After working at Abengoa Water for over 10 years, finishing as chairman and CEO, Carlos Cosín has launched Almar Water Solutions to tap into the renewable powered desalination market. Tom Freyberg catches up with him to find out the latest on the new venture.
Tom Freyberg, chief editor, WWi magazine (TF): The last time we spoke was a couple of years ago in San Diego at the IDA World Congress. At that time you were CEO of Abengoa Water and today you’re in a very different position with Almar Water Solutions, a company backed by Abdul Latif Jameel. So tell me why has this water company been launched and where are you positioning it in the global water market?
Carlos Cosín, founder and CEO, Almar Water Solutions (CC): Absolutely Tom, it has been a year of many changes. Underlining the commitment of Abdul Latif Jameel to become a global leader in the water sector, Almar Water Solutions has been launched to address the water security and water scarcity needs.
Benefiting from the solid financial standing, strong networks and long-established relationships of Abdul Latif Jameel, we have positioned ourselves as a key player in the water market. Almar Water Solutions has been born as a specialist provider of technical capabilities and expertise, offering services across all phases of water infrastructure development. Our solutions range from technology selection, project development and financing, to design and engineering and all the way through to operation and maintenance of project assets.
TF: The company investor - Abdul Latif Jameel - has become a significant figure in the solar energy market. Water is very different. There have been some high-profile casualties after companies entered the global water market, thinking it was a easy. The reality is that the water market is very fragmented, competitive and political. How will it be different for Almar Water Solutions?
CC: I agree that the water sector is very fragmented and it has been running historically by EPC (engineering, procurement & construction) contractors, so why is Almar Water Solutions different? There are a lot of technological companies supplying technology, and also EPC contractors. However, what the market needs is a solution to complement the financial and the technical and construction capabilities.
And this is the reason why Almar Water Solutions has been created. The company combines both its knowledge and experience developing water infrastructures and bringing capital, its capacity to attract potential investors alongside Abdul Latif Jameel, and its team’s reputation with EPC contractors. These strengths enable Almar Water Solutions to enter into the water market with a competitive position
The current problem is that EPC contractors are looking for positive cash-flows because they already have the knowledge and the technology. In addition, pure investors don’t have the capacity and the comfort to assume the risks associated with construction. And here it is where we have one of our main advantages. We offer financial capabilities and our experience in water infrastructure management.
In my opinion, there are not many developers in the water sector - something that is very common in the power sector. We feel comfortable assuming the development risks, with a careful and appropriate allocation of all technical risks.
TF: Is it primarily desalination you’re looking to go into or is it the whole water cycle including wastewater and treatment plants?
CC: Firstly yes, we are aiming to focus in the desalination market. If you remember just 10 years ago, not a single project in desalination appeared as a PPP (public-private partnership). Now that trend has changed. According to 2016 data, almost half of the desal market are PPPs. So there are a lot of opportunities for us in that market.
However, we are also looking for opportunities to replicate this PPP model not only in desalination, also in wastewater treatment, recycling and reuse facilities. Wastewater is becoming more important and over 20 percent of the wastewater contracts are already under a PPP model. The truth is that in addition to the desal market, we also feel very comfortable in these two areas and we don’t want to be a company only for desalination. Our goal is to provide a proper and comprehensive water solution, which includes water transportation services. In some cases, these alternatives to desalination can even be more cost-effective becoming the most reliable solution for our clients, so it is essential for us to offer those water solutions well.
TF: So you’re going to start on desalination and then diversify?
CC: Yes, because this is the market that gives us more opportunities now, but in parallel, wastewater and water transportation and distribution projects are also key areas of interest and alternative solutions offered by Almar Water Solutions. We do not say no, if the project is profitable and bankable.
TF: We’re seeing a lot of small scale renewable desalination trials taking place, including those with Masdar in Abu Dhabi. Is it something you are trying to package with your desalination business on a large scale?
CC: Yes, this is a clear target for us. Our sister company, Fotowatio Renewable Ventures (FRV) is a global leader in the photovoltaic sector and renewable power generation, with very competitive prices and a deep experience in PPPs. We are aware that next generation of desalination plants needs to improve its efficiency with photovoltaic or hybrid energies.
There is a good opportunity because the market is already demanding these solutions. We can already see, for instance in Saudi Arabia, projects built to be commanded by solar power. Also some initiatives have been developed by Masdar in Abu Dhabi, and the latest project launched in Morocco.
Governments and citizens are gradually becoming aware how clean energy provision is a central challenge for the coming years. The market is asking to reduce the consumption of fossil fuels in the desalination market.
We have capabilities through Abdul Latif Jameel Energy and Environmental Services, with FRV and Almar Water Solutions working together to offer this kind of solutions.
Around 40 percent of the cost is due to power and we are sure that even though CO2 emissions don’t have a value right now, they will in the future. We cannot continue bargaining oil to produce water, especially in the areas where the irradiation of the sun can be used to produce energy. So, we have the resources to build large scale desalination plants using renewable energies, not only solar. We are also studying water projects powered with wind energy, through FRV’s recently added wind division.
TF: So already Almar Water Solutions is jointly developing a wind and solar powered project - what’s the scale of this development?
CC: The standard size for a desalination plant should be around 100,000 m3/day, that could supply water for between 400,000 to half a million habitant, which is a good prospect and it makes sense. In some locations the markets are buying PV energy at the same tariff as gas, which is not unrealistic.
But injecting the power into the water facility is not our only goal. We also need to solve many issues regarding energy storage. Although nowadays batteries are developing faster, there are other ways to store the energy. We have the mandate to work internally in this direction, and keep exploring alternative storage technologies. Our goal is to develop a large desalination plant powered by renewable energy and to this end, the storage of energy coming from renewable sources, is essential for our success.
TF: Your proposed project pipeline is very ambitious! One report suggested that Almar Water Solutions is investigating 23 water infrastructure projects in nine countries worth US$7 billion. How many of the 23 projects will actually come to fruition?
CC: Absolutely, we are aware that it is very ambitious but we have a great team and the know-how to do it. What has happened during the last three years has probably been a consequence of the financial crisis. On the one hand we have found that governments have very restrictive budgets so it is very difficult to see the municipalities launching projects as they did in the past. On the other hand, financial institutions are looking for new niches to invest in but without assuming the risk. Given this situation by presenting ourselves as developers in the water sector, it has been easy to generate interest in our company since off takers are approaching us requesting solutions for its PPP projects.
EPC contractors with high incurred debt do not have as many EPC projects as they had in the past, so they also approaching us. Using their credentials as contractors, we can develop their projects assuming the role as developers, taking advantage of our recognised experience in the water sector developing profitable and bankable assets.
We have 23 identified projects in the pipeline but we realise we don’t yet have the resources to go ahead with all of them, so we need to prioritise. Our exercise for the next coming months is to analyse the most suitable alternatives, taking into consideration those that first have the necessary guarantees to develop a bankable project.
For example, at the beginning of our business plan, the US and Saudi Arabia were not in our mind. Our previous experience in the US was that it took 10 years to develop one single project, but nowadays this situation has completely changed.
We have high expectations with the new American administration infrastructure plan, and we are able to replicate what we have done in the past. In addition, the privatization of the water sector in Saudi Arabia is a reality and Almar Water Solutions, as local player, has to participate in some manner. These two areas can be worth US$2 billion and we have to evaluate and prioritise our efforts to select those projects that are more likely to close sooner.
Other areas where we want to focus our efforts include Latin America, especially Chile because it is a reliable market with many opportunities in the mining sector. Likewise, Africa is a country full of opportunities and of course the Middle East, which a mature market. Traditionally, desalination plants in the Middle East‘ have been developed with thermal processes but nowadays the trend has changed towards reverse osmosis technology. There are many projects to be launched in Bahrain, Oman, the Emirates and Qatar.
TF: Finally Carlos, I read that the company aims to be profitable in two years. How realistic do you think this is and from a finance point of view, how much investment is Abdul Latif Jameel putting into the group?
CC: First of all, we have to demonstrate that we are capable to do everything I have told you in this interview. Abdul Latif Jameel is a recognised and experienced company that has been many years in the market, so we have to go step by step.
Our priority is to close a couple of projects this year and consolidate Almar Water Solutions as a solid organisation, in all the geographies I mentioned before. We are going to open two more offices; one in the US and another one in Chile and at the same time we will consolidate our water solutions in the rest of locations.
Our expectation is to be capable to close a project per year. This is what makes sense for us considering the market demand. The water business is not easy: each transaction needs time and it can take years to develop one single project.
Our aim is to have two or three projects already closed and under construction in two years’ time, and reach that goal, to demonstrate to the market that we can keep growing to become a global key player in the water sector.
TF: Carlos - thanks for your time. Really interesting as always chatting to you and it sounds as though you have big ambitions. To take a company global from the outset, you need to dream big. You are clearly doing that so I wish you the best of luck on this journey and also reporting on some of these developments, particularly the jointly powered solar and wind project in Morocco.
CC: Thank you very much Tom, it is always a pleasure talk with you.
Tom Freyberg is chief editor of WWi magazine.
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