Carlos Cosín: “The core business of Almar Water Solutions is to become a services company”
Consolidated as one of the great leaders of the water industry worldwide, Carlos Cosín, CEO of Almar Water Solutions and President of the International Desalination Association (IDA), gives us an exclusive interview as we transit to the new normal after the outbreak of COVID-19.
Cosín reviews the first three years of the company he leads and analyses with precision (and some optimism) the prospects to overcome the economic crisis and the business opportunities that derive from it.
It would seem that 2019 was the year Almar Water Solutions truly consolidated its position after its creation in 2017. What is the company's current situation? Has it met the expected milestones in terms of business development?
2019 has been the result of two years of intense work. The awarding of the Shuqaiq III desalination project in Saudi Arabia and the Mombasa desalination project in Kenya provided us with the opportunity to tell the market our value proposition. Afterwards, with the acquisition of a stake in the Muharraq wastewater treatment plant, we have been able to consolidate our portfolio of assets via greenfield and brownfield investments, something that enables Almar Water Solutions to have stable cash flows in the long term to continue growing. Our company develops innovative water projects, while at the same time we invest in third party assets.
Private companies want to be in the front line and help develop the entire network of infrastructure required for citizens and industry
2019 also allowed us to create our regional O&M services platform, among others, to grow organically in the industrial sector. Our decision to buy Osmoflo SpA meant the birth of the second line of business for our company: O&M services for our own and third-party projects.
Therefore, we consider that in this short period we have met the objectives we had set, and we have laid the foundation to replicate the model in other regions of the world and continue to progress.
The Shuqaiq III desalination project, developed by Almar Water Solutions through Abdul Latif Jameel CDC, is a flagship project. As well, it received iAgua's "Contract of the Year" Award. Can you describe its singularities?
Shuqaiq III is a flagship project for us, firstly, because it was the first large-capacity project awarded to Almar Water Solutions, and secondly, because it happened at a time when several large scope desalination projects were on the table. Large international companies were doing an excellent job and competition was very high.
With the acquisition of a stake in the Muharraq wastewater treatment plant, we have been able to consolidate our portfolio of assets
However, we believe our great accomplishment was to achieve financial closure in just a few months, taking into account the large number of parties involved and the size of the project. Our team worked intensely to make it possible.
Shuqaiq III will supply water to 1.8 million people, contributing to the economic and industrial development of Saudi Arabia, and project development continues positively, even though the drawbacks in the past few months.
Another significant project is the Mombasa desalination plant in Kenya. What is the project status at this point?
Mombasa is a PPP project to develop a desalination plant with a capacity of 100,000 m3/day in Kenya. Almar Water Solutions has been the project's developer from scratch: everything has been done within our company. To date numerous pieces of work have been completed, including engineering work, studies on feasibility, marine currents and input water quality, geotechnical and topographical surveys, the environmental impact assessment, etc. In addition, water purchase contracts have been drafted and negotiated. The COVID-19 pandemic has stalled some approvals and we are waiting for the sovereign guarantee and letter of support by institutions, to continue with the financial closure phase. The regional and central governments strongly support the development of this project, and there is a great appetite by commercial and multilateral banks. We expect to achieve financial closure before the end of this year and to continue with the following phases of the project.
The Mombasa desalination plant is a strategic project in Sub-Saharan Africa which will also help increase the confidence and willingness of international companies to develop similar projects in the region, where they are very needed.
Shuqaiq III will supply water to 1.8 million people, contributing to the economic and industrial development of Saudi Arabia
Almar Water Solutions has stood out for its acquisitions, both assets and companies. Can you tell us about operations such as the stake in the Muharraq wastewater treatment plant or the Chilean company Osmoflo?
The development of greenfield opportunities takes time, several years from the time a proposal is submitted until implementation. However, when a company has equity, it can quickly expand its portfolio and gain a foothold on markets in those regions where it is difficult to enter, by investing in brownfield projects. This is the case of wastewater treatment for Almar Water Solutions. We are well known in the area of desalination in the international water market, but we also have extensive experience in wastewater treatment and reuse, even with fewer project references. With the Muharraq project, we aim to enter the market and continue growing in the wastewater treatment industry.
Nevertheless, the core business of Almar Water Solutions, what we want to use our equity for, is to become a services company. We have vast knowledge in this area and can contribute extensive experience and value to the international sector. We have established our services platform in another region to be able to grow and expand O&M and services contracts in Latin America, both for the municipal and the industrial sector. We believe the region has great potential and very real water and service needs.
The MENA region and Latin America appear to be priority regions in your strategy. What is your assessment of their evolution in the past few years?
To be honest, they are not priority regions, rather they are regions where we have been successful in the short term. We also want to be present in other regions such as Africa, Europe and the Asia-Pacific region. The effort we are making to replicate our model in other regions is a collective, team effort, and we hope to see the results very soon.
Up to now, we have talked about the situation before the COVID-19 crisis, but our world has changed a lot in the past months. What do you think will be the impact of the pandemic on the water industry?
Since the COVID-19 health crisis started, we have drawn several conclusions concerning the water sector. First of all, we think that the water market, specially the municipal market, has not suffered the effects of the crisis and can be considered a safe haven. Moreover, we have observed very good performance and resilience in asset holding companies, which have responded in a very solid and stable manner.
On the other hand, leverage in many companies is requiring the rotation of a portion of their assets in operation, in order to relieve very strict cash situations, something which will boost company mergers and acquisitions a lot more than before.
Finally, as governments focus on things like health, pensions and unemployment, PPPs and private financing position themselves as the only alternative to improve and develop the water infrastructure required.
The fiscal outlook in many countries is worrisome. The deficit, debt, unemployment, etc. But water services and infrastructure are more necessary than ever. Are public-private participation models a potential solution? Does the private sector have the financial willingness to invest in water?
Private companies, as we have indicated for years, want to be in the front line and help develop the entire network of infrastructure required for citizens and industry. We have the knowledge, experience and liquidity to tackle this challenge. However, we need the other side — governments and institutions — to embrace this debate and recognise that it is a win-win solution for everyone, and especially the final user who needs the resource. In many countries, it is still believed that a public-private partnership is a nationalisation, instead of a solution that provides experience, technology and development.
In this situation, there could be new and important opportunities to purchase assets or companies. What are the interests of Almar Water Solutions?
It is, without a doubt, a growth path for the company. Although currently, we cannot comment on any news in this regard, we hope to have some news in the coming months. We are working hard towards it.
Shuqaiq 3 IWP desalination plant to supply fresh water to 1 8 million people
Besides being the CEO of Almar Water Solutions, you are the President of the International Desalination Association (IDA). What do you think about the development of desalination techniques in the past few years, and what can we expect in the coming years?
Desalination has reached a degree of technical maturity where we do not expect disruptive improvements, but we do expect qualitative improvements. It is scaling, with large size plants, allows us to say that desalination is today an affordable commodity and a well-established technology to produce quality water in regions with water scarcity. Therefore, the IDA is currently making a great effort towards the development of similar technologies in the area of water reuse and its regulation, so it can be as well known and accepted as desalination.
The water market, specially the municipal market, has not suffered the effects of the crisis and can be considered a safe haven
I became president of the organisation after many years of work, with a very active role on the board over the past four years. From the board, we have implemented the changes the IDA needed (regarding financial, investment, image and communications aspects, etc.) and now we are embarked on a new plan to give visibility to the high degree of technological expertise of its members and open the door to discussions with new stakeholders interested in desalination, such as the financial sector, utilities, the legal sector, etc.
Desalination is a mature value, with a 10% growth rate, which besides being a technology necessary in many regions, is quite interesting for other players that to date were not participating in the sector.
Another area of expertise of Almar Water Solutions is water reuse. Do you believe recent measures such as the one adopted by the European Union will contribute to driving up as expected the percentage of water that is reclaimed?
Certainly, water reuse is an outstanding issue for the coming decade. There is a clear intention to expand its development and progress in the market, and thus reach the reuse levels necessary for all countries. This new European regulation will enable increasing the use of reuse technologies, thereby helping to fight water stress and scarcity.
To date, legislation had not been of much help, but now there is an appropriate framework for its uses and technologies in some regions, thus enabling a greater reach for agriculture, urban uses and industry. Greater reuse of treated wastewater will decrease withdrawals from surface water bodies and groundwater, promoting water savings and ensuring a high degree of environmental protection.
Access to water and sanitation, as defined in UN SDG 6, takes on a new dimension given this health emergency. How can we work to reach this goal as soon as possible?
Financial crises have never been good allies to make progress towards environmental objectives; however, I personally think that thanks to the level of commitment of our society there will be no backsliding concerning the United Nations Sustainable Development Goals. Citizens are well aware and will demand the measures needed to achieve the goals, together with the impetus from companies. So I am quite optimistic on this issue.
PPPs and private financing position themselves as the only alternative to improve and develop the water infrastructure required
Climate change is a reality, and when we have given the planet a break, we have been able to see it. We must foster sustainable businesses and initiatives, that allow caring for the environment and natural resources. As I have said more than once, water plays an essential role in this regard, being part of the solution to this problem. The use of non-conventional water sources, such as desalination or reuse technologies, will help to preserve natural water sources while improving the lives of millions of people.
From international organisations as well as from companies, we must support the solutions and mechanisms that help achieve the United Nations SDGs.