PRINT THIS PAGE Water goes high-tech
12/10/2005. Source:Israel Venture Capital Journal. Booky Oren, Chairman, Mekorot
In this IVCJ article, Booky Oren, Chairman of Mekorot, Israel's national water company, describes the burgeoning water technology market that has recently found new entrants from among major global companies. Oren points out that Mekorot's initiatives in water technology are now presenting interesting opportunities for venture capitalists. Water is one of the five largest markets in the world. It is estimated that over $350 billion is spent annually on generating and delivering water for human consumption, industry and agriculture.
Expenditures are growing at seven percent yearly because of population growth, a higher standard of living, a decline in available ground water sources and climatic changes leading to conditions of worldwide drought.
As water demands grow and sources shrink, new technologies are needed to increase the supply. This year alone over $50 billion will be invested in infrastructure and technological solutions in an attempt to meet the challenge of growing water demand.
The global water shortage is generating attractive opportunities and serving as an incentive for growth of global business activity. Following are key water industry developments that have taken place since September, 2004: Full-scale market entry of multi-national corporations via acquisition
GE, Siemens and 3M have begun to change the business model of the water technologies market, and the water industry is being increasingly recognized as a high-tech market.
- Siemens purchased US Filter, a water technology company for $1 billion. Siemens sees a growing worldwide market for water and wastewater treatment, particularly for industrial customers.
- GE acquired Ionics, a global leader in desalination, water reuse and recycling, and industrial ultra pure water services, for $1.1 billion. In addition, the company launched Ecomagination to develop environmental technologies. GE plans to invest $1.5 billion annually in research for cleaner technologies through 2010, up from $700 million in 2004.
- 3M acquired Cuno Inc., a water technology company, for $1.35 billion in cash. Growth of governmental involvement on a national scale
- Singapore intends to become a global "hydro hub," and hopes to garner some three to five percent of the world market in 10 years - a share valued at about $12.5 billion.
- The Netherlands' government established Wetsus, a center for sustainable water technology, and a research institute in which universities and industrial parties join in partnerships. The major investment (about 60 percent) in Wetsus was made by the Netherlands government. Wetsus focuses on the development of treatment technologies for sustainable water.
So, what does it all mean for Israel?
Mekorot believes that based on Israel's relative advantages, Israel can follow on its successes in communications, software, life sciences and advanced materials, and flourish in the areas of water technology and advanced water solutions. Israel's technology industry is currently ready for expansion.
Blueprint for industry expansion There are several factors that favor the development of a vibrant water technology industry in Israel:
- Existing trends in the global water market, including entry of the "global giants."
- The spirit of Israeli technological entrepreneurship. Since 2002, over 200 Israeli technology companies were sold to global firms for more than $6 billion. The technological achievements of Israel are well-known, and Israel is considered one of the world's leading high-tech centers.
- Existing water institutes. There are currently two academic institutes for water research. In addition, a government-supported fund dedicated to R&D for applied water technologies is planned.
- Chief Scientist programs. There are two techno-logical incubators dedicated to water technologies
- Israel has one of the most developed venture capital industries in the world.
- Israel's water technology industry is recognized for its advances, especially in the field of agriculture. Unique capabilities
Mekorot is Israel's national water company, operating 3,000 installations throughout the country for water supply, water quality, infra-structure, sewage purification, desalination, rain enhancement, etc. Mekorot supplies 80 percent of the country's drinking water. The company's experience, know-how and advanced solutions enable Israel to successfully manage water shortages and desert and drought conditions, as well as the rapid rise in consumption accompanying Israel's modern technology-driven society.
Broad scope of activities
a. Water resources management - The national network supplies water reliably for various uses by using an advanced operational planning model. It combines four main water sources, providing operational flexibility.
b. Water security - Mekorot has implemented systems to address contamination or poisoning of water via chemical, biological or radiological agents; disruption of water supply; employee security; and information security.
c. Well drilling and production - drilling to depths of up to 1,500 meters by advanced drilling technologies.
d. Control systems - operating 3,000 installations and eight centers with systems that include online alerts for water security and quality and online optimization for energy savings.
e. Wastewater treatment and reclamation -Mekorot reclaims about 75 percent of Israel's reused effluents for agriculture. The Dan Region project is the largest of its type in the world.
f. Water quality - Mekorot pays special heed to water quality control and invests extensively to ensure reliability of water quality and supply through its central and regional laboratories.
g. Desalination - Mekorot has been developing additional water sources through desalination. Mekorot has pioneered the effective implementation of reverse osmosis technology for water supply in Israel. There are 31 desalination plants, mainly in the south of the country. There is no other water company in the world that manages, treats, and operates so many different water sources for so many uses, and all by means of the most advanced technological solutions.
The WaTech initiative
Mekorot's newest initiative is WaTech, a program supporting the expansion of Mekorot's water technology solutions. WaTech offers early stage entrepreneurs beta site and commercial plat-forms, technology analysis and support, access to global markets, and assistance with strategic partnerships and capital. WaTech also offers more mature water technology vendors the opportunity to enter into commercial arrangements and joint projects with Mekorot.
For investors, the WaTech initiative provides their portfolio companies with a commercial platform, and ongoing business and technical expertise. The relationship with Mekorot - a strong, reputable customer and partner - helps lower the risk profile of water technology companies.
Although most deal flow will come from Israel, Mekorot is actively seeking entrepreneurs worldwide. Mekorot's increasing deal flow includes more than 100 projects, and the company is currently in a process of beta site testing with more than a dozen innovative technologies, aiming to integrate successful ones into its daily operation.
Mekorot believes that WaTech offers a win-win- win situation for VCs and other investors, entrepreneurs and Mekorot.
Developing technological solutions is the only way to cope successfully with the water challenges facing us all. By offering the Mekorot-WaTech platform, Mekorot will serve as a leader in bringing advanced technological solutions to world markets.
While many of us already know the famous forecast of Fortune Magazine that "water promises to be to the 21st century what oil was to the 20th century," we in Mekorot believe that investing in water technology can be to the next decade what investing in IT was to the last decade. Venture capitalists can count on Mekorot to do its part in advancing tomorrow's water technologies.
This article first appeared in the Israel Venture Capital & Private Equity Journal (IVCJ). IVC Research Center publishes the
Israel Venture Capital & Private Equity Journal, a quarterly review of
trends and developments in the Israeli-related venture capital industry. IVCJ, distributed worldwide, is dedicated to provide wide-range coverage of Israel's venture capital industry. For more information please visit www.ivc-online.com
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