Bangkok floods reveal inadequate risk assessment by multinationals

Posted on October 25, 2011 by Andrew

October 23rd’s Financial Times article on the current flooding in Thailand tells us that the global supply chain of auto-parts and hard-disc drives has been interrupted by the inundation of the industrial heartland to the north of Bangkok.

A quick online search reveals that Bangkok is known to be highly vulnerable to flooding. A 2009 paper by the East-West Centre states that flood protection in Bangkok is inadequate for even a 30 year flood event.

Water related risk, which can result from too much, too little, or the wrong quality water, needs to be taken seriously by any multinational with a global supply chain. However water related risk makes it into the risk section of very few financial reports.

Incidentally, both Shanghai and Guangzhou are listed in the top ten list of global cities vulnerable to coastal flooding…both favourite locations for multinationals in China. Do you know what the water related risks are to your supply chain?

Filed under: China, flooding, water risk | Tagged: | 1 Comment »

Sydney city recycled water network to employ ASR

Posted on October 4, 2011 by Andrew

A recent article in the Sydney Morning Herald reported that the City of Sydney plans to utilise an aquifer to the south of the city for storage in the operation of a city-wide non-potable water network. The network will be integrated with a  decentralised trigeneration  network.

The most interesting thing about this is that the corporatised water utility Sydney Water provides water and wastewater services to Sydney City, and the City of Sydney local government entity has no experience with operating water and wastewater systems. In fact the terms of the original design tender specified that the system should be able to constructed under a PPP arrangement, where presumably a private entity will operate the system.

This will be complicated from a governance perspective, let alone an engineering one, and I will be watching progress with interest. The introduction of the aquifer storage solution introduces a lot of additional complexity from an environmental perspective. 

Certainly if it gets off the ground, this will be a project of sufficient size to be well and truly on the global water radar, and the global water majors will be interested. I wonder who will have the capability and the appetite to take on the risk profile of a large unconventional system like this one?

Filed under: decentralised systems, IWM, utility management, WSUD | Tagged: | 1 Comment »

Brine management a major growth area

Posted on August 31, 2011 by Andrew

There is a great article here on the growth of the Coal Seam Gas industry in Australia. It is anticipated that 300,000 megalitres of highly saline water will be extracted every year from CSG bores in Australia, and the search for ways to manage that water continues.

This is not just about mining though. As fresh water becomes more scarce globally, inland farmers and communities around the world will increasingly turn to desalination to make use of higher and higher salinity water.

Along with inland desalination comes the question of brine management. How do you deal with all that high-salinity water? H2Otalent is already starting to see the growth of the brine management industry reflected in the positions we are recruiting for.

Watch this space.

Filed under: Desalination, industry trends, water resource management | Tagged: | Leave a Comment »

Water industry opaque to outsiders

Posted on August 18, 2011 by Andrew

I was excited to see a full length article about the water industry in the Financial Times hit my inbox this morning. For a large industry, water gets very little coverage in the world’s premier financial publication. Water stories generally appear under Energy in the iPad version.

I was unsurprised then to find the analysis shallow, and while making a valid point, largely wrong.

The drive of the article is the industry must globalise further to meet the challenges of water shortages. I am inclined to agree, although the inherently local nature of water related challenges limits the traction global firms can get.

The authors claim that ” few water companies operate outside a confined geographical area”. Even by the narrowest definition there are many global water players, and if you broaden the definition to include technology firms there are hundreds.

They also claim that European  firms have not been involved in developing water supplies for India, China etc., which is completely wrong.

Where they are correct is that from a British perspective the general trend seems to be against globalisation. Most of the regulated UK utilities have sold their overseas interests over the past 5-7 years.

However the Middle East remains a playground for major infrastructure providers from all over the world. North Africa, the Philippines and India are all trending towards increased foreign participation in their water markets.

While China has seems to be less excited about foreign participation in their water sector, there has been an interesting increase in globalisation inside the chinese speaking countries, with Singaporean firms significantly increasing their mainland China presence. Also in Asia, the Japanese trading houses are developing their water DBO capability as fast as they can through international acquisitions.

Finally the Spanish water DBO firms are expanding internationally at breakneck speed, achieving significant wins in South America, North Africa and Australia.

I think we can safely say that the trend is towards globalisation, and the pace is just about as fast as is politically possible.

We can also say that the water industry is still an enigma to the broader business world.

Filed under: China, utility management, water industry trends | Tagged: | Leave a Comment »

Veolia’s opportunity

Posted on August 5, 2011 by Andrew

Veolia’s terrible earnings results, coming on the back on substantial write-downs, have caused their share price to plunge again, and at time of writing their share price is down close to 50% over a year, and 71% over five years.

This is an opportunity for those pushing for a change of approach in the business to assert themselves.

In my previous post on the “power to the edge” organizational structure I suggested that a centralized and hierachical management approach is poorly suited to creating an adaptive business that can change rapidly in response to a rapidly changing external environment.

Veolia has a lot of excellent assets, both tangible and intangible, not least of which is the outstanding quality of their employees.

I believe they could they could create a lot more organizational bandwidth with the decentralization of authority in their business. Sure, manage your risk and protect your intellectual property, but don’t waste your most precious resource; your people.

Filed under: Uncategorized | Tagged: | Leave a Comment »

The political after-effects of drought

Posted on July 29, 2011 by Andrew

Australia’s crazily stochastic rainfall is having serious political fallout, one to two years after a major east coast drought turned to catastrophic floods almost overnight. As climate change begins to replicate Australia’s climate in other continents, our lessons may be relearned by others.

Australia’s east coast states  spent something like AU$15-20b on drought mitigation infrastructure in the 2005-2010 period, including large desalination plants for every major city and a very extensive network of reuse plants and pipelines for Brisbane.

The dam water supply levels in every major city had reached critical levels in spite of severe water restrictions and in the case of Queensland, the state government had been planning for trucking water into the centre of the capital, Brisbane.

In every east coast city’s case the rain began shortly after the drought infrastructure was complete (sometime before in the case of Melbourne’s gigantic desal). Water utilities and state governments were left with huge bills for now unnecessary infrastructure.

The fun really began when people started to hear how much their water bills were going to increase to cover the cost of the capital works. Society’s collective memory is very short, and people hearing that their water bill is going to go up 15-20%+ a year for the next few years has caused a lot of political difficulty.

This has been particularly interesting in South-East Queensland, where a major restructure of the water sector for the purpose of increasing water security in the region was attempted during and after the drought. The result has been a rash of finger-pointing and political maneuvering between State and local government as both sides try to blame the other for cost increases. The fall-out could well bring down one or more local or state governments.

I think there are a few lessons here.

It is very important to avoid infrastructure lock-in if at all possible. Large scale solutions may be more efficient, but a modular and scalable response to water supply threats is likely to be less costly in the long-run. Moving early to manage potential threats before they become critical will leave more options on the table. Having a now unneccessary $3b desal plant operating on a take-or-pay contract can be  very politically awkward.

Expect people to forget their previous support for decisions made in-extremis…particularly when they get the bill.

 Don’t miss the chance to set up a more resilient system when the status-quo is threatened by a crisis…but make sure your alternative approach makes sense under both rainy and dry scenarios.

Filed under: Desalination, utility management | Tagged: | 1 Comment »

China’s desalination boom

Posted on July 22, 2011 by Andrew

H2Otalent anticipates a major boom in the desalination industry in China,  as demand for water increased and alternative supply options fall away. H2Otalent’s Isa Cruz attended the Qingdao Desalination Conference last month, attended by representatives from all over the world positioning for a piece of the action.

Isa Cruz at the Qingdao Desalination Conference
H2Otalent’s Isa Cruz at the Qingdao Desalination Conference

This excellent Circle of Blue report documents a proposal by a respected Chinese engineering professor to build a desalination complex that will pump water 3,400 kilometres to Inner Mongolia and provide the water supply to exploit a massive coal field.

 
While this proposal in controversial, the fact that it is being proposed at all does show how seriously China needs more water.
 
The South-to-North pipeline project, which was going to effectively take water from the Himalayas to Beijing is bogged down in construction challenges, and expected to yield less water than originally planned.
 
Desal seems like the only remaining option to stop Beijing drying out. The government agrees, with a substantial increase in desal capacity specifically stated in the latest five-year plan.
 
Desalination is also one of the more obvious niches where multinational EPC firms looking to make their mark in China can be competitive. Domestic firms have their hands full delivering less complex and risky wastewater and industrial water treatment plants, and few domestic firms have the capability to deliver a large desal plant.
 
Companies like Aqualyng and Befesa are already delivering plants.  A local JV partner will definitely be required, and non-recourse finance is now obtainable for China projects.
 
A word of warning though, local engineers with desalination experience are still thin on the ground, and in great demand so be prepared to pay top dollar for local talent. Feel free to contact Isa Cruz on isa.cruz@h2otalent.com for further information on entering the China market.

Filed under: China, china water, Desalination | Tagged: | Leave a Comment »

Managing Change – The Power to the Edge approach

Posted on July 19, 2011 by Andrew

If you are a senior executive in a large organisation, you are unlikely to have the knowledge required to make major strategic decisions for your organisation.

This is a challenging idea for traditional hierarchical managers, but it is now pretty much accepted wisdom amongst management theorists. I have just been reading an article in the HBR titled Adaptability: The New Competitive Advantage . It makes the excellent point that in a rapidly changing and complex world, rapid adaption is itself a source of competitive advantage…if you can move faster than your competitors then you can beat them to new opportunities.

The article suggests a few different organisational competencies required for rapid adaption, but one of the key requirements is the shifting of authority in your organisation to the people on the front-line. This follows very closely the thinking of US military strategist John Boyd. He proposed that the military force that can adapt most rapidly to circumstances can outmaneuver an opponent. The critical point is that the individual on the front-line has the best knowledge of how to respond at a tactical level, and should be empowered as far as possible to make decisions themselves. Too much time is wasted referring decisions up a command-chain and the opportunity is lost.

That is fine as far as tactical decision-making is concerned, but how about strategic decisions? Strategic decisions must certainly be made by management, but the information that informs that decision-making must be collected from the front-line in the form of quantitative or qualitative data. The pathways for information to flow upwards in the organisation are even more critical than the pathways for information to flow downwards.

In summary, transferring the power in your organisation to the edge is the best way to create an organisation that can respond rapidly to external changes.

Leadership has to be performed at all levels of the organisation.

Unfortunately I come across very few organisations that do shift power to the edge. Most large organisations have heavily centralised decision-making and frustrated employees who see opportunities pass-by and are unable to act on them.

 To create an adaptive organisation, it is critical that individuals at all levels of the organisation have leadership qualities. Check out my post on leadership qualities for the water sector here.

You can find the US Command and Control Research Program publication Power to The Edge here

Filed under: career management, industry trends, utility management | Tagged: | 1 Comment »

Build global talent shortage into planning

Posted on July 11, 2011 by Andrew

The global water talent market looks increasingly constrained, with a shortage of mid-level talent even in countries with high levels of unemployment. I cannot emphasise enough that you should build high salaries and talent-shortages into your business planning.

We are observing the most severe talent shortages in Brazil and China, where it is very difficult for global companies to identify English speaking talent with a reasonable level of techical knowledge and relevant experience. I will reiterate that companies should not expect to pay substantially lower salaries for high-impact professionals in China than they would in Europe or North America.

In Brazil they can expect to pay more.

Australia continues to lead the world on water industry salaries, with another resources investment boom working its way through the economy; mine infrastructure construction is sucking up the tiny amount of spare capacity that was there previously. Expect to pay between 1.5x and 2.5x what you would pay in Europe or North America for junior-mid-level Engineering talent.

For high-impact, strategic hires (H2Otalent‘s specialty) you should be prepared to offer both competitive salaries and a compelling organisational structure and strategy. See my earlier post on attracting leaders here.

Even more critically you should have a policy in place for opportunistically hiring and utilising water leadership talent even when you do not have a formal vacancy in your organisation. The alternative is to make-do with whoever happens to be available when you have a vacancy, which could mean the best people going to your competitors.

Filed under: China, china water, industry trends, Uncategorized, water careers, water industry trends | Tagged: | Leave a Comment »

China and Point-Of-Use

Posted on June 15, 2011 by Andrew

Could China be bypassing the centralised potable water treatment paradigm and skipping straight to POU?

I recently attended Aquatech China in Shanghai, the biggest water technology trade show in China. There were hundreds of Chinese membrane manufactures present, with both high-pressure and low-pressure membrane solutions.  Most were targeting the domestic market, and it was clear that the government endorsed strategy to grow a domestic membrane industry is working.

More interestingly though, at least half, and perhaps two thirds of the exhibitors were selling  point-of-use products. Over the years I have heard many  people argue that it is ridiculous to send potable quality water through the network for all household use, when only a tiny fraction of the water consumed is actually for human consumption. Third-pipe systems are an alternative, but require costly duplication of infrastructure.

The alternative is to send partially treated water down the network and have consumers treat their own water at point-of-use. This idea is an anathema to those steeped in the John Snow school of taking control away from the consumer for their own good, and seems unlikely to get anywhere in developed countries.

In China however, where the availability of high quality potable water out of the tap is far from universal, but a relatively wealthy and educated middle-class is growing rapidly, demand for high quality potable water is resulting in a high demand for point-of-use treatment solutions.

I wonder if the bulk of China’s cities may bypass the John Snow paradigm and move straight to consumer control of their own water quality.

Filed under: China, china water, Uncategorized, utility management, water industry trends | Tagged: , | 2 Comments »

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