Be Grateful For Small Emefcys
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The Australian Securities Exchange (ASX) has ambitions to be a regional stock exchange, and actively seeks foreign companies to list, but even it would have been surprised at an approach it received last year.
A group of Israeli tech impresarios wanted to list a company holding their water purification technology. The worlds “Israeli” and “tech” make the ears of many investors prick up these days: the Middle Eastern dynamo is a hotbed of high-tech in a wide range of fields. This particular group had already had success with one biological water and wastewater treatment solution company, AqWise: this time they had developed a water purification technology that was aimed at “disrupting” the wastewater treatment business, reducing power consumption for wastewater treatment by up to 90 per cent.
The company, Emefcy, was backed by Israel Cleantech Ventures, Plan B Ventures, and GE Ventures, the corporate venture capital arm of General Electric. Melbourne’s wealthy Liberman family also held a stake. The upshot was that Emefcy headed to the ASX late last year to list, using the shell of corrosion management products company Savcor, which collapsed in 2013.
Savcor acquired 100 per cent of Emefcy in a share swap that included a $13.8 million capital raising at 20 cents a share, and Emefcy Limited (EMC) listed on December 22, capitalised at $35 million. All of the original investors in Emefcy stayed onboard for the Australian float, except for one whose mandate did not allow it to invest in ASX companies.
Emefcy listed at 20 cents, and took a couple of days to get moving, but since then the stock has been on a one-way rise. Within a week EMC was at 26 cents, but those who sold for a 30 per cent price rise have been sorely disappointed, as Emefcy has shot to 72 cents – enough to capitalise it at $141 million.
Although Emefcy was floated as a pre-revenue scenario, the market has given a huge vote of confidence in its wares.
Emefcy’s original technology, the Spiral Aerobic Biofilm Reactor (SABRE), is a simple, low-cost, modular solution for small and medium-sized wastewater treatment plants, which can use up to 90 per cent less energy than conventional technology. SABRE is based on self-respiring membranes, which provide oxygen for the biological treatment process. The energy saving comes from eliminating the need to blow compressed air through the wastewater for aeration. SABRE also reduces sludge production.
Because it is a modular system, SABRE can be used on a small-scale, and easily expanded as needed. It is ideal for wastewater treatment and reuse in small municipalities, hotels, resorts, casinos, campgrounds, mining camps, commercial centres, golf courses, and many others.
A SABRE demonstration plant has been in continuous operation at Ceasarea in Israel since late 2014. So far, the demonstration wastewater treatment plant has shown a 50 per cent net saving on opex (operating spending); a 2.1-year payback on the plant cost capex (capital spending); and relatively silent and odourless operation compared to existing small wastewater treatment plants. The recycled water is used to irrigate a golf course.
The company says SABRE is now ready for commercial rollout in the global market. The target market initially is resorts and golf courses that need water consistently over the year: the stage two target is small municipal wastewater treatment plants seeking an effective low capex and low opex solution. Emefcy expects to sell SABRE units for between $140,000–$550,000. Not only does the low-cost solution replace high-cost water and wastewater treatment, it enables a recurring revenue stream through the sale of recycled water for irrigation.
The company is adapting the SABRE technology into higher-capacity solutions for specific additional markets. The first of these adaptations, SABRE2, is aimed at mid-to-large-sized municipal wastewater plants that can ‘retrofit’ it: the company says SABRE2 is significantly more cost-effective and efficient than SABRE, with up to four times the processing capacity. The first trial version of SABRE2 is planned for mid-2016, and first sales projected in 2017. Emefcy expects to sell SABRE2 systems at $685,000–$1.3 million.
The SUBRE system is very similar to SABRE2, but instead of being deployed in a tank, it will be deployed directly into the wastewater treatment ponds. It is also targeted as a retrofit for existing wastewater treatment, lowering operating costs while complying with tighter regulations. This system is aimed at mid-to-large-sized municipal water plants that can retrofit it to their ponds: Emefcy expects to sell SUBRE units for $1.3 million-plus, with first sales scheduled for 2017.
Then there is the company’s new technology, the electrogenic bio reactor (EBR), which is designed to treat industrial wastewater, while simultaneously generating electricity from the process, to be fed to the grid. The EBR system is energy-positive, meaning it can use the organic contamination of the wastewater as a fuel source, using bacteria to generate electricity. Because electricity is produced as a by-product, this form of treatment can potentially reduce operating spending to almost negligible levels.
The target market for EBR is industries that generate organic or highly saline wastewater, for example the food and beverage, paper and pharmaceutical industries. Usually this kind of industrial wastewater is very costly to treat, but harvesting electricity from the process makes it efficient and highly cost-effective. Emefcy expects EBR to generate up to 80 per cent less sludge than conventional treatment processes.
The company says EBR requires substantial further development work before it will be ready for operational use. EBR is not anticipated to be commercially ready until 2018, but the company says it would expect to sell EBR units for at least $2.7 million.
The upgrades to the SABRE technology and introduction of EBR will require upgrades to Emefcy’s manufacturing plant at Or Akiva in Israel, but the company says these modifications will not be significant.
So far on the stock exchange, Emefcy has signed its first commercial contract, valued at about $380,000, for a municipal wastewater treatment in Ha-Yogev, Israel, The SABRE modules have been installed three months ahead of schedule, and the company’s first revenue is expected from this project in the current half. This was followed last month by the first international contract for a SABRE-based wastewater treatment plant, in Saint Thomas in the US Virgin Islands.
When complete, this plant will act as the first reference site for customers in the Americas. Emefcy says it has a pipeline of 39 potential projects, worth an estimated $15 million, including China, the USA, Africa, Latin America and Australia. This is only a tiny fraction of a global wastewater market estimated to be worth at least US$93 billion in the 40 most robust markets.
Further out, though, the main game for Emefcy will be China, where the current government Five-Year Plan calls for the installation of wastewater treatment plants for up to 100,000 communities. Emefcy reckons its technology is relevant to up to 40,0000 of these plants. It expects to strike its first deals in China in 2017, with a Chinese business partner slated to be signed by the end of this year.
Emefcy’s business is focused on the coming together of two global and growing markets: the increasing demand to process wastewater (from municipal sources, agriculture, food manufacturing and pharmaceutical production), and the increasing demand for useable water (for municipal use, industrial use, irrigation). The company has won rave reviews: it has been cited by the Artemis Project as a global top 50 water technology companies; CNET described it as “one of the five companies that will contribute to the reduction of the world dependence on fossil fuel.” Global Water Intelligence called it “one of ten technologies that will save the world.”
It looks impressive, but many investors would assume the big share price gains have already been made. However, if the roll-out of the upgrades proceeds as projected, and the commercial progress starts to accelerate, there could be more to come for this emerging cleantech star – which could one day find itself listed on Nasdaq.
James was founding editor of Shares magazine, and oversaw one of the most successful magazine launches in Australia. He has also written for BRW, Personal Investor, The Age and Management Today, and was subsequently personal investment editor at The Australian and editor of financial website, investorweb.com.au