The Pridesa acquisition has opened up a new frontier for Thames Water, which has until now been viewed in the Middle East solely as a water supply and wastewater company. 'We see the future of desalination moving to reverse osmosis,' says Thames Water Middle East director Jim Bentley. 'The membrane process is about water pressure management and pre-treatment. This means the desalination market is going to get much closer to the core skills we have as a water manager than it has in the past.'

The twin priorities of providing power and fresh water to meet the Middle East's sharply rising demand over the past two decades have meant thermal desalination plants were developed together with power plants. This has allowed excess power generated to be used to heat the saltwater.

Conservation

Now the situation is changing. Governments have become increasingly aware of the importance of water conservation. The result is a rise in the number of free standing desalination schemes, which no longer makes thermal desalination the automatic choice.

The shift dovetails with the emergence of corporate social responsibility (CSR) as a business driver for many publicly-quoted Western companies. CSR means investing in, and buying from, companies that are seen to be environmentally friendly and socially responsible. For a company such as Thames Water, which prides itself on its ethical credentials to such an extent that it has a CSR director, the shift to greater water efficiency is a logical and desirable development.

'We look at desalination as part of water efficiency, which is what we are about,' says Bentley. 'We do not want to just build desalination plants. We want to provide water efficiency and recycling in total.'

The Middle East is an important target region for Thames Water. Its biggest market is the Mediterranean market - particularly Spain and Portugal, where Pridesa already has a strong position - followed by the southern states of the US and the Middle East.

A year on from completing the acquisition of the Spanish companies, Thames Water is working on detailed plans for international expansion, says Bentley. 'We are looking at a range of potential options to develop long-term business plans, and the UAE and Saudi Arabia are key markets. However, I don't believe we are going to make a large splash in a short period. It will be step by step.'

Iraq is not among the company's target areas, despite the fact it is already working in the country, providing mobile water supplies. 'We are not positioning ourselves for commercial contracts in Iraq,' says Bentley. 'Our Middle East strategy is clear and it is about desalination and water efficiency. We are targeting half a dozen countries, the places we know best. Number one is the UAE. Number two is Saudi Arabia, where we are currently operating as a consultant.'

The company currently has three major projects in the Middle East. Since 1997 it has been providing consultancy and management services for one of the largest wastewater treatment works in the world, at Gabel el-Asfar, near Cairo. In Turkey, it is working with local partners Gama and Guris and Japanese companies Mitsui and Sumitomo, having been awarded the country's first build-operate-transfer (BOT) water supply project in 1995. The scheme - the largest private-sector project of its kind in the world - involved building a huge earth dam, a water treatment plant and a 146-kilometre trunk main system in Izmit, east of Istanbul.

Wastewater

The company's other Middle East venture is the $140 million Ajman integrated wastewater project. Thames Water has a 60 per cent shareholding in the project. Other investors are the US' Black & Veatch International and Six Construct of Belgium, each with 10 per cent, and the government of Ajman, which holds the remaining 20 per cent. Thames Water also has the contract to operate and maintain the network for the duration of the 27.5-year BOT contract.

Ajman has been important to Thames for several reasons, not least because it was the company's first major investment in the Gulf. 'It is a significant investment and we are playing to our core skills,' says Bentley. 'We are not an EPC [engineering, procurement and construction] contractor. We are an operator and an investor. Ajman is a sign of our commitment to the Gulf.'

Ajman is also a showcase for what Bentley calls the second strand of Thames Water's Middle East strategy - an alliance with Sharjah water company Metito. 'We have formed a non-incorporated alliance with Metito and we will look to develop opportunities in the Gulf with them. So, some things we will do with Pridesa and other things we will do with Metito,' he says.

As an EPC contractor with operations and maintenance (O&M) capability in RO, Metito is a natural competitor to Thames Water. But Bentley says the alliance shows that Thames Water has reached a point where it is happy to align with competitors, if that route offers the best fit for a particular project.

'We formed the alliance for the Ajman O&M contract because we recognised that we needed people who were technically competent but who also had local knowledge and skills, such as language. This is the first alliance of its type in the Middle East,' he says.

Bentley does not predict many similar projects in the short term - instead advocating a more cautious approach. 'We certainly want more desalination and we certainly want water efficiency in the Gulf. This is our first step,' he says. 'Five years ahead, I would hope to have two or three significant desalination projects in the Gulf, probably the UAE and Saudi Arabia. So it will not be a rapid expansion. I imagine we will also have more operational and consultancy contracts.'

However, it is clear that, irrespective of the number of contracts Bentley secures, the message Thames Water wants to send out the loudest is more efficient use of water. 'It is all about using water as efficiently as possible,' he says.

Richard Thompson