A Way for Californians to Invest in Solar Desalination
One of our most popular articles so far this year has been “How to Invest in Desalination“, mainly we believe, because so many people are looking for ways to invest in desalination since there are very few pure-play opportunities available. There is one way, however, for Californians to invest in solar desalination, and the 22% of our U.S. readers that hail from the State of California should take notice of a company called WaterFX .
Founded in 2012, WaterFX began operating a pilot plant in 2013 in order to demonstrate their solar desalination technology was economically viable. This technology is not just environmentally friendly but also stands to address a real economic problem.
California has experienced an unprecedented extreme drought over the past 4 years leading to 400,000 acres of farmland not being planted in 2014 alone. The State has turned to desalination in an attempt to solve their water problems with 11 facilities in operation and 16 planned, all using “reverse osmosis” which has a fresh water recovery rate of 50%. The concentrated brine that is a byproduct of the reverse osmosis process is then pumped back into the ocean, much to the dismay of those who believe it might disrupt the delicate ecosystem of marine life.
WaterFX has a proven technology that has a fresh water recovery rate of 93%, is less energy-intensive, and also looks to sell the byproducts from their desalination process to generate additional revenue. The first large scale project they are undertaking is called HydroRevolution.
HydroRevolution is in the development phase of what will become the first commercial solar desalination plant in the United States and will occupy 150 acres of land when complete.
At full capacity, this solar desalination plant will generate over 1.6 billion gallons of water a year, or enough water for 10,000 homes or over 2,000 acres of irrigated farmland. The plant will be powered by WaterFX’s Aqua4™ technology which is a concentrated solar still (CSS) process which is a proven process for optimizing freshwater production from salt water using solar energy. Stills have been around for a very long time, and your basic solar still will produce 9 cubic meters of water per day per acre of solar collection area. The Aqua4 system can produce over 275 cubic meters of freshwater per acre, every day, which is a thirty-fold increase in the productivity of solar distillation technology. The byproducts of this process are naturally-occurring mineral salts such as sodium chloride (table salt), sodium sulfate, and calcium sulfate materials which have value to heavy industries and will be sold to generate additional revenue for the project.
Two of WaterFX’s competitors, Poseidon Water, and IDE Technologies, are in the process of finishing the biggest desalination plant in the Western hemisphere called the “Carlsbad Desalination Plant” in California. This plant, which took $1 billion and 14 years to complete, will produce 18.25 billion gallons of water per year. While this much-anticipated project will produce more than 12X the amount of fresh water than HydroRevolution, it will cost nearly 3X as much to construct.
Planned to come online in July 2016, The HydroRevolution™ project is expected to be profitable in the first year of operations. Here’s a statement from WaterFX on the financial forecasts for the project:
At its full production capacity, revenues from the project in 2016 will be $4.9 million, increasing slightly to approximately $5.2 million by 2026. During the same period, the company’s expected 2016 EBITDA is $3.3 million, growing to $3.6M by 2026. After operating expenses and debt service, the company will produce $989,000 of annual free cash flow for distributions beginning in 2016, growing to $3.1M per year once the project’s debt facility is paid off. The lifetime of the plant is expected to be 25 years with regular scheduled maintenance and is based on process guarantees from reputable vendors for all the major systems
Shares in the project will generate a fixed annual return of 6% in addition to any appreciation of the stock. The dividends begin to accrue as soon as you buy the shares, but will only be paid out when economically feasible. For example, investors can expect their first dividend next year which will slowly increase over time and accelerate when the debt is paid off. Half of the project will be funded by equity at a maximum of $10 million (2,000,000 shares X $5) and the rest by debt which will be 2X the amount of equity raised. The company has a minimum funding target set for $7.5 million in which case they would only take a $15,000,000 loan and operate at a “downsized capacity”.
How to Participate?
WaterFX is raising funds for their HydroRevolution project via a direct public offering (DPO) available to California residents only. A DPO is a securities offering that is legally allowed to be offered through public advertising and that allows both wealthy (accredited) and non-wealthy (unaccredited) investors to participate. The Company intends to sell 2,000,000 shares at $5 a piece with a minimum investment of $2,000 for non-accredited investors and $5,000 for accredited investors. WaterFX will accept investments from no more than 500 non-accredited investors and 1,500 accredited investors.
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