Inima’s €3 billion global ambition

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OHL’s water subsidiary was the first of the Spanish water groups to go international. Director general Antonio García-Zarandieta thinks the business can quadruple in size over the next five years. Richard Weyndling reports.

Spanish companies are increasingly a force to be reckoned with in the global water market. Backed by the financial muscle of the construction giants which own them, their technical and operational expertise honed in a domestic market kept buoyant by generous public funding, these firms are now winning major water infrastructure and concession contracts around the world.

The company that can best lay claim to having blazed the trail into international markets is Inima. Currently building or extending plants in Algeria, Chile, Mexico and the United States, as well as in Spain, Inima took the strategic decision seven years ago to look abroad, with the result that 70% of its €1.9 billion order book is now outside Spain and by 2008 more than half its production will also be abroad.

This international vocation contrasts strongly with Inima’s origins as a national environmental institute from which the company name derives. As a public sector enterprise it built Spain’s first desalination plant with ME technology in the Canaries. It developed its desalination and wastewater treatment expertise over 30 years before being sold off to become part of the OHL group in 1999.

Antonio García-Zarandieta Giménez, now the company’s director general, was the man tasked with implementing an international strategy when he joined Inima’s concessions department from Dragados in 1999. “I was taken on because at that time it was clear the Spanish market was saturated,” he says. “My appointment coincided with OHL winning its first motorway concession in Brazil. We made the decision to specialise in seeking concessions in the international market. Now all the Spanish companies are looking abroad with differing degrees of enthusiasm.” Inima’s international focus does not mean that the domestic market has been ignored. Since 2000, it has built and operates Spain’s largest sludge-drying plant and designed and operates Spain’s largest functioning SWRO at Carboneras,
Almeria. Earlier this year, it won the contract to design and build one of the first plants in the government’s ambitious Agua programme, the 65,000m3/d Alicante II.

“Inima intends to bid for every single desalination contract in the Agua programme, no matter how small,” says García-Zarandieta. He recognises the competition will be tough, with “five or six bids” from Spanish desalination specialists while “probably Ionics, Veolia and IDE will present bids – possibly in partnership with medium-sized Spanish constructors”, but he is convinced that now is the moment of opportunity because “by 2008, the Spanish desalination market will largely have dried up”.

García-Zarandieta believes that “this is not only an important juncture for Spanish desalination” but that “desalination offers amazing prospects for all the world’s population”.

“We have done studies in Chile showing we can take desalinated water 200 kilometres inland and up to 3000 metres for less than $2/m3,” he enthuses. “Desalination has an unrivalled potential that nobody is yet capable of visualising.”

The belief in desalination’s worldwide potential gave García-Zarandieta the confidence to jump into a new and untried market like Algeria and win two major desalination contracts last year in partnership with Aqualia.

“If you know the country and you’re prepared to take on the risks then you feel comfortable,” he says. “We see Algeria as a country with enormous potential, with a huge need for infrastructure of all kinds, including water, and with the sort of financial resources many other countries don’t have.” Financing arrangements under which an Algerian bank put up 80% of the capital using the project itself as the guarantee “gave Inima the right conditions to go ahead” with its bid.

The other element that attracted García-Zarandieta to the Algerian projects was the fact that they were both 25-year concessions. A singular characteristic of Inima’s international strategy is the exclusive concentration on concession projects. The company currently operates two desalination plants in Chile and a waste treatment plant in Brazil, and has two more desalination plants under construction: a BOT in Mexico (Los Cabos) and a BOO in the US (Taunton River).

“Inima’s strength is its experience in the management of infrastructure, in concessions,” he says. “We provide, above all, operational and management skills”. Its track record in running concessions is what García-Zarandieta believes will help Inima break into its next big target market – China. “It makes no sense to go there unless you can offer something different to that which the Chinese can do themselves. We’re in China to manage businesses and we’ve got to do it in partnership with Chinese because there are things they can do more cheaply than us”.

Inima has been assessing opportunities in China since 2000 “but the problem has been to find projects that have the right financing arrangements guaranteed by the project itself”. García-Zarandieta believes in being patient, though: “We’ve got to be on the starting grid with the engine revved, ready for when the conditions become right.”

Other regions where Inima aims to grow are in the Middle East – Inima is shortlisted along with Ionics and IDE for the giant Hadera project in Israel – in Eastern Europe and in the US. The US will become particularly promising “once the political decision is made to press ahead with desalination” because “US companies are very inexperienced in operating concessions. We were called in by a local promoter to build and operate the Taunton River concession because US companies didn’t know how to do it”.

However, though García-Zarandieta has ambitious targets for the company – a €300 million turnover and a €3 billion order book by 2011 – he recognises the dangers of attempting to grow too fast. “Since winning the contracts in Algeria, we’ve become more selective,” he admits. Inima’s “huge growth has implications, particularly for human resources – not only technical human resources but plant operators, lawyers, finance specialists. If you’re not careful you can die of success”.

The company was set up as a national environmental institution in 1957. It has come a long way since then.

Inima’s parent company OHL is Spain’s sixth biggest constructor. In 2005, its turnover was €2.442 billion, up 9.8% on 2004. The company made net earnings of €102.3 million, up 151.5% on 2004, thanks in large part to the success of the launch of OHL Brasil on the São Paulo stock market. The group’s order book also grew by 37% to €22.6 billion while its net indebtedness fell by 46.5%. Inima made a gross operating profit of €12 million on sales of €65 million in 2005. It has what it claims is the largest order book in the sector, worth €1.9 billion.

It pioneered desalination technology in Spain building the first MED plant in 1968. It has since built over 20 desalination plants in Spain and operates plants with a total capacity of 365,000m3/d including the 120,000m3/d desalination plant at Carboneras. It is currently constructing the 65,000m3/d Alicante II plant for the Spanish Environment Ministry.

It has also built 50 small brackish water industrial plants and 100 wastewater treatment plants, while it operates 40. The company has a subsidiary specialising in industrial wastewater treatment.

Principal international references
Mostagenem/Algeria (in partnership with Aqualia) 200,000m3/d SWRO 25-year concession with $211 million investment (at project stage)
Cap Djinet/Algeria (in partnership with Aqualia) 100,000m3/d SWRO 25-year concession with $102 million investment (at project stage)
Antofagasta/Chile 52,000m3/d SWRO 18-year concession with €32 million investment (in operation)
Los Cabos/Mexico 20,700m3/d SWRO 20-year concession with $22 million investment (under construction)
Taunton River/US 18,900m3/d BWRO 20-year concession with $32 million investment (under construction)