Bloomberg News

NanoH2O to Build China Plant to Tap Water Desalination Market

October 20, 2013

NanoH2O Inc., a manufacturer of reverse-osmosis membranes that cut the cost of energy for seawater desalination facilities, plans to build a plant on the Yangtze River delta to tap China’s industrial water needs.

The Los Angeles-based company will spend $45 million on the plant in Liyang, 250 kilometers (155 miles) west of Shanghai. Construction starts this quarter “and we anticipate the plant being operational by the end of 2014,” Chief Executive Officer Jeff Green said in a phone interview.

“The market opportunity for desalination technology, specifically reverse-osmosis membranes, is quite substantial particularly in China and more across Asia as well,” Green said on Oct. 19. “We anticipate that China will see a 20 percent year-over-year growth in demand for membrane technology over the next 10 years.”

China is projected to have $6 billion of sales for reverse-osmosis membranes over the next seven years compared with $500 million this year, he said. The country plans to increase its seawater reverse-osmosis desalination capacity three-fold by 2015.

NanoH2O develops membranes used to purify water and filter salt from the sea. Making more advanced membranes with increased permeability means less pressure is required to produce fresh water through the membrane, lowering a desalination plant’s energy costs, it said.

That in turn raises demand for its products as water remains a challenge in China, which suffers from pollution and contamination issues. An increasing population with urban migration combined with economic growth means China needs more clean waters for industrial, agriculture and drinking use.

“The bulk of Chinese market is for industrial feed water,” Green said.

Raise Funds

The company plans to raise funds in equity financing in the next year to fuel growth though how much hasn’t been determined, he said. NanoH2O investors include Khosla Ventures LLC, Oak Investment Partners, Total Energy Ventures and Beijing-based Keytone Ventures, according to Green.

The world’s second-biggest economy after the U.S. has a fifth of the global population yet only 6 percent of its freshwater supplies, he said.

The company can “compete in terms of capacity directly with existing suppliers” led by Dow Chemical Co. (DOW:US) as well as Toray Industries Inc. (3402) and Nitto Denko Corp. (6988) of Japan, he said.

NanoH2O will dedicate 20 percent to 25 percent of the capacity in the new plant to China and the rest for exports as the company is targeting growth in southeastern Asia and India, Green said.

China mandates under its current five-year plan that 70 percent of the equipment used in desalination plants be produced domestically. The same requirement was applied to wind turbines before 2010 to attract technology when few domestic makers could compete with international producers.

The company, whose technology stems originally from research from the University of California at Los Angeles, also plans a new product for wastewater reuse next year, Green said.

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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