separate line items misstated the total assets, total liabilities and other affected income and expense accounts by undetermined amounts. Likewise, the difference between the reciprocal accounts

Million in CY 2011 despite repeated recommendations for its immediate reconciliation.

The reported Cash in Bank-Local Currency and Other Investments and Marketable Securities – BTR Special Reserve Fund (SRF) accounts were overstated by PhP 18.91 Million due to unreconciled amounts with various banks.

Loans Payable – Domestice and Foreign accounts of MWSS CO and RO were revalued at year end using the FOREX closing rates on December 29, 2011 instead of the closing rates on December 31, 2011, thereby resulting in the overstatement of liability and Loss on FOREX account as of December 31, 2011 by at least PhP 50.98 Million.

The abnormal balances of Accounts Payable totaling PhP 6.96 Million impaired the reliability of the

accordance with generally accepted state accounting principles in the Philippines.

Report on Other Legal and Regulatory Requirements

statements. In our opinion, the information is fairly stated, in all material respects, in relation to the basic

COMMISION ON AUDIT

By:

Priscilla DG Cruz (original signed)Supervising AuditorJuly 24, 2012

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

(With Comparative Figures as of December 31, 2010)(In Thousand Pesos)

Notes 2010

ASSETS

Current Assets

4 & 5 1,412,907 4,384,776

Accounts receivables, net 4 & 6 1,829,682 1,515,619

Other receivables 7 5,675,361 5,407,697

Inventories 8 737 61,263

Prepayments 9 601,347 927,361

9,520,034 12,296,716

Non-Current Assets

Property, plant and equipment, net 4 &10 38,633,109 40,136,817

Construction in progress 4 &11 3,590,917 1,010,505

Investments 12 475,920 808,266

Other assets, net 13 877,447 885,620

43,577,393 42,841,208

TOTAL ASSETS 53,097,427 55,137,924

LIABILITIES AND EQUITY

Current Liabilities

Payable accounts 14 926,872 1,087,309

15 260,289 239,127

16 637,983 535,860

Current portion of long-term liabilities 18 1,226,734 1,066,650

17 795,534 971,140

3,847,412 3,900,086

Non-Current Liabilities

4 &18 11,974,276 15,452,504

Deferred credits 19 2,626,387 2,352,573

14,600,663 17,805,077

Total Liabilities 18,448,075 21,705,163

Equity 34,649,352 33,432,761

TOTAL LIABILITIES AND EQUITY 53,097,427 55,137,924

4

STATEMENT OF FINANCIAL POSITION

December 31, 2011

2011

See accompanying Notes to Financial Statements.

Cash and cash equivalents

Inter-agency payables

Intra-agency payable

Other liability accounts

Long-term liabilities, net of current portion





(With Comparative Figures for the Year Ended December 31, 2010)

(In Thousand Pesos)

Notes 2011 2010

REVENUES

Concession fees 4

Debt service 1,596,572 1,467,540

Current operating budget 840,033 612,567

Progress billing 2,669 16,754

Business income

Interest on investments and deposits 66,838 75,520

Rental of leased properties 4 84,656 75,249

Raw water 52,721 50,442

Gain on disposed assets 7 133

Miscellaneous income 203 120

2,643,699 2,298,325

EXPENSES

Personal services 22 208,281 248,465

Maintenance and other operating expenses 23 105,685 228,262

Non-cash expenses

Depreciation 4 & 10 1,559,977 1,597,067

Amortization 8,122 21,618

Financial expenses 24 281,494 322,576

Gain (loss) on foreign exchange, net 4 147,044 (85,796)

2,310,603 2,332,192

NET PROFIT (LOSS) 333,096 (33,867)



STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended December 31, 2011

2012 Annual nnual nnual ReportReportReportReportReport2012 A2012 Annual


STATEMENT OF CHANGES IN EQUITY


(With Comparative Figures for the Year Ended December 31, 2010)( In Thousand Pesos)

Notes 2011 2010

CAPITAL STOCK

Authorized - 80 million shares, P100 par

Issued and outstanding 60,954,867.84 shares

Balance, beginning 6,095,487 6,095,487

Additions (deductions) - -

Balance, end 6,095,487 6,095,487

DONATED CAPITAL

Balance, beginning 20 1,046,971 1,046,971


Balance, end 1,046,971 1,046,971

APPRAISAL CAPITAL 4

Balance, beginning 28,656,079 28,656,079


Balance, end 28,656,079 28,656,079

RETAINED EARNINGS (DEFICIT)

Balance, beginning (2,365,776) (1,563,295)

Prior-period adjustments 21 883,495 (768,614)

Net profit (loss) 333,096 (33,867)

Balance, end (1,149,185) (2,365,776)

TOTAL EQUITY 34,649,352 33,432,761






(In Thousand Pesos)

2011 2010

CASH FLOWS FROM OPERATING ACTIVITIES

3,540,325 3,050,115

79,347 80,161

44,188 70,000

113,884 153,778

(30,291) (688,217)

(297,852) (487,113)

(317,751) (261,573)

Net cash generated from operating activities 3,131,850 1,917,151

CASH FLOWS FROM INVESTING ACTIVITIES

Matured investments 319,402 -

(13,367) (14,396)

(2,280,487) (854,152)

Net cash provided by (used in ) investing activities (1,974,452) (868,548)

CASH FLOWS FROM FINANCING ACTIVITIES

4,479,443 529,899

(8,582,142) (1,544,606)

- (368,139)

Net cash used in financing activities (4,102,699) (1,382,846)

(26,568) (229,591)

(2,971,869) (563,834)

4,384,776 4,948,610

CASH AND CASH EQUIVALENTS AT END OF YEAR 1,412,907 4,384,776

Capital expenditures

Collection of rentals on leased properties


Investments in special reserve fund

Collection of water accounts

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Payment of borrowing costs

Payment of prior year's dividends to National Government

Effects of exchange rate changes on cash and cash equivalents

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

Loan proceeds

Other collections

Debt servicing

Payment of operating expenses


STATEMENT OF CASH FLOWS


Collection of concession fees

Other expenditures

(With Comparative Figures fo the Year Ended December 31, 2010)

49

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM NOTES TO FINANCIAL STATEMENTS (In Thousand Pesos)

1. Corporate Information

The Metropolitan Waterworks and Sewerage System (MWSS), a government-owned and controlled corporation, was created under Republic Act No. 6234 which was approved on June 19, 1971 replacing the National Waterworks and Sewerage Authority. Its main objective is to ensure an uninterrupted and adequate supply and distribution of potable water for domestic and other purposes to its consumers at just and equitable rates. It also aims to provide sewerage and sanitation services to the public. MWSS owns and has jurisdiction over all waterworks and sewerage system of all the cities and municipalities of Metro Manila, and some municipalities of Cavite and Bulacan.

Because of the felt need for the government to adopt urgent and effective measures and to address the nationwide water crisis which adversely affected the health and well-being of the public, legislators passed into law Republic Act No. 8041, otherwise known as the National Water Crisis Act of 1995, implemented under Executive Order No. 286 dated December 6, 1995, which reorganized the MWSS. The passage of Executive Order No. 311 on March 20, 1996 encouraged the private sector’s participation in the operation of the facilities of MWSS and paved the way for its privatization.

Pursuant to a process of a competitive public bidding and selection, MWSS’ operations were privatized. Thus, on February 21, 1997, MWSS entered into a Concession Agreement (CA) with two private companies (Concessionaires), namely, the Manila Water Company Incorporated (MWCI) and the Maynilad Water Services Incorporated (MWSI), granting them the rights to manage, operate, repair, decommission and refurbish the Facilities in the Service Area, including the right to bill and collect for water and sewerage services supplied in the Service Area. MWCI operates on the east zone while MWSI services the west zone The two concessionaires formally took over the operations of MWSS on August 1, 1997. In addition to the performance of the service obligations, the concessionaires are required, under the CA, to pay MWSS concession fees in consideration for such right.

As a result of the privatization in 1997, MWSS is now divided into two Offices, the MWSS-Corporate Office and the MWSS- Regulatory Office.

Due to financial difficulties, the MWSI suspended payments of concession fees to MWSS beginning March 8, 2001. As a result, disputes between MWSS and the concessionaire ensued which brought them to a process of arbitration before the Appeals Panel appointed pursuant to the CA. On November 7, 2003, the Appeals Panel issued an award declaring that there is neither a Concessionaire Event of Termination nor an MWSS event of termination and that, consequently, the CA shall continue in force and that MWSS and the concessionaire shall perform their respective obligations under the CA until the termination of the concession. The Appeals-Panel further declared that concession fees which should have been paid by the concessionaire to MWSS were due and payable to MWSS with the corresponding interest pursuant to the CA and that MWSS may draw on the performance bond in accordance with Section 6.9 (Performance Bond) of the Concession Agreement.




51Metropolitan Waterworks and Sewerage System 51

issues to warrant the extension. On April 28, 2009, per Board Resolution 2009-072, MWSS approved the extension of the concession for the East Area Concession.

Following the extension of the CA with the MWCI was the extension of the CA with the MWSI for additional fifteen (15) years. On June 24, 2009, MWSI submitted its formal proposal for 15-year extension of its Concession anchored on the following considerations:

a. Economic benefits to consumers through the mitigation of tariff increases;

b. Ability to undertake long-term water supply and sewerage projects to ensure adequate service and comply with more aggressive regulatory and environment requirements;

c. Access to longer-term financing at competitive rates to fund more long-term CAPEX projects; and

d. Ensure the long-term viability of the Concessionaire.

On September 10, 2010, Board Resolution No. 2009-180 resolved that the Concession period of the Maynilad Water Services, Inc. be renewed/extended for an additional period of fifteen (15) years, subject to the same conditions required when the MWCI was granted their extension.

SOURCES OF FUNDS

The following are the sources of funds of MWSS:

Concession fees collected Rentals on leased properties Interest income on investments Loan availments from foreign and domestic financial institutions Collection of raw water and accounts receivable (accounts prior to privatization)

KEY PROJECTS

To ensure uninterrupted and adequate supply of clean and affordable water in Metro Manila and neighboring towns, MWSS continues to implement the following projects:

A. Foreign-Assisted Projects

Angat Water Utilization and Aqueduct Improvement Project (AWUAIP) - Phase 2

In order to secure the conveyance of raw water coming from the Angat Dam, the Project, denominated as Angat Water Utilization and Aqueduct Improvement Project (AWUAIP), was conceived.

Phase 1, which involves the construction of a 5.50 km by-pass aqueduct, was completed in January 2006 and is now operational.

Phase 2, which is on-going, involves the construction of a 9.9 kilometers aqueduct extension, the rehabilitation of existing Aqueduct No. 5 and interconnection works for the six (6) aqueducts, including the clearing of informal settlers/illegal structures along the 60-meter right-of-way of the aqueduct alignment.

50

On November 13, 2003, MWSI filed a petition for its corporate rehabilitation with the Rehabilitation Court, submitting therewith a rehabilitation plan as required under applicable legal requirements. A stay order was then issued by the Rehabilitation Court on November 17, 2003 prohibiting the concessionaire, among other things, from making any payment of its liabilities outstanding as at the date of the filing of the petition.

After securing a favorable decision from the Supreme Court, MWSS was able to draw on the Performance Bond in the entire amount of One Hundred Twenty Million US Dollars (US$120,000,000.00) for unpaid concession fees. On September 9, 2004, the concessionaire filed with the Rehabilitation Court a revised rehabilitation plan which was recommended for approval by the court-appointed Rehabilitation Receiver. However, the terms thereof had to be further modified in order to address the concerns raised by several creditors of the concessionaire. On April 29, 2005, the concessionaire submitted its 2005 Rehabilitation Plan incorporating therein the terms of a Debt and Capital Restructuring Agreement (DCRA) executed among the concessionaire, MWSS, Benpress Holdings Corporation, the Suez Group and the Lenders. The Rehabilitation Court approved the 2005 Rehabilitation Plan as well as other related documents, including the DCRA, on June 1, 2005.

Under Clause 2.6 (Increase in capital) of the DCRA, as part of the implementation of the Capital Restructuring, MWSS is given the right and obligation to subscribe to 1,238,476,000 Class “A” shares (the MWSS Subscription shares) representing 83.97% of the outstanding capital stock of the concessionaire (the MWSS Subscription Right), pursuant to Clause 2 (Capital Restructuring) of the DCRA, which subscription shall be paid for by MWSS by way of conversion into equity of the MWSS receivables converted into Philippine pesos based on assumed exchange rate of P54.63 to US$1.00. Alternatively, under Clause 24 (Substitution of the MWSS) of the DCRA, MWSS is given the right, subject to the prior approval of all the lenders and the Suez Group, to assign the MWSS Subscription Right; provided, that the assignee of MWSS shall assume all the obligations and undertakings of MWSS under the DCRA in connection with, relating to or arising from, such right, including the execution of a debt conversion and subscription agreement with the concessionaire and the provision of the Financial Assistance to the concessionaire, as required under Clause 14.1 (the Financial Assistance) of the DCRA.

Article 3(j) of the Charter authorizes MWSS, among other things, to dispose of real and personal property, including rights and franchises, consistent with the purpose for which MWSS was created and reasonably required for the transaction of the lawful business of the same. Consistent with the privatization policies of the Republic, the MWSS Board of Trustees, in its meeting dated September 8, 2005, issued Resolution No. 2005-203 authorizing MWSS to exercise its option to assign the MWSS subscription right to a private investor. Pursuant to a process of a competitive public bidding and selection, the sponsor was awarded the right to acquire the MWSS receivables and the MWSS subscription right, subject to the sponsor’s assumption of the DCRA sponsor obligations and performance of the other sponsor obligations.

0n March 2, 2009, MWCI submitted a business plan proposing to increase the investments on wastewater and new water sources project and to ensure water supply security to support their request for extension of the Concession Agreement for an additional period of fifteen (15) years, from 2022 to 2037, subject to the written consent of the Republic of the Philippines (ROP) as required under Section 16.12 of the CA. Series of public consultations were conducted to inform and educate stakeholders of the





Permitting works is on-going;

Procurement process is on-going for the engagement of consultants for the review of documents and Construction Management & Engineering Services (CMES);

Target start of construction is July 2012.

3) Umiray-Angat Transbasin Tunnel Rehabilitation Project Phase 2

This will be implemented and funded by the Concessionaires under the Common Purpose Facility (CPF) framework of the Concession Agreement:

Permitting works is on-going;

Same consultant for the Sumag Project will undertake the project cost update, tender documents and procurement of contractor;

Target start of construction is July 2012.

4) Ipo Watershed Management

The project cost of P23M for CY 2011 was funded by the two Concessionaires (MWCI and MWSI);

A total of 560 hectares were reforested as of December 31, 2011;

For the next five (5) years (CYs 2012-2017), target reforestation is 900 hectares per year.

5) Waterproofing at MWSS Roofdeck

Supply and installation of waterproofing and concrete topping for the roofdeck of MWSS’s Administrative and Engineering Buildings were completed on March 13, 2012.

2. Basis of Financial Statement Preparation

The Administrator has the inherent authority to issue Financial Statements of MWSS pursuant to Section 8 (g) of Republic Act No. 6234, the MWSS Charter. The accompanying financial statements have been prepared in conformity with generally accepted state accounting principles in the Philippines. The financial statements of MWSS have been prepared using the historical cost basis and are presented in Philippine pesos, which is the System’s functional and presentation currency. All values are rounded to the nearest thousand. The financial statements of the MWSS Corporate Office and the Regulatory Office are consolidated in this report.

3. Changes in Accounting Policies The accounting policies adopted are consistent with those of the previous financial year.

52

Project Location : San Jose Del Monte, Bulacan

Project Schedule : March 2010 – March 2013 (3 years)

Total Project Cost : P6.109 Billion (as approved by NEDA – ICC)

Total Project Cost : P6.089 Billion (cost after the bidding)

Amount of Loan : P5.537 billion (US$116.602 Million)

Export-Import Bank of China

Contract Cost with China International

Water and Electric Corporation : P5.298 Billion

Project Status as of Dec. 31, 2011 : The project was awarded to China International Water and Electric Corporation and the construction works is in progress at 71.66% physical accomplishment.

B. Locally – Funded Projects

1. Angat Dam and Dyke Safety Project - P31M

2. Sumag River Diversion Project - P562M

3. Umiray-Angat Transbasin Tunnel

Rehabilitation Project Phase 2 - P454M

4. Ipo Watershed Management - P23.056M (CY 2011 only)

5. Waterproofing at MWSS Roofdeck - P4.058M

1) Angat Dam and Dyke Safety Project

This project shall determine the effect on the Angat Dam & Dykes should the West Valley Fault move due to earthquake and ensure the safety of the Dam/Dykes, establish contingency measures and formulate long-term dam strengthening and stabilization.

Phase 1 (study and preliminary design):

This was funded by PSALM in the amount of P31 million;

The consulting services was awarded to EDCOP in joint venture with Tonkin & Taylor which was started on November 8, 2011 for a contract duration of six (6) months or until April 8, 2012; and

Accomplishment as of December 31, 2011 is 31.50%.

Phase 2 (detailed design and remediation works):

Fund sourcing is on-going

2) Sumag-River Diversion Project

This will be implemented and funded by the Concessionaires under the Common Purpose Facility (CPF) framework of the Concession Agreement;





Construction in-progress Construction in-progress is stated at cost. While the construction is in progress, project costs are accrued based on the contractors’ accomplishment reports and billings. These represent costs incurred for technical services and capital works program contracted by the System to facilitate the implementation of the project. While the construction of the project is in progress, no provision for depreciation is recognized. Construction in-progress is transferred to the related Property, Plant and Equipment account when the construction or installation and related activities necessary to prepare the property, plant and equipment for their intended use have been completed, and the property, plant and equipment are ready for service. Long-term foreign loans

Long-term foreign loans are recorded in peso based on the exchange rate at the time of withdrawal and are revalued at the end of each reporting date. Impairment of financial assets An assessment is made at each reporting date to determine whether there is any indication of impairment of assets, or whether there is any indication that an impairment loss previously recognized for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price. An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to operations in the year in which it arises. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. In 2004, an impairment loss was recognized by MWSS for the Umiray-Angat Transbasin due to damages caused by typhoons. Since said impairment was effected in the books only in 2005, it was charged directly to Retained Earnings of that year. Leases A lease where the lessor retains substantially all the risk and benefits of ownership of the asset is classified as an operating lease.

54

4. Summary of Significant Accounting Policies Cash and cash equivalents Cash in banks earn interest at the respective authorized government depository bank rates. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less from dates of acquisition and that are subject to an insignificant risk of changes in values. Cash equivalents are for varying periods of up to three months depending on the immediate cash requirements of the System, and earn interest at the respective investment rates. Due to the short-term nature of the transaction, the fair value of cash and cash equivalents and short-term investments approximates the amount at the time of initial recognition. Receivables Receivables are recognized and carried at original billed amount. Provision for doubtful accounts on water/sewer accounts receivable prior to privatization is maintained at a level considered adequate to provide for potential losses on receivables. The level of this provision or allowance is based on management’s evaluation of collection experience and other factors that may affect collectability. Property, plant and equipment Property, plant and equipment (PPE), except those fully depreciated and those classified as administration equipment, are stated at appraised value based on the appraisal conducted in 1995 by Cuervo Appraisers, Inc., an independent appraiser hired by MWSS for that purpose, less impairment in value. Appraisal increments are recorded as appraisal capital. Additional PPE acquired after said appraisal were recorded at cost. In 2006, another appraisal was conducted by Cuervo Appraiser Inc. Appraisal increments were recorded in the books in 2007. Depreciation of PPE commences once the properties become operational and available for use, and are calculated on a straight-line basis over the estimated useful lives of the property, plant and equipment. Minor repairs and maintenance costs are expensed when incurred, while major repairs and/or those repairs that will prolong the useful lives of the assets are capitalized. When property and equipment are retired or disposed of, the cost and the related accumulated depreciation, amortization and accumulated provision for impairment losses, as the case may be, are removed from the accounts and any resulting gain or loss is recognized in profit or loss. The useful lives and the depreciation and amortization methods are reviewed periodically to ensure that they are consistent with the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.





policies. Management believes the following represent a summary of these significant estimates and judgments: Use of estimates Key assumptions concerning the future and other sources of estimation and uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Estimating allowance for doubtful accounts

The System maintains allowances for doubtful accounts at a level considered adequate to provide for potential losses on receivables. The level of this allowance is based on management’s evaluation of collection experience and other factors that may affect collectability. The amount and timing of recorded expenses for any period would, therefore, differ depending on the judgments and estimates made for the year. Estimated useful lives of property, plant and equipment

The System estimates the useful lives of its property, plant and equipment based on the period over which the assets are expected to be available for use. The System reviews annually the estimated useful lives of property, plant and equipment based on factors that include asset utilization, internal technical evaluation, technological changes, environmental and anticipated use of the assets tempered by related industry benchmark information. It is possible that future results of operation could be materially affected by changes in the System’s estimates brought about by changes in the factors mentioned. Contingencies

The System is currently involved in various legal proceedings. The estimate of the probable costs for the resolution of various claims is established in consultation with the in-house lawyers and the Government Corporate Counsel handling the case.

5. Cash and cash equivalents Cash and cash equivalents consist of the following: 2011 2010

Cash 1,583 1,717 Cash equivalents 1,411,324 4,383,059

1,412,907

4,384,776

The decrease in cash equivalents was due to full settlement of BNP Paribas loan that matured in the First Quarter of the year.

56

Revenue recognition All Concession fees billed/collected/received from the Concessionaires are treated as operating revenue.

Concession fees – Debt Service and Progress Billings are concession fees received from the Concessionaires that are intended for MWSS loan amortization and payments to contractors/suppliers, respectively. These are pass-on payment without any margin in favor of MWSS. Concession Fee – COB is the annual Current Operating Budget being paid by the concessionaires to MWSS for administrative expenditures subject to annual Consumer Price Index adjustment. Foreign currency-denominated transactions Foreign currency-denominated transactions are recorded using the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the closing exchange rate at reporting date. Foreign exchange gains and losses arising from foreign currency fluctuations are recognized in profit or loss for the period. Subsequent events All post year-end events up to the date the financial statements are authorized for issue that provide additional information about the System’s position at reporting date (adjusting events) are reflected in the financial statements. Any post year-end event that is material and not an adjusting event is disclosed in the notes to the financial statements. Borrowing costs Borrowing costs are generally expensed as incurred. Borrowing costs that are directly attributable to the acquisition, development, improvement and construction of fixed assets (including costs incurred in connection with rehabilitation works) are capitalized as part of the cost of the asset. The capitalization commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalization of borrowing costs ceases when substantially all activities necessary in preparing the related assets for their intended use are complete. Judgments and use of estimates The preparation of the accompanying financial statements in conformity with PFRS requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of relevant facts and circumstances as of the date of the financial statements. Actual results could differ from such estimates. PAS 1, Presentation of Financial Statements, which was adopted by the System effective January 1, 2005, requires disclosures about key sources of estimation, uncertainty and judgments management had in the process of applying accounting





7. Other receivables

This account consists of the following:

2011 2010

Receivables from MWSI

5,509,501 5,225,891

Receivables from MWCI 141,172 160,005 Others 24,688 21,801

5,675,361 5,407,697

Details of the Receivables from MWSI and MWCI are as follows: 2011 2010 MWSI Cost of borrowings 4,022,352 3,797,066 Penalty on delayed remittance of Concession fees

1,118,315

1,118,315

Inventory held in trust 158,480 98,050 Penalty for non-payment of borrowing costs 95,247 95,247 Guarantee deposits 94,996 94,996 Mabuhay Vinyl 4,994 4,994 LMG Chemphil 4,627 4,627 Other receivables 10,490 12,596

5,509,501

5,225,891

MWCI Guarantee deposits 65,583 72,210 Inventory held in trust 43,747 43,747 Penalty on delayed remittance of Concession fees

13,182

13,182

LMG Chemphil 7,730 7,730 La Vista 591 591 Other receivables 10,339 22,545

141,172

160,005

Cost of borrowings include the principal, interest and finance charges such as bank conversions, documentary stamps, cable charges and penalties. The increase in the Inventory held in trust of MWSI represents the transfer of inventory account to receivables amounting to P60.43M. Inventory held in trust represents costs of inventories turned-over to the concessionaires upon commencement of the Concession Agreement. Under Sec.16.12 of the Concession Agreement, upon the expiration of the Concession, the Concessionaires shall transfer to MWSS the inventory having a value (adjusted for CPI) at least equal to the Inventory made available to the Concessionaire on the Commencement Date.

58

6. Accounts receivables, net This account consists of:

2011 2010

Trade/business Receivables from customers-water, sewer, including raw water accounts

1,126,099

1,117,538 Receivables from concessionaires 538,772 555,040 1,664,871 1,672,578 Allowance for doubtful accounts (1,117,002) (1,117,002) 547,869 555,576

Non-trade receivables Intra-agency receivables 1,134,412 820,436 Inter-agency receivables 25,107 16,754 Due from officers and employees 66,497 66,276 Loans receivables 54,277 54,563 Interest receivables 1,520 2,014 1,281,813 960,043

1,829,682

1,515,619

The Receivables from customers-water, sewer, including raw water accounts represent the balance of accounts receivables prior to the privatization of MWSS in the amount of P1.117B, the collection of which is highly improbable. Thus, Management set-up the provision for bad debts account for the same amount. Meanwhile, Management is presently considering the process of writing-off the account in accordance with the required procedures , such as the congressional approval. The Receivables from concessionaires represent concession fees for Current Operating Budget, Debt Service and Progress Billing that are outstanding as of balance sheet date. Intra-agency receivables are receivables from the MWSS Regulatory Office consisting of electric bills, telephone bills and share in dividends paid to the National Government plus other accounts such as share in janitorial, security and other expenses. Inter-agency receivables represent collectibles from other government agencies such as the Department of Public Works and Highways (DPWH), Office of the Government Corporate Counsel (OGCC), Supreme Court, Manila International Airport Authority (MIAA), Local Water Utilities Administration (LWUA) and the City of Manila for office rental, electric and water bills. Some of these accounts are classified as dormant. The Management created a task force to work out on all inactive and dormant accounts to be written –off in the books of account.





10. Property, plant and equipment, net

The details of property, plant and equipment (PPE) are as follows:

Building, Plant Equipment and

Office Furniture

Trans-

Land & Land

Transmission Lines

and Other Equipment

portation Equipment

Improve- ments

TOTAL

Cost

January 1, 2011

61,462,292 1,252,944 619,529

12,780,233

76,114,998

Additions Adjustments

14,426

1,175

- 34,206 49,807

Transfers/capitalization 6,412 - 34,965 - 41,377

December 31, 2011

61,483,130 1,254,119 654,494 12,814,439

76,206,182

Acc. Depreciation

January 1, 2011

(34,665,779)

(906,502)

(405,900)

-

(35,978,181)

Depreciation expense Adjustments

(1,451,592) (3,447)

(71,561) -

(36,824) (31,468)

- -

(1,559,977) (34,915)

December 31, 2011

(36,120,818)

(978,063)

(474,192)

-

(37,573,073)

Carrying Amount December 31, 2011

25,362,312

276,056

180,302 12,814,439

38,633,109

Cost January 1, 2010

61,138,831

1,247,950

592,124

12,779,936

75,758,841 Additions Adjustments Transfers/Capitalization

81 9,230

314,150

3,704 -

1,290

- -

27,405

297 - -

4,082 9,230

342,845

December 31, 2010

61,462,292

1,252,944

619,529

12,780,233

76,114,998

Acc. Depreciation January 1, 2010 Depreciation expense Adjustments

(33,066,701) (1,465,196)

(133,882)

(807,772) (85,791) (12,939)

(330,192) (46,080) (29,628)

- - -

(34,204,665) (1,597,067)

(176,449)

December 31, 2010

(34,665,779)

(906,502)

(405,900) -

(35,978,181)

Carrying Amount December 31, 2010

26,796,513

346,442

213,629 12,780,233

40,136,817

60

Guarantee deposits are customer deposit prior to the privatization of MWSS. The amounts were withheld by the two concessionaires from the collection of accounts receivable from water and sewer services of MWSS on the onset of the privatization where the two concessionaires were authorized to collect. Management and the two concessionaires are presently coordinating and in the process of reconciliation to arrive at the amount of guarantee deposit to be refunded to MWSS.

8. Inventories


2011

2010

Construction materials

-

60,430

Office supplies and printed forms 531 739 Auto parts and supplies 118 77 IT supplies and accessories 88 17

737

61,263

Construction materials represent materials available for use in the projects. Decrease of

construction materials was due to reclassification of the Inventory account to Other Receivables from MWSI - Inventory Held in Trust.

9. Prepayments This account consists of the following:

2011

2010 Advances to suppliers/contractors 564,383 895,212 Prepaid expenses 34,076 29,261 Deposits on letters of credit 2,888 2,888

601,347 927,361

Advances to suppliers/contractors include the balance of the 15% mobilization costs paid to the contractors/suppliers/consultants of civil works/goods/consultancy services, subject to periodic recoupment.





MWSS Share in Angat Dam construction 46,774 54,897 Garnished accounts 11,461 11,461 Guarantee deposits 10,728 10,728 Dormant accounts 897,256 938,417 Allowance for dormant accounts

1,396,447 (519,000)

1,404,620 (519,000)

877,447

885,620

Unserviceable assets are the costs of construction materials and supplies that can no longer be used in projects due to obsolescence or assets which are no longer operational. Management is working out on its disposal. Dormant accounts are accounts prior to the privatization in 1997. These include balances of accounts carried over since the time of the old National Waterworks and Sewerage Administration (NAWASA).

14. Payable accounts This account consists of:

2011

2010 Accounts payable 682,060 664,414 Interest payable 124,598 302,175 Due to officers and employees 120,214 120,720

926,872

1,087,309

Accounts payable includes accrued maintenance and other operating expenses and local counterpart of loans payable.

Due to officers and employees refer to accrued personal services and COLA of incumbents to be paid the following year. These also include unclaimed gratuity/terminal leave pay of former MWSS employees which were taken up in the books prior to 1997.

15. Inter-agency payables

This account consists of payables to the: 2011

2010

BTr 247,406 235,091 BIR 10,029 1,716 GSIS 1,934 1,508 Pag-IBIG 466 305 Other GOCCs 454 507

260,289

239,127

Payable to the Bureau of Treasury pertains to the guarantee fee on existing loans.

62

11. Construction in-progress The movements in this account follow:

2011 2010 Balance, beginning Additions/New Project Transfers/capitalization Reclassification/Adjustments

1,010,505 2,620,381

(41,377) 1,408

1,237,083 302,555

(342,845) (186,288)

Balance, end

3,590,917

1,010,505

The increase in Construction in Progress represents the implementation of Angat Water Utilization and Aqueduct Improvement Project (AWUAIP) Phase 2.

12. Investments


2011

2010 Stocks and bonds

NAPOCOR bonds

106,465

457,852 Home Guaranty Corp. bonds 19,008 19,008 MERALCO stocks 2,152 2,152 PLDT investment plan 373 373

127,998 479,385 Miscellaneous

Special reserve fund 318,412 299,371 Sinking fund 29,510 29,510 347,922 328,881

475,920

808,266

The NAPOCOR bonds are Government Securities with an interest rate of 3.25% to 3.85% per annum and will mature on November 2012.

The special reserve fund with the Bureau of Treasury, which is intended as guarantee for the financial obligations of MWSS during the concession period, was established in pursuance to Article 2.1 of the Memorandum of Agreement (MOA) between the Department of Finance (DOF) and MWSS.

13. Other assets, net


2011

2010 Unserviceable assets 272,961 231,850 Research and development 157,267 157,267





Current Portion - Asian Development bank (ADB)

1,069,091 916,981 Int’l. Bank for Reconstruction & Development (IBRD) 122,528 114,548 French Protocol 23,548 23,565 Special Project Implementation Assistance Loan (SPIAL)

11,567 11,556

1,226,734 1,066,650

Non-Current Portion 11,974,276 15,452,504

On February 10, 2011, the MWSS Board of Trustees unanimously passed Board Resolution no. 2011-017 approving the P2.250 Billion floating rate Bond Issuance under the DBP-LBP Club deal Arrangement. The bond issuance was guaranteed by the National Government. The proceeds were used to partly finance the MWSS’ maturing 7-year USD 150M 9.25% Fixed rate Bond with the BNP Paribas which matured last March 14, 2011. The bond was drawn in full on March 30, 2011 and payable in seven (7) years. Interest rate was based on the higher of the BSP Reverse Repurchase (RRP) Facility or BSP Overnight Borrowing Rate. The Special Project Implementation Assistance Loan (SPIAL) is a portion of the National Government’s multi-currency loans from the ADB under Loan Nos. 779 & 780. This was relent to MWSS to partly finance the following projects: Manila Water Supply Rehabilitation Project I (MWSRP I), Manila Water Supply Project II (MWSP II), and Metro Manila Sewerage Project (MMSP). ADB Loan No. 1746 PHI is a sub-loan agreement entered into by and between the Department of Finance and the MWSS on October 13, 2003 for the implementation of the Pasig River Environmental Management and Rehabilitation Sector, a sanitation component of the loan. NHA Loan was transferred by NHA to MWSS before the privatization that financed the transfer of water and sewer systems of Tondo Foreshore, Dagat-Dagatan and Kapitbahayan. The validity of the account is still subject to confirmation and subsequent preparation of MOA between MWSS, NHA and the two concessionaires. International Bank for Reconstruction and Development (IBRD) Loan No. 1272/1282- Manila Urban Development Project – are likewise a national government loan relent to MWSS on October 1, 1976. Per subsidiary loan agreement dated October 1, 1976, MWSS shall repay the principal of the subsidiary loan that started on November 15, 1981. The Banque Nationale de Paris (BNP) Paribas Loan was obtained on March 26, 2004 to finance/refinance the system’s maturing obligations brought about by non-payment of MWSI in its obligation and arbitration related expenses for the year 2004. Part of it was used to finance BNAQ I Project. It is a seven (7) year fixed rate note amounting to US $150M, which matured and fully settled during the 1st quarter of CY 2011. ADB Loan No. 1379 PHI was obtained on November 27, 1995. The primary objectives of the project were to divert an average annual flow of about 15.7 cubic meters per second from the Umiray river basin to the Angat reservoir and to augment the treated

64

16. Intra-agency payable This account represents the share of the MWSS-Regulatory Office in the concession fee received from the concessionaires for their current operating budget as provided in the CA.

17. Other liability accounts

This account includes 10% retention from contractors’ claims, unreturned borrowed materials, cost of flushing, attorneys’ fees, guaranty deposits and depository liabilities. It also includes liabilities with existing law suits and money claims such as cost of living allowance, contract collectors early retirement pay and retirement claims of former MWSS-CO employees under RA 1616 pursuant to Supreme Court Decision GR No. 164542 dated December 18, 2007, released to MWSS on March 12, 2008 and taken up in the books in September 2008.

18. Long-term liabilities

This account consists of domestic and foreign borrowing, as follows:

Source

Maturity

Date

Currency

Annual Interest

Rate

2011

2010

Domestic DBP/LBP SPIAL ADB 1746-PHI NHA IBRD 1272/1282

12/31/18 05-15-26 02-01-22 07-15-20

P $ P P $

4.50% 9.65% floating floating 8.50%

2,008,929 374,869 194,029

98,795 63,442

- 386,057 193,840

98,795 63,380

2,740,064 742,072 Foreign BNP Paribas ADB 1379-PHI ADB 986-PHI JBIC (OECF) IBRD 4019-PH China Eximbank AWUAIP II ADB 947-PHI ADB 1150-PHI French Protocol IBRD 4227 PHI ADB 2012-PHI

11-26-11 07-15-20 10-01-14 02-20-20 07-01-16

01-21-30 12-15-12 10-15-16 12-31-18 09-15-17 08-15-13

$ $ $ Y $

$ $ $

FF $ $

floating floating floating 2.70% floating libor rate floating floating 3%-6.8% floating libor rate

- 2,579,644 2,085,940 1,984,782

595,108

2,552,378 193,139 293,572 109,601

43,223 23,559

6,582,750 2,747,455 2,474,678 1,849,205

718,597

529,899 350,484 313,946 133,249

49,109 27,710

10,460,946 15,777,082 Total 13,201,010 16,519,154





IBRD 4227 PHI was part of the Water Districts Development Project funded by a loan from the World Bank-IBRD. MWSS entered into a subsidiary loan agreement with the Republic of the Philippines through the Department of Finance for a $2.3 Million from said IBRD loan. Repayment period is 15 years on a semi-annual basis starting March 15, 2003 and ending on September 15, 2017 per Schedule 3 of the Loan Agreement between the Republic of the Philippines and the International Bank for Reconstruction and Development dated May 15, 1999. ADB Loan No. 2012 PHI – MWSS New Water Source – was obtained November 24, 2003. The objective of the project was to provide the Borrower with consulting services to a) prepare and design projects for the development of new water sources for Metro Manila and b) improve the Borrower’s capacity for financial management, accounting, and fiscal control. It was a seven (7) year loan with a grace period of four (4) years which will mature on August 15, 2013.

19. Deferred credits

This account consists of: 2011

2010

Deferred credits to income 2,228,204 1,643,280 Others

398,183 709,293

2,626,387 2,352,573

Deferred credits to income account represent a) annual income concession fee – corporate operating budget received in advance from concessionaires usually at the early part of the year and amortized equally over a period of twelve months to the appropriate income account, and b) penalty for non-payment/deferment of Debt services of MWSI computed based on 364 T-bills rate which is still being disputed by the MWSI.

20. Donated capital

This account represents the costs of waterworks facilities turned-over by private subdivisions by way of a Deed of Donation. It also includes the grant from the Japan International Cooperation Agency (JICA) for the rehabilitation of Balara Water Treatment Plant.

21. Prior-period adjustments Details of this account are as follows:

2011 2010 Closing of payables -

23,790

Collection of deferred income - 19,309

Capitalization of assets - 16,179

Adjustment of receivables/payables - 12,954

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water supply capacity of MWSS by about nine cubic meters per second by 1999. The secondary objective of the project was to reduce Non Revenue Water (NRW) by providing support for leak detection and repair activities. It is a twenty (20) year loan with a grace period of five (5) years which will mature on July 15, 2020. ADB Loan No. 986 PHI– Angat Water Supply Optimization Project was obtained on December 18, 1989. The objectives of the project were to maximize the capacity of the main water supply source of the MWSS and to meet projected water demand in the project area through construction of additional supply, treatment and distribution facilities. It is a twenty (20) year loan with a grace period of five (5) years which will mature on October 1, 2014. JBIC Loan PH 110 – contracted by Japan and the national government of the Republic of the Philippines in 1990 intended for Angat Water Supply Optimization Project. The proceeds of the loan were treated by MWSS as government equity for drawdown incurred before privatization and as loan after privatization. IBRD Loan No. 4019 PH - Manila Second Sewerage Project - was obtained on June 19, 1996. The objectives of the project were to assist the Borrower to a) reduce the pollution of Metro Manila waterways and Manila Bay; b) reduce the health hazards associated with human exposure to sewerage in Metro Manila; and c) establish a gradual low-cost improvement of sewerage services in Metro Manila by expanding the Borrower’s septage management program. It is a fifteen (15) year loan with a grace period of five (5) years which will mature on July 1, 2016. China Eximbank - Angat Water Utilization and Aqueduct Improvement Project Phase II (AWUAIP-II) is being financed through a loan from the Export-Import Bank of China on May 7, 2010 in the amount of US$116,602,000. The Angat Water Utilization and Aqueduct Improvement Project Phase 2 is an offshoot of the Angat Water Utilization and Aqueduct Improvement Project (AWUAIP). To be implemented by the MWSS, the AWUAIP is targeted to maintain and optimize the water conveyance from Angat Dam to the Water Treatment Plants via the Ipo Dam-Bicti-La Mesa Portal system. The project involves the rehabilitation of AQ-5, which supplies half of the raw water for Metro Manila, as well as the construction of AQ-6 in order to recover around 394 million liters of raw water lost to leakages. AWUAIP Phase 2 on the other hand involves the construction of the remaining 9.9 km section of AQ-6, and the rehabilitation of AQ-5. The AQ-6 extension aims to completely recover the lost water due to leakages in AQ-5. Repayment period is fifteen (15) years on a semi-annual basis starting January 21, 2015 and will mature on January 21, 2030. ADB Loan No. 1150 PHI – Manila South Water Distribution Project – was obtained on January 23, 1992. The primary objective of the project was to improve the water supply services of MWSS in the project area. The secondary objective was to reduce the use of ground water, to prevent saline intrusion and land subsidence, as the main source of water for the remaining population not served by MWSS in the project area. It is a twenty (20) year loan with a grace period of five (5) years which will mature on October 15, 2016. The French Protocol is a French Treasury Credit Facility from the French Republic intended to finance the implementation of the Rizal Province Water Supply Improvement Project (RPWSIP) payable within a period of ten (10) years that started December 2002.





23. Maintenance and other operating expenses This account consists of the following:

2011 2010 Security services 21,513 22,326

Taxes, duties and licenses 13,560 14,833

Auditing services 10,583 5,038

Electricity expenses 10,544 16,411

Consultancy expenses 9,604 28,681

Extraordinary and miscellaneous expenses 6,526 35,173

Survey expenses 5,854 17,058

Insurance expense 4,992 6,486

Janitorial services 3,484 3,438

Communication expense 3,056 3,348

Other professional services 2,483 5,944

Training expenses 2,477 10,919

Office supplies expenses 1,697 2,446

Gasoline, oil and lubricants 1,682 3,056

Repairs and maintenance 846 1,347

Advertising expenses 686 723

Other supplies expenses 669 653

Rent expense 631 805

Representation expenses 462 1,403

Travelling expenses 436 502

Subscription expenses 174 206

Drugs and medicines expenses 218 5,055

Water expenses 120 177

Fidelity bond premiums 86 92

Membership dues and contributions to organization 55 34

Printing and binding expenses 12 6

Postage and deliveries 6 3

Scholarship expenses - 10,982

Environmental/sanitary services - 158

Donations - 23

Confidential expenses - -

Other maintenance and operating expenses 3,229 30,936

105,685

228,262

68

Adjustment of concession fee 988,486 3,198

Payment of prior years’ rental 2,238 1,911

Closing of dormant account - 997

Collection of prior years’ water accounts 23 107

Reversal of accruals 11,380 (1,223)

Payment of prior years’ expenses (73,562) (12,710)

Adjustment on loans payable - (44,704)

Adjustment of construction in-progress - (162,850)

Dividend paid to the Bureau of Treasury - (195,882)

Adjustment of depreciation (34,915) (208,668) Adjustment of PPE-Land 34,206 -

Income/expense adjustments (44,361) (221,022)

883,495 (768,614)

22. Personal services

This account is comprised of the following:

2011 2010 Salaries and wages – regular

65,981 61,064

Subsistence, laundry & quarter allowance 16,003 14,553

Representation allowance 12,517 13,124

Life and retirement insurance contributions 8,170 7,844

Provident fund benefit 8,127 7,088

Longevity pay 6,602 10,169

Productivity incentive allowance 6,467 19,533

Cash gift/13th month pay 4,672 4,871

Transportation allowance 3,407 2,156

Honoraria 2,399 6,601

PERA 2,386 2,117

Additional compensation 2,271 3,036

Year end bonus 2,142 9,535

Hazard pay 1,855 1,946

Terminal leave benefits 1,389 1,157

Salaries and wages - contractual 1,212 3,194

Clothing allowance 777 796

PHILHEALTH contributions 706 704

Pag-IBIG contributions 238 268

ECC contributions 238 268

Other personnel benefits

39,977 36,614

Other bonuses and allowances 20,745 41,827

208,281

248,465





27. Report on the Supplementary Information Required Under Revenue Regulation No. 15-2010

In compliance with the above regulation, MWSS’ taxes and withholding taxes paid and accrued during the year are categorized as follows:

Corporate income taxes: CO RO TOTAL

Paid in 2011 - - -

To be paid in 2012 - - -

Total - - -

Add: Taxes paid in 2011:

On compensation 5,254 3,505 8,759

Final Withholding Tax (FWT) on Loans - BIR Form 2306 1,435 - 1,435

Real Property Taxes 10,859 - 10,859

Input VAT 4,542 - 4,542

ITW on Suppliers & Contractors 141,691 889 142,580

Output Vat 9,921 - 9,921

Total 173,702 4,394 178,096

Add: Taxes Withheld (To be paid in 2012)

On Compensation - Per diem/salaries/OT 3,466 1,313 4,779

Input VAT 216 - 216

ITW on Suppliers & Contractors 401 42 443

Output VAT 556 1,355 1,911

Total 4,639 2,710 7,349

Total taxes paid and accrued 178,341 7,104 185,445

70

24. Financial expenses

This account consists of: 2011 2010 Interest expenses 241,002 271,458 Other financial charges 39,276 50,708 Documentary stamp expenses 450 217 Bank charges 766 193

281,494

322,576

25. Subsequent events

MWSS is still pursuing the disputed claims on cost of borrowings from Maynilad Water

Co., Inc. relative to the BNP Paribas loan. Should MWSS be able to collect additional cost of borrowings, the said amount will be used to pay the new loan with LBP/DBP Bonds Facility.

26. Contingent liabilities

The System has pending court litigations concerning project contracts and land disputes totaling P29.71M prior to its privatization in 1997. The MWSS has also disputed the real estate taxes charged by the local government of Quezon City in the amount of P264M. In 2010, the Quezon City government auctioned some of the properties located in the area. To prevent the inclusion of MWSS property in the auction held in December 2010, the System deposited P30M. The legal issues on the matter are elevated before the Supreme Court and subsequently a temporary restraining order (TRO) was issued on January 21, 2011 enjoining Quezon City government from proceeding with the levy of the subject properties until further orders from the court.



2012 Annual Report

We have laid out our journey in pursuit of our Water Security Legacy barely a year and a half ago.

Our coverage area, Metro Manila, together

of Philippine GDP in 2012. One only need to imagine what it would be without water for only just a day in these areas. Any stoppage in economic activity will cause major impact to our country’s economy and affect our image in our ability to deliver the very basic infrastructure and utilities for long term survival.

When viewed in this way, the pursuit of the Water Security Legacy becomes NOT just an MWSS pursuit. It is a shared pursuit…

… of our existing Concessionaires as our agents in delivering timely, quality, and affordable services in sewerage and sanitation and maintaining our major water assets - all in a manner that recognizes that water unlike other businesses, is still primarily a utility, and therefore carries with it a huge public responsibility.

… of the Private sector who will take part in the planning for, construction, funding and perhaps, even operating our new water infrastructure.

… for our partner agencies in the national government, in facilitating the needed permits, approvals and legal documentation for our projects, in providing guidance on time

tested and best implementation practice in certain components of our projects and in giving creative inputs to the packaging of our numerous project feasibility studies and facilitate project approvals.

… of our funders, be they multilaterals or private banks, in fast tracking the release of critical funds.

… of the host LGUs in paving the way for our project implementation of our aqueducts, dams, watershed management plans and piping and sewer networks, among others.

… of our indigenous brothers and sisters and our affected communities as they patiently allow their relocation into new settlement areas to give way to our water sources.

… of the National Government who has made the delivery of a most basic and critical utility a matter of national concern.

truly appreciate the real value of water and our water resources, and then to demand to be well informed and well served by all of the above.

The success of the Water Security Legacy lies in the hands of each of these stakeholders. If we each passionately do our part, then all will have a part not just in securing water but in securing life for future .generations in Metro Manila and its outskirts.

2013: LegacyThe Continues

For 2013, the legacy continues with all of us in MWSS

…as we protect and manage our finite water resources

partnerships

infrastructure

and guardian of water security

… deeply committed to Integrity, Transparency and Accountability

as symbolized by this Bid Box.

In 2012, we pursued water security legacy while persistently transforming the systems, processes

and culture within the organization.


Metropolitan W Waterworks and Sewerage System

MWSSSS Comomplex, 489 9 Katipunan Road, BaBalalarara, QuQuezezonon C City 1105 Philippines TeTel. no.: (+(+63632)2) 920-5521 wwwww.w.mwss.gov.ph


Documents

Metropolitan Waterworks and Sewerage System ANNUAL …mwss.gov.ph/wp-content/uploads/MWSS-Annual-Report-2012-reduce.… · Metropolitan Waterworks and Sewerage System ANNUAL REPORT