Water Fix

Without solving water resource problems investors will find it increasingly difficult to reach gross domestic product targets embedded in their earnings models.  The last post “A Taste of Water” made a case for investing in products and services that address water shortage problems. 

Some investors, who otherwise embrace the water resource theme, might be quite disappointed to learn that there are few water-related public companies of size available for a minority stake.  We mention here three companies that are involved with water reclamation and reuse  -  two are private and one has publicly traded stock.

Waste Water into Energy

It is beguiling, the idea of turning waste water into renewable energy.  Cambrian Innovation calls its solution the Ecovolt Reactor.  Housed in a shipping container for easy deployment, the system relies on electrically-active microbes to treat wastewater while extracting energy in the form of biogas from the organic matter.  Clean water is a by-product.  The Ecovolt can be configured to process between 10,000 gallons to 300,000 gallons per day. 

Cambrian is not content to simply sell the equipment and walk away.  The company offers customers its Waste Water Purchase Agreement (WEPA), installing the equipment at customer premises at its own expense and then processing waste water streams under a ‘pay for performance’ arrangement.  Customers get a waste water solution with zero down and lower operating costs. 

Initial demand is coming from interesting verticals.  In early September 2017,  Cambrian inked an agreement with Seismic Brewing Company for a new beer made from reclaimed water.  Seismic will deploy a the smaller version of Cambrian EcoVolt.  Cambrian hopes to use the demonstration to popularize the idea of using reclaimed water for food and beverages.

A Napa Valley winery Rombauer Vineyards is already on-board.  Like all wineries in California, Rombauer Vineyards needs to reduce energy costs and reliance on piped water.  In early 2017, the winery installed the EcoVolt system to treat waste water.  The biogas and cleaned water will be reused on site.  The system is expected to generate up to 30 kilowatts of electricity and heat. 

Water Reclamation

Cambrian is not the only company with an onsite wastewater solution.  Natural Systems Utilities (NSU) is a private company with turnkey solutions for water reclamation.  The company claims to have over 200 systems in place around the United States for manufacturers, hotels, universities, healthcare institutions, government agencies, water utilities and others. 

NSU specializes in systems for black and grey water treatment, but also incorporates rainwater harvesting and storm water management in its systems.  In other words, little water escapes an NSU system.  NSU deploys anoxic and anaerobic treatments to remove biologics from the water.  Then the water is filtered through micro-filtration membranes.  Ozone is used for disinfection. 

NSU offers several case studies on its corporate website, to give investors as well as customers a taste of what its engineers can do.  One of the most eye-catching examples is a long standing relationships with Charles River Watershed Association located in the state of Massachusetts.  The group was set up to save the Charles River from industrial pollution and is now working on a project to improving urban and suburban sewage systems.  The Charles River ‘smart sewering’ strategy involves sewer water mining, water reclamation and water reuse solutions.  Importantly, the NSU water solution is crafted to allow customers to offset infrastructure costs with revenue from resource recovery, which fits well into the Charles River strategy.

Water Combo

Fluence Corporation Ltd. (FLC:  ASE) is the combination of New York-based RWL Water and the Israeli firm Emefcy, which at the time of the merger in May 2017 was valued at $100 million.  The merger combines the desalination technology of RWL Water and the sewage treatment expertise of Emefcy.   Since the deal was inked, Fluence has taken in $11 million in new capital from institutional investors.  The new capital gave Fluence a cash kitty near $48 million.  The extra financial resources will allow Influence to move more aggressively in global water markets.  A stronger balance sheet may also make it possible for Fluence to register its securities on a U.S. stock exchange or quotation system.

The reverse osmosis technology on which RWL Water and now Influence relies for its desalination solutions is well understood around the world.  However, the company’s NIROBOx SW solutions can compete by giving customers turnkey solution in three standard models.   The systems incorporate energy-saving devices that mean customers can benefit from low-cost of operation.  Likewise the company’s wastewater treatment reduces energy usage by up to 90% compared to conventional aerobic treatment.  The biofilm reactors Fluence uses for wastewater treatment use passive aeration made possible by self-respiring membrane.

Investors will have to wait for the report of the quarter ending September 2017, to find out what the RWL Water-Emefcy combination looks like.  The June 2017, report reflected only a few weeks of sales related to both companies.  It is a company worth watching even if its stock requires a bit of extra effort to acquire on the Australian exchange and at the end of the day remains by U.S. standards a penny stock.

Next post will explore more water treatment, water usage efficiency and water technology solutions.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.