Water. desalination + reuse

Water d+r Dec 2016

Water. Desalination + reuse

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Desalination and water cooler services provider AquaVenture, which styles itself as water-as- a-service, has completed a successful fl otation on the New York Stock Exchange, and closed a signifi cant acquisition in Peru this quarter. It explains why the desalination markets in South America, the Middle East, and Texas are in its sights. D O U G B R O W N C H I E F E X E C U T I V E A Q UA V E N T U R E A quaVenture chief executive Doug Brown has a track record of delivering shareholder value. When he joined water technology and engineering rm Ionics as chief executive in 2003, the struggling business was trading at $16 a share. Twenty months later he sold to GE (a business now up for sale itself, see page 18), by which time shares had soared to $44, valuing it at $1.1 billion. "The investors were very happy. When I came around again, this time they remembered how well they did from that investment, and so they were quite supportive of me," Brown says, referring to the New York Stock Exchange initial public o' ering of AquaVenture in October 2016, which was supported by Citigroup, Deutsche Bank Securities, and RBC Capital Markets. Shares in AquaVenture — which styles itself as WAAS, or water-as-a-service, a trademark of AquaVenture's that nods to the new and emerging business models in San Francisco's disruptive technology scene — were priced at $18 on 6 October, and hit a high of $24.05 a fortnightœlater. AquaVenture is a desalination and water cooler business founded by Brown in 2006. It acquired Seven Seas Water in 2007, a small desalination operator supplying hotels and holiday resorts in Saint Thomas and Saint Croix, in the US Virgin Islands, and in 2014 bought Quench, now one of the largest point-of-use water cooler businesses in the US. "They had less than 5,000 coolers that they owned, and today we own more than 85,000," Brown says. Brown is an engineer turned private equity investor turned water industry leader. He graduated from Massachusetts Institute of Technology (MIT) "way too many years ago", he says, and started out as an engineer at Ionics, a leading company in developing membrane- based water desalination technology, spending seven years starting up new desalination plants in Libya, Kuwait, and Saudi Arabia: "The garden spots of the world, back then. North Africa and the Middle East were the only places that could a' ord desalination – it was very expensive." He went on to graduate with an MBA from Harvard, and then to private equity rm Advent International for 17 years, before rejoining Ionics as chief executive. The idea for AquaVenture germinated while he was running Ionics. "The thing that was interesting is that there were two business units inside Ionics. It was about a $500 million revenue company. It had two business units that I particularly liked: one a desalination services business in the Caribbean, where it put in desalination plants and owned and operated them, and e' ectively sold the water to hotels and municipalities; and the second business, that I really liked, was point-of-use water coolers, where the company bought or built water coolers with ltration technology inside them —replacing the type of water coolers with the ve gallon jugs on the top — plumbing them into the water supply in the building, and it was cheaper, more convenient, water quality was better, and it was environmentally more sustainable," says Brown. The thing that really appealed to Brown's business instincts was that both of the business units generated recurring revenues, and with very good margins on earnings before interest, tax, depreciation, and amortisation (Ebitda), the group had strong recurring cash¨ ow. "If you're in the business of selling desalinated water, once you have a customer, every month you read the meter, determine how much water they've used, and send an invoice at the price you've agreed with them. It's nice, recurring revenue. Once you have a customer, they tend to stay with you unless you fail to deliver," he adds. "Same with the water coolers; we collected a monthly fee, and besides supplying the cooler we'd come out once or twice a year and change the lters, and service the cooler, and if anything broke we'd x it at our own cost." The Seven Seas Water part of the business does mostly seawater desalination and some wastewater treatment and recovery, in some cases acquiring existing Brown is an engineer turned private equity investor turned water industry leader Water. desalination + reuse December 2016 Interview 9

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