Desalination could be PSG’s new sweet spot
PSG Group — the R60bn investment group — is backing a small Strand-based water desalination specialist that it hopes to turn into a multibillionrand business.
With the water shortage in Cape Town reaching critical level, Business Day learnt on Friday that PSG Alpha power management subsidiary Energy Partners had secured an option to take a 50% share in GrahamTec for an undisclosed sum.
PSG has shown a knack for backing fledgling businesses such as Capitec Bank, and private education supplier Curro Holdings and turning them into huge successes. It reckons water desalination could be another sweet spot.
In August. the City of Cape Town issued its first tender to produce an additional 500million litres of water from desalination plants. It is expected that the first desalination plant should be in operation by the end of March 2018.
GrahamTec CEO Julius Steyn said the company submitted four tenders to the city council for erecting water desalination plants. Dams providing water
for Cape Town are at less than 40% capacity after below- average winter rain and predictions are that the city could run out of water by the end of the first quarter of 2018. SA has only one other major desalination plant, in Mossel Bay.
There is also speculation that GrahamTech is on the verge of clinching a big deal in Saudi Arabia – the details of which could be released as early as November. The company uses reverse osmosis to produce fresh water from mobile plants that cost about $3m to set up.
The modular plant, with a life expectancy of about 25 years, is capable of producing 3-million litres of fresh water a day. GrahamTec’s plant was capable of producing water at R12 a kilolitre, Energy Partners CEO Karel Cornelissen said. But if its production capacity was harnessed by the City of Cape Town only over two years, the cost of producing water would rise markedly to ensure that the project was viable. The Municipal Finance Act precludes municipalities from committing to projects for longer than two years.
Cornelissen said it took about ten weeks to set up a plant.
“There are roughly two weeks of manufacturing with around six weeks needed to wait for specialised components to be ordered from around the world.”
CEO Piet Mouton said PSG was excited to be backing and providing funding for GrahamTec. “These guys were originally water-services consultants. We are effectively giving them a balance sheet so the company can own its operating assets.”
PSG typically makes a small initial investment and then ramps it up as the operation’s traction is established — in accordance with founder and chairman Jannie Mouton’s philosophy of making an investment that can either be a huge success or a small failure.