In 2008, the management of UAE wastewater firm Metito said it was planning an initial public offering (IPO) within three years. At the time, the company turned over $330m annually and was aiming for $500m before 2010. The world has changed a lot since then, with the global economic crisis and the Arab Uprisings, but Metito still plans to go public.

Executive director Rami Ghandour says the internal preparation for floating the firm was done in 2010. “We had [US management
consultants] Deloitte come in and do an IPO readiness assessment,” he says. When Metito decides the time is right to list its shares, it can be ready “within a few months”.

Going international

The company will first have to decide where to float and Ghandour says this is undecided, but his firm is erring away from regional bourses. “They are designed for local companies and we are not local,” he says. Metito was founded in Lebanon in 1958, but moved its headquarters to Guernsey in 1976, the same year it opened an office in Houston. Now it is based in Dubai, although it has offices and operations around the world.

Ghandour says local stock markets are also hampered by restrictions and lack either the liquidity or the structure for firms to access them on multiple occasions, a point that is crucial to Metito.

Three markets are on a provisional shortlist. London is one, as “it understands [the Middle East and North Africa region] very well, it has a long history here, and emerging market companies tend to go to London from all over the world,” says Ghandour. The other two are Hong Kong, which was the world’s most active market for IPOs last year, and Singapore, which “has an analyst community that knows the water sector well.”

Metito in numbers
Annual turnover (2011) 300
Value of current Metito Overseas contracts 964
Contracted revenues of Metito Utilities deals 1,383
Source: Metito

“The need for us to IPO is due to the fact that Metito Utilities [the owner-operator arm of the firm] is a capital-intensive business,” says Ghandour. “If we are to continue our growth we need to invest in our assets. We need to optimise our costs and capital. We are private-equity backed by [Abu Dhabi-based] Gulf Capital, but we need to have a more efficient and suitable source of capital to invest in infrastructure.”

For now, however, there is no timetable for the IPO and the management is waiting for the global and regional economy and the investment climate to improve. “As a mid-cap, we would be too small to change the direction of world markets, so we want to wait until the environment is better,” says Ghandour.

Metito’s current priorities are restarting its 30 projects in Libya, where the government repaid invoices in September, and winning deals worldwide. Despite being Dubai-based, the firm has enjoyed success in Asia and today 60 per cent of operator revenues come from China, where it operates seven treatment plants.

These revenues come from Metito Utilities, formed in 2007 as an owner-operator of water treatment assets. Engineering, procurement and construction, contracting and design operations are conducted through Metito Overseas. Metito Utilities entered China in 2008 in a joint venture with Germany’s Berlinwasser to build and run a 500,000 cubic-metre-a-day treatment facility in Nanchang, a city of 8 million people located 600 kilometres from Shanghai. In 2011, Metito bought out its partner’s 49 per cent stake.

In the Middle East, the firm is perhaps best known for launching the region’s first build-own-transfer (BOT) wastewater facility at Dubai Investments Park in 1999. The company built the facilities and will operate them for some years before transferring ownership back to the client. Metito also launched a concession in the same year in Sharm el-Sheikh in Egypt, supplying desalinated water to 50-60 hotels.

But Ghandour says public-private partnerships (PPPs) are still underused in the region. “Qatar has not embraced the BOT model,” he says. “They like to do everything themselves, and they think they have everything under control. They don’t have much of an issue financing things compared to other countries.”

“I think [regional governments] would be better served by private sector models,” he adds. “I believe the private sector will have a more efficient approach. We’ve seen it in the projects that we’ve done.”

In Indonesia, Metito has supplied water to Jakarta’s port since 2006. Under state operation, 56 per cent of water leaked away or was stolen. Within eight months, Metito had reduced wastage to 11 per cent without significant spending. “It wasn’t [the government’s] core business, but for us it is our core business,” says Ghandour.

Alternative financing

He says the region can benefit from studying alternative financing models used worldwide. In Hefei, in Eastern China, Metito operates a treatment plant on a takeover-operate-transfer (TOT) basis. The municipality fixed the tariff when it sold the operation to Metito, leaving a sophisticated adjustment formula in place to take account of factors such as the cost of power and chemicals, and consumer spending.

There have been no TOTs in the region yet, but Metito is in talks with local municipalities and private developers. “We are looking at acquiring projects, be it from government bodies privatising their plants, or from private operators who might have developed a plant and want to sell it,” says Ghandour. Egypt, Saudi Arabia and the UAE all have potential. “In the UAE, you have real estate developers who have developed assets that are not their core business. For them it is an opportunity to realise some capital,” he says.

It may take time for PPP models from overseas markets to enter the region, but Metito is banking on governments and developers being won over by efficiency and gradually changing their philosophies.