New GE Water boss makes his mark

GE Water’s incoming president Heiner Markhoff tells Christopher Gasson why the industrial giant is committed to water, and how he intends to honour that commitment.

GE remains totally committed to the water sector, despite its recent difficulties, according to incoming GE Water president Heiner Markhoff. “It is a great niche to be in, with a lot of global challenges”, he told GWI.

“It has been and is a good business for GE, and GE is very committed to this space. If you look at it in the context where GE is going to, we have aligned ourselves with these great challenges. Water is one of them.”

Markhoff was appointed to run GE Water at the end of last year after the departure of Jeff Garwood, and concurrent with the merger of GE Water into the new GE Power and Water division. Previously, he had been general manager for Europe with GE Plastics, which was sold to Sabic in 2007.

He stayed with Sabic, spending time at its Jubail production centre (near the massive Saline Water Conversion Corporation site). It has made him well aware of the context in which GE Water operates, both on the industrial side, and in terms of water scarcity solutions, but it will be a few months before he is in a position to deliver a detailed strategy for GE in the water sector.

“It is a great space to be in for us. What we have to do is to see how to best play in this space. How do we best put our arms around this business?”

He is convinced that the integration with GE Power has been the right first step. “It is tough to make power without water and water without power,” he says, explaining that with such strong overlapping customer bases and similar risk management and project management skills required, there are plenty of synergies between the two.

Big brother

GE Water will continue to operate as a unit underneath the power and water umbrella. “We will leverage the fact that our big brother is a very big player in a related market which has a lot of overlap with the water business.”

He also defends the decision taken by his predessor to position GE Water as a technology supplier rather than an EPC (engineering, procurement and construction) contractor for large desalination and water reuse plants.

This strategy has been questioned by the company’s competitors in the industry. While other companies such as IDE and Befesa look for the broadest possible involvement in a project, as EPC, technology supplier, operator and developer, GE has tried to avoid taking EPC risk on projects such as the Jafza desalination plant in Dubai, and the Korangi project in Pakistan.

Sweet spot

“The sweet spot for GE was and will be technology,” says Markhoff. “I think in this environment we have to think much more about partnerships where we work with players who can bring things together. I do not want us being the integrator of bits and pieces.

“I think that the core of our offering in this business is technology, and bringing differentiated technologies to market which will help solve major problems.” He cites efficient membranes as one specific area where GE Water can develop a differentiated technology offering.

“Do I know that we have the answer yet? No, but I think that we know where we need to work to differentiate ourselves.”

His instinct is to look at the areas where GE already has competitive advantages, such as the industrial water sector.

“The thing that you should not underestimate is our reach into the marketplace,” he says.

“I think that industrial markets around the world are very interesting to us; the municipal market for desalination, reuse and wastewater treatment – these are the things that are interesting to us.”

In terms of his own role within GE Water, he does not see himself as a turnaround specialist called in to sort out a struggling business.

“I spent a lot of time in the chemicals and materials business, so I understand a lot of what our customers are looking for, and I have a track record of delivering successful business results. Nobody likes restructuring and I would not say that we are restructuring. What we are doing is looking at ways of being as efficient a business as we can be in a difficult business environment.”

Markhoff is originally German, but if he has any nationality today, it is General Electric. Engaging and intelligent as a person, he exudes leadership in a way that his predecessors perhaps did not (Garwood was a McKinsey technocrat, while George Oliver struggled to engage with the intricacies of the water sector).

It begs the question: will he, like them, fail to square GE’s expectations of profitability with the realities of the water market, and find himself replaced within three years?

His communications officer intervenes. “Heiner will be here for many years,” she says.

Markhoff looks less certain that he wants to spend the rest of his career in Trevose, Pennsylvania, but he is certainly up for the challenge of making GE Water the success he evidently believes it can be.

“I am positive about the future of this business. I think that we are very well positioned to play here. Can we play everywhere? No, not necessarily, but we will continue to be a major player in this industry based on our technology.”

GE Water timeline

1999: GE Power Systems buys Glegg Water Conditioning.

2002: GE Specialty Materials buys BetzDearborn from Hercules Chemicals for $1.8 billion (1.8x turnover); George Oliver appointed CEO of GE Betz.

2003: GE Specialty Materials buys Osmonics for $278 million (1.3x turnover).

2004: GE Infrastructure buys Ionics for $1.1 billion (3.2x turnover); George Oliver appointed CEO of GE Water.

2006: GE Water buys Zenon Environmental for $689 million (2.9x turnover); Jeff Garwood replaces George Oliver as CEO of GE Water.

2008: Jeff Garwood is replaced by Heiner Markhoff as CEO of GE Water. GE Power and Water is formed.

2009: Ionics’ Watertown, MA facility is closed.