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‘We see there’s a push from the government towards DC’

Jasim Husain Thabet, CEO, Tabreed, speaks to B Surendar about the sector and the best practices being evolved by the company in its endeavour to create new benchmarks.

| | Jun 8, 2014 | 10:10 am
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In the wake of what is seen as a nascent economic upturn in the region, Tabreed, one of the leading District Cooling providers, has registered positive gains in the first quarter. In this context, Jasim Husain Thabet, CEO, Tabreed, speaks to B Surendar about the sector and the best practices being evolved by the company in its endeavour to create new benchmarks.

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What are the attributes and underlying reasons that have helped National Central Cooling Company PJSC (Tabreed), achieve the recently announced profit (AED 272.4 million)?

As you know, we are not only a regional utility company, but we are also a publicly traded company. So, we have the obligation to go to the market every quarter and give our results. And we have just released our Q1 financial results – a strong bottom line result. Our net income has increased by 22% compared to the same period last year. And the key drivers include the fact that we have connected 16,000 tonnes (TR) in this quarter alone. And also, we have proved efficiencies and reduced finance costs.

You say increased efficiencies. Just to understand, in what sense? Could you give us some specifics?

When I say that, I mean organisational efficiencies, and not technical, not practical [efficiencies]. As a company, we are always striving to operate in a more cost-effective manner. And that’s always the focus for us – to not only grow the business but also to try to manage our costs.

And when you talk about 16,000 tonnes of refrigeration of new connections in Q1, that efficiency is also going to underpin how you perform overall, yes?

Yes. So the 16,000 tonnes is additional connections, and not really related to efficiencies. So, if you are trying to focus on plant efficiencies, yes, that’s a key driver for our company, and we focus a lot on power efficiencies. We have some Alpha plants that operate at 0.85 kw/TR Also, as an organisation and as one of the leading District Cooling companies, we are engaged in further improving that and not accepting the status quo. So, we are taking several initiatives on the technology front.

Last year, we signed a Research & Development agreement with MIST (Masdar Institute of Science and Technology) where we have identified one cooling plant, and we have some leading professors – ex-MIT – participating in Masdar and looking at ways to improve efficiency, developing our growth to make sure at what speed the compressor should run and at what speed the cooling tower should run to get that 100% improved efficiency.

That’s on one front. We have also signed an MOU early in the year with IRENA. It is at very early stages. We are exploring ways we can reuse the waste heat from the power plants to provide cooling, either to some of the industrial areas, or use it to cool the intake again, to improve the efficiency of the power plant. All these really contribute to improving efficiency. There are other things we are working on, and we will announce them soon.

Going back to efficiency in District Cooling, what is the industry benchmark? Is it efficiency against standard load? Chillers? What is the true measure of efficiency?

We are one of the biggest District Cooling companies in the world, and looking at benchmarks, many people take benchmarks from us when it comes to efficiencies for complete systems – not benchmarks for standalone chillers, but the entire, overall plant. And we continuously aspire to exceed the bar. Like I said, we have some plants, which are at 0.82 kW/TR, 0.83 kW/TR, and we take it on ourselves to beat our best plant year on year. So it’s an internal KPI or benchmark. And we are also looking at other ways to improve efficiencies with some technology providers.

And you are in collaboration with Masdar?

Masdar is more our end-user. We are looking more at some short-term technology providers. And it’s not only the efficiencies – there’s the power element. There’s also the water element, and we need to look at the bigger picture of District Cooling. So, Tabreed has been using Treated Sewage Effluent (TSE) from the early days, since 2006 in Dubai. And now again, we are re-engaging… in Dubai. We are installing another TSE unit for one of our cooling plants. In Fujairah, we are working to install a TSE unit for cooling plants for the military. And, as an organisation, I’m in discussions with Abu Dhabi entities to make sure that we can tap into the TSE available in Abu Dhabi. So, it’s not only the power efficiency, but also the TSE.

Do you feel the market as far as the District Cooling industry in the GCC is concerned, has come of age? I ask this in the context of what we saw in 2005 and 2006, when there was a lot of frenzied activity, and people were talking big numbers like 15 million TR by 2015 in the GCC. We didn’t quite see that because of the global economic downturn. But do you see a more mature, wiser industry?

I believe District Cooling is a much stronger sector. Developers are starting to re-appreciate the benefits of District Cooling. Do we still see numbers of one million tonnes in two years? Yes, we see those numbers. In terms of how the market perceives District Cooling, it perceives it as not only a more efficient way of cooling, but also as a corporate responsibility. Companies want to have the most reliable and cost-effective way of cooling. That’s always been there. But now the trend is, developers and big organisations want to be able to participate in, as an organisation or as an entity, in the UAE or in the GCC, by contributing to reducing carbon footprint. We see mature organisations do that. However, District Cooling all over the GCC is different. Kuwait is different than Abu Dhabi, or Saudi is different than Qatar. We can’t really generalise.

But is there an overall perception that District Cooling is the way forward?

Yes, District Cooling is the way forward. I can speak about one example. Now in Abu Dhabi, all the government entities who require new facilities, new buildings – project management is being carried out under Estidama and Musanada. And these entities have sent out instrucions that for your new facility, you have to connect to District Cooling as a cooling option. We see that there is a push from the government towards District Cooling.

Do you see better engineering and management practices in the industry compared to prior to the downturn? What is Tabreed doing to be prepared for the economic upturn? Have you, in this time, gone through a period of introspection? Looked at historical data, looked at the way plants are being constructed and the way chillers have been deployed?

Absolutely. As a regional District Cooling company, we have built over 66 plants across the region, and there are a lot of lessons learnt and best practices we have developed. And there is a responsibility, as one of the biggest District Cooling companies, to ensure that the sector grows in a healthy way. So, as a company, and also as a leader in District Cooling, we have an obligation, when we see a certain developer or a certain project evaluating District Cooling. If it is not making economic sense for the end-user and the developer, where we don’t have the right density in place and the cost is tremendous, we don’t recommend District Cooling. It’s not only about having strong contracts back to back, it’s also about having the moral obligation to support District Cooling and to apply it wherever it makes sense.

So, do you tell the developer, “maybe DC is not the best option for you”?

Yes, absolutely. We have an obligation. In the end, these cooling assets will be there for 25-30 years. And we have to make sure that the developer that is going to use these assets, makes sense for him in the long run.

So, you would probably suggest that you are far better off having your own water-cooled chiller as an internal system?

Yes, if we don’t have the economy of scale for it, then we will suggest that. It’s not only about making the bucks, right? Also, other than that, like I said, we have built over 66 plants. And in the past, we were building relatively at a higher cost. Now, we are re-thinking how we can phase out, and how we can tackle the developments and how we deploy CAPEX, and how as a company, we are able to build the most cost-effective Dirham per RT plant, because, in the end, any savings that we can provide in terms of building a more cost-effective project can be transferred to the government organisations we provide cooling to.

You obviously have a lot of expertise built over the years. As part of the leadership, have you ever thought of coming up with your own best practices and sharing the findings?

Yes, we have our own Tabreed standards in terms of District Cooling. And I think, that’s one of the strengths of Tabreed. And we have been passing on our best practices to our sister companies. Have we thought about publishing a best practices guide on District Cooling in Tabreed? Well, not yet. But I think it’s a good point, and I think we should think of that.

You have a footprint in the region. But does Tabreed have any expansion plans beyond the region, into the Middle East, the Far East or into the Subcontinent? Also, in light of Empower’s acquisition of Palm Utilities and Palm District Cooling, are you also looking to consolidate, to acquire and be a larger entity, as opposed to growing organically?

We are not a local company based in one emirate. We are a regional company – a publicly traded company. And we have over 20,000 shareholders, and we grow, not for the sake of growing, but in a healthy and gradual manner. We provide cooling to critical constructions in the UAE, and across the region. We provide cooling to the entire UAE Armed Forces. You can imagine the entire Armed Forces relying on one company to provide their cooling. That says something.

And on a regional front, we have a good footprint in Saudi Arabia. I never dreamt five or 10 years [ago] that Tabreed would be providing cooling in the Holy City of Makkah. And we have the right partners in Qatar. And in Oman it’s relatively small, but growing very healthy and gradually. It’s about gradual, small, healthy steps for a utility company. We are not a real estate company. It is not a one-time EPC contract where you make one-off gains and walk away. We are out there. And in terms of going outside the GCC, I think the market is very healthy here. So, at this point of time, our focus is on the GCC. We see tremendous opportunity in the region. And as an organisation, we continue to evaluate other opportunities. And if the right opportunity arises in the Far East, we will explore it. Absolutely.

And as for consolidation, I see it as a very positive development. We see Empower acquiring Palm District Cooling as a positive thing. I mean, the governments and the country – it shows their belief in District Cooling.

Talking about us, as an organisation, we always look at organic and inorganic opportunities for growth. Maybe I can break up our growth in three chunks. We have three pies. To put things in perspective, our first pie is connecting existing assets that we have. If we have a plant on the Corniche in Abu Dhabi and another not too far away, we look at connecting the two existing plants. It’s already available, and it gives us higher yield and we are sweating the assets. It creates better cooling for the customers.

The second opportunity we look at is building new plants. We continue developing. We are in the final stages now of building several plants.

And the third pie is the inorganic growth. We continuously look at acquiring opportunities in utility companies and cooling plants. We are in very close stages of acquiring some assets in the region. And once we close them, we will announce them.

Tabreed has largely been providing cooling to commercial entities. Do you, at some point in time, see a change in your customer profile? Do you plan to diversify?

As an organisation, what really distinguishes Tabreed from other cooling companies is that our cooling is with big entities like the RTA, the Sheikh Zayed Mosque in Abu Dhabi, the Marina Mall…. But at the same time, we continue to evaluate and explore the possibility of looking at providing cooling to end-users – individuals.

Is that something that fits in well with your overall revenue strategy?

Yes. And it’s another market that we haven’t tapped into, yet. So, we are looking at that. And it’s a good opportunity to diversify. We see that other companies are doing it, and we continue to look at the market, and see how things go from there. But our strength remains with the big organisations.

We see a lot of industrial developments happening in the Eastern Province of Saudi Arabia. Do you feel that it’s an opportunity for you to step in and offer District Cooling for industrial purposes?

I think there is a lot of potential and opportunity in the GCC for industrial growing. And we are exploring opportunities, such as food processing, intake for power plants, etc.

We are also exploring geo-thermal cooling.

And Saudi Arabia is a huge market. And we provide cooling to Saudi ARAMCO. I mean, there is no bigger customer than Saudi ARAMCO. It’s one of the biggest companies in the world. And we are exploring with them to provide additional cooling to other facilities … to build additional plants. We are looking at expanding the plants.

Do you see some movement in Oman also, in terms of industrial cooling?

Not really. Oman is really more of shopping malls. We provide cooling to a mall? project in Oman, and we are exploring providing cooling to two other malls. Hopefully, we will be able to close in the next six months. Oman is interesting because they have limitations on building heights. You don’t get those high-rise 100 storeys like Dubai or Abu Dhabi. So it makes much more sense when you have those big malls.

Do you see some sort of push in the direction of thermal energy storage from the government – that they mandate its use? And as a District Cooling pioneer, have you been pushing in that direction, as well?

Whenever we have the opportunity to install thermal storage, be it water or ice storage, we take that opportunity, because we can run the plant more efficiently. During low periods, you can run the plant at a slightly higher load, and you charge your thermal storage, while the efficiency of the plant is maintained. And once the thermal storage is topped up, you either switch off one train or two trains of chillers, or completely – you can stop the whole plant – and run it in summer. And in winter, you can run it out of thermal storage.

Internally, in Tabreed, do you do that?

Internally, yes, if we have the plot available and depending on the size of the plant, we go ahead with thermal storage. We have plants which don’t have thermal storage, and we are thinking of upgrading them and installing ice [thermal] storage. In fact, we are doing it in one of our plants on Abu Dhabi Island.

You believe that thermal energy storage can also be used to increase the cooling load, as opposed to operating at partial load – maybe more close to full load. But in Tabreed do you have any spare or excess capacity, as such?

We have excess capacity. So there are benefits of thermal storage, if you look at it from the UAE or the Government of Dubai perspective. You are able to shift that peak. So the two O’clock peak, maybe you can shift that a little bit and reduce your peak. This provides tremendous savings in Umm Al Nar and Jebel Ali power plants. So, you require less installed power capacity giga watts. That’s the prime advantage of thermal storage. And there are some secondary benefits for the cooling provider. That is, maybe at some point, you can run the cooling plant more efficiently during winter, and sometimes you are able to manage if you have different profiles of different customers. With thermal storage you can manage that – integrate through your plant.

You said that you do have some excess capacity. What percentage is it of your overall capacity?

We have 855,000 tonnes group capacity across the GCC. And in the UAE, it is over 658,000 TR. So, the majority of our tonnage is in the UAE.

If you are talking about our installed capacity, our connected capacity, pretty much we are off 99%. So, whatever we have installed, we have connected. There is little excess capacity when we compare installed and connected capacity. However, there is excess inventory when you compare peak to connected. And that I cannot say.

Okay, so, peak to installed you have excess?

You build a plant of 100,000 tonnes and you connect 99,000 tonnes. So your utilisation is 99%, right? But how much is actually peaking? That’s your real utilisation, right? And you can sell the excess capacity to other customers and to other providers.

And that’s where, perhaps, as you said, thermal energy storage can help?

Yes, it could help. For example, maybe you have 20,000 tonnes of plant and 5,000 tonnes thermal storage. During the day, you need to provide 22,000 tonnes. But you can’t because the plant is only 20,000 tonnes. So, in the day time, you are running thermal storage a little bit. And during the night, the load requires only 10,000, as there’s no one in the offices, and there’s no need to cool. So, instead of running the plant at full load, you run the plant slightly lower. And you top up and re-charge the thermal storage. That’s where the diversity comes in, right? That’s where the business is.

Have you ever thought of linking plants?

Absolutely. Interconnecting different plants into one scheme is one of the opportunities that we continue to explore to improve the efficiency of the plants. We have several plants interconnected in some specific projects. And we continue to explore interconnecting other plants, especially when it comes to acquiring. So, if I’m acquiring a plant, I take into account the fact that I have two other plants nearby. I connect them all together. And in the summer, instead of running three plants, I run one plant. And instead of three teams, I have one team. I do remote monitoring. You might require some additional piping and you might require some minor modifications.

Is hydronic balancing a big issue?

Hydronic balancing is an issue. We have three plants currently in Qatar – Pearl Qatar and we have two plants in West Bay. These, two plants are interconnected. We made sure through proper fluid dynamics and hydraulic modelling that we are able to, at any time during the year, shift the load and have one plant, as much as possible take on the entire network. Yes, these are best practices.

There are concerns about customers regarding initial inefficiencies in a District Cooling plant. And you have cases where customers have to pay for those inefficiencies. Or it could be a case of using temporary chillers that run on air cooling systems. So, till things settle down you have a lot of staggered development. How do you make sure that customers are not at the receiving end of situations that still need some time to settle down?

We reiterate that our customers are big organisations. These are not small individuals or small apartments. That is the first thing. And the only way District Cooling is going to grow, and the only way I’m going to grow is if the customer is provided with a more cost-effective District Cooling and more reliable District Cooling. So we work very closely with our customers to make sure we provide support, make sure that the load is correct. And the biggest question I ask when I go to any meeting is: Are you sure you want X tonnage? Are you sure about the date? Because, if you are sure about the date, if you are sure about the tonnage, then somebody – Tabreed or somebody else – is going to go and put the infrastructure in the ground. You have to be very comfortable and serious about your commitment.

In terms of interruptions during the commissioning period, the utility company has to take full responsibility. It has to provide support to the developer or the client, if the client needs support on sizing, etc. And as far as the client is concerned, if he needs certain tonnage at a certain date, yes. Period. That is the whole point of outsourcing your services. Why should a client be at a disadvantage?

The biggest issue maybe is the timing of the developments. The developers need to have proper planning in place to make sure that the requirements are correct. If he needs X tonnage, he needs to make sure he needs X tonnage, and by those dates when he needs the tonnage. And we provide support on that. We engage with the developers and say, do you really need this tonnage? Do you need it in six months? You haven’t broken ground, yet. Why do you need it in six months? So, we try to engage as much as possible. We try to be proactive and we support them.

Consultants say that they try as far as possible not to design beyond what is needed and design as per the capacity. But at the same time, they are also looking for some clarity. What more should they be expecting out of Tabreed, a District Cooling provider, to bridge the gap that exists? What do you want them to do to serve you better?

Consultants need to understand that they need to design properly and have proper cooling requirements in place. Our rule of thumb, from what we have seen is that consultants are over-designing… almost double of the cooling requirements. And it is not only in District Cooling, it’s all over Abu Dhabi in any building. It is adding cost to the clients. And sometimes you have consultants thinking about redundancies and what-if scenarios.

As a major District Cooling provider, do you give directives to the consultants?

Tabreed, as a cooling company, does not go to a building and say: Building X, you need Y tonnage. It’s the other way round. So, the building goes out with the EPC contract, they have their consultants. The owner’s engineers come up with their cooling requirements. They say they need 200 tonnes. And we say, are you sure about your cooling load? They say, yes, we have consultants from Germany or from UK – very solid consultants. But we as a cooling company, we have 800,000 tonnes. We have over 130 contracts. So, we have the biggest database. We know what a 20-storey building is peaking at. We advise our clients, because, in the end, it’s going to backfire on the cooling provider, when after two years, the owner recognises that he is paying a capacity charge or tariff, and he is only using half of his requirements. Again, the ultimate responsibility lies with the EPC and with the owner.

Could you share with us how many of your plants still have HCFCs and what your long-term policy is, as far as aligning yourself to regional goals are concerned, and adhering to what the Montreal Protocol is saying – be it about ozone-depleting potential or global-warming potential? You do have, R123 in several of your plant rooms. Are you going to phase them out? Have you made concrete plans already?

As an organisation, we are following all the obligatory protocols where we operate, and we strive to be not only a leading District Cooling company, but we also want to be a safe and environment-friendly cooling company. And yes, we have some cooling plants with R123. But this represents only five per cent of our whole capacity. And we have significant and proper integrity inspections being carried out. We have proper detection systems in place. Also, we have our own internal KPIs for keeping track of any discharges of those harmful gases. And as an organisation, we will evaluate when the right time to upgrade those chillers is and when it is the right time to phase them out.

In cooling towers, Legionella is a major issue this is giving sleepless nights to consultants and cooling tower suppliers. How does Tabreed look at it from an overall CSR point of view?

We take it very seriously. Again, this is one of our Workplace Health and Safety obligations and requirements as a cooling company. And we have strict and solid inspections. We carry out quality requirement inspections. And we follow the authority requirements, be it the Environment Agency of Abu Dhabi or the Dubai regulations.

As the oldest District Cooling company in the GCC, could you share with us operations and maintenance strategies that you have adopted?

We have over 800,000 tonnes. We have more data than some of the manufacturers have when it comes to operational hours. And we carry out different maintenance regimes, be it breakdown maintenance, be it corrective maintenance, be it preventive maintenance or condition-based maintenance.

We are trying to bring best practices in the District Cooling sector for over the last three-four years. So, to give an example, in the past, you have your chiller and the manufacturer says, you have 40,000 hours. And then you strip down the chiller and do complete overhauling… put some nice bearings and put a stamp that it is zero time and overhaul for another 40,000. Times have changed. We are not doing plant maintenance like that. We have over 450 operations & maintenance staff in-house in Tabreed. As an organisation, we carry out condition-based maintenance. We take vibration analysis, we take oil monitoring, we do thermography. We measure the health of the equipment and anticipate things before they fail. We don’t wait for an outage to happen. We plan the outage before. So, we are measuring the oil. We see if the metaparticles are increasing. We have liability teams in the organisation. They measure how many drums of oil we have now. Is it increasing? Am I going to make it this summer? So I operate throughout the summer, and when the winter comes, I have excess capacity, I plan a plant shutdown. By that time, for six months I am monitoring it – the oil level or the vibration level. And at that time I have already ordered my bearings, my shafts, my couplings and everything. So, when it’s time for planned maintenance, everything is ready. So, we open the place, and in two to three days it’s done.

So, maintenance strategy has changed. It’s not about 40,000 hours or waiting for the equipment to fail or trusting blindly the manufacturer. We have all this history in the organisation, and you build the data and you build the personnel and feel more comfortable.


 

TSE – a viable option?

june2014-interv02Jasim Husain Thabet shares his thoughts on TSE, a hot issue in the DC sector

What has been your overall experience with TSE? Are all your plants connected to receive TSE as of now? Or do you still use potable water in some cases, where you find it a challenge?

We have a mix. We have some plants connected to TSE, and a majority of our plants are connected to potable water. We have some plants connected to sea water. We use it as makeup water – sea water intake. But wherever there is a possibility to hook up to a header or a network nearby TSE, we take that opportunity. And I’ve been in discussions with ADSSC (Abu Dhabi Sewerage Services Company), and other entities to tap into their TSE network in Abu Dhabi, and in Dubai, the Dubai Municipality. And yes, there may be some challenges with volumes. But if you have proper planning, proper makeup time and have efficient pumps, they can be overcome. Also, in Fujairah we are in discussions with Tanqia, the first private sewage company in the UAE, and exploring with them to take on their TSE and using it for makeup for District Cooling plants.

How long do you think it is sustainable to use potable water, since water is the most precious commodity in the desert? And as an Emirati, you view it as most valuable. Also, desalinated water comes at a great cost from the carbon emissions point of view and also because of the salinity issue. Is it, at this point of time, lack of availability of adequate TSE or are the networks still not completely ready? Or is it the capital cost involved? It’s a complex issue, isn’t it?

Yes, it’s a complex issue. And it really depends upon in which region you are and what you are. So, Dubai is a bit different than Abu Dhabi. In some areas in Dubai, they have the infrastructure, but they don’t have the volumes. In Abu Dhabi, we have tremendous amount of volumes, but we lack the infrastructure. We require about half or one kilometre of the extension network. And yes, the government plays a big role in this. They have to mandate, and facilitate between the different organisations. How raw sewage is collected and how it goes to the TSE plant and how it is distributed back to the TSE into the islands. All this needs to be done in a comprehensive manner.

You spoke about, as an Emirati, water being very precious. Absolutely. Water is very precious in the UAE, and cooling is also precious in the UAE. I mean, almost 70% of the UAE power requirement goes to cooling. And when we compare District Cooling to conventional cooling, we all know that the benefits of that is up to 40% more efficient. And if we have governments who are heavily subsidising power, the governments are saving significant amounts … multi-billion Dirhams in subsidies. So, the savings in power subsidies is greater than, I would say, the use of the water subsidies.

One more thing, people get obsessed with water. I mean, if you look at the UAE, in Abu Dhabi, Tabreed consumes less than .2% of the water requirements. The majority of water is going to farming and irrigation. So, you have to put things in perspective. And cooling is not a luxury. Cooling is a necessity. It is a vital, infrastructural requirement for the government.


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