This interview took place on January 6, 2021.
Waterbedrijf Groningen has five production locations and supplies 44 billion litres of fresh water to over 575,000 private and business customers. The company also produces industrial water through the joint venture North Water and, together with Waterleidingmaatschappij Drenthe, owns WLN [formerly Waterlaboratorium Noord].
Waterbedrijf Groningen also has various heat projects. Riksta Zwart has been managing director since 2014. Ronald Wielinga of WaterCampus Leeuwarden interviewed her.
Riksta, you have been managing director of Waterbedrijf Groningen for over 6 years now. What have been the most important developments at Waterbedrijf Groningen during your tenure as managing director, both within the walls of the company and in your environment?
One critical development in recent years is that we have really brought the outside world inside. As an organization, we now have a much better understanding of what is going on around us. We work closely with important stakeholders, such as the Hunze en Aa and Noorderzijlvest water boards.
In addition to the urgency of energy transition, we are also seeing increased attention to the need for a water transition. The sufficient availability of high-quality drinking water is under pressure. Our society is using increasing amounts of water, partly due to economic growth, and partly due to increasingly dry and hot summers as a result of climate change. As a water company, we have developed a roadmap with regional parties. The most important goal is to sustainably secure the drinking water supply in Groningen and contribute actively to a province in which water production, nature, agriculture, economic developments and quality of life reinforce each other.
The roadmap elaborates five routes. The routes focus on optimizing our operational management, creating awareness of water usage among consumers, achieving water savings among business customers, providing alternative sources for industrial customers and establishing sufficient sources of drinking water.
Waterbedrijf Groningen’s drinking water rates have been among the cheapest in the Netherlands for years. Is there anything you do differently and smarter than other water companies?
It is not always easy to compare the water rates from different organizations. For example, we largely source from groundwater, while other water companies use surface water, which is always more expensive. Regional differences may also affect the price; it is a complex interplay.
But there are certainly some things we do well that I am proud of. One example is our cooperation with WMD in ICT and for our joint laboratory, WLN. There is also the relationship with the most important stakeholders, including our own shareholders. This is a hugely sustainable relationship; we really have a shared interest.
Another example is that, due in part to our strong relationship with these stakeholders, we pay a lot of attention to maintaining clean sources. That remains the most important thing to us. After all, anything not in there doesn’t need to be filtered out.
And last, but not least, my colleagues; they are fully committed to making everything run as smartly and efficiently as possible, from purification to our internal processes. The size of our organization allows short lines of communication and lower level authorization. That makes you agile and collectively engaged.
The price of our drinking water is not an end in itself, although we do have to adhere to the legal conditions, in particular the statutory return on capital (WACC). But reliability and quality are paramount.
There’s always room for improvement, of course. What are the biggest barriers currently delaying the achievement of your objectives?
We need to invest heavily in our infrastructure in the coming years. Things like replacing pipelines and renovating production installations; we also feel a social responsibility to invest in making our business operations more sustainable. It is vital that we have sufficient financial leeway to finance that investment. In recent years, we have seen water companies’ earnings capacity decline due to successive reductions in the WACC (Weighted Average Cost of Capital) from 6% (2013) to 2.75% in 2021. The result is that the financial ratios on which lenders assess us are under pressure, which jeopardizes the financing of intended investments.
Also, as I indicated before, we are in a water transition. Social changes take a lot of time. Raising awareness and reducing water consumption are long-term processes that must be implemented with conviction before a water company can lay claim to scarce new resources. With the water transition, we are aiming for all steps simultaneously.
What role does innovation play in solving these challenges?
Innovation is essential. Let me give a few examples. Innovative approaches and purification techniques are essential when supplying custom water to industry, such as the use of effluent from the WWTP. Another example is the reduction of our CO2 footprint; one way of achieving that is the reduction of CH4 emissions from groundwater extraction. After the test phase, we are now designing the groundwater treatment plant. WLN also developed the PCR method. This accredited method is used to detect low concentrations of pathogens in drinking water and is much faster than culture methods, providing our customers a quicker answer about the biological safety of drinking water. KWR recently applied this technique for the detection of COVID in sewage.
In addition to the innovation necessary to tackle challenges, Waterbedrijf Groningen also faces other developments, such as the extent to which we can leverage data. What other technical changes do you see in store for the drinking water sector, and more specifically, for Waterbedrijf Groningen?
Our sector has been digitalizing for a long time. We are using smart algorithms for our production and distribution processes, for example. The challenge lies less in producing data than in translating it into valuable information that we can use to predict vulnerabilities in our distribution network, for example. Combining data is also important. By combining social media data from our customers regarding water outages in our area with our internal operational data, we can quickly determine the location and size of an affected area. In addition to preventing calamities, decision-support software will also play an important role in deciding whether or not to replace pipelines. Drinking water networks last approximately 80 years. You don’t want to replace them too late, but you certainly don’t want to replace them too early either. Decision-support software can be of great help here.
It should also be noted that good data analysts are essential for the whole digital transition.
In my interview with Constantijn van Oranje, he indicated that entrepreneurship in the water industry is challenging, because a lot of the knowledge and experience we could bring to the market belongs to public organizations. Drinking water companies, such as Waterbedrijf Groningen, are an example of this, despite the fact that entrepreneurship is not only necessary to increase the sector’s economic impact, but also for solving societal challenges. How do you stimulate entrepreneurship within your organization?
Water companies are enterprising utilities, and while we certainly try to push our employees at Waterbedrijf Groningen, it is always to further the social interest for which we have been established as a public limited company. We push our employees to be creative; to come up with their own solutions to the challenges we face as a water company.
Sure, as a water company you do your best to stimulate enterprising behaviour among your employees. But in the context of entrepreneurship, I’m talking more about new business. Many water companies, including Waterbedrijf Groningen, participate in subsidiaries. What is the strategy behind the development of these activities? Why do you choose to take up certain activities and not others? Where are the boundaries?
The decision to participate in a subsidiary, such as North Water or WarmteStad, is made in agreement with our shareholders. The request often even comes from the shareholders. We consider whether the participation will contribute to our objectives as a water company. For example, North Water allows us to supply customized water to industry in our supply area, which positively affects the availability of our own sources for the supply of drinking water. That contributes to our intended water transition. In other cases, such as heat networks, we are asked by our shareholders to play a role in the energy transition, because of our expertise and experience. Don’t forget, we have 141 years of experience in managing infrastructure and knowledge on and expertise in soil. Heat networks have a lot in common with the current infrastructure under our management.
The drinking water supply always has the highest priority when considering participations. Other activities are always placed in separate legal entities to prevent potential associated risks from affecting our drinking water customers.
Innovation and successfully launching a water tech company is a highly complex matter. It often requires large investments, margins are relatively low and many customers are risk-averse. For many entrepreneurs developing a technology, it is difficult to turn an interested end user into a first customer. Waterbedrijf Groningen could be a launching customer. If a company wants to test its innovation on your premises, is that possible? And how should they go about that? What are the difficulties in these programmes?
Yes, in principle. We are very open to that. I would say get in touch, we are always happy to meet with entrepreneurs, and not just for Waterbedrijf Groningen. We also have an extensive network; our subsidiaries, such as WLN and North Water, for example, as well as other organizations in the region and the rest of the country.
I would like to add that, as an organization, we always make long-term investments. Our infrastructure must be reliable and sound. After all, we have to provide safe and reliable drinking water 365 days a year, 24 hours a day. But that does not mean we are not open to new, innovative technology. That much is clear from the challenges we face as an organization.
Aren’t you hampered by procurement regulations?
It has to be legally correct, of course, but there are plenty of options when it comes to innovations, such as a test site or at one of our other entities. If the innovative solution really provides added value, it will score highly during any tendering procedures.
Is it possible for the water company and one or more partners to develop an innovation that could be commercialized? Specifically, a situation where the water company would continue to play a role in the commercial phase. Would Waterbedrijf Groningen be willing to participate financially in a tech company?
As a water company, we are happy to share our knowledge and join forces as partners. We are frequently involved in European projects, and we always play a role in your annual WaterCampus Business Challenge for starting entrepreneurs, for example. But we will not engage in commercial activities on behalf of the water company— that’s not our role. But please consider this an invitation to contact us when entrepreneurs want to exchange ideas with us about something they are developing.
Interested to learn more about entrepreneurship at WaterCampus?
Please contact Ronald Wielinga our manager entrepreneurship via +31 6 121 38 876 or Ronald Wielinga.
Riksta Zwart has worked as managing director of Waterbedrijf Groningen since 2014. She studied international law in Leiden and graduated in energy law and environmental law. After her studies, she served in various managerial positions for energy company EDON—which later became Essent. In addition to her job at Waterbedrijf Groningen, Zwart chairs the Royal Dutch Water Network and is on the board of the NWB Water Innovation Fund. She is also a catalyst for sector research on water in the circular economy at KWR.