Manila Water Company Harvard Case Solution & Analysis

INTRODUCTION

Manila Normal water operates in the East zoom of Neighborhood Manila that encompasses 1 city and also municipalities spanning approximately 1400 rectangular kilometers and is a home to approximately 5.3 trillion people. Manila Water’s 1997 bet was developed and won by way of a consortium led with the Ayala Institution - among the oldest and also largest organization conglomerates in the Philippines - in partnership with United Utilities, the greatest private driver of drinking water and wastewater systems in Great Britain. Mitsubishi Institution (Japan) and also Bechtel Corporation (USA) have been investors in the consortium. Manila Water has been publicly traded about the Philippine Stock market since Drive 2005. Even so, the Ayala Institution remains the most important shareholder (30 percent), accompanied by United Utilities (12 percent).

Manila water Company, Inc. (Manila Water) can be a provider of water along with wastewater concessionaire operating from the east program zone of Metro Manila. Because assuming businesses in 1997, Manila Normal water has connected over 160,000 low-income households towards piped drinking water system along with provided entry to clean drinking water to around 860, 000 low-income folks. At duration, Manila water has enhanced water along with wastewater solutions throughout their particular entire program area when it comes to service insurance coverage, reliability, customer service and drinking water quality. The truth examines these special challenges and prospects of offering water along with wastewater services towards urban poor plus, the innovative methods that Manila Normal water has acquired to increase coverage along with this, it prevents watershed from where the drinking water is found.

CHALLENGES

Beyond the challenges encountered by MWSS total, there was a much worse crisis with improving use of water along with wastewater services for the poor. Poor people were disproportionately underserved because of the MWSS Water network along with relied on alternative Water providers, public standpipes or maybe illegal connections because of their water. Many alternative water suppliers charged larger tariffs for each liter, as a consequence of higher exchange costs inside the provision of their service.

TARIFFS AND CONNECTION FEES

  • Accelerating prohibit tariff design – the initial 20 cubic feet’s of drinking water is lowest priced, the purchase price boosts having greater volumes ingested.
  • Maximum price arranged pertaining to installing of a family group network.
  • Installment payment plans acceptable pertaining to completely new contacts.

PERFORMANCE INDICATORS

 

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Non-revenue water

63.0%

55.2%

53.0%

51.0%

52.0%

54.0%

50.7%

43.4%

35.5%

30.0%

Billed volume
(mld)

440

594

645

706

758

751

767

825

864

948

Households connected
('000)

325

352

383

413

457

526

595

663

708

909

Continuity of supply for the Central Distribution System

26%

56%

60%

69%

83%

89%

95%

98%

Employee /
1000 connections

6.3

5.1

4.8

3.8

3.6

3.2

2.9

2.8

2.6

1.8

Revenue
(US$ '000)

10,504

25,289

32,496

28,954

31,065

49,130

66,347

73,908

104,383

132,327

Net Income
(US$ '000)

-947

-1,703

2,493

2,454

3,117

10,485

20,698

23,634

37,889

48,827

Total assets
(US$ '000)

37,781

64,545

82,922

91,247

111,996

147,328

174,192

226,177

337,715

489,007

Long-term debt
(US$ '000)

0

0

20,000

36,994

46,257

68,966

82,887

89,511

75,760

146,828

 

Wastewater products and services have improved upon, that has a doubling involving sewerage associations as well as sewerage treatment ability given in the year 1997. Manila Drinking water is actually tackling sterilizing products and services by simply providing free of charge septic reservoir dislodging thus, to their buyers – pretty much 20, 000 given in the year 1997.

These kinds of business changes were attained while retaining an excellent personal report. Manila Drinking water ended up being lucrative because of the 3rd season of functioning and has formulated any status as being a successful and useful corporation. Due to the Company’s history, Manila Drinking water appreciates by providing assistance of intercontinental traders and the finance is not available from the federal (MWSS),nor from the actual West zoom concessionaire (Maynilad).

ASSUMPTIONS

Risk Free Rate

2.79%

 Risk                                1.12
 Market Risk Premium

5%

 Cost Of capital

8%

 Discount rate

10.40%

 Tax Rate

32.00%

 Growth Rate

8.00%

 

Risk free rate has been assumed 2.79% as per current market scenario, market risk 1.12 and market risk premium 5% has been assumed in the case. The Cost of Capital has been calculated through above data which is 8%. Apart from this, discount rate 10.40% has been given in the case with a growth rate of 32% has been assumed to evaluate terminal value of Manila Water Company.......................

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In 1997, the Philippine government to privatize their water supply in the capital Manila. East Zone concession was won by the Manila Water Company and West concession zone Maynilad water services. Over the next decade, Manila Water has become a lucrative and impressive performance, while Maynilad failed. The procedure for the management of water Manila and raises the question of whether and how they should apply for the vacant West concession area.
To enhance their effectiveness, color cases should be printed in color. "Hide
by V. Kasturi Rangan Source: Harvard Business School 21 pages. Publication Date: August 9, 2007. Prod. #: 508004-PDF-ENG

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