Befesa takes a new approach to the US

After struggling to make the numbers add up on Poseidon’s Californian desalination projects, the Spanish company has made an acquisition to fully realise its new strategy.

Spanish desal specialist Befesa has bought Texas-based NRS Consulting Engineers following a significant refocusing of its US strategy. Carlos Cosín, head of Befesa Agua’s international division, commented: “We have spent three years following the projects of Poseidon, and I do not think that it is the proper way.”

Poseidon is developing desalination plants at Carlsbad and Huntington Beach in California on a design-build-finance-operate basis. Befesa bid unsuccessfully for the engineering, procurement and construction contracts on these projects, and the experience confirmed Cosín’s belief that it is difficult to deliver value to both clients and shareholders in EPC-only contracts. “I think that the water business cannot provide three different margins – for developer, EPC contractor and operator,” he told GWI. “The idea that we are working on in Befesa is that we will be responsible for the EPC, and we will also be the operator and the developer. With these three margins I think that we can reach the tariff that is in the market.”

The acquisition of 51% of NRS gives Befesa a base from which to expand in the US. It has built its reputation designing, building and piloting brackish water desalination projects in Texas. It has revenues of USD7.5 million and employs 50 staff. “In the next two years I would like to take advantage of the opportunities in Texas within brackish water, and also the three seawater projects which are coming up.” The company will also pursue desalination projects in Nevada, Florida, California and Arizona.

Cosín is aware of the hostility towards private water in the US, but he believes that Texas “is the most advanced state in the water business”. Befesa’s parent company Abengoa has already established itself as a leading renewable energy developer in the Southwest. It is building the world’s largest solar power plant in Arizona, with a USD4 billion 30-year contract to sell the electricity to the Arizona Public Service Company. With the support of Abengoa and NRS, Cosín believes that it will be possible to develop a business as developer, operator and EPC contractor in the US. “I am pretty sure the time is coming for this with Obama.”

The target is to build a USD100 million business in the US within three years.