Desalination, for a World Short of Water

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Among plant builders, Italian construction firm Impreglio (IPGOF) and South Korea's Doosan Heavy Industries & Construction (DOHIF) rank as some of the largest. Suez (SZEZY), Siemens (SI), and Spanish construction companies Acciona (ACXIF) and Abengoa (ABGOF) all have desalination businesses.

There are several other smaller companies with publicly listed shares that focus largely on the desalination market. One is Singapore-listed Hyflux (HYFL), which makes filter membranes used to purify water and builds desalination plants. Hyflux scored a coup when it won the contract for a 500,000-cubic-meter per day desalination plant in Algeria, which, when completed in 2011, will be the world's largest. Hyflux is also building 40 water treatment plants in China, where it gets 81% of its revenue.

Heading for the Desert

Quebec's H2O Innovation (HEO) makes filtration membranes for wastewater treatment. Sales for the company jumped 39% in the six months ended Dec. 31, 2007, and its order backlog rose, though the operating loss widened as well. Christ Water Technology (CRSWF) in Mondsee, Austria, sells desalination and other water purification equipment, getting 41% of sales from its "ultrapure water" division. In August, 2007, Christ Water got its largest order ever, an $84 million desalination plant in the United Arab Emirates that will produce 91,000 cubic meters of water per day beginning in 2010.

In Japan, which has about 10% of the world's desalination capacity, Tokyo's Kurita Water Industries (6370.T) builds desalination plants and sells other water purification equipment, getting all of its 205 billion yen ($2 billion) in revenue from water-related businesses. Sasakura Engineering of Osaka gets about half of its 13.7 billion yen ($118 million) in annual revenue from water-related businesses, including seawater-desalination equipment and evaporation concentrators.

For U.S. investors, two desalination companies recently announced initial public offerings for their shares. German utility RWE (RWE) raised $1.1 billion selling a 36% stake in American Water (AWK), its Voorhees (N.J.) subsidiary, an offer that was previously postponed and fetched a somewhat disappointing price. American Water operates a desalination plant in Tampa, the largest in the U.S. Also, Energy Recovery in San Leandro, Calif., which sets for itself "the goal of making seawater desalination affordable worldwide by dramatically reducing energy costs," filed in April to raise up to $175 million by selling shares to investors.

Scully is a reporter for Standard & Poor's Editorial Operations .