Finance
Water sector investments expected to explode against fast-rising inflation
Global Banking & Finance Review®
Company
By Connor David, Freelance Writer
Coming off the pandemic and now the Russia-Ukraine conflict, there is a rippling effect on economic activity and inflation caused by higher commodity and energy prices, and overall weaker confidence in economies. In America, the consumer price index is the highest it has been in over 40 years. While in Europe they are also facing higher than expected inflation. As investors look ahead at opportunities, utility stocks are becoming more desirable due to their relatively low risk and steady gains regardless of economic or market cycles.
One of the fastest growing commodities coming out of these times is water. As water scarcity becomes more widespread due to climate change and population growth, investing in water utilities is set to become a fast-growing sector. One company hoping to make a splash is OriginClear with their Water On Demand™ pay-per-gallon water recycling system that allows businesses and housing developments to clean their water on-site and pay for it like they would a utility bill. Riggs Eckelberry, CEO of OriginClear shares, “The portion of an investor‘s total investment that goes into Water On Demand is secured in a wholly-owned subsidiary for use in providing water equipment for projects where the end-user does not need to pay for the machine upfront, but pays by consumption. In other words, we are operating as a private water utility.”
Water On Demand™ claims to generate a steady 25% net profit share to investors for 25+ years. Interesting to note, investors get paid similarly to a master limited partnership, a model that has worked for years in the oil and gas industry but has yet to be done with water. From an investment perspective, water rates historically increase three times the rate of inflation. And since the water royalty is indexed against water rates, the investment should be very inflation friendly. Eckelberry adds, “Since we plan to retain title to the equipment, the Water On Demand subsidiary would always hold either cash, secured notes or equipment assets; enabling the investor to enforce their right to receive royalties, which are set at 25% of net profits on their entire investment. Currently, the founding investors also receive substantial stock grants in OriginClear.”
Water On Demand is not designed to build its own equipment but rather to contract with local water equipment companies to build and support systems in their area. This was designed to ensure rapid expansion of the Water on Demand footprint across America to finance much-needed water treatment by local businesses and housing development that are increasingly affected by failures of municipal services. Other companies in the pre-funded water equipment space traditionally have always installed their own systems. But OriginClear believes this creates a limitation on the ability to scale up to the demand for such pre-funded systems. Eckelberry shares, “Water On Demand is unique in that we plan to harness local water company resources to build, install and service these systems. This will make a partner out of every water company in North America.”
But what is wrong with our current water systems? According to Infrastructure Report Card, our water systems are aging and underfunded. In the US there is a water main break every two minutes, and 6 billion gallons of clean water is lost per day. Global water demand expected to rise approximately 30% by 2050 due to climate change, a growing world population, and agricultural needs to support that growth. “I see a real issue with the scarcity and resultant price increases of water. Right here in the US, water rates greatly exceed core inflation. In China, water demand is estimated to exceed supply by 25% in 2030, yet most of China has less water than the Middle East. It’s estimated that India will run out of water by 2050. We can see a real problem brewing—and one that’s only liable to get more and more expensive if water management isn’t improved. That’s really, really something we’ve got to focus on across the world,” added Eckelberry.
With one out of every ten people in the world still not having access to clean water, it is an issue in need of funding and solution. OriginClear hopes to aggregate the collective financial resources of investors to meet this need, while providing an investment opportunity that historically does well in the current high inflation times we are facing today.
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