Energy Recovery Inc.

Infobox Company
name = Energy Recovery Inc

type = Public (NASDAQ:ERII)
genre =
foundation = 1992
founder =
location_city = San Leandro, California
location_country = U.S.
location = San Leandro, CA
locations = 5 (San Leandro, CA;Shanghai, China;Madrid, Spain; Dubai, UAE; Sunrise, FL) as of 2008-07-01
area_served = Worldwide
key_people = Hans Peter Michelet, Executive Chairman of the Board
GG Pique, President, Chief Executive Officer and Director
Thomas D. Willardson, Chief Financial Officer
Richard Stover Ph.D., Vice President - Sales, Chief Technical Officer
Terry Sandlin, Vice President - Manufacturing
MariaElena Ross, Vice President - Administration and Human Resources
Marilyn A. Lobel, Chief Accounting Officer, Corporate Controller
Dominique Trempont, Director
Arve Hanstveit, Director
Paul Cook, Director
industry = Water Resources
products = PX Pressure Exchanger® Energy Recovery Device: Model: PX-30, PX-45/70/90, PX-140S, PX-220, PX-260, PX Circulation Pumps
services = Aftermarket service and support
market c

revenue = $35.4 million in FY 2007
operating_income = $9.3 million in FY 2007
net_income = $5.8 million in FY 2007
assets = $27.3 million at December 31, 2007
equity = $20.1 million at December 31, 2007
owner = Various institutions and individuals
num_employees = 78 as of August 2008
parent =
divisions =
subsid =
homepage = http://www.energyrecovery.com
footnotes =
intl = Energy Recovery Inc. (ERI®) is a California multinational corporation which designs and manufactures energy recovery products and technology for seawater reverse osmosis (SWRO) desalination. The company’s best known product includes a line of PX Pressure Exchanger® energy recovery devices.

Hans Peter Michelet HP Michelet who has been in the Board of Energy Recovery since 1995 is currently Executive Chairman. G G Pique GG Pique has been the President and CEO since 2002.

History

The technology foundation of the company is an invention by Norwegian Inventor, Mr. Leif Hauge based on a unique ceramic pump called the [PX Pressure Exchanger® (PX®)] [http://www.energyrecovery.com/px_technology/how_it_works.php4] . The PX is based on a rotary positive displacement pump principle that recovers energy from the high-pressure waste stream of SWRO desalination systems. This technology can reduce the cost of water production to less than half the cost without energy recovery.

This reduction in desalination costs is driving a boom in global desalination projects--with over 140 major projects being tracked worldwide by Global Water Intelligence [http://www.globalwaterintel.com/] Magazine.

Today ERI works with over 80 OEMs (Original Equipment Manufacturers) or engineering (EPC) companies worldwide. their headquarters is situated in the San Francisco Bay Area; San Leandro, California USA with offices in Sunrise, Florida and different parts of the world including: Madrid, Spain; Dubai, United Arab Emirates and Shanghai, China.

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"If we could ever competitively, at a cheap rate, get freshwater from saltwater, that would be in the long-range interest of humanity (and) would dwarf any other scientific accomplishments."

President John F. Kennedy
April 12, 1961

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The company was established in 1992 with the goal of making seawater desalination affordable by reducing energy costs.

At the time our late President Kennedy wrote these words, the US Navy was in the process of transplanting an emergency desalination plant to Guantanamo after Cuban President Fidel Castro cut off the water supply to the US base. President Kennedy was right about the enormity of this accomplishment, as well as the difficulty in making it affordable. The chief challenge was reducing the energy consumption of the plant, which accounted for 80 percent of the cost of desalinated water. Indeed the total energy consumption of this desalination plant was over 22 KWh per cubic meter (over 85 kWh per 1,000 gallons).

Forty years later, ERI is making President Kennedy's dream a reality by rapidly changing the economics of seawater desalination. ERI's Pressure Exchanger® (PX®) technology has reduced by a factor of ten the energy wasted in the process used in Kennedy's Guantanamo plant. Today, ERI's PX® technology enables plant operators to produce potable water from seawater with an energy consumption of less than 2.0 kwh per cubic meter (8 kwh/1,000 gallons).

How Saddam Wanted it-The Baghdad-Kuwait Connection

The roots of ERI can be traced to Leif Hauge, a Norwegian inventor, working in the early 1990s at a the Kuwait Institute of Scientific Research (KISR) laboratories. In 1990 when Saddam invaded Kuwait, Saddam's people were looking for advanced technology at KISR. Only the action of the quick-thinking researchers destroying key documents prevented the technology from falling in the hands of the invaders. This, however, did not prevent Mr. Hauge from being abducted and becoming a prisoner of war in Baghdad. At the end of the war the inventor was repatriated to the US and ERI was born.

ERI's technology is an improvement on reverse osmosis -- a widely used process in which seawater is pressurized to approximately 70 bar (1,000 PSI) and pushed through polymer membranes. Part of the water permeates the membranes and leaves all the salt behind. The remaining salty brine contains as much as 185% of the energy required to do the desalination.

Engineers designing modern seawater desalination plants using reverse osmosis have utilized Pelton wheels to try to recover this energy. The problem is that the Pelton wheel is a technology developed in 1850 and in its best modern execution, using advanced materials and computer designs, it can never be more than about 80% efficient. Typically when operating conditions change from design, Pelton devices in reality are much less than 80% efficient. This leaves a lot of the energy from a desalination plant literally going down the drain. Further, Pelton wheels are made of metal, which often suffers severe erosion and corrosion problems when exposed to high velocity seawater jets.

When he founded ERI, Mr. Hauge's idea was to develop a positive displacement pump that would recycle the energy inherently wasted by the reverse osmosis process. This type of pump had the potential to recover the brine energy with an efficiency of over 95%. However, Mr. Hauge tried for three years to make his device out of stainless steel, titanium and other fancy alloys but the metal parts would all gall and seize because seawater is such a poor lubricant.

The Invention - ERI PX Pressure Exchanger® Energy Recovery Device

Oak Ridge National Laboratories said it could not be done. By 1995 the inventor gave up trying to construct his pump from metallic parts and was intrigued by the potential of ceramics as a better approach. At this point Mr. Hauge got in a plane to consult with Oak Ridge National Laboratories, who at the time was considered to be among the leading experts of ceramic technology in the world. After looking at the challenge for several days, the experts at Oak Ridge told the inventor it was impossible because it was too difficult to manufacture to such fine tolerances.

Undaunted, Mr. Hauge continued to tinker in his laboratory and by 1997 he had several small, commercial ceramic devices installed in medium desalination plants in resorts and hotels in the Canary Islands. By late 1999 he had installed dozens of these small ceramic devices saving energy in smaller and medium desalination plants worldwide. Five US patents were granted along the way. Some of these devices have been operating for close to seven years with no maintenance.

Enter the Super Plumbers

By early 2000, it was clear to the founding investors of ERI that this technology had the potential to change the economics of desalination. However the device needed to be introduced to an industry, which is very conservative in adopting new technology. Even more challenging, desalination plants were getting larger and larger and the development of a much bigger device was required to address these larger plants.

ERI's strategy was simple: get the technology out on the market by re-plumbing existing plants with the device so that the operators could realize the big savings right away. The result was that by late 2002 ERI had close to 500 devices installed in the market and the prototype of the larger units in beta- testing. ERI is now a profitable enterprise and sales are running at over ten times the rate they were in the year 2000.

The New ERI large rotor Pressure Exchanger Device

Since late 2002, ERI has been shipping in quantity a large diameter ceramic device capable of handling the needs of a 1,000 ton per day desalination plant (250,000 gallons per day) in a single unit. These ceramic devices called Pressure Exchangers® can be arrayed in parallel to work in large installations. With this technology it is now possible to produce pure desalinated seawater cheaper than, for instance, the cost of pumping silty water, full of fertilizers and pesticides over the mountains from the Colorado River. As a result desalinated seawater is now so cheap that it is being used in drought ridden areas in Australia, Spain, the Middle East for agricultural purposes and the demand for desalination plants is growing at over 45 percent per year [*] [http://www.reuters.com/article/pressRelease/idUS170901+24-Jan-2008+BW20080124] .

PX Pressure Exchanger

The PX Pressure Exchanger (PX) is a unique and strange device. Consider that the engine in the thrifty Honda Prius Car is only 37% efficient. The PX has been perfected to operate at up to 98% efficiency. Few machines invented by man even get close to this high efficiency level, the PX device is only two points away from being a perpetual motion machine.

The ERI PX, Pressure Exchanger, is a rotary-type energy recovery device (ERD) with only one moving part. The PX is a new class of energy transfer device—a freewheeling, rotary positive displacement pump which is CNC-machined using engineered ceramic technology. The material of construction is corundum, which is a form of synthetic sapphire three times tougher than steel.

When applied to a seawater reverse osmosis (SWRO) desalination system, The PX recycles pressure energy from the briny desalination plant waste stream and recycles it back to the low-pressure incoming seawater at up to 98% efficiency. As mentioned above, at the core of the device is a unique ceramic rotor. This material is ideal for tough seawater applications because, being it is much tougher than steel but does not corrode in a hot, salty environment. These attributes of the PX design allow operation with no scheduled maintenance and ERI PX device equipped plants can achieve very high reliability. PX technology dramatically reduces costs associated with the energy intensive SWRO desalination process by up to 60% as compared to desalination plants devoid of any energy recovery devices.

As it is often the case for new technology, few people outside of the desalination industry understand how the ERI PX really works. However, it is increasingly accepted that when embedded into a modern SWRO desalination plant the PX device allows the designer and the operator to tweak the desalination plant as seasonal and membrane conditions change so that the plant can be operated at optimum efficiency at all times. Thus the PX device becomes the CPU of the desalination plant.

To date, Energy Recovery has shipped over 6,000 PX devices to hundreds of desalination plants worldwide, including those in China, Europe, India, Australia, Africa, the Middle East, North America and the Caribbean. The PX device is being installed in over 60% of the major desalination installations contracted globally in 2007.

Financial and Initial Public Offering

On July 2 2008, Energy Recovery Inc. went public in an IPO process led by CitiBank and Credit Suisse which resulted in the listing of the company shares in NASDAQ under the ticker symbol "ERII". The company sold over 14M shares - 8.1 million of which was offered by the firm itself, with the remaining 5.9 million to be sold by a stockholder group — IPO price was $8.50/share. With the underwriter "overallotment" exercised a few days later, the company raised some $77 million in fresh capital. This IPO process was conducted "in the middle of the worst June stock market in 75 years".

Awards and Achievements

2008 Finalist - Pump Industry Awards 2008, ERI's PX Pressure Exchanger nominated under two categories:
1. Technical Innovation of the Year
2. Environmental/Energy Savings Award

2008 Inc 500, ERI recognized by Inc. Magazine one of the top 500 fastest growing companies in America:
Ranked No. 396 in the fastest growing companies in America
Ranked No. 4 in the Top 50 Environmental Services Companies
Ranked No. 17 in the Top 100 Businesses in San Francisco-Oakland-Fremont, CA

2007 Inc 5000, ERI recognized by Inc. Magazine one of the top 5000 fastest growing companies in America.

2007 - ThinkGlobal/Commercial News USA Exporter of the Year award from ThinkGlobal Inc., publisher of Commercial News USA, the official export promotion magazine of the U.S. Commerce Department.

Energy Recovery Inc. provides seawater reverse osmosis desalination products which are saving 500 MW of energy worldwide. The company reported a 165% increase in export sales from 2004. Exports now represent 59% of the company’s total sales.

Gregory Sandler, publisher of Commercial News USA, said that Energy Recovery’s success is indicative of how American companies can benefit from exporting.

"“With 95% of the world’s market outside the U.S., there is significant growth opportunity for American manufactures and service providers.”" "'2007 GWI Global Water Intelligence Environmental Contribution of the YearFor environmental stewardship in the water industry as exemplified by the project, process or organization that best reflects the ability of a water/wastewater plant to leave a small environmental footprint."

2006 - Energy Recovery Inc. was named Ex-IM Bank'S Environmental Exporter of the Year. Ex-Im Bank was proud to support groundbreaking small businesses which contribute to environmentally beneficial development in emerging markets while supporting high-quality U.S. jobs as said by their Bank Chairman and President at that time, James H. Lambright. And we quote him saying:

"As a model of such innovation, Energy Recovery Inc. well deserves this year's Small Business Environmental Exporter of the Year award."

"'Sydney Loeb 2006 Award for Innovation in DesalinationAwarded by the European Desalination Society (EDS) to ERI's PX Pressure Exchanger technology that has enabled the desalination industry to provide alternative solutions for sustaining energy resources while saving water­ scarce regions millions of dollars in energy costs."

References

[Global Market for Seawater and Brackish Water Desalination Plants Slated for High Growth Through 2012] [http://www.energyrecovery.com/company/eri_history.php4 ERI and PX Pressure Exchanger History]
[http://www.inc.com/inc5000/2008/company-profile.html?id=200803960/ 2008 Inc 500 Fastest Growing Companies, Ranked No. 4 in the Top 50 Environmental Services Companies, Ranked No. 17 in the Top 100 Businesses in San Francisco-Oakland-Fremont, CA]
[http://www.pumpindustryawards.com/ PX Pressure Exchanger Finalist - Pump Industry Awards 2008]
[http://www.reuters.com/finance/stocks/officerProfile?symbol=ERII.O&officerId=1143067 Hans Peter Michelet - Executive Chairman of the Board of Directors]
[http://www.exim.gov/pressrelease.cfm/3DAE11EC-E3F4-AC8A-C3FEBF97D3555A1B Energy Recovery Inc., of San Leandro, California, is named EX-IM Bank's Environmental Exporter of the Year]
[http://www.sramanamitra.com/2007/02/08/serial-entrepreneur-hp-michelet-part-1/] [http://biz.yahoo.com/ap/080618/energy_recovery_ipo.html?.v=1 Energy Recovery discloses expected IPO terms]
[http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20080401&id=8418323 Energy Recovery registers for IPO]
[http://moneycentral.hoovers.com/global/msn/factsheet.xhtml?COID=159642 Energy Recovery Inc., MSN Money]
[http://www.inc.com/inc5000/2007/company-profile.html?id=200708810 Energy Recovery Inc., Inc5000]
[http://www.youtube.com/watch?v=eQirn1iRKlA&feature=related World Business Review - Energy Recovery, Inc.]
[http://venturebeat.com/2008/06/19/93984/ Energy Recovery Files IPO for Desalination]
http://ggpique.blogspot.com/
http://www.energyrecovery.com/company/GG_Pique.php
http://www.idadesal.org/t-board_063.aspx
http://www.economist.com/search/displaystory.cfm?story_id=11484059http://eastbay.bizjournals.com/eastbay/stories/2008/05/05/story2.html?b=1209960000^16300134http://www.sec.gov/Archives/edgar/data/1421517/000095013408010930/f38510a2sv1za.htmhttp://www.globalwaterawards.com/2007/http://www.energyrecovery.com/news/documents/SidLoebAwardPR6-2FINAL.pdf