September 16, 2005

Desalination: Tapping the Oceans

MORGAN
JOSEPH

.
EQUITY RESEARCH

The Disclosure section may be found on the last page of this report.
Key Points
 We expect demand for potable water to increase at a steady pace, putting considerable
pressure on current fresh water supplies and driving overall spending in the water sector.
Expanding populations and emerging economies will continue to be primary growth drivers
in freshwater consumption, while the supply of freshwater remains constrained by
insufficient infrastructure, fluctuations in weather patterns and contamination from both
naturally occurring and man-made sources.
 We believe desalination, the process of removing salts and other impurities from seawater to
make potable water, will play an increasingly important role in mitigating fresh water
supply and demand disparities in water-stressed coastal areas, as its capital and operating
costs come down and become more competitive with traditional water treatment.
 We expect the desalination market to increase at rates well above average economic
expansion. Annual spending in the desalination industry is estimated to be approximately
$4.3bn in 2005 and is expected to grow between 9%-14% annually over the next 10 years.

WATER

Richard S. Paget, CFA

212-218-3894
RPAGET@MORGANJOSEPH.COM
1

Richard Rossi
212-218-3741
RROSSI@MORGANJOSEPH.COM
 September 16, 2005

Summary
As we broaden our coverage on the water sector, we will periodically focus on certain
sub-segments of the industry and add related companies that serve those markets to our
water coverage universe. In this report, we will explore the topic of desalination, the
process of removing salts and other impurities most often from seawater to make it
cleaner, or potable.

As we have previously mentioned in our January water sector initiation piece, Investing in
Water: Is the Glass Half Empty or Half Full?, increases in water demand due to growing
populations and the needs of emerging economies are expected to outgrow viable water
supplies, which are already constrained by insufficient infrastructure, fluctuations in
weather patterns like droughts, and contamination from both naturally occurring and man-
made sources. While it may be uncertain which solutions will be most heavily utilized to
alleviate the supply/demand imbalance and fulfill the requirements for clean and safe
water, one thing is clear – more money will have to be spent in the sector during the next
several decades. Increased public awareness of both water supply and quality issues has
further added to a sense of urgency regarding investment in these markets. Although we
do not expect spending in the water sector to increase exponentially any time soon, we do
believe that expenditures in this sector will grow at better than overall Gross Domestic
Product (GDP) rates in the US and other developed economies. In many developing
economies and certain niche markets, growth rates could easily outperform overall
economic growth and reach low double-digit levels.

One such niche water market that we expect to exhibit above-average growth
characteristics is desalination. Expanding coastal populations in the South Eastern and
Western US, as well as the Mediterranean and Middle East, along with economic
development, especially in Asia, are expected to push many of these areas, which often
have stressed water supplies, to seek out alternative water sources. Converting seawater or
brackish water to potable water is one method that continues to garner more interest. In
the past, the high cost of desalination, related to the relatively high use of energy and
other process inefficiencies, has been the main hurdle for wider acceptance of this
approach outside of oil-rich areas like the Middle East. However, advances in technology
have made systems more efficient and lowered the costs considerably. In addition,
increasingly strict EPA regulations have added to the expense of traditional water
treatment and made desalination a more competitive option.

The global market for spending on desalination is estimated to be roughly $4.3bn in 2005
and is expected to grow at low double-digit rates over the next several years. These
favorable growth fundamentals have attracted the attention of some larger companies,
looking to expand their water-related business. Most notably, in the last year, General
Electric (GE - $34.38 - NYSE) entered the desalination industry in November 2004 by
acquiring Ionics, a company with a variety of leading-edge membrane technologies, as
well as a wealth of experience in the design and construction of desalination plants. GE is
not alone in its interest in desalination. According to a Frost & Sullivan report, over 200
public and private companies serve the desalination industry. The market contains a wide
variety of players ranging from large engineering and construction providers, such as
Doosan Heavy Industries and Construction (a subsidiary of Doosan Co.: 000150.KS -
17,250KRW - KSE) and Fisia Italimpianti (a subsidiary of Impreglio: IPG - €3.47 - IM);
subsidiaries of large international conglomerates that provide an array of desalination and
other water-related services, like Degremont (a subsidiary of Suez: SZE - $29.63 -
NYSE), Ionics and Sidem (a subsidiary of Veolia: VE - $42.62 - NYSE); specialized
technology producers that manufacture membranes and valve systems, like FilmTec (a
subsidiary of Dow Chemical: DOW - $43.52 - NYSE) and Energy Recovery, Inc. (ERI);
and regional players that focus on specific geographic markets such as Consolidated
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 September 16, 2005

Water (CWCO - $19.96 - NASDAQ); Waan Enviro Tech and GETCO. (See Appendix
on pages 11-15 for a larger list of companies in the desalination industry).

Key Points
Increasing Demand for Potable Water Drives Overall Spending
Rising demand for fresh water, for which there is a limited supply and no real substitute,
is expected to continue to drive increased spending in the water market over the next
several decades. Fresh water is essential for human existence. Beyond direct consumption
and agricultural needs, fresh water is vital for industrial production, energy generation and
even recreational uses. Although it is one of the most common substances in the world,
the majority of water is either in the form of ocean saltwater, frozen in glaciers or trapped
underground in inaccessible aquifers, leaving less than 1% of total water as fresh water
readily available for human use. Considering that the total number of people on earth is
expected to increase from six billion in 2000 to nine billion by 2050, global population
expansion will continue to require higher levels of water withdrawals from present water
supplies, many of which are already at or near capacity thresholds. This increased demand
will be an important driver of all types of water-related spending aimed at improving the
efficient use, sanitation and distribution of the existing water system, as well as
identifying and developing new fresh water resources. While a rise in water expenditures
will occur globally, we expect low-to-mid-single digit growth in developed countries, as
their population growth is forecast to be relatively slow and the infrastructure to deliver
water is mostly in place. In developing countries, the impact of higher growth rates in
populations combined with human migration from rural areas to cities, increased
industrialization and a growing consumer class will all put tremendous stresses on already
limited water resources and infrastructure. This should raise the need for higher rates of
water-related spending in these regions to develop increased supplies of clean, potable
water and the systems to distribute that water to end-users.

Desalination Should Play a Growing Role in Alleviating

Fresh Water Supply Issue
We believe desalination should play an increasingly significant role in relieving
freshwater supply and demand disparities and expect it to be a growing niche in many
coastal markets. Given that over 97% of the earth’s water is saltwater, it makes sense that
finding a way to utilize the oceans and seas as a fresh water source should be an important
means for meeting future fresh water demand. Desalination technology has already been
used successfully in the Middle East for roughly 100 years, where the arid dessert climate
coupled with abundant energy supply make desalination an effective means of providing
potable water. While the Middle East should continue to be a key area of desalination
development, we believe this technology will become a more frequently used solution in
other water-stressed regions in the developed world like Spain, California and Texas. We
also look for desalination growth to occur in the emerging coastal countries of Africa, and
later in the future, Asia, especially where scarce fresh water supplies and a lack of
infrastructure have played a part in hindering socio-economic development. Additionally,
in island regions, like the Caribbean, desalting the surrounding seawater should become a
more frequent alternative to help reduce pressure on traditional water supplies like wells
and rivers.

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 September 16, 2005

Desalination Market, a $4.3bn Global Industry, is Growing at 9%-14%

Annually
Given the previously discussed demand drivers of increasing water demand and
decreasing desalination costs, we believe the industry is an attractive niche market within
the water space and expect it to grow at low double-digit levels during the next decade.
Global spending on desalination is estimated to be approximately $4.3bn in 2005, with the
market split 60%-40% between municipalities and industrial users. A majority of the
business, roughly 65% or $2.8bn, is in Europe, the Middle East and Africa (EMEA). (See
Table 1.) Over the next 10 years, the global desalination market is expected to grow
between 9%-14% annually, which would bring desalination spending in excess of $14bn
per year by 2014 at the high-end of the estimate or a total cumulative expenditure of
nearly $100bn during that time period.

Table 1: 2005 Geographic Desalination Market by Percentage of Total Spending

Americas
10%

Asia
25%

EMEA
65%

Source: General Electric

A 1999 study tracked global desalination capacity and showed, not surprisingly, that the
Middle East dominated in total volume as measured in cubic meters per day with over
half of the world’s desalination capacity (see Table 2). Saudi Arabia led all countries in
desalination capacity, with over 25% of total volume. North America was second in total
desalination capacity, with a majority of desalination plants in California, Texas and
Florida. In Asia, which represented about 11% of total volume, almost half of that area’s
capacity was in Japan and South Korea. Spain and Italy each account for roughly 30% of
capacity in Europe, which accounted for 8% of total global capacity.

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 September 16, 2005

Table 2: 1999 Desalination Capacity by Geography as Percentage of Total Capacity

Africa Other
5.3% 1.3%
Europe
8.1%

Asia ex Middle
East
10.7%
Middle East
56.1%

North America
18.5%

Source: Pacific Institute, last updated 4/21/99

In terms of new desalination capacity, we expect the Middle East to remain the largest
market with notable growth areas in Africa and Europe, mostly in countries bordering the
Mediterranean. According to the Global Water Intelligence’s May 2005 Desalination
Tracker, which follows a wide-ranging list of large international desalination projects,
there are over 120 desalination plants that are either in the initial planning phases or are
currently under construction throughout the world. The Middle East continues to be the
biggest consumer of desalination technology requisitioning over half of all new
desalination capacity (see Table 3). Africa accounts for the second largest amount of new
plant volumes, mostly in Algeria and Libya. Europe and North America each represent
roughly 11% of new plant capacity. Strong market activity in these regions includes Spain
(roughly 90% of new European capacity) and California (over 55% of added capacity in
North America).

Table 3: 2005 Desalination New Capacity by Geography as Percentage of Total New Capacity

Other
Africa 2.4%
14.5%

Europe
11.3%
Middle East
Asia ex Middle 54.0%
East
6.1%

North America
11.6%

Source: Global Water Intelligence

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 September 16, 2005

Costs Have Been a Hurdle, but They Continue to Come Down

The high cost of desalination, relative to other water purification methods, has been a
considerable obstacle preventing wide-spread acceptance of this technology. Fortunately,
the reduction of capital and operational costs have been a focus of desalination research
and development over the years, and the expenses related to building and operating
desalination plants continue to come down. According to the US Department of Interior,
the cost for desalination has declined by roughly four percent per year over the last 30
years, reflecting the improvement in membrane technology, as well as other process and
equipment improvements. Capital construction and the energy used during processing
account for a majority of the costs for a desalination facility, representing between 65%
and 80% of total costs, depending upon technology used, local conditions and energy
prices (see Table 4). This cost structure has limited the use of desalination plants in many
regions, but as new methods and technologies arise and these expenses drop further, it
will increasingly become an economically feasible option for areas that need new sources
of fresh water.

Table 4: Cost Structure for Reverse Osmosis in the Desalination of Water

Consumables
3%
Fixed Charges
Maintenance & Parts
37%
7%

Labor
4%
Membrane
Replacement
5%
Electric Power
44%

Source: US Bureau of Reclamation, "Desalination and Water Purification Technology Roadmap",

January 2003

Cost decreases have been driven by many factors, including increased vendor
competition, as well as technological advances in reverse osmosis (RO) membrane
performance and production. An RO element, which is the unit that holds the filtration
membranes now costs less than half of what it used to and lasts more than twice as long.
Considering an RO desalination plant can have over 10,000 RO elements, the savings in
capital expenditures are estimated to be substantial. Increases in energy efficiency of RO
plants have also taken down operating costs, as newer facilities require just one-fifth the
energy on a per-gallon treated basis as a plant did over 20 years ago (see Table 5). Some
distillation plants have found ways to lower energy costs by collocating with power
facilities and using the excess heat emitted from electricity generation in the distillation
process. In addition, hybrid desalination plants that use a combination of both RO and
distillation technologies have been shown to reduce operating costs by as much as 15%,
according to a study by the Middle East Desalination Research Centre.

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 September 16, 2005

Table 5: Historical Salt Water Reverse Osmosis Energy Consumption 1980-2001

kWh/m3 kWh/kgal kWh/acre-ft

8.11 30.7 10,000
10,000

6.48 24.5 8,000 8,000

4.86 18.4 6,000 6,000

3.24 12.3 4,000 4,000

1.62 6.1 2,000 2,000

- -
1980 1990 2000 2001

Source: Affordable Desalination Collaboration (ADC), October 2004 presentation

All of these cost improvements have brought the price of desalination down by as much
as 80% over the last 20-25 years. For example, RO treatment costs for a 2002 plant in
Singapore were approximately $1.53 per 1,000 gallons (see Table 6), which is a
significant improvement when compared to the cost of $9.20 per 1,000 gallons from
plants in the early 1980’s. However, despite the drop in costs, desalination is still more
than, and in some cases almost double, other traditional methods of water purification.
While we believe desalination will continue to be a growing market, as it becomes a more
competitive option to traditional water treatment, this technology needs further price
improvements before it is used on a wider scale, outside of areas that have a large amount
of inexpensive energy, as is the case in the Middle East, or have limited fresh water
supply options, like island and desert regions.

Table 6: Cost of Seawater Reverse Osmosis Desalination 1980-2002

US$/m3 US$/kgal US$/acre-ft

$2.43 $9.20 $3,000 3000

$2.03 $7.67 $2,500 2500

$1.62 $6.14 $2,000 2000

$1.21 $4.60 $1,500 1500

$0.81 $3.07 $1,000 1000

$0.40 $1.53 $ 500 500

- 0
1980 1990 2000 2001 2002

Source: Affordable Desalination Collaboration (ADC), October 2004 presentation

Beyond advancements in technology, additional cost reductions in desalination could

stem from more unified regulation of and standardization in the industry. Many
desalination plants are custom built and may employ very different architectural plans;
use diverse construction materials, and follow varied treatment processes, when compared
to other plants using similar technologies. A path towards industry standardization could
help improve efficiencies related to construction, operation, maintenance and repairs and
bring down costs even more, which would promote further adoption of this technology.

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 September 16, 2005

Environmental Concerns Remain

Beyond cost and financing issues, environmental concerns have also been an impediment
for the construction of new desalination facilities in a few areas, particularly the US.
Some view the desalination process as an exorbitant use of energy, and certain plants are
considered ecologically intrusive eyesores in environmentally-sensitive coastal areas.
Additionally, opponents to desalination plants want more comprehensive studies on the
long-term environmental impact to surrounding areas from brine discharges, the left over
extracted salts from the process. Furthermore, resistance to desalination plants may also
come from some residents of sea-side communities, where additional water supply
capacity may be viewed as promoting further residential growth and commercial
development. This brings up issues related to land use, over-population, traffic
congestion, and other quality-of-life topics, which may put a damper on acceptance at the
grass roots level.

Two Technologies Dominate the Market

In simple terms, desalination is the process of removing dissolved salts from a liquid,
most often seawater or brackish water. The two methods most commonly used for
desalination are membrane-based RO and thermal distillation. Lesser used techniques that
are not yet commercially economical on a large scale include electrodialysis, which uses
charged electrodes to attract water impurities and vacuum freezing, which lowers the
temperature and pressure of the seawater to form pure water ice crystals that are then
washed and melted to produce potable water.

Reverse Osmosis (RO)

The RO method involves semi-permeable membranes that only allow certain substances
to pass through, while blocking out others and thus filtering out any impurities. In a
desalination plant (see Table 7), saline feedwater is pumped through specialized semi-
permeable membranes that let water molecules through, but reject salts and other
substances to create purified water. The feedwater is often pre-treated to remove larger
suspended particles to help minimize membrane clogging or microbe infestation. High
pressure pumps then push the water through the membranes to separate the impurities and
create de-salted water. This stage uses the largest amount of energy during the entire
desalination process. The separated water is often further treated to meet drinking water
standards before it is introduced into the water system. In most areas outside of the oil
states in the Middle East, RO is predominantly used, as it requires considerably less
energy consumption relative to distillation. In addition, RO plants do not require as big a
footprint to process the equivalent amounts of sea water and do not have as many
problems with salt corrosion when compared to distillation plants.

Table 7: Flow Diagram of a Reverse Osmosis System

Source: California Coastal Commission (CCA)

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 September 16, 2005

Distillation
Thermal distillation is a method that involves heating a liquid into vapor, which rises and
leaves behind most contaminants. The vapor is then condensed back into liquid form to
produce a more purified liquid. Thermal distillation basically mirrors the earth’s
hydrological cycle, where surface water evaporates, then becomes clouds in the
atmosphere, before returning to the ground as rain. In a thermal distillation desalination
plant, it essentially follows the same process. Feedwater is heated into vapor, which is
then channeled into a separate chamber. That vapor is then cooled and condensed into
cleaner water. Thermal distillation desalination plants require a lot of energy to heat the
large amounts of seawater, but usually require less pre-treatment and can desalinate lower
quality feedwater, when compared to RO desalination plants. Thermal distillation is the
preferred technology in the Middle East, primarily the Gulf States, reflecting the relatively
low costs of energy and the high salinity of the water in the Arabian Gulf, which can
negatively impact the performance of RO membranes.

Table 8: Reverse Osmosis Compared to Distillation

Distillation Reverse Osmosis
- Requires less pretreatment of the water, so it can - Uses lower amount of energy
use lower quality feedwater
- Plants do not need to be shutdown for cleaning or - Has fewer corrosion problems
Advantages replacement of equipment
- Does not generate waste from backwash of - Plants have smaller footprints as they produce more
pretreatment filters deslainated water per square foot of plant
- Uses higher amount of energy - Is more sensitive to poor water quality, resulting in
shutdowns when feedwater has higher levels of
Disadvantages sedimentation
- Is more suceptable to scaling and corrosion - Requires more cleaning and maintenance, with
chemicals and cleaning agents, and often requires full or
partial plant shutdowns during cleaning

Source: California Coastal Commission (CCA)

US Government Involvement is Limited

Early US government involvement in desalination technology dates back to World War II,
when the US military was looking for new methods to get potable water to troops in arid
combat environments. While the Federal government has played a role in the
advancement of desalination technology over the years, mostly by providing research and
development grants, we believe more government involvement is needed to provide
incentives for greater desalination implementation through tax credits and funding for the
construction and operational costs of new desalination facilities. After the War, in 1952,
the Department of Interior (DOI) created the Office of Saline Water (OSW) to further the
advancement of desalination research and development. Later, in the early 1970’s, the
OSW was folded in to the Office of Water Research and Technology, another part of the
DOI. It is estimated that together these offices have spent more than $1.4bn (in 1999
dollars) and produced more than 1,200 technical reports on desalination development
through 1982. In the mid-1990’s, the Federal government introduced the Water
Desalination Act of 1996, which is a cost-sharing program to help fund desalination
research. Beginning in 1997, the act stipulated up to $5mm in funding per year for
research and studies over six years with a total funding capped at $25mm. Congress
renewed the Water Desalination Act through the end of 2005. While these contributions
have certainly helped the evolution of modern desalination in the US, we believe that the
Federal government should help capitalize on these research efforts by increasing focus
on encouraging the building and operations of more working desalination plants
throughout the country.

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 September 16, 2005

In 2005, both the House and Senate introduced identical Bills to authorize the Secretary of
Energy to make incentive payments to the owners or operators of desalination facilities to
offset the energy costs required to operate the facilities. The Bill would make a payment
to the operator of $0.62 for every 1,000 gallons of desalinated water produced and sold.
Surely, this subsidy would help defray costs. However, the bills appropriate a total of
$200mm over the course of five years, from 2006-2010. This roughly equates to
maximum funding for a volume of 175,000 gallons per day, which is the total
approximate capacity of four new plants being proposed in California. While this is a step
in the right direction, we believe that, if the Federal government is to make any major
impact on wider-spread use of desalination in the US, it will need to expand its programs.
Taking into account the current budget deficit, we do not anticipate any significant
increases in this type of desalination funding in the near future.

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Desalination Industry Overview September 16, 2005

Appendix: Desalination Equipment and Service Providers

Company Stock Symbol Desalination Product Description

Calder AG is a privately-owned Swiss company and is a world leader in
Manufactures energy recovery products for deslaination
Calder AG Private manufacturing and supply of energy recovery products to the seawater desalination
systems.
industry.
Manufactures pressure, level, speed and temperature Danfoss A/S produces a completely new-developed product range for water
Danfoss A/S Private controls, pumps, and valves for reverse osmosis water hydraulics and high-pressure systems for humidification, fire fighting, wood
systems. processing, industrial cleaning and pumps for reverse osmosis.
Energy Recovery, Inc. (ERI) is a California-based company that has developed and
Energy Recovery, Inc. (ERI) Private Produces technology to lower the energy cost of desalination. commercialized new, patented, technologies that are radically lowering the energy
cost of producing fresh water from seawater.
As a part of Dow Liquid Separations, FILMTEC provides reverse osmosis
Subsidiary of Dow Chemical membranes to meet global needs for water treatment, as well as specialized
FilmTec Manufactures and develops reverse osmosis membranes.
(DOW - $43.52 - NYSE) applications in industries including pharmaceuticals, fine chemicals, chemical
processing, mining, catalysts, sweeteners, beverage and dairy processing.
Genesys International Ltd. provides a wide range of goods and services through a
Manufactures reverse osmosis membranes and provides
Genesys International Limited Private global network of distributors, agents and associated companies, all of whom are
related services
dedicated to the membrane industry.

GETCO is one of the first Saudi companies specializing in the design and supply of
Designs and supplies water, waste treatment and water
GETCO Private water, waste treatment and water desalination systems. Since 1965, GETCO has
desalination systems.
developed and expanded its facilities, expertise and manufacturing capabilities.

Grundfos is one of the world's leading desalination pump manufacturers. Circulator

pumps (UP), submersible pumps (SP), and centrifugal pumps (CR) are the three
Grundfos Private Manufactures pumps for desalination systems. major product groups. In addition to pumps, Grundfos manufactures electric motors
for the pumps and sells state-of-the-art electronics for controls for pumps and other
systems.

Based in Oceanside, California with sales offices worldwide, Hydranautics is the

Subsidiary of Nitto Denko global leader in membrane technology. Hydranautics manufactures reverse osmosis,
Hydranautics Develops and manufactures membranes.
(6988 - ¥6,830 - JP) nanofiltration, ultrafiltration and microfiltration membrane products for water
treatment applications around the world.

Develops and manufactures membranes and provides
services related to process design and optimization,
Hyflux SES:600 - 3.62SGD - SI
engineering procurement and construction management,
installation, operation and maintenance of desalination plants.
Hyflux is one of Asia’s leading water purification and fluid treatment companies with
experience in the manufacture and use of membrane and related technologies for
liquid/solid separation. Its product offerings range from customized liquid treatment
plants for both industrial and municipal applications. It also offers a suite of turnkey
services including process design and optimization, engineering procurement and
construction management, installation, and operation and maintenance.

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Desalination Industry Overview
Appendix: Desalination Equipment and Service Providers - Continued
Company
Koch Membrane Systems
Nalco
Pall Corporation
Piedmont Pacific Corporation
SIDMAS
Waan Enviro Tech
Zenon Environmental
Stock Symbol Desalination Product
Manufactures cross-flow membrane filtration and separation
Private
technologies for desalination systems.
Services and chemicals to analyze, evaluate, and pre-treat
NLC - $17.53 -NYSE
feed water, as well as services for membranes.
Provides advanced design reverse osmosis technologies to
provide high grade drinking water from seawater or other
PLL - $28.27 - NYSE
sources in a single automated process, without the need for
chemical cleaning or pretreatment.
Private Manufactures stainless steel flexible pipe couplings.
Private Develops and manufactures a variety of membranes.
Private Provides complete line of seawater desalination systems.
Develops, manufactures and markets an array of advanced
ZEN.TO - $25.20 - TSE
membrane technologies.
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September 16, 2005
Description
Koch is a leading manufacturer of cross-flow membrane filtration and separation
technology and has its membranes installed in more than 15,000 systems around
the world, serving food processing, the life sciences, the water, and wastewater
needs of various industries and municipalities.
Nalco is the leading provider of integrated water treatment and process improvement
services, chemicals and equipment programs for industrial and institutional
applications.
Pall Corporation is the global leader in the rapidly growing field of filtration,
separations and purification. The company provides leading-edge products to meet
the demanding needs of customers in biotechnology, pharmaceuticals, transfusion
medicine, semiconductors, water purification, aerospace and broad industrial
markets.
Piedmont Pacific specializes in stainless steel couplings for wet and corrosive
environments, where high strength and long service life are required. Water,
wastewater, seawater and some chemical process industries have these
requirements and stainless steels have proved over time to be the most cost-
effective materials for these applications.
SIDMAS (Saudi Industries for Desalination Membranes and Systems Limited) is the
only Saudi company specialized in the production of membrane elements for water
desalination by reverse osmosis, nanofiltration, ultrafiltration and microfiltration.
Waan Enviro offers a complete line of seawater desalination systems designed to
provide a very high quality drinking water from available seawater. These systems
are available from 200 Gallons per day to 240,000 gallons per day as standard
systems. Larger systems of up to 180,000,000 gallons per day are buildt to order
from standard or custom designs.
Zenon Environmental is a leading developer, manufacturer and marketer of
advanced membrane technologies. Zenon water treatment systems are used to
purify drinking water, produce high quality process water, and treat wastewater for
discharge or reuse.
Desalination Industry Overview September 16, 2005

Appendix: Desalination Design and Construction Service Providers

Company Stock Symbol Desalination Product Description

Bechtel is a global engineering, construction and project management company with

Bechtel Private Designs, builds and operates desalination plants.
more than a century of experience on complex projects in challenging locations.

Black & Veatch Corporation is a leading global engineering, consulting and

Black & Veatch Private Designs, builds and operates desalination plants. construction company specializing in infrastructure development in energy, water,
information and government markets.

Cadagua, S.A., an engineering company that builds water and waste treatment
Subsidiary of Ferrovial
Cadagua Designs, builds and operates desalination plants. plants, is the leader in Spain and has international prestige in seawater desalination
(FER - €62.25 - SM)
installations.

Camp Dresser & McKee CDM is a consulting, engineering, construction, and operations firm with public and
Private Designs, builds and operates desalination plants.
(CDM) private clients worldwide.

CH2M Hill is an employee-owned, multinational firm providing engineering,

CH2M Hill Private Designs, builds and operates desalination plants. construction, operations, communications, security, environmental, and related
services to public and private clients in numerous industries on six continents.

CWCO's primary business is to provide water services in areas where naturally

Designs, builds and operates desalination plants in Caribbean occurring supplies of drinking water are scarce. These water services include
Consolidated Water Co. CWCO - $19.96 - NASDAQ
market. production of potable water from seawater, and the distribution of water through
pipelines to customers.
Degrémont designs and builds drinking water production plants, desalination
Subsidiary of Suez facilities, wastewater treatment plants and sludge treatment facilities for local
Degremont Environmental Designs, builds and operates desalination plants. authorities, from the engineering stage to their commissioning. In addition,
(SZE - $29.63 - NYSE) Degrémont can run the installations and provide all the services required for them to
function correctly.
Subsidiary of Doosan Co.
Doosan, Heavy Industries &
Ltd. (000150.KS - Constructs desalination plants. Doosan is a diverse multi-national company, based in Korea.
Construction
17,250KRW - KSE)
Elran Group, through Elran Infrastructures, leads the field of electricity production
Elran Investment LTD Private Designs, builds and operates desalination plants. from private power stations and dominates water desalination and sludge treatment
and dispersal in Israel.
The company is part of Veolia Water, a leading provider of outsourced and
Subsidiary of Veolia Designs, builds and operates desalination plants in Caribbean
Enerserve privatized water and wastewater treatment services and systems, as well as the
(VE - $42.62 - NYSE) market.
leading designer and provider of water systems.
Fichtner Consulting Engineers Limited is one of the UK’s leading independent
Fichtner GmbH Private Engineering and consulting services for desalination plants. technical advisory teams specializing in process engineering, power generation and
transmission, renewable energy and waste treatment.

13
Desalination Industry Overview
Appendix: Desalination Design and Construction Service Providers - Continued
Company Stock Symbol
Subsidiary of Impregilo
Fisia Italimpianti
(IPG - €3.47 - IM)
Hitachi Zosen HZS - €1.25 - GR
Hyder Consulting HYC - ₤208.50 - LSE
IDE Technologies Private
Subsidiary of the OHL Group
Inima Designs, builds and operates desalination plants.
(OHL - €12.50 - SM)
Subsidiary of General
Ionics Electric
(GE - $34.38 - NYSE)
Kindasa Water Services Private
Metito Private
Subsidiary of Mitsui & Co.,
Mitsui USA
Ltd. (MTS1 - €8.94 - GR)
Mott MacDonald Private
September 16, 2005
Desalination Product Description
Impreglio is a general plant engineering contractor in seawater desalination,
Constructs desalination plants.
wastewater and solid waste treatment.
Hitachi Zosen is a contractor that provides services and products related to
Constructs desalination plants.
environmental, energy, industrial, electronics and marine equipment industries.
Hyder Consulting is a planning, engineering, environmental and management
Provides engineering and consulting services for desalination consultancy that helps government bodies and companies to develop the
plants. increasingly complex buildings and infrastructure needed to raise living standards, to
support commercial activity and to protect the environment.
IDE develops, designs, installs state-of-the-art desalination technologies. In addition,
Develops, designs and installs water treatment and reverse IDE maintains and supports desalination plants. IDE also treats effluent
osmosis desalination plants and low temperature distillation concentration and purification of industrial streams and water treatment. In recent
units. years, IDE's product line has expanded to include a range of heat pumps and ice
machines.
The OHL Group provides integrated solutions to environmental problems.
Ionics, a division of GE Infrastructure, Water & Process Technologies, is known for
its expertise in the design, installation, operation and maintenance of water and
Designs, builds and operates desalination plants and provides
wastewater treatment systems and is a leading provider of emergency and long-term
membrane-based systems for the desalination process.
water treatment services. More membrane-based desalination systems have been
designed and built by Ionics than any other supplier worldwide.
Kindasa provides water services by producing high quality, pure and healthy potable
Designs, builds and operates reverse osmosis desalination
water that matches both international and local standards. Kindasa has adopted the
plants.
reverse osmosis system for its plant, the technology of the future.
Designs, builds and operates reverse osmosis desalination Metito is a world leader in the design and supply of water / wastewater treatment and
plants. water desalination systems.
Mitsui & Co., Ltd. and its subsidiaries engage in general trading business. It involves
a range of global business activities, including worldwide trading of various
commodities; arranging financing for customers and suppliers in connection with its
Provides project management of desalination and wastewater
trading activities; organizing and coordinating industrial projects; participating in
treatment projects.
financing and investing arrangements; assisting in the procurement of raw materials
and equipment; providing technologies and processes for manufacturing; and
coordinating transportation and marketing of finished goods.
Mott MacDonald Group is an independent management, engineering and
development consultancy with over 8,000 staff working in 100 countries to deliver
Provides engineering and consulting services for desalination
solutions touching many areas of everyday life - from transport, energy, building,
plants.
water and the environment to industry, communications, social development, health
and education.
14
Desalination Industry Overview September 16, 2005

Appendix: Desalination Design and Construction Service Providers - Continued

Company Stock Symbol Desalination Product Description

Pridesa has been a leader in desalination, demonstrated by more than 50 reference

plants in this sector, with a current project capacity of nearly 700,000 m3/day. The
Subsidiary of RWE Designs, builds and operates reverse osmosis desalination
Pridesa company has also delivered in excess of 150 water, wastewater and sludge
(RWE - €55.42 - GR) plants.
treatment projects and has developed a strong capability in the treatment of
wastewater for re-use.

PB Power has played a major role in implementing desalination facilities associated

Provides engineering and consulting services for IWPP with power projects since the earliest thermal power stations in the Middle East. Its
PB Power Private
desalination plants. project portfolio includes MSF, MED and SWRO processes, integrated with power
projects based on diesel, steam turbine and combined cycle technologies.

Develops, invests in, and manages water supply projects with a focus on seawater
Poseidon Resources Designs, builds and operates reverse osmosis desalination
Private desalination, water treatment, and reuse. Provides the link between financing and
Corporation plants.
construction and operations of water supply and wastewater treatment infrastructure.

Subsidiary of SACYR
SADYT is devoted to the design, construction, investigation, maintenance and
Sadyt VALLEHERMOSO Designs, builds and operates desalination plants.
operation of water treatment systems and was established in February, 1995.
(SYV - €23.11 - SM)

Subsidiary of Veolia Sidem specializes in the outsourced management of water services for municipal or
Sidem Environmental Designs, builds and operates desalination plants. industrial customers, it is a world leader in engineering, design and execution of
(VE - $42.62 - NYSE) construction projects for turnkey facilities and water treatment plants.

Eni is a contractor for the design and implementation of large-scale plants for the
production, treatment and transportation of hydrocarbons; the monetization of
Subsidiary of Eni
Snamprogetti Designs and constructs desalination plants. natural gas (liquefaction and conversion); the conversion and upgrading of the
(ENI - €24.33 - IM)
bottom of the barrel from conventional and unconventional crude oils; chemicals;
infrastructures; and protection of the environment.

Sogex Oman is one of the Sogex Group Companies and provides supply,
construction services for large projects covering different industries on a turnkey
Sogex Oman Private Designs, builds and operates desalination plants.
basis such as building and civil construction, power and desalination plants,
electrical transmission lines and associated sub-stations of voltage.

VA Tech Wabag is a global technology leader in drinking water, industrial and

process water treatment, desalination of sea and brackish water, municipal
Subsidiary of Siemens
VA Tech Wabag Designs, builds and operates desalination plants. wastewater treatment, and industrial wastewater purification. VA TECH WABAG is
(SI - $76.86 - NYSE)
also the only Austrian company to be globally successful as operator of drinking-
water and sewage treatment plants.

15
Equity Division
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