"A project where we design, build and operate the plant gives the client a guarantee it will work properly"

Friday, April 15, 2011

The El Zapotillo-León pipeline is one of Mexico's largest water projects for 2011, with capex pegged at some 5.36bn pesos (US$454mn).

The project has two major components. The first is the 911Mm3 Zapotillo reservoir in Jalisco state and the second involves building and operating a potable water plant and 140km pipeline to transfer water from the reservoir to León in Guanajuato state.

Mexican water company Atlatec is one of the potential bidders for the 25-year pipeline concession, which national water authority Conagua is scheduled to award in June.

BNamericas spoke with Atlatec's director of business development, Rafael Forseck, about the project, as well as the company's other plans in Mexico and the rest of the region.

BNamericas: Atlatec is looking to bid for the El Zapotillo-León pipeline. What's the main attraction of that project?

Forseck: Yes, we're already preparing the proposal and forming a consortium to participate in this project.

As part of the Mitsui group, we're interested in participating in everything to do with water-related projects, not only wastewater treatment, but also pipelines, desalination plants and potable water plants.

This pipeline also has a potable water plant as part of its scope. It's a very important project for us.

BNamericas: Has the tender process been efficient?

Forseck: Yes, in fact Conagua's invested a lot of time and effort in this project for the city of León, which has serious issues with water scarcity and the overuse of aquifers. They've completed all the studies and procedures needed to implement it. Especially considering there is a certain complexity in putting this all together with federal funds, from Conagua or Banobras, the Mexican government's development bank, and the Guanajuato state government and Sapal, the water and sanitation utility in León.

I think Conagua has followed a very good process to develop and tender the project. Like all projects there are some clarifications and questions still on the table, but in general it's been a well-structured project under the private financing model of Fonadin, the Mexican government's national fund for infrastructure.

BNamericas: Atlatec has been involved in some 80 projects. How many plants do you currently operate?

Forseck: We operate 20 plants directly. In the other projects the scope was to build the plant and then hand it over to the client to operate it. There is a mix of industrial and municipal projects.

BNamericas: Do you prefer pure construction or construction and operation projects?

Forseck: Our intention is to look for projects that include the design, construction and operation of water plants, in some cases with our own financing, which is private financing or sometimes with public financing from the company that hires us.

Having a project where we design, build and operate the plant gives the client a guarantee that it will work properly.

BNamericas: Is that how most tenders are structured in Mexico at the moment?

Forseck: Under the previous system with the Mexican government, you might have a series of projects where for example, first they would hold a contest to do a feasibility study. It would be awarded to a company, then with that study they would launch another tender for the executive projects, the engineering, and company B would win. Then another tender is held to carry out the construction and company C would win the construction, then finally a tender for someone to operate it, and company D would operate it.

When things didn't work like they was supposed to, D would blame C, and C would blame B, and B would blame A. When you have just one company responsible, there's no one else to blame and you have to resolve the problem.

That's what's made the tender of many of these projects viable; otherwise it's possible they could still be stagnated. With only one player responsible, whether it's an individual company, or a group of companies in a consortium, we can be more effective and efficient with these types of projects.

BNamericas: Wastewater treatment plants seem to form the bulk of the company's projects; are they still the main focus?

Forseck: The area where we are dominant and have most experience is in wastewater treatment. But we also participate in industrial wastewater projects. We're leaders in treating wastewater at the refineries of [state oil company] Pemex. Of the five refineries they have in Mexico that have integrated water systems, we've designed, built and are operating four of the wastewater treatment plants, so this is also a strong area for us.

And also we have a lot of interest, and also experience, in participating in projects and tenders for potable water plants and desalination plants.

BNamericas: Desalination technology is often regarded to be prohibitively expensive - have you had a lot of success in this area?

Forseck: That's the impression that people have in general about desalination plants; that the technology's very expensive. But the reality is that there are constant advances, especially in reverse osmosis membranes, and there are reverse osmosis projects where very competitive prices have been reached. So project by project we've been participating in some tenders where depending on the need we feel like we can present a good proposal.

And that's the plan in general for Atlatec, making things to order. It's not all one specific technology where if you have a problem I have to adapt my technology to your problem. It's more like I see a problem that you have and I adapt a solution to that problem using the most adequate technology, which could be American, European, or Asian depending on the problem. And in that way we're focusing on some opportunities that we've detected in the realm of seawater desalination.

BNamericas: Most of Atlatec's projects are in Mexico - have you had any projects in other parts of the region?

Forseck: In 2001 we were acquired by Tyco Group from the US, and for some years we worked as Hertec Mexico. We were in charge of operations for projects that Hertec had in Latin America, in Venezuela, Brazil, partially in Colombia and in Trinidad and Tobago. We currently maintain operations of a 1.2m3/s plant in Puerto España in Trinidad and Tobago.

Since July 2008 we've been part of the Mitsui Group and the operations in Mexico and Trinidad and Tobago were newly incorporated into Atlatec.

BNamericas: Do you have any plans for expansion to other countries in the region?

Forseck: With the support of Mitsui our intention is to participate effectively in water treatment projects in Latin America. Currently we're identifying business opportunities in Peru, Colombia and some countries in Central America.