promising investments in the water industry

Promising Investments in the Fast Growing Water Industry

Overview of the Opportunity & Approach

Water Investments LLC February 2015

The Macro Case for the IndustryThough water covers 70 percent of the globe, most of the greatest needs for water in agriculture and high population density locations require significant transport distancesOf all the Earth’s water, 97.5 percent is salt and 2.5 is fresh. Of that water, about 70 percent is locked in glacial ice and 30 percent in soil, leaving under 1 percent (.007 percent of the total water) readily accessible for human use. Only 3% of the global water supply is fresh, drinkable water, largely locked up in glaciers, groundwater and soil. Less than 1% of the world’s supplies are easily accessible fresh water;

Water Investments LLC

That 1 percent cache is rapidly dwindling worldwide, driven by population growth, industrialization and pollution that ruin fresh water. By 2030, our planet will face a 40 percent global shortfall in water supply (Source: World Economic Forum)

Continued Strong Industry GrowthThe global water industry amounts to $620 billion in revenues generated by 400 water-related companies globally, though most are in the U.S , where water prices have risen by a third since 2000. (Sources: WaterTech Capital and Circle of Blue)

In the next 25 years, up to $25 trillion could be spent on global water and wastewater infrastructure expenses, according to WaterTech Capital and Goldman Sachs. The U.S. will need to spend at least $500B over two decades for water infrastructure, according to the EPA and Lux Research.


• North Americans use 1,280 cubic meters

• Europeans and Australians use 694 cubic meters

• Asians use 535 cubic meters• South Americans use 311 cubic meters• Africans use 186 cubic meters

Differential Water

Consumption

Rising Water Demand Across UsesWater demand is rising in manufacturing, electronics (in chips) and agriculture -- where most water is consumed. Offset strategies include:

Improved Efficiencies Water Reclamation Desalination


Source: United Nations Environment Programme (UNEP)

Rising Water Prices Across Uses


The End of Los Vegas? : The 28.5 million acre feet Lake Mead is shrinking, and 36 U.S. States faced water shortages in 2013, according to the EPA

Will North America move towards a toll or user-fee based model?

Alternative Water Resource Management Practices

Best Margins are Generated with Advanced Treatment Processes:

Tunable Reverse Osmosis (RO) systems High performance membranes Ultraviolet (UV) Disinfection and continuous

quality sampling Granular activated carbon Various chemical treatment processes and other

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Key Publicly Traded Water Plays

Water Treatment: GE, Osmonics, Energy Recovery, IDE

Water Rights: JG Boswell, Limoneira Co.

Infrastructure: Northwest Pipe, Mueller Water, Rupp

Smart Instruments: Badger Meter, Pall, Itron

Agricultural Irrigation: Valmont Industries, Lindsay Corp.

“Smart” Instruments

Water Infrastructure

Water Treatment

Water Use & Rights

Agricultural Irrigation


Opportunity: Dedicated Water FirmWater Investment LLC: Formed 2014, four partners experienced in water strategy, facilities optimization, strategic planning/finance & information systems

Active, Opportunistic Investment Model: Acquire portfolio of controlling interests in synergistic companies and improve cash flow from operations by applying industry expertise, reaching out to professional network & using metrics

Apply MV4 Methodology: Focus on operational fundamentals, virtualization, maximization of human capital and resiliency to leverage and grow competitive advantage

Emphasize WRM: Focus on all aspects of water reliability management (WRM) to help firms deliver high quality and required quantities of water to specification & standards


MV4 Methodology for Maximizing Business Value

MV1 – Operational FundamentalsBusiness strategies, structures and processes that minimize waste and maximize goal-driven efficiency and effectiveness are the key to enterprise value creation.

MV2 – VirtualizationFocus on creating organizational flexibility and fluidity through minimizing the fixed costs associated with physical operations and infrastructure.

MV3 – Maximization of Human CapitalMV3 techniques focus on minimizing turnover and maximizing the productivity of human capital by empowering employees to achieve breakthrough business results while at the same time maintaining work-life equilibrium.

MV4 – ResiliencyMV4 techniques focus on understanding and attacking the key assumptions embedded into the organization’s business model and processes, and then minimizing the functional constraints that those assumptions impose on the business’ ability to succeed in different possible states of the world.


http://lionswing.wpengine.com/mv4/mv1/




Water Reliability Management (WRM)

All water treatment facilities need to have a high level of reliability to ensure water quantity and quality are delivered to acceptable levels that consistently meet health and quality standards. Consistent and assured levels of reliability can be met only by:

A comprehensive approach to a proven design Effective operational management A robust maintenance strategy, and Proven response procedures


Centers of Excellence - DesalinationSalt Water Reverse Osmosis (SWRO)

The portion of the water supply that has been desalinated is poised to notch 9.5 percent in growth annually this decade, reaching 54 billion cubic meters by 2020, according to Boston-based Lux Research

More than 7,500 desalination plants are operating worldwide, mostly in the arid Middle East and the state of art in multiple Israeli SWRO facilities linking the National Water Carrier (NWC)


Large scale plants being developed such as the $1B Poseidon Carlsbad facility (San Diego County, CA) with a daily million gallon feed, 54% yield from advanced pressure recovery but at a cost of $2,100 per acre foot

Centers of Excellence – High PurityIndustrial Reverse Osmosis (IRO)

The portion of the water supply that has been desalinated is poised to notch 9.5 percent in growth annually this decade, reaching 54 billion cubic meters by 2020, according to Boston-based Lux Research

Plants are Ethernet controlled with high speed communications linking suppliers, continuous performance and error reporting, and great attention paid to diagnostics and security


Large scale food, pharmaceutical and consumer goods producers such as Nestle SA consider water a high value input, with downtime costs exceeding $1M an hour or more so systems are Ethernet controlled with real time reports (Source: www.AutomationWorld.com)

WI Portfolio Companies

Investment Model: Privately-owned, baby-boomer founded firms with strong reputations and cash flow looking for a strategic partner

Pipeline Opportunities: DHP – NM water treatment system training expert with

intellectual property, 35% recurring revenues, and broad customer representation by industry

Phillips – CA water system operator with high purity demand customer base and high recurring revenue profile (70%)


promising investments in the water industry

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