Water. Desalination + reuse
Issue link: https://fhpublishing.uberflip.com/i/1056083
6 The Quarterly December 2018 Water. desalination + reuse United States Shareholders file lawsuits a er profit warning Evoqua revised down expectations for full-year results 2018 United States Water Security Grand Challenge Secretary of Energy Rick Perry wants competitions to solve water problems South Africa Cape Town scraps 'extremely expensive' desalination Row erupts over whether city can afford to invest in desal — or can't afford not to Singapore Hyflux restructure proves challenging Water company sells controlling stake, receives single bid for Tuaspring What happened? Who covered it? Why does it matter? Investor sites Motley Fool and Seeking Alpha both covered the precipitous 34.6 per cent fall in Evoqua's share price, down to $9.02, on 30 October 2018, a er the water technology company signalled worse-than-expected profits for the full-year 2018. Motley Fool concluded that "the news isn't entirely horrible," noting that even at the revised level, revenues will have grown by 7 per cent year-on- year. However, this didn't stem the flow of lawsuits, which began a week later. The US Department of Energy's news that it wants to harness "the power of competition" to solve water challenges was picked up by energy title Daily Energy Insider, but overlooked by the wider US media. This perhaps reflected the content of the announcement, which set out goals and aspirations, but provided not much by way of concrete plans or, crucially, any funding. The long-awaited funding Radio station 702 Live featured an interview with chief executive of business lobby Accelerate Cape Town, Ryan Ravens, in which Ravens claimed that a proposed desalination plant project at Strandfontein beach had been shelved owing to its high price. In response, News24 columnist Mamphela Ramphele argued that, in the light of the expected long-term effects of climate change in Africa, the decision was wrong. Residents had committed to conserving water and energy, she added, and politicians therefore owed it to them to provide adequate investments in water and Reuters carried the story of two Indonesian companies — Salim Group and Medco Group — joining to create SM Investments, which is to buy 60 per cent of Hyflux's shares for $290 million, and to lend the company $94 million. The deal is central to the water company's ongoing restructuring. Meanwhile Business Times of Singapore reported that Hyflux received only one bid for Tuaspring desalination power plant, whose sale is another important piece of the reorganisation. The offer from Sembcorp was below the facility's book value. Simultaneous with the financials, Evoqua laid out a cost-saving restructure, creating two new divisions — Integrated Solutions and Services, and Applied Product Technologies — to replace the existing three-unit structure. The move is expected to cost between $17 million and $22 million during the two years ending 30 September 2020, and will result in annualised cost savings in the range $15 million to $20 million, starting Q3 2019. Secretary of Energy Perry said that the DOE's 17 National Labs may be involved in the challenge initiative; at least four are poised to bid for the Water- Desal Hub project The question now is whether the DOE will combine the power of competition with some hard cash to address real water challenges. A climate-independent supply of clean drinking water for Cape Town is important for obvious reasons; and beyond this, the plant is significant because, as Ramphele implies, driving down demand is only one side of the story. To create a sustainable supply of water for the future, investment in water infrastructure and new supplies is vital. Hyflux is a central player within the water sector in Singapore and across other parts of Asia, and the Middle East. The company is invested in a number of critical desalination plants, including Tianjin Dagang, Qurayyat, and TuasOne. Failure to secure a full-price sale of Tuaspring risks a knock-on effect on the value of desalination assets more generally. The Quarterly