Interview with Nalco Holding Company

| About: Nalco Holding (NLC)

The Wall Street Transcript recently interviewed J. Erik Fyrwald, Chairman, President and Chief  Executive Officer of Nalco Holding Company (NYSE:NLC), and Michael Bushman, Division VP, Communications and Investor Relations. Key excerpts follow:

TWST: We'd like to begin with a brief historical sketch of the company and a picture of the things you're doing at the present time.

Mr. Fyrwald: Nalco is the global leader in water, energy, air and process technology and services that deliver savings for our customers and help them to improve the environment. We target a variety of industries around the world through three divisions — Industrial and Institutional services, which covers a whole host of the industries; Energy services, targeted at the oil industry; and Paper services. We're roughly a $4 billion revenue company located in 130 countries and are growing at about 10% per year.

TWST: Would you tell us about your principal products and services?

Mr. Bushman (VP): There is really a broad range of products and services. In water treatment, we provide cooling and boiler water automation and control, basically allowing the cooling tower or boiler to operate as energy efficiently as possible and using as little water as possible. We provide chemistry, software and automation control technology for boilers and cooling towers and industrial wastewater chemistry and services. On the energy side, our products range from drilling fluids that help get the drilling done as efficiently as possible through oil production chemistry as it controls scale, corrosion, waxes, and acids through the oil production process, and finally refining the oil. We also have a whole host of paper-related technologies that help everywhere from processing the pulp, making the water work with the pulp more effectively, improving paper quality and making sure that you use as little energy as possible in the paper production process. It's really a combination of engineering services, chemistry, software, equipment all working together to optimize that customer's performance.

Mr. Fyrwald: Then there are two areas that are fairly new for us, but rapidly growing. One is Nalco Mobotec air pollution control technology. It is an engineering service where we work with customers, today mainly power companies, and modify their coal-fired boilers to reduce the amount of NOx, SOx and mercury that are emitted. We also have BrightWater technology, a new program that is used in enhanced oil recovery. It is used in wells that have started to decline, to help customers increase the amount of oil that they get out of that well and significantly increase the output.

TWST: Would you give us a case study, a major improvement that you made?

Mr. Bushman: We do this every day and we've been doing it for 80 years, but let's take cooling water technology at a refinery. Our 3D TRASAR technology for cooling water can take a molecular level sample of the water in the cooling system every six seconds and then automatically adjust the chemical feed to very precise dosing so that water is perfectly treated. It helps to make sure that there is no scale or microbial film buildup in the cooling tower because if you get scale or microbial growth it's going to reduce the heat transfer efficiency and waste energy. We also use 3D TRASAR technology to control corrosion and protect that cooling tower so you don't have to replace it nearly as frequently. It is not unusual for Nalco to deliver savings that are anywhere from 100% to 300% above what it costs for us to treat a system, so the customer is making money in the process of having us save them water and energy. That energy saving results in fewer greenhouse gas emissions and reduces air pollution from their energy source. The water savings also has a great deal of value, particularly in some of the increasingly water-challenged parts of the world.

TWST: What are the other main items on your agenda as you look out over the next three to five years?

Mr. Fyrwald: We have a great opportunity in the energy industry. I know that oil prices have declined recently off an extremely high peak, but we believe that as global growth re-establishes itself, that demand for energy will be very high and there will be a continuing need to extract oil from more difficult places. Whether it's the oil sands in Alberta or ultra deep-water production off of the coast of Brazil or of Africa, there will be a need for more energy from tougher locations. Nalco has a big role to play there because we can help the oil companies enhance the flow of oil, including oil that is much more corrosive, and we can improve the processing of oil, taking the water out of oil, and cleaning that water so that it's not an environmental problem. As I said earlier, Nalco also has a big role to play in getting more oil out of the ground with our enhanced oil recovery technologies.

There will be more and more challenges with water shortages around the world and we'll bring our technologies to help better utilize waters that are of lower quality in the industrial processes, and then ensure that any water that's coming out of the industrial processes is very clean and meets environmental requirements.

The other area is air pollution control. We have good technologies and we continue to work to enhance them to reduce nitrous oxides, sulfur oxides, and mercury emissions from coal-fired power plants. We think coal will play an increasingly important role around the world and we want to be there to help the electric industry utilize coal in an environmentally sustainable way.

TWST: What about possible challenges?

Mr. Fyrwald: I think in all of these areas, there are certainly challenges. It's not easy to get ultra deep oil out of the ground, it's not easy to get more oil out of existing fields, it's not easy to clean up dirtier water to use in industrial processes and then have 100% recycle of that water, and it's not easy to reduce air emissions. These are big challenges, they require advanced technology, and that's where Nalco fits in. These challenges at the same time are big opportunities for our combination of services, engineering capability and the innovative technologies behind those services to help our customers solve these big problems.