XECUTIVE SUMMARY
ACCOUNT
Gross Revenue
Operating Expenses
Net Income
Net Income Ratio
Cash Balance
Total Assets
2013 BUDGET
PhP 1,385,211,969
1,102,936,753
195,345,987
14.5%
701,204,674
3,442,373,951
2012 ACTUAL
PhP 1,310,601,700
995,639,379
230,120,285
18.0%
1,085,846,384
3,357,385,016
VARIANCE
6%
11%
-15%
-3.5%
-35%
2.5%
Table 1
By the end of 2013, the water district is expected to earn PhP 195
Million or 14.5% out of the Total Operating Revenue of Php 1.348 Billion
Pesos.
A total of PhP 960.3 Million will be spent on operations and
maintenance while PhP 142.6 Million is allotted for Depreciation Expense.
Collections for the year from water sales are expected to reach
PhP 1.375 Billion Pesos. Net cash outflow from operating activities is
projected to be in the amount of PhP 986.2 Million while disbursements
for debt service and capital expenditures are expected to reach PhP 180.5
and PhP 629.7 respectively. This will result to an ending cash balance of
PhP 701.2 Million.
Total assets will grow next year by PhP 85 Million or 2.5% only.
Utility Plant and Service is expected to increase by 27%, while Current
Assets will decrease by 33% because of the expected huge outflow for
capital expenditures in 2013.
Operation and maintenance expenses will increase by PhP 107.3
Million or about 11%. Major expenses which contribute to the increase
are the new bulk water supply contract in Guadalupe, maintenance
materials and personnel cost increases in amount of PhP 26.2 Million, PhP
18.5 Million and PhP 46.9 Million, respectively.
1
In reference to certain targets, the year 2013 will see the following figures:
Not more than 45%
PERFOMANCE
BASED ON 2013
BUDGET
14.5%
2.5
38%
Not less than P 3.7 million
Not less than 134,416 cu.m
P 3,795,101
146,295
P 3,463,769
134,416
Not more than P 600 per SC
Not more than P 20.06 per SC
599
20.7
588
20.1
Not less than P 566/SC
Not less than P 32,239/SC
P 575
P 33,048
P 566
P 32,239
MEASURE
PROPOSED THRESHOLD
Net Income Ratio
Current Ratio
Debt Ratio
Sales per day
In pesos
In cubic meters
Operating Cost
per SC
per cu.m
Revenue per SC
Below 1”
1” and up
Not less than 15%
Not less than 2.5
EXISTING
THRESHOLD
15%
2.5
45%
The details of the revenue and expense accounts are discussed in detail in the succeeding pages.
For reference, Annexes are hereto attached at the end of the report as follows:
Annex A – Detailed Income Statement
Annex B – Cashflow Statement
Annex C – Balance Sheet
Annex D – Expenses by Cost Center
Annex E – Capital Expenditures
2
Revenue on Water Sales
Figure 1
With water sales expected to hit 53,397,517 million cubic meters at an effective rate of PhP
25.94/cu.m, Gross revenue is projected to reach PhP 1.385 Billion. This revenue target is higher than
the 2012 estimated revenue by 6%.
On-Time
Collection
PhP 47,097,206
(Discounts)
Year-to-Date
Collection
PhP 1,284,590,172
Arrears Collection
PhP 64,938,322
PhP 40,518,014
(Discounts)
ACTUAL
TARGETS
Collections from Water Sales
PhP 1,245,071,615
(95% Collection Efficiency)
PhP 61,503,979
(28% of Acct. Rec.)
3
Collection efficiency for the 2013 is targeted at 96% which brings the target collection to PhP 1.28
Billion. To add to this inflow is 30% of our receivables from previous year’s water sales which we hope
will be collected in 2013.
Operations Expenses
Figure 2
Operations Expenses is projected to increase by 14% compared to the actual costs in 2012. The
components of which include Customer Accounts Expense, Production Expense, Technical Services,
Maintenance Expense and Administrative Expense.
ACCOUNT
Customer Accounts
Production
Technical Services
Administrative
2013 BUDGET
2012 ACTUAL
PhP 80,537,983
355,876,557
68,557,905
248,826,921
PhP 67,757,582
319,642,730
58,334,489
216,777,958
VARIANCE VS 2012
ACTUAL
19%
11%
18%
15%
Table 2
Customer Accounts
Customer Accounts Expenses include those expenses that directly affect customer service such
as service connection-related expenses, meter reading, consumer records, collection and public affairs.
Production Expense
Production Expenses is composed of Purchased Water, Pumping and Water Treatment
Expenses.
4
ACCOUNT
2013 BUDGET
2012 ACTUAL
Purchased Water
Pumping
Water Treatment
PhP 215,250,424
115,024,114
25,602,019
PhP 186,890,354
112,374,526
20,377,849
VARIANCE VS 2012
ACTUAL
15%
2%
26%
Table 3
At present, MCWD has eight (8) bulk supply contracts which can deliver a minimum of 30,000
cu.m. per day. MCWD is expecting one more bulk water supply contract for Guadalupe for the year
2013 which will deliver an additional 4,500 cu.m of water per day.
Only the base rates per cubic meter in these supply contracts were included in the budget.
Any increase in the base cost shall be passed on to the consumers via the Purchased Water
Adjustment.
Pumping Expenses include the cost to produce and deliver the water. Power Cost, which
accounts for 53% of the total pumping costs, is estimated at PhP 61.2 Million. Any increase in the
kilowatt-hour rate shall be passed on to the consumers via the Power Cost Adjustment formula. In
1991, MCWD got the approval from Local Water Utilities Administration to pass-on to the consumers
the increases in power cost beyond the kilowatt-hour rate and was since fixed at 2.627769787.
Water Treatment Expenses would include all materials, chemicals, laboratory supplies for the
maintenance and improvement of our water quality.
Technical Services
Technical
Services
represent the expenses allotted
for engineering, construction
supervision and water sourcing
and environmental expenses.
Engineering Expenses
have declined because the
allotment of budget for
Hydraulics has already been
stopped.
Water Sourcing and
Environmental
expenses
increased due to appropriation
of budget amounting to Php 7.6
Figure 3
million for the Buhisan River
Watershed Integrated Development Program, Mananga Reforestation Program and the Integrated
Water Sources Management Program for the Central Cebu River Basin in fulfillment with our
agreements with various LGUs and other government agencies.
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ACCOUNT
Engineering
Construction
Water Sourcing & Environment
2013 BUDGET
2012 ACTUAL
21,145,289
15,219,112
32,193,503
22,515,984
14,138,123
21,680,382
VARIANCE VS 2012
ACTUAL
-6%
8%
48%
Table 4
Administrative Expense
Figure 4
ACCOUNT
2013 BUDGET
2012 ACTUAL
Personnel Related
PhP 129,874,369
29,711,706
15,560,066
13,360,755
16,101,122
2,297,953
12,000,000
29,920,949
PhP 109,084,396
30,611,078
14,057,646
11,253,241
13,467,973
1,435,358
12,756,949
24,111,317
Outside Services
Legal
Procurement
MIS
Fuel, Oil and Lubricants
Light, Power & Water
Other Admin Expenses
VARIANCE VS 2012
ACTUAL
19%
-3%
11%
19%
20%
60%
-6%
24%
Table 5
Administration Expense which is composed of Personnel-related expenses, Outside Services,
Legal, Procurement, MIS, Fuel and Lubricants and Miscellaneous Expenses is projected to increase by
15% compared to the actual costs in 2012.
6
Personnel-related expenses will increase considerably next year because of the full
implementation of the fourth tranche of salary increases and the recategorization of positions which
took effect last June 2012. Consequently, GSIS, PhilHealth, and Pag-ibig contributions as well as the
provident counterpart will likewise increase as these are all dependent on basic salary.
The increase in the budget for Procurement Expenses can be attributed to the increase in
honoraria of members of the Bids and Awards Committee by Php 1.3 Million which go along with the
increase of the basic salary.
MIS Expenses include the development of programs and applications and the maintenance of
all computer hardware of the company. The significant increase in the expenses was mainly due to the
increase in personnel costs.
The budget for Fuel, Oil and Lubricants Expense increased because of the increased in price and
quantity in oil for engines. GSD is in the process of setting up their ideal maintenance program for all
their vehicles and equipments.
Miscellaneous expenses increased due to the increased in service and loyalty awards in the
amount of Php 2.5 Million.
Maintenance Expenses
Figure 5
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ACCOUNT
Power Prod. & Equipt
Pipelines
Meters
General Plant
Motorpool
Fabrication
2013 BUDGET
2012 ACTUAL
PhP 29,506,733
113,669,308
33,608,174
7,574,987
17,437,109
4,729,660
PhP 34,275,053
104,347,820
25,093,766
8,341,632
18,114,885
3,999,078
VARIANCE VS 2012
ACTUAL
-14%
9%
34%
-9%
-4%
18%
Table 6
The increased in Meter Maintenance budget was due mainly to the increase in materials expense due
to increase in water meter and water meter spare parts price by 22%, and 21%, respectively. The
Division also increased their corrective maintenance target by 10% .
Maintenance for Power Production and Equipment has declined mainly due to the decrease in
materials budget. In 2012, about PhP 9 Million was allotted for the massive purchase of flexible risers
to replace all old G.I riser pipes. In 2013, no flexible risers are expected to be purchased.
Of the total increase in Maintenance Expense of PhP 12.4 Million or 6%, 70% is attributable to the
increase in materials and the rest is attributable to the increase in personnel and other expenses
Depreciation Expenses
Total Depreciation Expense for the year is estimated at PhP 142.6 Million. This is higher by 3%
compared to the actual expense in 2012.
Capital Expenditures
All of the capital expenditures listed for the year amounting to PhP 629.7 Million are carry-over
projects and equipment from 2012. About 80% of the total amount shall be spent on projects while
20% allotted for the purchase of equipments.
Included in the list of capital expenditures are the following projects:
1. Expansion and Rehabilitation Projects
MCWD has allotted PhP 237.2 Million for year 2013 including the MWSIP
Package 5 in the amount of PhP 58.5 Million. MWSIP Packages 2, 3 and 4 are
planned to be financed through loans.
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2. In-House Water Sourcing Projects
All in-house water sourcing projects included in the list are all carry-over
projects from 2012. A budget amounting to PhP 61.7 Million is appropriated
for 2013.
3. JV 24-7 Programs
To ensure continuous supply of water to low pressure areas or areas with
intermittent water supply, the company has allotted Php 75.2 Million for the
JV 24-7 Programs in the year 2013. These include mainly the Monterazzas
Distribution Mains and Construction of Modular tank and the Rizal Bulk Water
Supply in Umapad, Mandaue City.
4. WASEC
The amount of PhP 24.4 Million is allotted for WASEC-approved projects. This
is the company’s way of addressing the growing demand of subdivisions and
other communities. There will be nine subdivisions, condominiums and
barangays who will benefit with these projects.
5. Stand-by Power
To ensure continuous power supply in case of brownouts or other power
interruptions, the amount of PhP 20.3 Million was appropriated for the
purchase of 12 generator sets for 12 production wells.
6. Pump Maintenance
With 85% of our production coming from groundwater sources, it becomes
imperative to strengthen our spare pump program. The amount of Php 25.9
Million pesos is allotted for maintenance of pumps in the event of unexpected
breakdown of such.
7. Procurement of Various Vehicles
MCWD appropriates twenty vehicles, three trucks and sixteen motorcycles
which will be used mainly for its operations and maintenance. The approved
budget for this project is Php 35.3 Million.
8. Corporate Social Responsibility Projects
MCWD has allocated P 20 Million for CSR projects and programs which will be
used primarily in improving and strengthening water services.
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9. Pre-approved projects
Listed below are projects which had already been approved but budget for
these items were deferred because these projects will have to be further
discussed.
Item
1. Mactan-Mandaue Booster Station
Bridge II
2. Mactan
Water
System
Improvement:
A. Package 2 (Cluster B)
B. Package 3
C. Package 4
3. Septage Management
Estimated Project Cost
PHP
27,000,000.00
226,580,927.62
210,991,628.92
173,386,142.12
Phase 1 is estimated at Php 52.5
million.
Table 7
Debt Service
Now on the 8th year of its 15-year loan contract with DBP, MCWD will be disbursing PhP 64.2
Million as payment of the principal amount of the loan and PhP 116.2 Million as interest charges.
Other Revenues
Penalty charges
PhP 8.8 Million
Water Levy
PhP 1.4 Million
Interest Revenue
PhP 12.5 Million
Misc. Non-Operating
Revenues
PhP 24.0 Million
Interest revenue will go down by PhP 2.2 Million in 2013 with MCWD expecting a lower
amount placed in short-term investments and lower cash balance due to increased capital expenditure
disbursements.
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Items that are included in the Miscellaneous Non-Operating Revenues are from the rental of
the old MCWD building, income from Water Truck delivery, Bid Documents, Social Hall and
Contributions from San Miguel Corporation.
Other Expenses and Disbursements
As mandated under the Local Government Code, MCWD is religiously paying 1% of its Gross
Revenues to the different LGU’s. This amount will be apportioned accordingly to different barangays,
municipalities, cities and the province as provided for under the said law.
MCWD is appropriating PhP 2,000,000 for 2013 to real property taxes.
Financial Ratios
Current Ratio of the company for year 2013 is at 2.5 compared to 2012’s current ratio of 3.6 because
of higher CAPEX outlay in 2013. Although the ratio will go down, the company will still have enough
cash on hand and disposable assets to pay off near term liabilities.
Return of Utility Plant and Service is lower by 5 percentile point because of an expected decrease in
net income in 2013.
Debt Ratio for year 2013 is 38% compared to last year of 42%. Debt ratio measures the financial
leverage of water district.
Asset Turnover of the company for 2013 is 40.2% which is slightly higher than last year by 0.1
percentile point. The company will be as efficient as last year in using it’s assets in generating the
revenue.
Contingent Liabilities
Although it still subject to final assessment, MCWD has several contingent liabilities which it
might be forced to pay in 2013. Among these contingent liabilities are as follows:
1. Real Property Tax payable to the City of Cebu
2. Purchased Water differential, the case of which is still pending before the Supreme Court
3. Franchise Tax liability which is still under protest before the BIR and the Court of Tax Appeals
amounts to 96.5 million pesos excluding interests and surcharges
4. Revenue Share payable to the City of Cebu
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