Interview: Tawfiq Abu Soud of Drake and Scull
Managing director of D&S Water and Power division on growth ambitions
Tawfiq Abu Soud, Managing Director of Drake and Scull Water and Power, on growth, partnerships and responsibility
This is not the first time Tawfiq Abu Soud, Managing Director of Drake and Scull Water and Power, has sat across from a journalist and said: “the sky’s the limit” with a big smile.
A quick look at Drake and Scull’s latest set of financial results reveals why; things are going extremely well for the power and water specialists, and it’s not by chance.
The most recent set of figures released by the company, for Q3 2011, show a 96 per cent increase in revenue, and a 77 per cent increase in net income year on year. Clearly, they’re doing something right.
“Drake and Scull Water and Power has, in the last two years, adopted a philosophy of vertical and geographical diversification,” says Abu Soud, with perhaps the most obvious example of this being the firm’s high-profile acquisition of German water and wastewater specialists Passavant-Roediger.
“This was the first acquisition for DSWP, at the end of 2009, and it has added strength to the company across the board. With Passavant-Roediger, our geographical spread now covers China, India, south east Europe including Romania, Bulgaria and Ukraine, north and South Africa, Algeria and Sudan. The acquisition had two folds – to extend our geographical presence, and to add to our water and wastewater knowhow.”
Drake and Scull Water and Power is a standalone legal entity with its own subsidiaries, established by DSI PJSC. Headquartered in the UAE, the company operates in virtually every aspect of the water and power industries, including district cooling, wastewater treatment, power infrastructure, infrastructure for oil and gas projects and telecommunications.
Historically, the firm is best known for its district cooling expertise. Having been responsible for some major projects – Dubai’s Festival City and the Jumeirah Beach Residence cooling plant to name two – DWSP is now looking at other sectors to expand into.
“Now we are looking into renewable energy, and we’ve got our first project in India. It’s a small project – one megawatt – but it’s a start. It’s a solar photovoltaic plant, and on the back of that we’re hoping to get larger projects through strategic alliances and partnerships.”
For the solar PV business DSWP has constructed a strategic alliance with a Spanish firm, and also recently announced a deal with Australian geothermal specialists Earth and Heat Resources, signing a memorandum of understanding to jointly explore, bid for and secure geothermal opportunities in the Middle East and Africa.
Discussing the deal, Abu Soud said: “There is substantial demand and growth in the new energy space in the region, and our association with Earth Heat will allow us to explore and identify viable geothermal project opportunities in the MENA region, especially with government endorsement of such developments through tax incentives, grants and carbon credits.”
But while interest in alternative energy projects in the Middle East is rising at an unprecedented pace, it’s not DSWP’s main area of focus ”If you add up all the projects in the Gulf, it will come to a fraction of the requirements of the solar and renewable energy requirements in India – a small fraction.
Article continues on next page ...
Hence our first project is in India, and the plan is to have a substantial number of solar plants by 2017 or 2018, which is a massive undertaking,” says Abu Soud.
But these projects are not without their pitfalls. “The lifecycle of these projects, from creating the opportunity until you sign a contract, is very long,” Abu Soud explains.
“We’re talking more than two years sometimes, so if you look at the business of utilities, you have to have patience. You have to be willing to invest time and money before you see results.”
As an experienced EPC contractor, DSWP also sees some issues with the management of projects.
“The EPC contracting, or design and build (which is one level higher) principles are not really very well adhered to in this area. When you design and build or EPC, you do not need the client’s approvals on many issues, but in this part of the world they often misinterpret consent to approval.
So usually you need the consent of the ultimate client for what you are doing, but at the end of the day the liability of the design and the responsibility remain with the EPC contractor.” So why is this, and is it changing?
“It’s an education,” he explains. “The whole region is used to doing construction contracts, and the design is done by a consultant appointed by the employer, who then directs the consultant to do whatever they want.
In design and build or EPC, the client can give us the performance criteria and the preferred look, and leave the rest to us.”
One area of the business Abu Soud is enthusiastic about is Zero Liquid Discharge, or ZLD, which is a process that continues to treat, purify and recycle wastewater at a plant so that nothing is left.
“The payback period for this process is longer than the normal process, but we have a responsibility to the environment and to all stakeholders, whether it’s the municipalities, the government or local authorities,” Abu Soud says.
“The concept is that district cooling plants use a lot of water; massive amounts of water. A plant like the Jumeirah Beach Residence facility, which we built, uses probably 20,000 cubic metres per day at full capacity. Much of the water is evaporated, but the rest of the water that goes into the system cools the chillers and comes back again.
“The water that comes back has chemicals in it, so we treat the water and reuse it again. Whatever we get back, some of it will evaporate and some of it will remain, so we use the remaining water over and over again. We do not discharge any water into the external environment.”
And while the payback period is longer, Abu Soud insists that financially it looks good. “Instead of having a payback period of five or six years, it might be seven years,” he says.
“But financially it is viable, and especially if we’re losing potable water – in a lot of areas there isn’t sufficient treated sewage effluent, or if it is available there might not be the distribution network.”
Article continues on next page ...
On the subject of district cooling – a concept that has seen periods of boom and bust – Abu Soud is confident that a better understanding of capacities and a more cautious attitude to construction could ensure the cooling method a sustained future.
“District cooling has been overbuilt in the past. Four or five years ago money was not an issue, so if you wanted a 10,000 cubic metre capacity plant, you built 15,000 and found another 5,000 to hook up to it.”
When construction slowed, the need for cooling capacity dropped and firms were left with dead assets, having put large amounts of funding into underground infrastructure for which there was no longer demand.
“That business model cannot apply now, and you have to be more prudent – very prudent. You have to plan when to spend the money, when to put the infrastructure underground, and you have to work with the developers in order to reduce the exposure of the infrastructure.”
Working as a full-service EPC contractor is also something Abu Soud sees as one of the reasons behind the firm’s success in the region, both in terms of efficiency and trustworthiness.
“It’s one point of contact,” he explains. “You don’t have one contractor to do the pipes, one contractor to do the pumping stations and one contractor to do the wastewater treatment plants.
If something fails, nobody knows who is responsible, but with us, you know who is responsible. The schedule for responsibility is very clear, and we’ve been pushing this for a while.
The first contract of this type was in Sudan four years ago, on a design, build and operate basis. So we design the plant, build it and operate it for ten years which ensures our design is good and our construction is fit for purpose. If it’s not designed and constructed properly it’s going to cost us a lot of money to operate.”
The firm currently has similar projects running in Qatar and Saudi Arabia; the latter being an important country for DSWP’s future development. Having recently gone strong on Saudi development, Abu Soud admits that more could be done to facilitate working in the Kingdom.
“Drake and Scull has been in Saudi Arabia for some time, but during the last few years we went all out for Saudi,” Abu Soud says. “We have done a couple of acquisitions in the Kingdom, and they were very important in order to allow us to work there and have people already on the ground.
But getting Saudi visas and employing engineers and technicians is very difficult.”
But he’s confident this will change. “It has to – it will be with restrictions, but it will change because there is a need. Somebody will look at those needs and manage them.”
Access aside, Abu Soud is confident that the Saudi Arabian market is growing – at least for now.
“It does depend on which area of Saudi and in what sector,” he says. “If you’re talking about wastewater and treatment, very few local companies do that, but competition is fierce – you’ll probably find 40 international applicants for tenders, out of which only probably half a dozen will be prequalified.”
Article continues on next page ...
“Don’t forget also, with wastewater treatment, it depends on how much water you have in the first place. Your wastewater cannot be equal to your water production; this water is actually upstream. You have to look at the consumption per person, and then see how much wastewater capacity you have to build. We are currently bidding on many projects in Saudi Arabia’s water and wastewater industry.”
Partnering with regional experts is also a strategy that has really paid off for DSWP. “We always try to find ways to reduce cost, so we can be competitive. This is mainly by selecting strategic partners that are super-specialised in some areas, which means I don’t have to create a specialised division; I can outsource it in order to be competitive.”
This approach is necessary when you look at the broad geographical reach of the company’s operations; working across different countries brings with it a set of challenges that cannot be taken lightly.
“It’s easy, but difficult at the same time,” Abu Soud explains. “It’s easy if you do your homework correctly, so before we go into any new territory we send a team and do proper due diligence.
We try to find people from that country who have worked in our area; for instance, when we go to India we look for people to employ in the country to manage our office there, who understand the culture of our operation and also know the culture of their country.”
“We keep tabs on each and every project in the Middle East, whether it’s district cooling, wastewater or water treatment. Our business development team is always on the run, trying to find sales leads and even trying to know about projects from their inception.
When the client starts thinking about it we want to be there, and we do create opportunities by going and checking the needs for a region or country.” In terms of money and time it’s an expensive process, opportunity creation, but for DSWP, ultimately worth the investment.
So how does the company manage to work in so many regions, across so many different sectors, and still maintain cohesive growth?
“We do research and development all the time,” Abu Soud says. “We also do value engineering for the clients all the time – any proposition that saves money and time to a client, or improves operation of the cost of operation or maintenance, we always put on the table.
How do we manage this? It’s very simple – people are accountable, but authorised. We have ownership – we don’t put a manager into India or Romania with no authority to manage the business. Everybody has a limit of authority, and we have a good control system, and a risk policy in place.”
And one final question, to which I should have guessed the answer: Where do you see Drake and Scull Water and Power in 10 years’ time? “The sky’s the limit.”
Meet Tawfiq Abu Soud
Tawfiq Abu Soud is an executive member of DSI PJSC, and has more than 25 years’ experience in the oil, gas and MEP contracting fields. Having built, diversified and expanded divisions and departments across several companies, Abu Soud was previously responsible for the MEP operations at the Jordan-based Manco Contracting WLL.
With more than 13 years at the company, Abu Soud is DSI’s longest-serving executive, and is responsible for developing and maintaining strong working relationships with existing and potential business partners, and identifying opportunities for expansion along with stimulating demand for the company’s water and power offerings.
Abu Soud has an MBA from the University of Hull in the UK, as well as a BSc specialising in mechanical engineering from Southern Illinois University, USA.