MCWD redux

Cebu City Mayor Archival re-appointed me this month as board director in the Metropolitan Cebu Water District (MCWD). I will be one of the five-member board that has dwindled to two, due to controversies in the appointments of directors. I like to believe I was appointed due to my experience as MCWD chairman in previous years, and for my expertise in management, banking, and finance.

Since I left MCWD, I would bump into former and current MCWD employees in many places and they tell me stories/updates on MCWD. When it was rumored that I will be re-appointed to the board, more information was relayed to me. As an investment/commercial banker, financial analyst, Finance professor, and businessman, I had a fairly good idea of its operational and financial predicament even before I rejoined MCWD.

MCWD’s basic problem is that their “cost of water” is more than the “revenues” of the water sold. There is no gross margin on the product. The reasons for this are: 1.) The weighted average of the price/cost of the bulk water purchased from private suppliers is much higher than the average selling price of MCWD to consumers; 2.) The high non-revenue water from leakages/pilferages of MCWD at 32%, translates to ?50 million per month unrealized revenue if reduced to 20%; 3.) The water prices of MCWD which has to be approved by the LWUA have not been adjusted realistically.

While MCWD could still be solvent due to its large fixed assets, it had to be incurring net losses and a negative cash flow for years. It has a profitability and liquidity problem that has to be addressed as soon as possible, if it has to survive and provide the services expected by the consumers. MCWD has more than 200,000 service connections which serve at least a million Cebuanos and visitors.

I joined the flag ceremony in the MCWD building last Monday morning before the board meeting, and after a warm welcome by the other directors, the officers and the employees, I delivered a short speech to establish the baseline for the task and work ahead for all us in MCWD:

“Fellow board directors, GM Donoso, mag kauban ko kaniadto ug mga kauban ko karon dinhi sa MCWD, daghang salamat sa inyong welcome. I was with MCWD for almost 11 years but it has been more years since then. But, I never lost touch with MCWD because in the streets, in the malls, in the airports, ex and current MCWD employees walk up and talk to me. They introduce themselves and we talk about MCWD then and now. The latest was in the anti-corruption rally/demonstration in Fuente Osmeña where I talked to Victor Chiong and three other MCWD employees. I never really lost touch with MCWD and I have good and pleasant memories of MCWD and its people.

“Last week I was re-appointed as one of the MCWD directors, and today will be my first board meeting. As the information I know of MCWD are those I read in the main and social media, and from the past and present employees, I will need orientation/updates on the current operational/financial situation to be able to suggest strategies and policies that will be good for the company, the employees and the consumers. To do these, we will need to work together as a team, share expertise and talents.

“My assessment of what I know so far of MCWD’s condition, which I hope I am wrong, is that it is between the devil and the deep blue sea, or worse in deep sh*t. I am also hoping that management already have an action plan to address the situation, and we are only in deep blue waters. It is harder to swim out of deep sh*t than in blue waters.

“Daghang salamat karon ug sa umaabot nga adlaw. Maayong Buntag and Merry Christmas.”