Water: Our Basis of Life as an
Investment Opportunity
Viscount Portman
Jeremy Pelczer Stephen Howard
29th April 2015
1
Introductions
• Lord Portman. Chairman of the Portman Settled Estate Ltd which
manages 110 acres in central London; has undertaken multi-million
investments in the improvement of buildings across their properties. Lord
Portman is an experienced investor in nanotechnology, pharmaceuticals,
stem-cells and medical devices.
• Jeremy Pelczer. Previously CEO of Thames Water and American
Water. Chair of WaterAid International, and Non Executive Chairman of
Sutton and East Surrey Water in the UK.
• Steve Howard. A qualified engineer experienced in taking
technologies from the laboratory into the field. Over 25 years research in
the evolution of integrated manufacturing business, service environments
and their associated technology policies.
2
The Expanding Worldwide Water Crisis
– Increased demand for water:
• Population increase, global increased standard of living,
agriculture increase, industrial use increase.
– Decreased supply:
• Changing rainfall patterns – droughts.
• Water lost in transmission – in some countries up to 50%.
– Not Yet Factored In:
• New sources of demand: biofuels
• Pollution of existing supplies – >25% of all freshwater is
polluted. Up to 75% of China’s groundwater is now unfit to
touch; up to 97% in cities.
• Global exhaustion of Fossil Groundwater: water laid down in
aquifers 110,000 to 12,000 years ago during the last Ice Ages
and not rechargable (is not replaced).
3
The Expanding World Water Crisis
• In the Global Risks Report from the World Economic
Forum, survey participants ranked the water crisis as
the highest impact of all risks
• UN report in 2015 highlights a 40% projected global
shortfall between forecast water demand and
available supply by 2030
4
The Expanding World Water Crisis
• There is a clear relationship between water
availability, health, food production and the potential
for civil unrest.
• The water crisis is not limited to shortage of water
for drinking, agriculture and industry. Heavy metals,
pharmaceuticals, chemicals from urban pollution are
finding their way into the aquatic ecosystem, as are
nitrates from fertilizers.
5
Measuring Water Hidden Below Ground
Launched in 2002, the twin GRACE
satellites (The Gravity Recovery
and Climate Experiment) is a joint
NASA/Deutsches Zentrum für
Luftund Raumfahrt (DLR) mission
to measure changes in gravity.
Data is now being analyzed from
long term studies of the earth’s
water.
The Northern Middle East aquifer loses 13 cubic kilometers
a year to pumping by Turkey, Iraq, Iran, Iraq, and Syria.
6
7
Depleting the Hidden Piggy Bank of Underground Water
(Aquifers) – “Fossil” Water
Laid down 10 million years ago,
the Oglalla Aquifer - the largest
in the US - has driven
agricultural prosperity since the
1950s.
8
Since the 1950s, the world has been “Water Mining.”
As in mining for ore, fossil water is extracted and never
replenished. Fossil water is a one-time resource.
Green: water in the soil. Rechargeable water in upper few feet of soil, available to plants
Light blue: renewable water. Rivers, lakes, reservoirs, wetlands, renewable
groundwater
Dark blue: non-renewable fossil water
Clear/white: non-local water, meaning sources such as desalination
9
Even Sustainable Aquifers (those capable of
recharge) Are Not Being Sustained
10
Overpumping of Aquifers: Ocean Salt Water
Pushes Inland, Turning Remaining Water Saline
11
Surface Water Disappears as Groundwater Falls
12
India: Losses Indentified by GRACE Satellites
Almost Double Predictions.
Groundwater from
India’s big red spot is the
second biggest
contributor to sea level
rise after icecaps and
glaciers. Between 2002
and 2008, more than
109 cubic km (26 cubic
miles) of groundwater
disappeared
(I was) flabbergasted at the NASA data showing disappearing groundwater.
- James Famiglietti. Univ of California, Irvine/NASA/JPL
13
Contaminants: Growing Identification of
Manmade and Natural Contaminants
14
Worldwide Nitrate Levels (Urea Nitrogen,
Phosphates) are Rising, Creating Dead Zones,
Eutrophication and Toxic Water
15
15
Investment Strategies for Problem
Solving
“In Africa, an area 3X the size of
Great Britain has been sold to
foreign countries to acquire
water.”
Leak detection, leak repair
Water
Colonization
Loss
Prevention
Increase
Water
Supply
Demand
Reduction
Desalination
Wastewater remediation
Clean up of heavily
polluted supplies
Aerial field imaging, well
monitoring, analytic
software, low flow devices
16
The Way Forward
• While current solutions such as reverse osmosis exist and
are widely used in the desalination of seawater, the
water they produce is expensive due to the high pressure
required to force the water through a membrane.
• To address the issue of water stress, any new solution
needs to:
– demonstrate precise control over pore sizes,
– be highly resistant to fouling, and
– significantly reduce energy use; a mere 10% won’t cut it.
17
Technical Fundamentals for
Successful Water Investing
• Is it solving the right problem? Bacteria and viruses were
the problems of the 19th century. Small contaminants (salts,
man-made and natural pollutants are the 21st century’s
problems.
• How small or broad a niche does it address?
• Does it meet operational criteria? Non-fouling. Non-scaling.
• The hidden question: how much pre-treatment is needed?
• How much maintenance is required?
• What are the total energy requirements?
• Is it a big energy saver?
• What are total CAPEX and OPEX requirements? Savings?
• Can it be manufactured in commercial quantities and at
commercially-acceptable costs?
• Does it produce high yields of water – how much water is
thrown away?
• Is it an incremental improvement or a game changer?
18
The Challenges of Creating More Water
21st Century Challenges
19th Century Challenges
Energy Required
Yield
Cost per Unit of Water
19
The Water/Energy Nexus
• Globally, 7% of all commercial energy now goes for delivering water.
• Additional unknown amount of “private” energy is used.
• In the future, energy use will rise in order to desalinate or purify
more water…..unless we can get down to the red line.
20
Case Study: LG NanoH2O
• Conventional polymeric RO membranes for
desalination - technology developed in the 1970s
• Surface modification to make hydrophilic
• Incremental improvement in throughput
• Incremental improvement in energy use
• $60M+ Venture Capital Investment
• Acquired by LG Chem, Korea for $200M March 2014
21
Case Study: Aquaporin A/S
• “Two Chinese companies have put a jaw-dropping
price tag on a 20.1% stake in Danish desal technology
company Aquaporin. As part of a joint venture
agreement, Heilongjiang Interchina Water Treatment
and Poten Environment agreed to pay $19.5 million for
the equity, implying a post-money valuation for the
business of $97 million. Aquaporin makes biomimetic
reverse osmosis membranes which incorporate
electrostatic nodes on the pores to facilitate water
transfer.” Water Sector News, November 2014
• 5 years away from production
22
Why Size Matters
Thickness of conventional
membrane
Copyright Agua Via LTD 2015
23
Agua Via’s Quantum Pores and Membranes
Show Benefits of Bottom Up Construction
Single Pore
Interior Diameter= ~0.33 nm
2 nm
[_______]
• Triangle pores lock together to form wagon wheel nanomembrane.
• Crystallography confirms this pattern of assemblage.
• Nanomembranes can be built swapping in different pores that produce
different types of Product Water.
• 100% active filtration surface versus only 1/16th for graphene
• Graphene size and cost will be >400% greater to get the same filtration.
Copyright Agua Via LTD 2015
24
Biomimicry of the Kidney to Establish a New
Water Paradigm
Building system for all product water definitions
and all types of source water
1.
2.
Pick a pore to give your desired Product Water
Pick a surface coating and substrate for long life
and enhanced performance in different water
sources.
Surface
coating
Pore
Substrate
Product
Water
definitions
and
different
Source
Waters
Creating
drinking
water from
most
freshwater
sources
Desalinating
Brackish and
Seawater
Desalinating
Water from Oil
Operations
Copyright Agua Via
LTD 2015
25
Relative
Size
Scales
One atomic
layer thick
pore
Virus
Bacterium
Grain
of Sand
500,000
Contaminants
Copyright Agua Via LTD 2015
26
Solving the Small Contaminants Problems –
Nitrates, Other Small Contaminants
Solute
Urea marker - Li +
Sodium - Na +
Potassiu m - K+
Calcium - Ca2+
Mg2+
NH 4+
Cs +
MeNH 3+
EtNH3+
NMe4+
Aminoguanid ine
Choline
NEt4+
Glucosamine
NPr 4+
Radius of
Solute
0.6
1.0
1.3
1.0
0.7
1.9
1.7
2
2.6
2.6
3.1
3.8
3.9
4.2
-
Radius of solute
w/ H20
(#’s in p arenth eses d en o te2nd
h yd ratio n shell)
2.0 (5.6)
2.2
2.7
2.7
2.8 (5.5)
2.9
3
3
3.6
3.6
4.1
4.8
4.4
5.2
-
Pores have “personality” and
membranes can be “tuned” by
using pores that, for example,
prefer one earth salt over another
for water softening.
Copyright Agua Via LTD 2015
PORE 1
PORE 2
Radius = 3.9 Å
Radius = 3.3 Å
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Yes
No
Yes
Yes
Yes
No
No
No
No
No
No
-
Pore 2 was built for
urea exclusion while
allowing earth salt
passage, and
defeating larger
contaminants.
Eliminate final
conventional
cleanup steps,
replace with
Agua Via
filtration for
higher purity
and lower costs.
27
Agua Via Desalination Savings: Reducing Capex & Opex
Energy: 66% reduction over RO
CAPEX: 28% reduction for large plants
OPEX: 60% reduction for large plants
Eliminates RO-type pretreatment
Eliminates high pressure pumps
Exotic metals replaced by PVC
Higher recovery rates
R/O Filters Producing
1,500 cubic
meters/day(400,000GPD)
0% salt passage to desal water. Then,
water polishing occurs within cartridge.
Desal cost becomes similar to today’s cost
of water purification
Brackish water, sea water, brine
Equivalent Agua Via Filters
Producing 1,500 cubic meters / day
Smaller footprint, lower maintenance
enables distributed systems, e.g., at the
well head in agricultural areas.
Copyright Agua Via LTD 2015
28
Complete Water Ecosystem: Low Energy, Low Cost
68.6 cm/27”
head of
water
Flow Input
Potable Water
Waste
Flow Output @ 1 psi
Clean out
• Enables small distributed plants at the Point of Use – at the house,
neighborhood, factory, farm
• For desalination or purification followed by cleanup and reuse.
• Reduces energy to move water
29
• Close cycle with no water “thrown away.”
Copyright Agua Via LTD 2015
Technical Fundamentals for
Successful Water Investing
• Is it solving the right problem? Bacteria and virus were the
problems of the 19th century. Small contaminants (salts,
manmade and natural pollutants are the 21st century’s
problems.
• How small or broad a niche does it address?
• Does it meet operational criteria? Non-fouling. Non-scaling.
• The hidden question: how much pre-treatment is needed?
• What are the total energy requirements?
• How much maintenance is required?
• Can it be manufactured in commercial quantities and at
commercially-acceptable costs?
• Is it a big energy saver?
• Does it produce high yields of water – how much water is
thrown away?
• Is it an incremental improvement or a game changer?
30
Agua Via and Technical Fundamentals for
Successful Water Investing
 Solves the right problems: salts, nitrates, small pollutants and
contaminants, in addition to bacteria, viruses and larger contaminants.
 Broad market applicability – Full Spectrum Filtration covers domestic,
industrial, agricultural water across the full range now addressed by RO,
nanofiltration, ultrafiltration, microfiltration
 Unprecedented ability to meet operational criteria. Innately nonfouling, non-scaling
 Designed to strongly reduce conventional pre- and post- treatment
 Ultra low maintenance
 Energy: gravity feed. 68.6cm/27” head of water for purification. Plus
10oC change to part of system for desal. Down to the “red line”: uses the
minimum energy required by the laws of nature
 Provides major energy savings throughout the entire system
 Unprecedented CAPEX and OPEX savings
 Manufacturable at low cost in commercial quantities
 Unprecedented high yields of water – purification 99.5%
31
 Game changer
The Investment Proposition
•
•
•
•
•
•
Investment need: $60m in 3 tranches
Cumulatively cash positive Year 4
DCF Enterprise value $800m assuming:
WACC 25%, terminal growth rate 8%
Terminal growth year is Year 25, tax at 23%
Average annual EBIT % on revenues 48%
32
Appendix
33
Thank You
• Jeremy Pelczer j.pelczer@aguavia.com
• Steve Howard s.howard@aguavia.com
34
Case Study
Orange County Wastewater/
Reverse Osmosis Retrofit
35
Case Study: Energy Use Comparison in Orange County’s
Ground Water Replenishment System (GWRS)
Replace with lower
Copyright Agua Via LTD 2015
cost, lower energy,
gravity fed Particle
Filtration
Eliminate Reverse
Osmosis. Replace with
Agua Via filter.
Not needed with
Agua Via, but
required by
California law
36
2010 Numbers, Most Current Available in 2015
35
Case Study: Total
Cost Comparison
Orange
County
$/AF
Agua Via
$/AF
Agua Via Cost
Reduction
Microfiltration
$27.08
0
Reverse Osmosis
$52.48
0
UltraViolet
$7.81
$7.81
Screenings
$0.12
$0.12
Pumping to Percolation
Basin
$11.15
$11.15
Pump to Injection Wells
$8.84
$8.84
Lime Post Treatment
$0.21
$0.21
Decarbonation
$1.13
$1.13
Agua Via process
$0.00
$1.19
Energy to lift H2O 27”/1psi
Energy Subtotal
$108.82
$22.64
79.19% electricity savings
Chemicals
$59
$29.56
Assume 50% reduction
Labor (32% benefits)
$110
$54.98
Assume 50% reduction
Plant Maintenance
$45
$22.50
Assume 50% reduction
Total Cost/ AcreFoot
$322.92
$129.69
59.84% total cost savings
Agua Via Ltd © 2015
Electricity Expense
Required by California law
Other Expenses
Source:
OCGWRS
2011/2012
Electricity
kWH cost as
per
OCGWRS
37
Meter3
• $0.2627
•$0.1051
Acre
Foot
• $322.92
•$129.69
1M
Gallons
• $955.2
•$398.00
1
Gallon
• $.0010
•$.0004
Copyright Agua Via LTD 2015
This retrofit study models replacing Orange County’s
microfiltration/RO units. Sunk capital costs are not
impacted, and savings derive from OPEX.
38
Agua Via Energy Savings (Orange County Case Study)
BTU
11,405,253 BTU
per Million
Gallons
3,716,440 BTU
per Acre Foot
3.013 BTU per
Meter3
Copyright Agua Via LTD 2015
BOE
kWh
1.97 BOE per
Million Gallons
3,343 kWh per
Million Gallons
.64 BOE per Acre
Foot
1,059 kWh per
Acre Foot
.00052 BOE per
Meter3
.88 kWh per
Meter3
39
NanoH2O
40
Desalination Energy Costs and Fresh Water Produced
by an Agua Via, NanoH2O, Conventional Cartridge
Water Produced Per Day-Cartridge
Agua Via
NanoH2O
0
Conventional
0
20000
40000
60000
80000
100000
Energy Required per Unit of Water
A gua V ia
Nano H2O
Copyright Agua Via LTD 2014
Conventional
0
0.2
0.4
0.6
0.8
1
Water Produced per Unit Energy-Day
Agua Via
NanoH20
Conventional
0
50000
100000
150000
200000
250000
300000
350000
41
Graphene
42
Graphene: Top Down Construction
The same process as in this much
larger track-etched membrane
Isopore Membrane Track-etched-PC
• Pore density: 1/16th of the area is active
filtration.
• Need to have a space around each pore
to try to avoid the problem of pores
doubling up, tripling up.
• Double, triple, quadruple pores do not
filter properly. Weakens the material.
43
Criteria
Graphene
Agua Via
How real?
Exclusively computer
modeled; nothing made
Pores built and tested;
nanomembranes made
Cost (per same filtration
unit)
$6,000 today
$100 goal
$1(calculated)
Salt rejection
Poor
Surface derivatization for
fouling control
Very difficult. Known to foul
on hydrophobic surfaces. 1
Complete control
Control over pores
Poor
Outstanding control
Manufacturability
Difficult. “Engineering is
formidable.” 2
Standard low cost, high
quality, high yield
Desalination - Energy
required
Reverse Osmosis
400 PSI (28bar) 3
Forward Osmosis – 1 PSI,
10o C
Total cost reduction
15-20% 3
50-65%
Opex
Backflushing required1
Crossflow filtration: no
backflushing
Toxicology
Demonstrated problem4
Biologically benign
1
Demonstrated good
1 Graphene Patent Lockheed US 2012/0048804
2 The Economist 21578525 Jeffrey Grossman, David Cohen-Tanugi MIT
3 The Economist 21578525 John Stetson, Lockheed
4 Proceedings of the National Academy of Sciences 2013/07/09 Yinfeng Li Graphene Microsheets Enter Cells
44