First published in Cleantech magazine, November/December 2009. Copyright Cleantech Investor 2009
Investment opportunities in water
By Anne McIvor
Water is big business. Water distribution and management, or maintaining and expanding the water mains (the role of the traditional water utilities), is estimated by Sustainable Asset Management (SAM) to cost $65 billion annually – and SAM expects that investment in this space will need to double by 2016. SAM places the value of the sewage treatment market at $104 billion (2007 figures) and the total wastewater treatment market (including drinking water purification and desalination) at $150 billion.
Water utilities are perhaps the most obvious way of investing in the sector. We have not focused on the water utility sector in this issue of the magazine, but clearly it is an attractive investment area. A number of indices, such as the DAXglobal and the FirstTrust ISE Water Index, track the larger, stock market-listed, water sector companies, which are predominantly utilities. Funds which invest in these types of stocks include the Pictet Water Fund, which was launched in 2000; the CAAM Aqua Global, which was launched in 2006; the SAM Sustainable Water Fund, launched in 2001; and the Sarasin Sustainable Water Fund, launched in 2006.
Early Stage Water Companies
In addition to the large water utilities, there are also many exciting technology companies. We have dedicated a large portion of this issue of Cleantech magazine to coverage of investments made and potential investment opportunities in early stage – and not-so-early stage – water technology companies. A host of new technologies are emerging in the wastewater treatment space, including ozone treatment, ultraviolet radiation and membrane filters. SAM expects the membrane technology market to reach $4.5 billion by 2016, growing from $1.5 billion in 2006.
As well as the water treatment market, opportunities exist in technologies for the more efficient use of technology – such as water meters – and agriculture-related technologies. Irrigation in agriculture is one of the major uses of water, accounting for something like 70% of all water use worldwide, and more efficient irrigation techniques are a key focus.
And there are a host of indirect water opportunities in areas such as the more efficient use of water (washing machines with a dry wash or toilets with a low flush).
An innovative new investment fund focusing on early stage water companies and emerging markets is the recently launched SAM Sustainable Water Evolution Fund. The new SAM fund, which is listed in Luxembourg, aims to focus on both small and micro cap water companies and emerging market water companies, to provide long term capital to pioneering water companies. It will overlap only very slightly with the SAM Sustainable Water Fund, which focuses on larger plays in the sector.
SAM has identified that growth in the global water sector will be driven mainly by the emerging markets of Asia, the Middle East and Latin America, where 1 billion people are without access to safe water supply, where agriculture must feed an additional 2.4 billion people by 2050, and where there will be an additional 1.8 billion people in cities. The latter issue, urbanisation, is throwing up opportunities for companies as diverse as water meter manufacturers and pipes, valves and pump companies – as well as water utility suppliers.
SAM anticipates opportunities in the contamination detection and treatment space as well as green fertiliser products and efficient irrigation system manufacture. The fund will also focus on advanced water treatments, including treatments for cyanobacteria, which are set to bloom more as temperatures increase. Examples of potential investments for the new SAM fund include engineering company, Pure Technologies Inc, a Canadian firm which provides real-time remote monitoring of water pipelines; and Asia Environment Holdings, in the wastewater treatment space, a company which provides solutions to the Chinese market.
Venture Capital Water Investors
We have identified one specialist venture capital fund, Canada-based XPV Capital, which invests exclusively in water technology companies. XPV looks at water technologies and innovations which can improve processes from semiconductor manufacturing to food processing – and even including oil and gas production. The fund’s approach focuses on technology or water-related businesses that address the transformation taking place in the way water is produced, managed or used.
XPV Capital’s investments include Aptwater Inc., a company which has developed oxidation and reduction technologies that target contaminants in industrial and municipal water and have wastewater reuse applications. It has also invested in EnviroTower, which offers a water treatment system for clean cooling tower water treatment, in Pionetics, which has developed advanced water purification systems, and in Sempa Power Systems, which provides low cost water heating technology.
Other venture capital funds with a strong water focus include UK-based WHEB Ventures, whose investments include Aquaspy (see guest feature on investing in water by Dr David Lloyd Owen of WHEB Ventures).
Elsewhere, Brazilian investment firm Greentech has made investments in several water sector firms including Perenne (turnkey water and waste treatment systems, and advanced solutions in reverse osmosis and membranes) and Aquapura (tailored water treatment solutions for industrial clients).
Singapore: Water Technology Focus
Singapore, which imports water from neighbouring Malaysia, is acutely aware of the importance of water. The nation is positioning itself as a hub for water technology innovation in Asia and launched Singapore International Water Week in 2008.
Innovative private sector water treatment companies based in Singapore include Hyflux, headed by Olivia Lum, which is a market leader in desalination technology and water treatment technology. There is also substantial activity in the Singapore universities.
The National University of Singapore (NUS) has established the NUS Environment Research Institute (NERI) to bring together environment and water technology expertise. NUS has created the Singapore-Delft Water Alliance (SDWA) together with Singapore’s water agency and Netherlands-based consultancy firm Delft Hydraulics. The SDWA is working on research in smart sensing and engineering technologies related to the urban water cycle.
Meanwhile, the Nanyang Environment & Water Research Institute (NEWRI) was established by the Nanyang Technological University (NTU) in Singapore. NEWRI includes the Singapore Membrane Technology Centre and the DHI-NTU Water & Environment Research Centre, which was established in conjunction with DHI Water & Environment of Denmark.
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