IPO Filing: Energy Recovery Inc.; A Desalination Play (ERII)

Energy Recovery, Inc. has filed to come public via an initial public offering.  The company lists that it will sell up to $175 million in stock in the offering, although that is merely for filing purposes and no shares count nor price range has been indicated.  Energy Recovery has applied to take the ticker "ERII" on NASDAQ.  Citigroup and Credit Suisse were listed as joint book-runners or co-leads on it.

The company is a developer and manufacturer of efficient energy recovery devices utilized in the rapidly growing water desalination industry.  It operates primarily in the sea water reverse osmosis segment of the industry.

In the process, high pressure is used to drive sea water through filtering membranes to produce fresh water.  Its primary product, the PX Pressure Exchanger, helps optimize the energy intensive process by recapturing and recycling up to 98% of the energy in the high pressure reject stream, thereby reducing energy consumption by an estimated 60% as compared to the same process without any energy recovery devices.

It has also noted its system deliveries.  Energy Recovery estimated that its devices shipped as of December 31, 2007 reduce electricity consumption in desalination plants by approximately 300 megawatts relative to comparable plants with no energy recovery devices. Assuming a rate of $0.08 per kilowatt-hour, this would result in annual electricity cost savings of approximately $210 million in the aggregate, which would equate to a reduction in carbon dioxide emissions of approximately 1.5 million tons per year.

As of December 31, 2007, it noted having over 4,000 PX devices shipped to desalination plants worldwide, in locations such as China, Europe, India, Australia, Africa, the Middle East, North America and the Caribbean.  Net revenues have grown from $4.0 million in 2003 to $35.4 million in 2007.

We frequently discuss IPO’s, back door plays into IPO’s, spin-offs, and more on our open email distribution list.

Jon C. Ogg
April 1, 2008