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Summary

  • Fresh water stress and scarcity are worldwide conditions opening opportunities for private investment in innovative companies that will reach across the globe with solutions.
  • It takes the full effort of government, academia, NGOs, and private equity to create innovative solutions and bring them to market with companies worthy of being on a watch list.
  • Israel's fresh water industry stands where its thriving, leading biomedical-tech industry stood a decade ago, i.e., on the brink of launching a new industry by companies readying to go public.

Mark Twain advised investors, "Buy land, they're not making it anymore." Invest in a fresh water technology companies today; we're using it faster than Heaven can replenish it. Other than buying your own river, here are some thoughts.

The Scope Of Stress And Scarcity

National Geographic calculates 70% of the earth is covered by water. Only 2.5% is fresh water for drinking, cooking, bathing, and agriculture. Glaciers and snowfields trap 1.5%, so about one percent remains for the world's 6.8 billion people. Aging and crumbling water delivery systems exacerbate the problems of stress and scarcity. Detroit Michigan's Mayor proposes selling off the entire water department, because the city cannot afford all the necessary repairs and improvements.

According to the UN, nearly two billion people live in water-scarce areas. One clean water advocacy NGO estimates 3.4 million people die each year from dirty water related diseases. "Lack of access to clean water and sanitation kills children at a rate equivalent of a jumbo jet crashing every four hours," and "more people have a mobile phone than a toilet." China's social stability and industrial growth is threatened from the number of polluted and depleted fresh water rivers once numbering 50,000 but down to about 23,000. Technology seems their only answer to supply enough fresh water.

Enter The Private Sector

Nestlé Chairman Peter Brabeck-Letmathe, claims "we will run out of safe, clean water before we run out of oil." He and other corporate executives argue they can do a better job than government more effectively preserving diminishing fresh water resources, efficiently distributing fresh water, producing more fresh water through innovative technology, and ensuring heightened security for drinking water collectors and water treatment systems.

Mike Taylor from Honeywell says the water utility industry over time is one of the best performing sectors in the financial markets. Water management and fresh water technology development are dominated by multinationals like GE with a $267.67 b market cap, and Dow Chemical has a $58b market cap. Veolia Environment (VE: NYSE) and Muller Water Products (MWA: NYSE) are much smaller but investment worthy companies.

The nascent fresh water industry in Israel is today where Israel's biomed-tech industry was a decade ago that I wrote about in Seeking Alpha and elsewhere. Israel fresh water companies are following these trailblazers.

Israel is a small nation surrounded by saltwater seas and deserts. The neighborhood spawns industries as a consequence for survival. Sharing this knowledge with countries suffering clean water stress opens new markets, and is a humanitarian good deed. Israeli companies, in close collaboration with the government, universities, the military, venture funds, and NGOs, are on the cutting-edge in water conservation, desalination, and sustainability. Here are three small but emerging companies currently privately held to watch:

Emefcy Ltd. of Caesarea, founded in 2008, focuses on cost-effective wastewater treatment technologies for municipal and industrial plants and agriculture. Its SABRE product significantly reduces the energy consumption and excess sludge in harvesting renewable wastewater. Emefcy's EBR system produces green electricity as EBR treats wastewater using microbial fuel cell technology. Emefcy was named a Global Cleantech 100 in 2013, and in January 2014 was highlighted in Forbes as one promising start-up. Their investors include GE Ventures and nearly a half-dozen cleantech venture funds.

Water-Gen is developer of breakthrough technology in high-efficiency air drying systems. Fast Company ranks Water-Gen twenty-first in their World's 50 Most Innovative Companies for 2014. The company produces drinking water from air, and solutions for purifying water sources. Water-Gen is pursuing strategic partnerships with consumer electronics manufacturers and industrial companies. It has contracts to supply fresh water through their proprietary technology to armed forces in several countries. It is currently financed through private investment.

IDE Technologies of Kadima, Israel, focuses on desalination and industrial water treatment plants. IDE can boast orders in Asia ($75m order), India, US ($650m contract), Australia and Israel.

IDE's PROGREEN desalination plant delivers affordable clean water without using chemicals and reduces energy consumption. They have worked in over 400 plants spanning 40 countries over four decades. The Global Water Awards in 2014 named IDE winner of Desalination Plant of the Year for the Sorek, Israel facility. Built in partnership with Hutchinson Water International Holdings Pte. Ltd., Sorek is the world's largest and most advanced seawater reserve osmosis (SWRO) desalination (technology in which the Chinese are taking a special interest).

Amiad Water Systems is publicly traded (OTC:AFSLF). The stock price barely moves from $4.75 but has been as high as $5.40 in the past year. Fewer than 100 shares are traded daily. Their dividend yields 2.34 percent. Sales exceed $118m in 2013 with an operating profit of $5.1m. Debt was reduced from more than $17m in 2012 to $13.7m in 2013. Cash and equivalents grew to nearly $15m in 2013. It has a market cap over $107m, 22m shares outstanding, and three funds own nearly 12 percent of the shares. Amiad experienced growth in the industrial sector including the installation of a major pre-filtration system in Columbia.

Amiad specializes in environmentally safe filtration technologies using no chemicals or polymers, a bare minimum of back flush water, on reduced energy demand with many systems not requiring any electricity, all on a small, space-saving footprint. It has headquarters in Israel and North Carolina. Its filters are found in 70 countries addressing fresh water needs in agriculture, aquaculture, industrial water processing, wastewater treatment, and a pre-filtration cost savings.

Three Venture Funds To Watch Or Contact

There is virtually no opportunity yet for trading stocks in Israeli companies, but water is a commodity for which people are willing to pay. That opens opportunities to innovative companies supported by national interests and academic resources. I predict we will soon see publicly traded companies emerging from the plethora now in the developmental stages.

Three major Israeli venture funds specialize in clean technology and fresh water with which an investor can explore investment opportunities.

Terra Venture Partners is a multi-stage fund including incubating novel companies. Their Smartap Company has various water applications to control and reduce water consumption in homes. Israel Cleantech Ventures was established in 2008 seeking ways to reduce water usage and create economical sources of fresh water via desalination. Kinrot Technology Ventures founded in 1993, believes "one of the most dynamic and profitable themes for the next decades will be investing in water. Purifying, filtering, desalination, transporting, and storing among others, will become increasingly important global businesses." Hutchison Water, a unit of global Hutchison Whampoa Ltd, acquired Kinrot at the end of 2012. The Canadian Stern Group in cooperation with the Israeli Chief Scientist privatized Kinrot in 2006. Kinrot remains a leader in seed investments in water and clean-tech technologies.

Israel's national agenda is clean water development at reasonable prices delivered effectively and efficiently to people facing drought and threats to public health. Many brokers and venture funds can advise on investment in this popping industry with a lot of capacity. We use way too much fresh water beyond the need for sustainability. Like in the Dr. Seuss book, A Fish Out of Water, we dare not feed ourselves a lot. "Never more than a spot! Or something may happen. You never know what." Out of water means chaos and rot.

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: Fresh Water: A Start-Up Industry In A Start-Up Nation