Stepping Up A Gear

In October 2015, Utico and a Spanish energy firm, Grupo Cobra, announced the first private joint venture in the Middle East to build a USD195.7 million water desalination plant in RAK. How will this project contribute to the growth of RAK as well as the UAE?

It is a project that has set a benchmark in terms of private water desalination projects. Governments, not private companies, have typically undertaken these kinds of projects, making it a first within the UAE. On April 19, we received a Global Water Award distinction for “water deal of the year,” and that was in recognition of this project being uniquely and privately financed as an independent water project (IWP). This project has set a benchmark not only for the UAE but worldwide. Water utility demand always grows with the growing size of the economy and GDP as well as through un-served areas that were not yet on the grid. We have laid nearly 400km of network to access these un-accessed areas, which is further adding to GDP and demand. A third factor is how economical this project is. The retail cost of water is lower than the cost for government projects, and one of the reasons is that the government does not have to give a guarantee on this project. But the government of RAK has been very supportive in terms of facilitating the means for us to be able to achieve a project like this in terms of land and permits. Of course, there were no freebies, but when you follow the rules, everything is open and clear and efficient for everyone.

Are you planning any similar projects in the region?

We have signed a deal with Sharjah, where our transmission line is under construction with approval from the government of the UAE , and we have a water transmission and storage project between RAK and Sharjah. We also have the potential to add Umm Al Quwain and Ajman if required. The other projects we are working on besides desalination and transmission and storage projects include a solar power plant and a pumping station and storage for all the plants, not just this one. Our long-term aim is to have three days worth of storage, and what we are building now will provide two days worth of storage for our facility.

What further regulatory changes would you like to see put in place to boost the industry and create fair competition?

Fair competition has to be fair to everybody, and that is not easy. The most important thing is that the system is fair to the consumer, be it industry or individuals. The consumer has a responsibility not to be wasteful, whereas we have a responsibility in making sure what we provide is sustainable. At the end of the day, the government wants to serve its citizens, we want to run an efficient business, and consumers want to have access to healthy, sustainable, and affordable water. A complex calculation is needed, and we are trying to convince the government to take the necessary actions to bring this about.

What are your prospects for 2017?

Even though oil prices are low, the fact that we can finance these projects on our own shows how strong our projects are and how strong our business model is. This model is here to stay and it will help governments to develop their water and power sectors in a different manner. We build without government guarantees, which changes the IWP development landscape. Government guarantees can lead to corruption because government employees know the government will pay the bill eventually for default and one can just pass it all down the chain. Guarantees can also lower the credit ratings of an Emirate or the country.