Mendocino, California. Gunter, Texas. Magdalena, New Mexico. These are just a few of the towns that have run out of water in recent years, whether because of a reliance on shallow wells that dried up during a drought, mechanical glitches in wells due to extreme heat, or the town’s water table falling by 20 feet.
Amid water supply problems, some say the water industry, typically considered a public service, has never been more in need of private financing and partnership with private water experts. Indeed, that was one takeaway from the lecture that Arnaud Lamagnere recently gave in Palo Alto, where he shared what he’s learned about water financing in general with the assembled Stanford students.
“For me, the recipe for the right municipal or government project still requires a mix of public and private financing,” Lamagnere says. “In fact, it’s similar to the privatization push in the energy sector. Because those assets are highly capital-intensive, and the governments or the municipalities need to find ways to spread the investment out over time.”
Lamagnere has real-world experience with both types of projects. As a former solar startup in-house counsel and now the general counsel at Gradiant, he has learned about both the energy and water sectors. Gradiant is a hybrid water and technology company that treats water and wastewater for major industrial corporations.
While public-private financing plans sometimes cost municipal governments more over the long haul, Lamagnere says working with the private sector can be an attractive option to municipalities, who might go from spending $80 million upfront on a wastewater treatment plant to $10 million with the investment of a third party.
And big investments are going to be necessary to make wastewater treatment processes, which release a considerable amount of methane into the atmosphere, waste neutral going forward. Infrastructure improvements can reduce emissions, but first governments will have to find money to pay for them.
Originally incubated at the Massachusetts Institute of Technology, Gradiant considers itself a different type of water company; Lamagnere says it’s committed to solving the world’s water problems. From industrial wastewater and recycling to direct lithium extraction to remove emerging contaminants to ultrapure water production, Gradiant works across a range of industries—pharmaceuticals, electronics, mining, refining and chemicals, textiles, renewables, and energy, food & beverage—to separate out the water that’s reusable.
Raising Funds and Negotiating Contracts
Lamagnere has been plenty busy at Gradiant, where he became the company’s first in-house counsel in February 2020. In May 2023, he finished Gradiant’s series D round of financing, in which he and his colleagues raised $225 million. That made Gradiant the first private water company with unicorn status, meaning it has crossed the $1 billion valuation threshold.
“This is really what I’ve been focusing on for the last six months,” Lamagnere says. “Since I moved to the U.S., I’ve been mostly working on corporate and finance types of assignments.”
Before he relocated to Woburn, Massachusetts, Lamagnere worked on a project in Singapore to build a water treatment plant for a global pharmaceutical brand owner and manufacturer. The client has a factory there that produces amoxicillin, an antibiotic used to cure bacterial infections like pneumonia and bronchitis. Gradiant treats the factory’s effluent, or wastewater outflows.
In Singapore, Gradiant built what it calls “the zero liquid discharge asset,” a system that purifies more than 98 percent of the tainted water without discharging any contaminants back into the water network. Lamagnere negotiated all of the contracts with the global pharmaceutical client, including those for the construction of the water treatment plant in a corner of the industrial site.
“From an operations standpoint, the big challenge was that we were building a water treatment plant within a very confined space,” he says. “And from a development, health and safety perspective, we had to abide by very high standards. Especially given the nature and the reputation of the client, it was quite a tough negotiation.”
A Two-step M&A Strategy
Over the past three years, Lamagnere has also been a key driver of Gradiant’s mergers and acquisitions strategy. He’s worked on five acquisitions: one in Australia, one in Malaysia and three in the Middle East.
“We have been really focusing on M&A these last few years, and now that we have these new funds, we will obviously continue to work with this external growth kind of approach,” he says.
Gradiant’s M&A strategy is driven not by new technology acquisition—because with 250 patents, it has the cutting-edge technology itself—but by strategic acquisitions of companies that have a geographic presence Gradiant doesn’t or synergistic capabilities in adjacent industry verticals.
Making A Leap Of Faith
A citizen of the world, Lamagnere launched his career in France, where he earned his law degree from Université Panthéon-Assas in 2002. In 2003, he joined Veolia, a sustainable energy company serving municipal, commercial, and industry customers, as its legal counsel in Shanghai. Over the next four years, Lamagnere rose to general counsel in Asia.
He credits Henri Proglio, the former CEO of Veolia and now an advisory board member at Gradiant, with mentoring him all these years. Lamagnere says he often consults Proglio on “high-level issues,” and indeed the ex-CEO has helped shape his younger mentee’s trajectory.
After stints at Alstom and Schneider Electric, Lamagnere made a leap of faith into the startup world, becoming general counsel of Cleantech Solar in Singapore in 2017. He found the startup environment invigorating, especially the diverse range of work.
“You really have to be a lot more open-minded in the type of assignments that you’re handling without the support of a big corporate legal department with hundreds of lawyers,” he says.
Today, at Gradiant, Lamagnere is glad his gamble on the startup world paid off. He’s helping to resolve global water concerns, and he’s enjoying the challenges of doing it.
“It’s a unique adventure for an in-house counsel to work with the brightest minds in the industry and contribute at the same time to ‘giving nature water back,’” he says.
Reprinted with permission from “Vanguard Law”, Summer III 2023. The original article may be accessed here.