Efficiency is the epitome of French-based energy giant Veolia.
The $13bn firm has made a considerable amount of its wealth from adhering to the principle of being efficient and generating new methods of resourcefulness.
It is no surprise, therefore, that global chairman and CEO Antoine Frérot is bullish about growing Veolia’s business in the GCC, a region where energy savings are as prevalent now more than ever amid current economic challenges.
“We could save 20 percent of the energy which is used in this country, and that’s the case in all other parts of the world,” Frérot says.
Veolia, listed in Paris with a market cap of $13.84bn, provides environmental management services, including drinking water treatment and distribution, wastewater and sanitation services, and waste management and energy services.
A world leader in its water services business, the 160-year-old company posted $28bn in revenue last year, with 174,000 employees across five continents. It has been in the Middle East for 25 years, employing about 3,100 people. Last year the firm reported $233m in revenue.
Almost half of the company’s revenue in the GCC comes from a joint venture with Majid Al Futtaim Ventures called Enova, an energy and multi-technical services company. Frérot believes the time is right to accelerate its growth.
“We think that in the field of energy efficiency, which today is about half of our actual activity in the region, we could double [current revenue of] €100m [$114m] in the next five years,” he says.
He also forecasts “a lot” of expansion in wastewater reuse in the region, as well as modernisation of waste treatment equipment, including waste to energy services. “I think we could add 50 percent on what we have today, meaning the €100m we have today could be €150m ($172m).”
Through Enova, Veolia is planning to develop its energy services and introduce efficiencies in the UAE’s mega malls, hospitals and universities. “In big buildings you use a lot of energy,” Frérot says.
Veolia’s UAE joint venture with Majid Al Futtaim Ventures, Enova, employs more than 2,000 people.
The GCC’s huge population growth also makes it a top candidate for energy efficiency programmes. “The GCC is probably the one part of the world where the growth in population is the highest for the last ten years, and probably for the next ten years,” Frérot says.
“The condition of life [in the GCC] is not so easy compared to others, you don’t have a lot of fresh water, it’s very hot and you use energy to live. So it’s typically a region where energy efficiency is useful to continue to have this sustainable development; to continue to grow by using less energy resources would be key in the future.”
Ironically, Frérot predicts that water — a scarce resource in the region — savings could be made in the future by moving away from the very desalination plants that Veolia is currently building in the GCC. “We could continue to make desalination plants but I will propose to the authorities to perhaps spend more energy on water reuse instead, because it is, in my mind, more efficient, and more useful. It is cheaper,” he says.
Reusing water also reduces transport costs and pollution, Frérot says. In Ajman, Veolia is using recycled wastewater for irrigation, but he insists that it could also be treated to become potable water if needed.
“We are doing it a lot around the world,” he says. “Do you know that in a city like Berlin — a big city of 5 million inhabitants, in a modern country with a very small river — half of the population is fuelled by tap water by using wastewater treatment and recycling? It’s the same case for Singapore. One hundred percent of the electronics industries of Singapore are fuelled with tap water from wastewater recycling. Technically, we could do everything with wastewater and it is cheaper than desalination.”
Frérot says he has the figures to prove it.
“If you want a cubic metre of tap water [from the] river, like the Thames or Seine [in Paris], it cost 25 [euro] cents. If you produce the same cubic metre with a good aquifer and without pollution, it’s 5 cents. It’s 80 cents with the sea water through desalination and it’s 45 to 50 cents with wastewater,” he says.
Veolia also has developed a counter-terrorism system for public water supplies, where any traces of pollution can be detected in real time, allowing the water management authority to shut down an entire system before the pollutant reaches households. The technology has not generated significant interest in the GCC, but Frérot says he is hopeful some governments will eventually be keen to install the system that has been used at major events in recent years, including the London Olympics.
Veolia is also keeping an eye on Iran, a country that could offer significant business, but Frérot remains cautious.
“There are some needs with the municipalities and the industrials,” he says, “and now we will be able to begin discussions, given the new geopolitical situation.”
Veolia is a global leader in optimised water resource management.
Still at the early stages of those talks, Frérot says the size of the market is potentially eight times that of the UAE, based on the size of the population alone.
“The needs should be proportional to the population, but the final means to pay is not the same,” he says. “They need some expertise for labs, especially for water and energy, [before energy efficiency systems can be implemented].”
Iran’s re-entry into the oil market has been partially blamed for keeping oil prices low, both because of the additional supply and Saudi Arabia’s refusal to freeze its own supply unless Iran does too. Frérot says the lower prices have positive short-term benefits, including saving on energy costs “on a short-term basis”.
“On the longer term, we are involved with the oil industry to help them develop their businesses and for sure the small level of oil [price] today affects all the investment of building new wells, so we didn’t have a lot of new projects during the last month. Despite that, we signed during the last three months two or three big projects because even if they don’t build new wells, [they need] to keep operating the previous ones.”
Older wells require five times as much water to pump oil. Frérot says such wells require water recycling facilities.
The biggest impact of the low oil price for Veolia is on its municipal clients, compared to industrial clients. In 2015, municipal clients represented 56 percent of Veolia’s activity and Frérot says the lower price has forced clients to alter their funding model.
“Municipal clients for the oil-dependent countries… [will] not completely cut the projects but transform them from public finance projects to PPPs [public-private partnerships] or concession contracts, asking also for an offer of financing on long-term,” he says.
“We had that ten years ago. A lot of desalination, wastewater, or water treatment plants were financed through PPPs. It stopped five years ago to come back to a more classical way. But there is so much money around the world looking for good projects — [there is] more money than good projects.”
When asked how the global economy is affecting Veolia’s business, Frérot describes it as “not very exciting for the past two years”. However, the economy is not the most important driver for Veolia’s activities.
“The most important driver for Veolia today is regulation,” he says. “Last year, in China we received 20 percent more hazardous waste in our plants. It does not mean that the Chinese industry produced 20 percent more waste, it just means that the global regulation in developing countries is now being put in place by the authorities and that the other hazardous waste could not go everywhere and more and more are forced to come to modern plants. This regulation is also involving some water issues, some energy issues in a lot of places in the world. This driver has nothing to do with macro [economic effects].”
Frérot says Veolia has demonstrated the relevance of its strategy despite a difficult economic environment.
Further down the line, the impact of COP21 — the global agreement to reduce greenhouse gases and stabilise the increase in temperatures to between 1.5 and 2 degrees Celsius — will be felt not only by companies like Veolia, but by industries the world over.
Veolia has been a strong supporter of lowering carbon emissions, and Frérot was one of 78 CEOs who promoted the transition to a low carbon economy in an open letter to governments around the world.
Agreed in Paris in December, Frérot says the potential impact of COP21 for business everywhere will take time.
“Before the COP21, the question was why should we fight against carbon emissions? Now there is a large portion of people who agree that we have to fight against this emission because there is strong pollution. For the last year, during the COP21, the question was no more why, but what should the international committee do to tackle this pollution,” he says.
The next question to be answered is ‘how’, which Frérot says will take some years and many more ‘COP’ (Conference of Parties) events to answer the question.
“And it’s only when we know ‘how’ to do, technically and economically, that we will have some business consequences of this issue globally,” he says.
The most common solution is to implement relevant legislation. “Technically, we already have some solutions and they will get progressively better. But economically, the problem today is to [legally] pollute is free [but] the [impact of the] pollution is costing money. The sole way to push polluters to pollute less is to give a cost to the pollution,” he argues.
A carbon tax is the simplest way, he says, rather than a complex carbon emissions quota market, such as those in Europe and China.
“I would prefer, personally, to begin with a simpler system with a carbon tax where the pollution will have a cost, but also to decrease the cost of depollution, to use this money to subsidise partially the depollution, meaning that [it will be] twice as quick to make depollution systems profitable compared to polluting,” he says.
Would the GCC ever see a carbon tax?
Veolia this month has secured a seven-year waste management contract in Oman.
“Even in Europe I don’t see it,” he replies, with a shrug of his shoulders.
As he says, it will take time, but following our discussion, Frérot says he plans to use some of his time in the region to engage with governments on COP21.
“I will discuss with different interlocutors, including government officials, about the profit of energy efficiency,” he says.
“This profit could be environmental of course, but also economical. I will explain to them even without a carbon price system. It is really interesting for cities or industrials to go through this way of energy efficiency because you could get the same use of energy by using less initial energy, by cutting the loss of energy, by capturing and recycling lost energy, by transforming waste into energy and so on.”
He says through better management of the different types of energy on the industrial platform or in cities, there are immediate savings in terms of costs and emissions.
“It’s a good first step before waiting for any price on pollution,” he says. “You could find energy efficiencies for a lot of different things, like hospitals, malls, cities, by using more cooling networks rather than individual cooling systems.”
Ever efficient, always looking for ways to improve. That is Veolia and its CEO.
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