Regulatory Office’s Non-Decision to Business Plan and its Subsequent Implications for a Water Concessionaire

Authors

  • Mark Franklin P. Manalang
  • Wilfredo L. Infante
  • Vivian E. Gutierre
  • Rex Mervin P. Ramos
  • Jaypee Pajarillaga

Abstract

The Company under study is currently on its 3rd year of its Rate Rebasing (RR) process. Considering the time stretch, one may think the process would be skewed towards resolution, however, the Regulatory Office (RO) is mum on the topic and haven’t released a decision on tariff adjustments. Water rates have been put in status quo. The Company was forced to operate in bare minimum OPEX. CAPEX was also put on hold. To show the subsequent implications, the researcher gathered data from the Company’s Key Departments. This provided a glimpse on what the Company’s service quality be like in the next 5 years along with its forecasted financial position.
The study has shown the challenges faced by the private concessionaire. Given the circumstance, it cannot sustain excellent performance and its services will eventually deteriorate: Water pressure, water quality, water security, power efficiency, including Non-Revenue Water (NRW) are expected to drop as early as 2021. There will also be noncompliance for the new wastewater standards. For financials: Gross Profit and EBITDA margins will decrease in percentages. Amortization will increase in value due to the existence of increasing loans payable. Cash and cash equivalents will not be enough to support the direct cost and direct labor as well as the loans payable. The Company will not be liquid to pay for liabilities. After 2025, the Company may operate at a loss unless some costs are cut down or some assets be sold. Status quo will eventually translate to deteriorated service and possible bankruptcy.

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Published

2020-03-27

Issue

Section

Articles