Desalination Companies

Written By Brian Hicks

Posted July 14, 2005

The more I look at the water market, the more convinced I am that desalination companies are poised for a generation of growth.

The consolidation we’ve seen in recent months, with GE buying Ionics (resulting in a 48% gain for PT readers in only 3 weeks) proves the point.

And things are just getting started. General Electric’s plans to build one of the largest desalination plants in the world is a clear sign that desalination projects are the wave of the future in terms of helping ease water shortages around the globe. GE has invested over $3 billion in its water business since its inception almost three years ago.

The $270 million desalination plant in Algeria is the ompany’s first foray into the drinking water market.

If you’ve read GE’s CEO Jack Welch’s book, Winning, you know that GE’s goal is to be number one or two in every market segment it operates in. Whether that happens in the desalination and water industry is anyone’s guess.

But the mere fact that the company is in the water game is a testament to the growth potential in water. GE wouldn’t be diving in if there wasn’t the opportunity for major profits in the water game.

In Particular, the Desalination Market

Get this, there are almost 100 desalination projects in development here in the U.S. alone!

And that’s in a country with plentiful water. The water-starved third world will see a boom in desalination plants in the coming decade. One in five people lack access to fresh water. And over the next ten years that number is expected to double.

According to the UN, over 1 billion people lack clean water and 2.4 billion have no access to basic sanitation, resulting in over 3 million deaths per year. In fact, 7 million people die every year from water-borne diseases. Over 2 million of those deaths are children under the age of 5.

Desalination is clearly the key to turning these statistics around. Plus, the cost of desalination has dropped from $20 to $3.50 per 1,000 gallons over the past 15 years.

GE’s Algeria desalination plant will provide clean, safe drinking water to 25% of the capital city, Algiers. According to GE, because of the scarcity of water in the region, the residents of Algiers only receive water every third day.

What’s Ahead for Desalination 

Looking forward, GE expects to build three or four major desalination projects per year. De-sal is a $5 billion market that is growing about 15% annually. I expect that growth rate to increase.

For the most part, water stocks have taken a breather for the past month. They’re consolidating, that is.

But the whole water industry is about to begin another leg up in this long-term bull market.

Until next week,
Phantom Trader

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