Cayman’s Consolidated Water Company has won its bid to build a half-billion-dollar desalinization plant in Mexico, making the company a global leader in water-processing technology, and opening the way to parched markets in the southwest U.S.
The award by the state government of Baja California came on June 15 after a two-stage bidding process. Consolidated Water beat Spanish and Singaporean rivals, and hopes to begin construction early next year on the first of two phases, each supplying 50 million gallons of desalinated seawater to Tijuana and other northwest Mexico markets.
“This is the biggest project we’ve ever done,” said Consolidated Water President and CEO Rick McTaggart, returning from the award ceremony in Mexicali. “It’s a long-term, 40-year project and puts us in a class of ‘desal’ experts capable of building some of the biggest plants in the world.” The company already operates a plant in Bali, Indonesia, supplying between 44 million and 54 million gallons per year to a group of four-star and five-star hotels and residential properties.
While revenues have not yet proved sufficient to register a profit, Consolidated Water launched the project only in late 2012 and anticipates local demand will ultimately consume the plant’s nearly 800,000 gallon per day capacity.
Tijuana is the largest city in Baja California and part of the international San Diego-Tijuana metropolitan area, sharing a 15-mile border with the southern California city. The link between the two is the world’s busiest land-border crossing. A major industrial and financial center, Tijuana has a population of nearly 1.7 million – boosted by 80,000 immigrants per year – and is among the fastest-growing metropolitan areas in Mexico.
Consolidated Water’s Mexico project encompasses construction and operation of a 100 million-gallon-per-day seawater reverse-osmosis desalination plant and an accompanying pipeline to deliver water to the Mexican potable water system, and eventually hopes to supply between 20 million and 40 million gallons per day to more than 3.3 million people in San Diego County, helping allay drought conditions plaguing much of southern California.
Phase one of the project is scheduled to finish in 2019 and phase two in 2024.
Consolidated Water has been working on the project since at least 2010, when it acquired a 50 percent stake in Mexico’s NSC Agua, described in the company’s annual reports as a “Mexican development company … formed to pursue a project encompassing the construction, operation and minority ownership” of the plant.
That stake was ultimately raised to 99.9 percent and in 2012, NSC Agua signed a 20-year lease with the government for 5,000 square meters of land to build water intake and discharge works.
Subsequently, NSC bought 20.1 acres for the plant itself, gained ocean access and contracted for 80 megawatts of power – the equivalent of more than half of Caribbean Utilities Company’s annual production – from the adjacent generating plant. Consolidated Water has designed the piping network for incoming seawater and outgoing fresh water, bound for both Mexican consumers and the U.S. border – although penetrating the American market will depend on U.S.-Mexico talks.
Consolidated Water has already spent $20.7 million for land and equipment in Rosarita Beach, and another $16.7 million in development expenses, which include an equipment piloting plant, a water data-collection program, engineering studies and governmental permits.
In January 2015, the company submitted a preliminary – and unsolicited – plan for the project, followed in late March by a more detailed proposal.
Baja California accepted the plan as “in the public interest, opening public tenders on Nov. 6. On May 20, the Mexicali government named Consolidated Water the winner of the preliminary technical bidding, setting June 15 for the final selection.
Mr. McTaggart said Consolidated Water acquired in February “a controlling interest” in Florida’s Aerex Industries, paying $7.7 million for a 51 percent share.
Based in Fort Pierce, Aerex manufactures equipment and provides services for a range of products for municipal water treatment and industrial water and wastewater treatment, providing “complete, customized solutions to your needs from membrane systems and vessel products to solutions and treatments for water and wastewater, purification and recovery processes,” according to the company website.
At the end of last year, Aerex registered unaudited revenues of more than $19 million.
At the time, Mr. McTaggart welcomed the acquisition, saying it represented “an important first step of the expansion of our business model into other water-related industries and markets.”
“The equipment it has manufactured for us is integral to the performance of some of our most efficient and profitable desalination plants,” he said, pointing to the benefits of vertical integration of Consolidated Water’s supply chain and that the company provided a U.S.-based platform to “expand our customer base and product lines.”