What are your objectives in the new assignment?

Aleksandar Jovanovic: I am almost very fresh here, so it will be maybe an outsider’s view on the market, because I still haven’t met all the customers. I am coming from Europe, especially eastern Europe, which has been one step behind western Europe. Most of the innovation, when it comes to heating, cooling, air conditioning, electronics and controls is coming from Europe, which is way ahead of the United States.

My objective would be to introduce existing trends into the market and making sure that they are implemented and that they are explained to everybody. Even though there are lot of manufacturers here, in Saudi Arabia and in Turkey, which especially is huge, very few innovations are coming through. The trends are still emerging in Europe, from a product development perspective; here in the region, it is a matter of implementing them.

Aleksandar Jovanovic

I am particularly passionate about educating the market. And again, if we look around here, we see a very different level of knowledge and understanding, starting from the end-users to the designers, and from the contractors to the service people. It depends from country to country, market to market, so it’s a very colourful picture, but basically, we spend a lot of time educating people and pushing the new technology through. And again, when I look here, there are so many different levels – you have end-users, who are very aware about the opex and capex and how it works. Most of them are still focused on initial investments without thinking about energy efficiency or lifecycle costs. You still have a lot of energy waste. A big part of my career I was working for food retail, so if I go to a supermarket here, I freeze myself with the open cabinets; I hate this. I was at a movie recently, and I was freezing, I mean there is absolutely no logic there. We are wasting energy here, and for sure, we can do better.

We can move the technologies, the new refrigerants into the marketplace. But, it is a process. We know how to do it, because we have the experience, but it will take time. Of course, any help is more than welcome, because of course, we cannot do it alone.

I think it is important that we are talking to the end-users, because without their mindset change nothing will move. We also need to go all the way down to the service guy, because again even if you had willingness to do something, if you have a lot of buildings and supermarkets, you also need to have the service guy who is educated in order to be able to service high-tech solutions. I heard two guys had died servicing a chiller here, and if I hear correctly, they put oxygen instead of the refrigerant in the compressor, and one of them was an engineer.

We need to make sure that people are aware that there are a lot of fake products in the market. The profit is such that every criminal is so good. Some of these things can be very dangerous. We also hear of people repairing the compressors. Some compressors are not meant to be repaired, so who knows what the guys did. In Europe, you have very few cases, but here in the region, it is present; again, it depends from country to country.

And, regarding the market, we are just revising the strategy. We believe Egypt will be a hot topic in the next few years. We were there together, a month ago, and I’ve been in the business for the last 25 years, and I have never seen anything like it. If you visited it recently, it’s amazing. You are driving, and you have 100s of buildings being built at the same time – the Red Sea projects, the monorail… it’s an unbelievable number of projects. Egypt is the fastest-growing market in the region, by far.

In Saudi, of course, on paper, it looks good, but they are slower when it comes to implementation, and that is the only difference. In terms of size, Saudi Arabia is even bigger, but the speed of implementation in Egypt is very fast. So, we are definitely planning to move more aggressively there and open the office. And you have the markets not counting the Emirates, and of course, we have Turkey, which is a huge market.

Santhosh, with perhaps the exception of Saudi Arabia and, to an extent, Qatar, we are seeing a change from a capital goods market to more of an aftermarket in the GCC region. Is the transformation forcing a revision of strategies?

V Santhosh Kumar: With respect to the Middle East, specific to the UAE, we have always been strong on our aftermarket, and that has been our strength. But, the level of education and training that’s lacking with the service technicians is still our focus point, where we want to get more to the secondary market, where we can engage more with the service technicians and help them get to a point where they are ambassadors of Danfoss.

V Santhosh Kumar

When they are dealing with Danfoss products, they need to speak that quality and technical capability, so we are looking for some certification programmes for them and not just leaving it up to the wholesalers. Danfoss has also set up its priorities, and it’s very evident that the focus must be on climate change. We are talking about the organisation, and it includes the food chain, of course, and we are talking about electrification. It depends on various sectors and, of course, it depends on the market. For this region, Africa and the Middle East are the focus. With Egypt booming, with Saudi booming and, of course, Qatar and the UAE talking of the next 10 years of industrial growth, so I think this is all assuring that the growth will be taking place at a fast pace.

In my view, district energy becomes a big topic for us, and this is something that we want to educate, and we want other parts of the region to understand that this is happening in the UAE. In Egypt, they are developing a completely new city, which seems to be a summer house for just 3-4 months.

They are not even talking about the concept of district energy there and developing such a huge city; in the long run, it will not be a sustainable project. So, we are engaging with consultants and contractors to make them aware of the benefits of district energy in terms of energy savings. District energy is becoming the focus for us, as is retrofit. For sure, the UAE is going to go on a revival, and I believe that there is a very clear focus on retrofitting the existing buildings. So, here we are again engaged with a lot of contractors and consultants to look into retrofit as not just specific to HVAC but as an overall solution provider, as we have all the products and technologies starting from lighting to HVAC control.

In the case of retrofits, the first priority are the hotels and hotel chains, and we are talking to the engineering departments. So that’s another focus for us.

And then, we have the traditional business, where we are looking at the refrigerant change driving the industry. With OEMs, we still have people manufacturing with R22. I don’t know whether it is acceptable or not.

When you speak on education, what is the direction you are taking? Is it total cost of ownership? Is it from an indirect emissions point of view?

Kumar: When I say total cost of ownership, that is a vital aspect. We’d like to take a step-by-step process. The more important aspect is with the contractors, consultants and the distributors, about trying to tell them what could go wrong and how not using the right technology would do damage. So, we are working on it at 2-3 different levels. We have set up a training centre in Deira, Dubai, with one of our partners, where we are bringing in customers and training them on a monthly schedule. Then, there are the trainings that we schedule for the leading contractors and the consultants, where it’s more of a thought leadership, where we are talking about Danfoss and what it is focusing on in the next 2-3 years.

Jovanovic: No matter who you choose, we have so many references, world-wide, and so many software that can easily prove to the end user the ROI over the cost of ownership. We are not inventing the wheel, we are just trying to implement something that already exists, and it’s just one more step if we are talking about CO₂ and you don’t need to explain the green footprint and the fact that it is super energy efficient.

Talk us through this. You have reported success with the CO2 transcritical solution in a supermarket project in Jordan. What would it take to switch from R22 to this? How can you amplify CO2 across the entire GCC region and Egypt?

Jovanovic: Normally, this is an end-user approach, and it is easy to show the payback time – it’s not rocket science. And all the cabinet manufacturers that we are dealing with here are already building the CO2 system; we only need to train the contractors here, but again we know how to do it, because I did it starting from the Czech Republic to Ukraine, because it was from one market to the next.

Now despite what you have reportedly achieved in Jordan, are you seeing instances where people are still not convinced that CO2 transcritical systems will work in high-ambient conditions? Do you sense other factors at work – say, the cost of moving away from R22?

Kumar: From an end-user perspective, it is seen as an initial high cost of investment. So, the ROI is not really looked into at an early stage. Also, it’s a personal drive for the end-users – when giants, like Carrefour, come into the market and establish a system, then we will see other chains coming in. But I believe it is seen as a high investment cost at the beginning.

Are there any instances of the ESCO model being applied in the refrigeration sector?

Kumar: We are engaged with Al Gurg, and TTE, which is an ESCO-certified company, as well. We are now engaging with them on certain projects. They are talking about a complete retrofit ESCO approach, and they are looking at all the aspects. For example, we are proposing micro-channel condensing units to go with this, and of course, they are moving into an ammonia system.

We have just started off with this discussion with them, and we have some reference projects, and there can be a full package that will do the whole project – the consulting as well as the execution. And, talking about CO2, the fundamental issue is that we can train, but are there resources who are really capable of taking up such a kind of training – that is a big challenge confronting the industry. We have had instances where the contractor says the technicians have no background. They wanted a job, they got in and then, by experience, they do things.

Today, we still find people installing a reciprocating compressor and then using the same methodology to install a scroll compressor, which will be a big failure. So, even when it comes to charging the systems, many things are still lacking, so I think it’s a long way, but it has to be a sustainable way of planned activities that we have to do in order to upgrade the level of education with these technicians. So, CO2 will take some time.

We don’t have the infrastructure, the skilled labour. These are high-end systems, and playing with them will cost us serious damage. And also, the industry should have the drive. In refrigeration, we don’t have enforced regulations that are pushing the industry to make these changes.

Jovanovic: We hear how the region is taking serious care about energy efficiency and savings; on the other side, R22 is still allowed in the market, which is the total opposite.

How difficult is it to install a CO2 transcritical system?

Jovanovic: It’s not at all difficult – you just need to be more careful, as it is higher pressure. It’s not such a big deal, we hear thousands of installations across the world. But you need specialised contractors, we need to train the existing ones.