The Situation

Our client, a Malaysian developer, is investing in a high profile, RMB 15.5 billion (AUD 3.13 billion) Zero Liquid Discharge (ZLD) seawater desalination plant in Tianjin, China; the first of its kind.  The ZLD requirement was introduced due to stringent discharge regulations in the Bohai Bay, and results in salt and chemical by-products being produced in conjunction with the desalinated water and demineralised water.  Prior to our engagement, the client commissioned a local design institute to develop the FEED for the project. However, the greatest concern for the client was the project’s financial viability and value optimisation, and they wanted a greater understanding of these prior to making the final decision to commence construction.

Approach

Given the high investment and technically complex nature of the project, Advisian provided a comprehensive and independent review of the current business case to confirm the economic viability of the project and its financial outcomes. 

We identified key success factors for the client by assessing major elements, including a Technical Review, Commercial Review, Contracts and Regulatory Review, Delivery and Organisation Structure, and Review of the Project Risk Profile.  The client has since asked Advisian to continue to support them with subsequent work-streams focusing on procurement strategy, organisation design and set-up, and execution planning.  In addition, the client has appointed Alan Yau as an Independent Advisor, sitting on the Project Steering Committee.  

Results

Technical Challenge:  The technical data provided by the client was conceptual and still undergoing changes, including amending process design, adding an alternative electricity source, and change in water intake location.  We added value by highlighting the design limitations, suggesting alternative technology evaluations and choice of metallurgy, and recommended re-evaluation of the unsustainably high OPEX costs.

Commercial Challenge: The market conditions for the water and salt products were not apparent in China.  The product portfolio provided by the client was not selected based upon market demand, but technical viability.  By working with specialists to get the latest market insights, we were able to add value by conducting field research to analyse market conditions and potential.  We also developed a user-friendly financial model; and enabled the client to use this powerful management tool in its decision-making process through sensitivity analysis and assessing financing viability.

Feasibility Challenge:  Supports offered by the local government were not specific, and the key commercial terms and conditions were not finalised.  We helped to overcome this by helping the client to develop a terms sheet for key documents to be negotiated with the local government.