Tuesday, Oct 24, 2017
Energy | Infrastructure | Conglomerate | Middle East | Saudi Arabia

Abunayyan Holding

Innovative solutions for scarce resources


11 months ago

Khalid Abunayyan, CEO of Abunayyan Holding
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Khalid Abunayyan

CEO of Abunayyan Holding

As a 65-year-old diversified family company that has grown in tandem with the Saudi Arabia, Abunayyan Holding is now firmly established as one of the kingdom’s leading players in water, power, and oil & gas. CEO Khalid Abunayyan explains how the company is committed to developing new, environmentally friendly technologies to help the country realize its ambitious Vision 2030 targets in water and energy, whilst retaining its core families and maintaining its reputation as a good corporate citizen of the world.

 

How confident are you that Vision 2030 can engender the necessary diversification of the kingdom’s economy?

Having a vision is very important, not only as a country but also as a company and as an individual. What makes Vision 2030 different is today we have a very clear strategy and a very clear execution plan. In my opinion, a vision without execution is merely a dream that never becomes reality. I believe Saudi Arabia has put forth how it is going to execute this strategy, and established who the stakeholders are and how we will measure our progress. If you look at the former five-year development plans, these lacked these very clearly defined measures and enablers. This time it is different.

 

Saudi Arabia is one of the most water scarce countries in the world, at approximately 98 cubic meters per inhabitant, per year. Water stress is only going to increase as trends point towards an expanding population. Vision 2030 promotes the optimal use of water resources, with a focus on reducing consumption and making better use of treated and renewable water. Where do you see new opportunities for Abunayyan Holding in helping the kingdom to maximize its water resources as the population continues to grow?

We are a 65-year-old family-owned company. My father founded this company and it evolved from very humble beginnings. Throughout our history, we have remained committed to our core business and family values. This is what makes our business value proposition unique, in my opinion. We are a very customer-centric organization. We are a highly reliable partner for our customers, for our employees, for our business partners and for society at large. We are innovative. We do take risks when necessary, and we don’t rest on our achievements. Added to that, we are honest. We firmly believe in being a good company and doing the right thing. Our business is not only about making money but also about being a good corporate citizen.

Water, power, oil and gas, and construction are the pillars of our market-driven sectors. Water has been very important to us since our humble beginnings. Saudi Arabia is challenged by a lack of groundwater, whilst our underground water resources are being depleted. As a company, we feel responsible for coming up with solutions to help our country deal with these challenges.

Today we see great opportunities. In the past, Saudi Arabia has relied heavily on desalinated water, and desalination plants in the past were very energy-intensive. Today there are innovative technologies that produce clean water without consuming so much energy. We have teamed up with the world leader in water membrane technology to manufacture membranes in the kingdom as part of our commitment to localization and technology transfer. Membrane technology is key to water treatment.

In the past, the country and the sector have relied solely on government funding. This model has worked in the past but today it is obsolete. The private sector is innovative and efficient and the government clearly recognizes this. Vision 2030 has been very clear that new developments in the water sector will be led by the private sector. The government does not want to build desalination plants, wastewater treatment facilities or water recycling facilities, they want the private sector to do this. We are very much capable of helping in this regard. We have Saudi technologies and capabilities, and we manufacture a high percentage of products and solutions locally. We believe that the opportunities are going to be great. Our company is definitely capable of building the necessary plants cheaper, faster and better than the state could.

 

Vision 2030 outlines tentative steps towards the development of a renewable energy market, with an initial target of generating 9.5 GW from renewable sources. What role do you envision Abunayyan playing in developing the renewable energy sector here?

I believe that the kingdom is capable of being one of the lowest cost producers of solar energy in the world. Vision 2030 has clearly identified these targets and how we will go about the execution of these objectives. Deputy Crown Prince Mohammed bin Salman and the Minister of Energy have clearly identified what Saudi Arabia wants to do about this. We will meet our targets through localization of technology. We are not going to simply import the technology from elsewhere, because we want to create value here.

Our company has an excellent track record. I am sure you have seen what ACWA Power has done in Morocco. One of our first projects, Noor 1, is already in operation. Noor 2 and Noor 3 are under construction and will come online in 2017 and 2018. This will be one of the biggest solar complexes in the world. Sheikh Mohammed bin Rashid al-Maktoum Solar City is another project of ACWA Power. It had the lowest tariff in the world when it was tendered. We will continue to align ourselves with Vision 2030 to drive the renewable energy sector in the kingdom. We are very excited to see these commitments being made here and we will soon see projects being tendered for the private sector.

 

The Deputy Crown Prince Mohammed Bin Salman has said that Vision 2030 is about ending the kingdom’s “addiction to oil.” Abunayyan is a diversified holding whose interests include oil & gas. What are the long-term implications of Vision 2030 for this side of your business?

I think we will see Saudi Arabia adopting a mixed energy portfolio. We can’t deny that fossil fuels still play an important role in power generation across the world. We will increasingly see Saudi Arabia rely on gas for local energy, as well as an increasing role for solar. We will take a balanced and responsible approach to our investment in energy. For example, ACWA Power has spent hundreds of millions of dollars on environmentally friendly fuel treatment systems and emissions-reducing technologies that basically reduce pollution at all its fossil fuel power plants. We believe in following a balanced approach and being environmentally responsible. I believe Saudi Arabia will continue to invest in environmentally responsible technology and solutions.

 

Vision 2030 is an all-encompassing vision that involves, amongst many other things, the building of local skill sets so that Saudis are willing and able to take private sector jobs in the new, diversified economy. Abunayyan developed a first-of its kind online portal, Mostaqbaly, in response to the challenges you faced in recruiting qualified Saudis. What impact has this had on your capacity to recruit local talent?

As a company, we needed to have a very clear vision and strategy regarding Saudi human capital development. You start with a commitment. I believe that Saudi Arabia has excellent talent, whether males or females. In many companies and sectors, you can see many young Saudi men and women perform very complex tasks to a very high standard. As a nation, we cannot continue simply importing labor. It is self-destructive and it undermines our capabilities. In my opinion, it is contrary to the normal course of business. Every country is built by its own people. In the past, expatriates have been very helpful in helping to build Saudi Arabia, and we will continue to rely on certain expertise. We respect our colleagues who have helped us build our country. But as a nation, we must pick up the pace and rely on our own human resources. We have started from this belief and commitment.

We are committed to building Saudi human capital not because of the legal regulations, but because we believe that as good corporate citizens, we must create job opportunities for our young men and women. As a company, and as a family, we have a responsibility. We started with a platform that helps these young people know who we are. I hope that Abunayyan will become the employer of choice for young male and female engineers in college, as well as experts in finance and project management. We are particularly focused on creating job opportunities for women. This was the vision of my father. We feel very responsible for this because he believed strongly in this principle. We hope we will fulfill his dream.

We are also very much involved in an initiative around employee value proposition and employer branding. This is going to follow a lot of elements. We want to have direct engagement with students. We want to have more active involvement with research centers at universities. We want to tap their resources and be close to them in certain disciplines, such as electrical engineering and environmental engineering. We want to attract highly talented students in their final years of study. This will involve being very active, such as participating in career days, and positioning ourselves as a technical reference. We will publish certain technical information about solutions for challenging environmental applications, in areas such as water treatment and so on.

We hope all of this will enable us to attract the best talent. The second step is to develop talent. We will invest in these young people and increase their capabilities and output. The third step is retention; we want to make sure they work with us for a long time.

 

Abunayyan has more than a dozen Strategic Business Units – including wholly owned subsidiaries, joint ventures with leading multinationals, and homegrown partnerships with other conglomerates. Your international partners include the Japanese firm Toray and American firm Chromalloy. What are the criteria you look for when choosing an international partner for a joint venture?

We choose partners that share our values, that is very important. We enjoy doing business with international family-owned businesses just like us. Secondly, our partners must be committed to localization and transfer of technology. They must see this as a driver of their business and growth. Thirdly, we encourage our business partners to take a regional view. Saudi Arabia is very well positioned to be a hub for the Middle East and Africa. For example, our joint venture with Toray covers 25 countries. Our joint venture with Chromalloy covers the entire region. We discuss these criteria with potential partners. Their commitment to developing local human capital is essential. We will employ and develop Saudis. From there, it will be survival of the fittest and hopefully we will succeed.

 

What advice would you offer to global companies eyeing opportunities here in the kingdom when it comes to the ease of doing business?

A lot of Western companies are used to a certain way of doing business. For example, it is not so different for a US company if they want to operate in the UK. Saudi Arabia tends to be different, but this does not mean it is difficult. If you take the GCC for example, we are a much bigger country than our neighbors, and we have much higher local population – 22 million Saudis. We also have local cultural aspects that are important for people to understand. From the outset, you are usually challenged by things you don’t understand.

The reality is it is not difficult to do business in Saudi Arabia. It is very developed in terms of the local business community and government departments. For example, SAGIA is transforming itself to ensure it is easy for foreign companies to do business here. Saudi Arabia has invested heavily in e-government to enable us to do business efficiently. The Saudi Industrial Development Fund is an excellent supporter and enabler of industrial joint ventures. The banking community is very capable when it comes to catering to very large MNCs that want to set up business in Saudi Arabia.

As a local partner, it is our responsibility to hold the hand of our business partners and explain to them how things are done here. At the end of the day, an MNC chooses a local partner for their knowledge of the local market and business environment.

 

We understand Chromalloy is the first American firm that one of your strategic business units has partnered with. As the economic transformation program gathers pace and new FDI opportunities open up in sectors such as renewable energy and water desalination, do you expect interest from US companies to increase?

American companies have participated in Saudi Arabia very successfully since the 1950s, if not before. As a business, we must take risks. Saudi Arabia may appear to be a risky country to do business, but those companies who are willing to come here and meet with the local business community have a lot of opportunities to enjoy. Those companies that have done it well are extremely successful.

There has been a fair amount of interest from American companies and I believe this will increase with Vision 2030. The vision has laid out the framework for localization and the transfer of technology. Take, for example, Aramco. Through their In Kingdom Total Value Add (IKTVA) program, they want to localize 70% of their entire purchases by 2021. This offers a huge opportunity for a lot of American companies and I think a lot of them will be interested to localize in KSA through direct investment with wholly owned subsidiaries, or through joint ventures with Saudi companies.

 

Abunayyan Holding has business interests across the Middle East and Africa. Where do you see the most potential for expanding your international presence?

We think of Saudi Arabia as our home market. We believe success at home will be the launch pad for success abroad. We also see an increasing integration of GCC markets. We will definitely cover other GCC markets, as this is a natural expansion of government policy and we see it as a big opportunity for us. Following that, we look at the rest of the Arab world. There are numerous free trade agreements with other Arab countries and many opportunities to be tapped in Morocco, Egypt and other places.

Saudi Arabia also contributes a lot of aid to Arab and African countries and this gives us an opportunity to participate in infrastructure projects through the Saudi Fund for Development.

 

Your company was started by your father in the 1950s and has grown to accommodate around 4,500 employees spread across its subsidiaries in the kingdom and throughout the Middle East and Africa. The business carries your family name. What do you want this name to represent internationally?

We are very proud of being a Saudi company and very proud of being a family-owned company. Being a family-owned company, we continue to be committed to our corporate values, which are based on our founder’s values. It also gives us the flexibility to take calculated business risks and execute decisions faster than a publicly listed company, which might be preoccupied with the stock market view and numerous regulations.

I want the world to see us as a very successful Saudi family-owned company committed to helping the world deal with challenges in scarce natural resources, by developing new technologies to meet these challenges, in an environmentally responsible way. I want them to also see us as a good corporate citizen of the world. 



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