Having designated 2008 the “International Year of Sanitation,” the United Nations is among the most prominent of a growing number of international aid and economic development organizations on a crusade to address poverty in developing nations around the world by facilitating projects that aim to provide poor communities access to basic and sustainable water, sewage and sanitation services. Long taken for granted in developed countries, concerns about water supplies, sewage and sanitation services are intensifying in cities, counties and municipalities in the US, Europe and developed countries around the world as well however.
Private sector investments and M&A activity in ecological sanitation solutions and clean tech’s wastewater treatment sector have surged as a result. A global industry of multinational companies is emerging, which in turn is stimulating growth of new, innovating start-ups, such as Israel’s Aqwise, that are pursuing ways of giving natural ecological processes a helping hand by cultivating growth of the biota naturally present in wastewater streams to remove polluting organic materials.
Aqwise last month raised an additional US$3.6 million in capital to support its growth plans, which center on use of its AGAR (Attached Growth Airlift Reactor) technology and ecological water sanitation process for municipal, industrial and aquaculture wastewater treatment. Last week, Triple Pundit got the chance to interview Aqwise CEO Elad Frenkel.
An Emerging Player in an Emerging Global Industry
“Conventional sanitation solutions are expensive – one reason why close to 2 billion people in the Asia and Pacific region still defecate in the open or make do with crude sanitation facilities. Fortunately, a cheaper and environmentally-friendly alternative exists. Ecological sanitation, or ecosan, is an approach that protects human health, conserves water, prevents water pollution, and returns to the soil valuable nutrients that would otherwise have been discarded, helping to ensure food security along the way.” So opens the Asian Development Bank’s April 2008 issue of “Water for All News.” It’s a sentiment and belief that Aqwise CEO Elad Frenkel would enthusiastically embrace.
Frenkel took the helm at Aqwise last year, coming over from Elron Electronic Industries (Nasdaq:ELRN) – one of Aqwise’s largest investors, as well as one of Israel’s first, and largest, technology investment and development groups – where he had been leading its clean tech investment effort.
Elron’s clean tech team was increasingly zooming in on Israeli companies developing water resources technology and processes and when Aqwise’s founders decided they wanted to move on, it was decided that he would take on the task of managing its growth and development.
“Analyzing the market, we saw that water, wastewater, is a very interesting market segment, and one that’s been a bit neglected by investors the last couple of years,” Frenkel told Triple Pundit. “Clean tech mainly meant energy for them…We thought it was a good opportunity to take a share in some very interesting technology companies…The market is growing very fast; the need is very clear. Aqwise meets a need that exists all over the world, not only in the First, Western world but a worldwide need that is coming from Asia – China and India – with eastern European countries joining the EU and from Latin America and Africa.”
Motivations for government, public agencies and wastewater treatment companies to come to grips with the pressing need for more effective, economic and sustainable wastewater treatment technology and infrastructure is growing and intensifying around the world, according to Frenkel.
“Regulations are getting stronger and water quality standards are becoming much more significant than they were a couple of years ago in many places, as is the necessity of preserving the natural environment – seas and rivers. A third is population growth – the lack of freshwater and the fact that desalinization is very expensive and not a feasible solution everywhere. Reusing water for agricultural and other purposes is much more effective than other methods of providing freshwater,” he maintained.
Growing clean tech investment and international exchange of information relating to R&D in the ecological sanitation and wastewater treatment field is spurring growth and fostering consolidation in what was up until recently a very fragmented and neglected industry and market, Frenkel continued.
“One very interesting trend in this market is the consolidation that’s taken place in the last couple of years, which has made all this possible. Investors were reluctant [to enter the market] for another reasons – there was no clear exit model. It was a very fragmented market, mainly local and government companies. In the last four to five years there has been a trend of privatization and also consolidation which is the key motivation for the industry in terms of technological innovation.”
This provides incentives for smaller, innovative companies and their investors, Frenkel continued. Larger industrial companies, including Siemens, 3M, ITT, GLMZ and Danaher, as well as infrastructure companies, such as Indosuez and Veolia, have entered the industry and have bought up smaller companies with promising solutions. “So generally we’re seeing the whole business model of the market being formed…I believe that in the next three to four years a global industry structure will have emerged…This creates the ability for investors to back companies like us.”