20 June 2011

WaterHealth International

While in Berlin to debate in favor of full cost recovery as the best way to get water to the poor, I  heard a presentation by Sanjay Bhatnagar of WaterHealth International. WHI is a for-profit company* that installs turn-key facilities in 2-3 weeks that deliver purified drinking water to communities. These facilities are "technology agnostic" because WHI will use whatever technology gives the best water at the lowest price. Each facility delivers 20 to 100 m^3 of water per day (enough to supply 4,000 to 10,000 people). WHI also operates the facilities for their 10-15 year contracted life, using revenues from water sales to cover operating costs.

WHI has 450 facilities operating in India, Philippines, Ghana and Bangladesh and plans to open 200 facilities in 2011.

Water from the facilities is VERY clean ("WHO quality") and sold at cost -- about $0.07 for 20 liters in India. (I saw the same volume being sold for $1.50 in Jakarta; those prices are also normal in India, where bottled water cost -- as I remember -- about $0.25 for ONE liter.) WHI tests its water frequently and allows villagers to compare water sources using a microscope that will show parasites and other pollutants floating in their existing water sources (from mains or natural water bodies).

Sanjay told the story of a 2010 cholera outbreak in an Indian village where three people died and 16 people fell ill. The only water that was safe to drink during the outbreak came from WHI's facility, not local wells or taps.

Some people worry about WHI's for-profit status, but WHI faces competition from other water vendors or any company that tries to emulate its model. More important (to me), WHI presents a much more serious competitive threat to municipal water providers who fail to provide safe water to their customers.

WHI's financing model is also very interesting:
User fees for treated water are used to repay loans and to cover the expenses of operating and maintaining the equipment and facility. WaterHealth hires members of the communities we serve to conduct the day-to-day maintenance of these “micro-utilities,” thus creating employment and building capacity, as well as generating entrepreneurial opportunities for local residents to provide related services, such as sales and distribution of the purified water to outlying areas.

And because the facilities are owned by the communities in which they are installed, the user fees become attractive sources of revenue for the community after loans have been repaid.
This model means that up-front costs covered by loans, donations or local sources are repaid by sales of water over 10-15 years. This makes it easier for poor people to "get what they pay for" (no water sales, no revenue) according to their use of the facilities. In Sanjay's words:
The Poor consume goods and services just like anyone of us. When we have the mindset that there should be no profits from the poor then we have subscribed to the mindset that these people deserve aid and cannot be productive members of society and earn their livelihood. Some people fall into this category, and they need our help and will be aid recipients.

But there is a very large group of people who can earn a living and can afford to pay for food and water, if affordably priced They should be treated like customers and not aid recipients. So for these people we need to do the following: provide them goods and services at an affordable cost so that they are then free to pursue their work and increase their earning power rather than spend many hours a day procuring water or falling sick due to waterborne disease and not being able to work. That is what waterhealth is trying to do.
Bottom Line: WHI offers an economic source of clean water to the world's poorest with a business model that forces informal and municipal providers to compete in sustainably delivering better water at lower prices. Win.

* Wenonah Hauter makes some ridiculous and baseless claims about WHI at HuffPo (no fact checkers there, I see). Several commentators (including me) call her bluff, and she does not reply.
Addendum: Some more information from Sanjay:
Q: What's the cost of a WH center?
A: Cost of a waterhealth center depends on the location and the size. The smallest center in India processing about 20,000 litres per day is about 10lakhs or 20K but that includes cost of equipment, the superstructure or shelter for the operator and equipment and the full civil plus mechanical construction work. I lay that out because sometimes people compare that number to only the cost of the equipment on a skid that some equipment suppliers sell in the market, for obvious reasons that is an apple and oranges comparison.

Q: Is WHI for profit?
A: For profit, not possible to get leverage as a non profit and get access to private funds. Grants from foundations is not a way to scale the company to be able to make impact and serve 100 million people which is possible in a 5-10 year timeframe with our systems.

2 comments:

  1. David,

    Great blog overall. Very much appreciate your work.

    Unfortunately, on this post I think you approach WHI and similar models with too light a touch. They certainly add an exciting wrinkle into the water equation, but require a close look and the same critical eye we'd bring to any proposed solution.

    There are numerous problems with the model, let alone WHI's version of it. These deserve careful consideration and much more dialogue. I'd be happy to chat about these offline if you're interested.

    Best,
    DEF

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  2. @DEF -- thanks for your comment, but I have no idea of the "numerous problems." Seems that WHI is just another source of water that people can use (or not) based on their willingness to pay. As such, it has significant advantages over incumbents who charge regardless of service quality or who monopolize supply of drinking water.

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