The Organisation for Economic Co-operation and Development (OECD) estimates that nearly 1.1 billion people lack access to safe water, and 2.6 billon people lack access to basic sanitation. Given below is a map of water stress present in the world today as published by the worldwatercouncil.org.
Large-scale seawater reverse osmosis (SWRO) is looked at as an economic solution to addressing the water crisis. Currently, there are 15,000 desalination plants in more than 100 countries. And, the number of plants is set to increase as the cost of desalinating water goes down. Already, compared with ten years ago, costs have dropped significantly. Today, the cost of producing a gallon of potable water using SWRO is $0.03, compared with $0.06 ten years ago. A report titled Reverse Osmosis for Seawater Desalination published by IHS estimates China and the U.S. to help drive further growth in this segment.
Today, the U.S. has 20 desalination plants planned nationwide with production capacities ranging from less than a million gallons per day to more than 100 million gallons of water per day. The Chinese government also estimates the growing contribution of desalinated seawater. According to their estimates, desalinated water will contribute 16% to 24% of the water supply in Chinese coastal areas in the future, with total daily capacity projected to reach 660 million to 795 million gallons by 2020. However, despite the growing market projections, current conditions remain grim. The global desalination industry is experiencing a multiyear slowdown due to the global recession and credit crisis.
Energy Recovery Inc.’s (NASDAQ:ERI) Q1 revenues fell 18% over the year to $10.4 million. The loss of $0.03 per share also fell compared with previous year’s break even quarter. The company continues to expect the soft conditions in the market to persist for the remainder of the year.
ERI’s Market Expansion
ERI continued to expand their global footprint during the quarter. Earlier last month, they were chosen to be the vendor for the Pressure Exchanger devices by Consolidated Water Co. as part of a major expansion of the Bahamas Water and Sewerage Corporation’s Blue Hills large-scale seawater reverse osmosis project. The expanded Blue Hills desalination plant is expected to provide 18,500 cubic meters a day of potable water to the island.
ERI’s devices were also selected for the Marina Baja-Mutxamel SWRO project being built near Alicante, Spain, to provide 50,000 cubic meters a day of water to the region. This is the third SWRO mega-plant in Spain within the past year to use ERI’s devices, making it a leading player in the region.
ERI’s stock is trading at $2.39 with a market capitalization of $126 million. It was at a 52-week high of $4.57 in June of last year.