MOYA: Steps Up to Slake Indonesia's Burgeoning Thirst

In June 2017, Moya acquired Singapore-based Acuatico, which also develops and operates water treatment and distribution facilities in Indonesia and provides water services to eastern Jakarta and parts of Tangerang.
(Photo: Company)

A veritable human dynamo, Lebanese-born Simon Melhem is not one to let grass grow under his feet.

The Executive Director of SGX-listed water solutions provider Moya Holdings Asia Ltd enjoys meeting people, generating ideas and making things happen.

"Getting to know someone, going somewhere new, doing something different - those are activities that energise me. My passion is business development, and I take a lot of pleasure in turning a 'No' into a 'Yes'," Melhem said.

"I'm a well-oiled machine that runs like clockwork - almost no fuel required," quipped the 53-year-old with a twinkle in his eye.

All his boundless energy - coupled with three decades of experience in power generation and energy infrastructure - are channelled towards shaping Moya into Asia's leading water player.

The company's inception dates back to 2009, when Melhem teamed up with Bahraini and Saudi investors to set up a water development and investment vehicle for the Middle Eastern market.

"I convinced them to look beyond the Middle East - at Southeast Asia in particular - because the water business is directly related to population growth, and I had previously spent a lot of time in Indonesia and the region," he recalled.

Moya Dayen was formed that year through a reverse takeover, after Bahrain-based Moya Holding acquired 51% of Catalist-listed engineering, procurement and construction (EPC) firm Dayen Environmental.

The company changed its name to Moya Asia in 2011, and again then to Moya Holdings Asia in 2013. Its business model was also revamped to focus on investments in Indonesia.

"We decided the Indonesian market would offer the best returns relative to effort and capital investment," added Melhem.

Moya, which means water in Arabic, has since embarked on an aggressive expansion program, signing three build-operate-transfer (BOT) water supply projects between 2011 and 2013.

The first two - in Bekasi Regency and Tangerang City - have started commercial operations in phases, with a 25-year BOT contract each and a current capacity of 1,300 and 1,150 litres per second (lps) respectively.

The third project, in Makassar City, is expected to begin construction work next year, pending amendment discussions with local authorities. This contract also has a 25-year lifespan, and is projected to have a capacity of 700 lps when fully operational.

We decided the Indonesian market would offer the best returns relative to effort and capital investment.

- Simon Melhem
Executive Director

Moya Holdings Asia

(Photo: Company)

With this goal in mind, Moya has adopted a proactive approach in developing new business leads.

"There are two kinds of water projects in Indonesia - first, those solicited by central or local governments, who issue international tenders in the local media that attract multiple bids, and second, those that are worked out hand-in-hand with local governments, based on feasibility studies and their specific needs," Melhem said.

The second approach requires a massive investment of time.

"We have made it a point to avoid the first type of tenders. Instead, we are focused on active business development, venturing into cities we feel are attractive investments based on their location, size and tariff regimes, talking to local governments about the type of projects they require, and negotiating those projects based on business-to-business regulations."

Moya's management also realised at an early stage that apart from water treatment capacity, developing a reliable pipeline network to deliver treated water to customers was essential.

"Several projects stalled because private sector investors focused only on water treatment, and relied on local governments to connect customers to the treated water," Melhem explained.

"Many companies shy away from network development because it basically involves digging up streets and laying pipes. What they don't realise is that Indonesia also needs help to develop its piped network, and a successful project means you need to be able to control the entire process from end-to-end."

Such strategies have set Moya apart from the competition, and enabled the company to make inroads into the domestic water market, he added.

So far, the outlook is bright. While organic growth from its various projects remains strong,

Moya is also looking to acquire other small water players. At the same time, it is in active talks with a number of local governments to improve water service levels in their territories.

"We're pursuing all three approaches vigorously, but you can only go as fast as your counterparty will go. You can't build the factory by yourself."

Meanwhile, there's no shortage of funds or technologies for water projects in the country, Melhem said.

"No good project will go unfunded - if there are good internal rates of return, a strong foundation and structure, there's plenty of money out there, especially in the current low interest-rate environment."

Instead, the challenge lies in conceiving and structuring a contract that works for the local government, banks, and operators.

"The commercial negotiations are the essence of the deal. Once you sign the BOT contract, you have to live with that document for the next 25 years," he added.

Another key challenge has, and will continue to be, Indonesia's regulatory environment. "Water is a very sensitive and basic need that gets a lot of attention from the government and its bureaucracies," Melhem noted.

"The issues are navigating through various regulations - both old and new - as well as the different regulatory regimes."

The role of the private sector is to boost the efficiency of delivery, allowing the government to deliver water more cheaply. And in some cases, without the private sector, the city may not be able to provide treated water to begin with.

- Simon Melhem
Executive Director

Moya Holdings Asia

• The Group will continue its efforts in its long-term strategy to achieve strong organic growth and acquisition-driven expansion to attain sustainable growth and maximise value for shareholders.
• In line with this, the Group announced in June 2017 the completion of the acquisition of Acuatico Pte Ltd. With this acquisition, the Group will expand its business reach significantly and boost production capacity by more than four-fold, allowing it to emerge as one of the leading private players in Indonesia's water treatment industry, with a total water treatment capacity of 13,935 litres per second.
• According to the National Mid-Term Development Plan 2015-2019, the Indonesian government aims for all Indonesians to have access to clean water by 2019. In order to achieve this goal, the Indonesian government will require more than Rp 660 trillion of investments within the next five years.
• As such, the Group remains cautiously optimistic on the demand for its product and services in the Indonesian market, and believes the Indonesian water industry will continue to receive significant investments in the coming years.
• With the acquisition of Acuatico, the increase in production of its existing water treatment plants, and overall growth of the Indonesian water industry, barring any unforeseen circumstances, the Group remains cautiously optimistic about its performance for the financial year ending 31 December 2017.