As the emphasis turns away from traditional investments and toward green ones, numerous oil and gas and utility industry investments are becoming less appealing.
Despite the fact that investors are fleeing the greatest energy corporations in favor of greener options, investors are flocking to the top desalination businesses.
Desalination is quickly emerging as one of the most promising green investment opportunities to keep an eye on.
The scarcity of water resources
As the global population continues to grow and is anticipated to reach 9.7 billion by 2050, there has been a pressing need to adopt water technology in order to alleviate the increasing strain on resources.
Among the advances promised is water desalination (ideal for short), which has garnered enthusiastic support from the government and business. The process of removing salt, contaminants, and other minerals from water on a big scale in order for it to relieve the thirst of millions and be utilized for other purposes, such as agriculture, is essentially two approaches. The less complicated process, dubbed reverse osmosis, involves heating sea or salty water to create pure vapor, which is then cooled to a drinkable liquid; the more complicated process, dubbed reverse osmosis, involves membranes that force water through filters at a high pressure to remove salt and other impurities.
Globally, about 20,000 desalination plants use these techniques to produce around 25 billion gallons of desalinated water daily.
The Middle East and North Africa account for up to 4% of global water desalination projects, with the global industry expected to reach $32.1 billion by 2027.
"While desalination alone cannot solve the global water crisis, it is proving to be one of the most effective methods of reducing water loss and increasing supplies, with the evolution of water recycling technologies reaching millions who would otherwise struggle to access clean affordable water," explained Matthew Wasike, a water engineer at the University of Nairobi. "This comes when the water has become a critical political and global problem."
Desalination: What Is It?
Regardless of the term used, desalination, desalinization, or desalinisation all indicate the same thing: the process of eliminating salt from saltwater in order to generate freshwater for consumption or agriculture. The critical point is that this process is gaining traction in California and other southern states.
Desalination plants typically do this via the use of two technologies or methods: reverse osmosis desalination (RO) and multi-stage flash distillation (MSF).
In reverse osmosis technology, high-pressure pumps drive water across a membrane, allowing the removal of salt and certain impurities from the resultant pure water.
Multi-stage flash distillation involves heating seawater in low-pressure chambers, enabling clean steam (water vapor) to travel into a second chamber and be collected as distilled water.
The desalination solution
Desalination may be used to convert marine saltwater to drinkable fresh water in one of two ways: by boiling it, allowing the salt to precipitate off, and collecting the condensation. Alternatively, you may remove the salt from the seawater by filtering it via a membrane.
It may be a costly process. A gallon of potable water generated by desalination costs almost twice as much as water obtained through other means. And yet, the cost of desalination has decreased by half over the last 30 years, indicating that it is becoming a more practical option. Additionally, when considering the costs of not investing in desalination: California lost $5 billion in agricultural earnings due to crops that it did not produce during the state's most recent severe drought, which lasted from 2014 to 2015. who might have used that same $5 billion to construct five additional desalination plants, assisting in the prevention of the next drought?
Nearly a dozen similar desalination plants are currently operational in California (and ten more are planned). Carlsbad's desalination plant, which was still under construction when I last wrote about this drought, has been operational for five years. It is the biggest desalination plant in the Western Hemisphere, filtering 50 million gallons per day and supplying 7% of San Diego County's water.
Poseidon Water, the company that constructed the Carlsbad facility, is now seeking to establish a plant of comparable scale near Huntington Beach – but at a greater cost. Carlsbad costs $1 billion, while the Huntington Beach facility is estimated to cost $1.4 billion.
Today, water shortage is an issue - approximately 2 billion people face water stress. However, as the global population grows and the climate warms, this situation will only worsen. According to United Nations predictions, global water consumption will grow by 30% by 2050. At that moment, over half of the world's population will be without access to safe drinking water.
However, 97% of the world's water is seawater, whereas just 3% is fresh water. Desalination, or the process of turning seawater into freshwater, seems to be the logical approach to increasing drinking water supplies. It is especially useful in arid coastal regions like the Middle East. (Despite the absence of permanent rivers and lakes, Saudi Arabia is the world's greatest producer of desalinated water.)
Around 16,000 desalination plants worldwide produce 95 million cubic meters of desalinated water every day. Around half of the overall output occurs in the Middle East and North Africa, two of the world's most water-scarce areas, and Saudi Arabia already receives 70% of its drinking water from the sea.
However, the International Water Federation reports that freshwater generated by desalination meets barely 1% of global demand. As a result, there is a probable opportunity for expansion, particularly considering that 40% of the world's population lives between 100 kilometers of the sea.
What are the reviewers' opinions? Desalination remains costly and energy demanding, making it unattractive to towns with alternative choices. Water production consumes one-fifth of Saudi Arabia's energy, while it may mitigate the environmental effect with improved technology and renewable energy.
Is Desalination of Water a Good Investment?
Desalination stocks may be an attractive investment if you're searching for a steady market.
For investors, this implies that desalination stocks are special in that their demand will continue to grow exponentially as population numbers continue to rise.
Additionally, these stocks are excellent dividend payers because they often have long-term agreements with municipalities requiring them to reach a specific level of capacity, which is typically set at roughly 85 percent or higher.
This is to guarantee that, in the event of an emergency, the municipality can depend on the desalination plant to supply water at a reasonable pace.
These stocks also have significant development potential since the majority of firms often construct new desalination plants while repurposing existing ones as regional water distribution hubs.
Additionally, water desalination plants are constructed to endure decades and have a long life cycle.
Water desalination stocks may be an interesting investment choice because of their stability, dividends, and extended company life.
With the need to increase freshwater daily, these shares may provide investors with a bridge to remarkable profits in the future.
Nevertheless, you should do your own due investigation before investing in any desalination stocks, including those on our list.
Investing in water desalination is not simple. Desalination is a niche market for a number of industrial companies and water utilities. For instance, Veolia, the global leader in desalination, also operates a water and wastewater utility. Private firms, such as Israel's IDE Technologies, are engaged in desalination. Hyflux, a pioneer in desalination technology located in Singapore, has ceased operations.
There are two primary methods to invest in desalination stocks: individually or via exchange-traded funds (ETFs).
This is an excellent strategy for generating big profits, but it also entails a higher degree of risk. As you may be aware, the desalination stock market is highly volatile, and investing in individual stocks has a number of risks.
2. invest in Exchange-Traded Funds (ETFs).
An exchange-traded fund (ETF) is a professionally managed portfolio of bonds, stocks, and other assets. It is composed of a variety of various investment vehicles. ETFs often provide lower returns than certain individual stocks, and they are more secure than individual stock investments. Therefore, if you are not a risk-taker, investing in ETFs is a better alternative.
1. Veolia Environnement SA (VEOEY)
Veolia is a French company that specializes in waste, water, and energy management. While Veolia is not a pure-play desalination company, it is the global leader in the industry, with a water treatment capacity of 13 million m3/day. Veolia operates more than 2,300 water treatment facilities in more than 100 countries. They delivered drinking water to 95 million people in 2020 alone.
The company designs and constructs desalination plants of different sizes, including almost 2,000 reverse osmosis desalination plants and systems capable of generating 6.75 million cubic meters of freshwater daily. For instance, Veolia's reverse osmosis desalination facility in Sydney, Australia, meets up to 15% of the city's daily water requirements.
In 2020, the Paris-listed company recorded revenues of €26 billion. Notably, Veolia is acquiring Suez SA, a French water provider that invented reverse osmosis desalination technology.
2. Consolidated Water Co (CWCO)
Consolidated Water Company, headquartered in the Cayman Islands, is one of the few publicly listed pure-play companies, which means its company is focused on a single principal product: clean, desalinated water.
It operates a water treatment facility in the United States and manufacturing plants in the British Virgin Islands, the Bahamas, and the British Virgin Islands.
At first look, it seems as if Consolidated Water's solutions are extremely constrained in comparison to others, such as Economic Recovery and California Water Service.
Investing in a pure-play company, on the other hand, may still make sense.
To begin, this implies that the company may focus its resources and growth efforts on a high-demand item that earns millions of dollars in yearly income.
Second, it enables Consolidated Water Company to expand into underdeveloped areas and expand its portfolio.
3. Global Water Resources (GWRS)
If you speak with 100 Americans about climate change, you will certainly find a few who are uninterested in the environment or sustainability (to put it mildly). To be sure, like with everything else in life, every action has a corresponding response. For every individual or company that is adamantly against sustainability measures, there is another that is adamantly in favor of them.
As its major business segments demonstrate, Global Water Resources falls into the latter group. It offers utility services for water, wastewater, and recycled water on paper, and the latter is a special area of interest.
"Recycled water is what we generate when we cleanse and purify wastewater," the company's website states. We use a separate system of pipes to deliver reclaimed water across the areas we serve, and we reuse water for a range of outdoor applications."
Global Water refers to this strategy as "Total Water Management." It regulates the whole water cycle, from drinking to wastewater. According to the company, their method "protects supplies in water-scarce places, allowing for increased growth and long-term sustainability." Sustainability activists such as Global Water seem to have the correct concept.
4. ACWA Power Co (TADAWUL: 2082)
ACWA Power, based in Saudi Arabia, builds and manages 64 water plants and power-producing plants across the Middle East, Africa, and Southeast Asia. While the majority of projects are energy generating, including oil and gas as well as renewables, around a third are in water desalination. Desalination installations, the majority of which use reverse osmosis technology, generate 6.4 million cubic meters of desalinated water each day.
It is entirely up to you whether you feel secure investing in Saudi Arabia, the world's largest oil producer. Because the company is not listed in the United States, you will need a broker that allows you to trade international stocks.
5. Suez Water Technologies (NASDAQ: SZEVF)
The French waste treatment and water management company was formerly considered minor by industry standards until it acquired GE Water for more than $3 billion in 2017, transforming it into the world's third-largest water company.
It currently serves at least 50,000 industrial and municipal clients internationally and supplies 114 million cubic meters of desalinated water daily via its expanded range.
Meanwhile, GE has been experimenting with sustainable desalination technologies such as reverse osmosis powered by solar energy.
While the idea is still in its infancy and costs are high, GE has already developed the infrastructure necessary to make it viable, such as the Hama desalination plant in Africa.
GE's green energy services also assist desalination plants across the globe, including Saudi Arabia's Yanbu-4, which is expanding to generate an extra 450,000 cubic meters of water by 2023.
Investing in Suez water stocks also allows you to benefit from GE's renewable energy solutions, which means that your shares may have significant upside growth as a result of these two firms.
6. Energy Recovery Inc (ERII)
Energy Recovery, Inc. develops, manufactures, and markets technology that addresses the industrial fluid-flow sectors on a global scale. This company is divided into two segments: water and oil and gas.
ERII manufactures energy recovery equipment to assist industrial firms in lowering their energy costs.
The company began with a water desalination facility, where its PX Pressure Exchanger ERD gadget repurposes energy that would otherwise squander during the seawater reverse osmosis desalination process.
According to statistics, the company saves its water desalination customers over $2.5 billion in energy expenditures each year. The greatest aspect is that the gadgets do not emit greenhouse gases and so contribute to carbon reduction.
Energy Recovery Inc has a market capitalization of $1 billion. To invest in ERII stocks, you must provide acceptable identification. The whole investing process is conducted entirely online and is very frictionless.
7. York Water (NASDAQ: YORW)
York Water (NASDAQ: YORW) is an investor-owned public utility company that purifies and distributes water in 51 communities located in three Pennsylvania counties.
Additionally, it collects and treats commercial and industrial wastewater.
York Water is also constantly expanding its portfolio, as seen by the January 2022 purchase of West Manheim Township.
Like the majority of rapidly developing desalination firms, York Water spends extensively on infrastructure.
One of its largest projects is the renovation of the Lake Williams Dam, which will add over 100 years to the structure's life and make it more capable of managing population growth.
8. Hitachi Zosen Corporation (7004.T)
Hitachi Zosen Corporation is a Japanese company that designs, builds, and manufactures desalination plants, waste treatment plants, and water and sewage treatment plants on a global scale.
The company works in many areas, including Machinery & Infrastructure, and Environment.
Hitachi Zosen designs and constructs a variety of water-related infrastructure, including desalination plants and sludge recycling centers.
The company and its affiliate have rapid deployment emergency containerized saline water desalination plants that can be transported to customers' locations worldwide.
Hitachi Zosen bought a stake in Osmoflo, a company leader in desalination and wastewater treatment. You may argue that Osmoflo has merged with Hitachi Zosen Corporation.
The company's market capitalization is $132.976 billion as demand for freshwater increases; investing in this company's desalination stock may provide an excellent opportunity to benefit.
Final words
Due to the criticality of water in human existence, desalination has emerged as one of the most cost-effective solutions to the global water shortage crisis. Due to population growth and the rising effects of climate change, the already precious resource is becoming scarcer. Although desalination technology is not new, it remains largely underutilized as a long-term investment opportunity, especially in poor nations.
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