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Sat 5 Apr 2008 04:00 AM

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Water war

Water treatment specialist Metito hopes to whet the appetite of investors with a stock exchange listing in the UAE. Claire Ferris-Lay reports on why the company is considering a flotation.

Water treatment specialist Metito hopes to whet the appetite of investors with a stock exchange listing in the UAE. Claire Ferris-Lay reports on why the company is considering a flotation.

Many believe the next Middle East war will be fought over water. Rami Ghandour of Metito is adamant that won't be happening in a hurry.

Approximately 90% of water consumed in the UAE is desalinated so I can't see any fighting here over water," says the executive director of the desalination, water and wastewater treatment specialist.

With such a high requirement for water coming from the sea, it's not surprising that Metito is currently undergoing an aggressive expansion plan which will this year see its profits double as it heads towards an IPO to further fund its growth.

Approximately 90% of water consumed in the UAE is desalinated so I can’t see any fighting here over water.

Established in 1958 by the Lebanese entrepreneur Farouk Ghandour, Metito has grown alongside the boom in the region. But as a family business, its growth was somewhat hindered until in November 2006 it sold a 60% stake to Abu Dhabi-based private equity group Gulf Capital.

Last September it sold a further 7.4% stake to International Finance Company (IFC), the private sector arm of the World Bank.

Today Metito Holdings, as it's now known, comprises Metito Utilities - set up last year to handle privately financed concessions and utilities contracts - and the original company Metito Overseas, which focuses on engineering, procurement and construction projects and services.

Having left Lebanon in 1979, Metito's head office is now based in Dubai with regional offices in Cairo and Jakarta and offices across North Africa, the GCC and in Houston, US.

Metito has not yet decided on the bourses it would like to list its shares, although Dubai's DIFX and the Abu Dhabi Securities Market are under consideration.

"I think it's very difficult to decide what will happen in a couple of years' time in terms of the markets and regulation," he says. Ghandour would also like to see more companies trading on the Dubai exchange before it commits to a listing.

It is a great market, but today it lacks the liquidity for a company like us to make it viable. If some big listings take place on the market and it becomes revitalised it would be a good option for us," he adds.
Although Metito's origins are in water desalination, the company now has interests in water supply as well as the treatment of sewage for industrial and domestic use. Its areas of focus vary from country to country.

In the UAE Metito is active across its entire product range but desalinated water remains its key area of business, as does the treatment of domestic and industrial wastewater.

Most recently the company won the contract to build a sewage treatment plant on Yas Island in Abu Dhabi, the home of the 2009 Grand Prix.

The facility will have a capacity of 38,000 cubic metres a day. "It's a very interesting plant because it is modelled on a very specific technology. There is also a very clear deadline which has to be met.

The private sector should take some of the burden off the state utilities.

Ghandour is also looking at a number of other projects in the region and is bidding for a desalination plant on Nakheel's Palm Jebel Ali development, which would be its most significant win to date.

In the past the company has struggled to win the larger projects, instead relying on partnerships with other companies when approaching bigger developments. But if it does win the tender for the Jebel Ali project it will be the company's biggest concession contract and could result in two separate contracts for water desalination and the other for sewage treatment.

More significantly, Metito will become the first private company in Dubai to connect straight to its customers. Using private sector companies in the water industry, Ghandour believes is the best way to deal with the current infrastructure problems and the water shortages the UAE faces.

I think it's necessary [to utilise the private sector]. Dubai is facing a shortage of infrastructure because of the pace of growth which is happening."

Despite infrastructure being an important aspect of any growing city, Ghandour says it is often left to the last minute with many developers more concerned with having bigger and better designs than their competitors. "People often don't think about the infrastructure or what is required until quite late in the game.

"[Providing the appropriate infrastructure] becomes very last minute and rushed, making it difficult for DEWA and any other government utility company to cope with that pace of growth.

The only way to support this growth is to actively involve the private sector to take some of that burden off the state utilities," he adds.

Metito currently predicts that some US$35 trillion needs to be spent globally on electricity and water infrastructure in order to provide sufficient supply until 2030.

It is an incredibly large number, but one that is music to the ears of companies in the desalination game. As a region lacking in natural water resources and as one of the largest consumers of water per capita in the world, the Gulf and the UAE in particular faces more problems than most other countries.
In addition to infrastructure provision, Ghandour believes something must be done to reduce water consumption. He believes one of the only ways to help ease the water shortages the UAE faces is to raise tariffs which are currently well below international standards.

Dubai actually has a reasonable tariff which ranges from 6.6 dirhams to 8.8 dirhams per cubic metre. In Berlin, where water comes free from the ground, it is priced at over five euros per cubic metre - three or four times as much for something which costs less to produce." Attitudes also need to change and Ghandour stresses the role of education. "People should be more accepting of reused water," he says.

If you look at water reuse historically it's a natural phenomenon," he continues.

Different countries have different ways of dealing with the problem, he explains. While in Singapore, the prime minister can be seen drinking recycled water live on television, in some parts of the US recycled water is injected back into the aquifer before it is consumed.

Whether through rising costs, the arrival of private utilities companies or the use of new technology, H2O is big business in the desert.

Treating waterDesalination refers to a number of processes which removes excess salt and other minerals from water.

There are a number of methods to desalinate water but reverse osmosis and multi-stage flash remain the most popular forms, accounting for 47.2% and 36.5% of installed capacity worldwide, respectively.

According to the International Desalination Association, 13,080 desalination plants across the world produce more than 45,000,000 cubic metres of water a day.

While the consumption of desalinated water usage is high around the world, the Middle East with its lack of natural resources is one of the highest consumers. Saudi Arabia's desalination plants account for around 24% of total world capacity and Dubai is home to the world's largest desalination plants.

Jebel Ali Desalination Plant (Phase 2) is a dual purpose facility which uses a multi-stage flash distillation and is capable of producing 300 million cubic metres of water per year.

While consumption of desalinated water across the world remains high and the benefits for reclamation irrigation and industrial use are noted, the process receives its fair share of criticism, in particular for its high production and transport costs as well as environmental affects.

Environmentalists' biggest concerns are the huge amounts of the by-product of concentrated seawater, which some claim is a major cause of marine pollution when dumped back into the oceans at high temperatures.

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