Point Roberts, WA - December 5, 2011 - Investorideas.com, a leader in sector research including water stocks and energy stocks issues a Q&A interview with Jud Hill, Managing Director of NGP Global Adaptation Partners, L.P. (www.ngpgap.com). NGP Global Adaptation Partners currently invests in water resources and services and food and agriculture.
Q: Investorideas.com
Jud, your recently spoke and acted as a moderator at the Water 2.0 Investment Summit Toronto, Canada on November 9, 2011. The theme for your discussion was Resource Recovery - Poised for Investment; can you give us some key points you walked away with?
A: Jud Hill, Managing Director of NGP Global Adaptation Partners, L.P.
Simply said, water that has historically been labeled "waste water" is a misnomer. Many wastewater volumes contain numerous constituents that now are cost effectively recovered,. These compounds include nitrogen , phosphates and trace elements which can be recovered and reused.. Not only can these compounds be reused, removing them from the water prior to discharge can dramatically reduce environmental harm in the receiving streams. Such as eutrophication (explosion of plant growth) as well as anoxia or dead zones which occurs when these plants dye and consume all the available oxygen in the water killing fish and other aquatic life. This is particularly relevant regarding areas called CAFOS, centralizes animal feeding operations, such as those operated by large chicken and pork producers.
Also with the price of energy continuing to rise, the sludge or biological byproducts from waste water treatment operations has become a very valuable resource. In many cases, the inherent btu values of these sludges can be directly converted to energy (biogas) or further processed into usable fertilizers.
In general, it is important to note that this resource recovery sector is not waiting for technology innovation to catch up (most are proven and ready to go) it is more a function that the demand drivers caused by appropriate regulation and the economic returns garnered by recovering these valued commodities
Q: Investorideas.com
You had told me recently your firm was looking at investment in companies in frac water treatment. Can you tell us the kind of companies and technologies you are seeing?
A: Jud Hill, Managing Director of NGP Global Adaptation Partners, L.P.
The frac water sourcing/treatment/recycle and disposal services sector is undergoing explosive growth throughout the United States and Canada. That said every gas or oil shale formation has different water issues. For example, sourcing fresh frac water is becoming a challenge in the Southwest such as in the Eagle Ford formation with salt water ejection wells which are used for final disposal of used frac waters are rather prolific...whereas in the Northeast such as in the Marcellus formation, fresh water is readily available, however due to different geology, disposal thru deep salt water injection wells is not feasible.
With such significant volumes of water now being utilized.(estimated 5 million gallons per frac) many operators are beginning to deploy numerous treatment and recycling solutions to reuse frac waters for follow on frac drilling operations. Numerous technologies or treatment trains are being deployed ranging from electro coagulation, reverse osmosis, ozonation, dissolved air flotation and crystallization. Simply said there is no "silver bullet" to solve the treatment issue. The successful water services providers are finding that recognizing the range of water qualities they are seeing in the field that more of a "tool box" approach is necessary…sing the right set of treatment solutions that are directly applicable to a specific frac water quality. Frac water can vary greatly as a function of total dissolved solids (TDS), biological and trace metal constituents. In essence the successful service providers will be those that understand that price, efficacy and reliability will be the determining metrics for their drilling customers.
These solutions may also change depending on the near term treatment of "flow back" water which is generated while the well is being developed vs. the longer, multi year, water production, "produced water" that flows during the life of the well.
There will also be participates in the frac water value chain that will focus on water movement logistics (trucking and or pipelines), both onsite and offsite (regional) frac water treatment operations as well as final disposal options thru deep salt water injection wells.
Q: Investorideas.com
Can you give investors some of the publicly traded stocks in this space?
A: Jud Hill, Managing Director of NGP Global Adaptation Partners, L.P.
There are very few public companies that have a particular focus in the frac water treatment area. A few example public micro cap companies include, Green Hunter, Abtech and Sionex. Some of the larger players that participate in the frac water treatment space include, GE, Veolia, Halliburton, Heckman Water and Danaher
Q: Investorideas.com
Some of the commentary on this growing sector compares the demand to the gold rush of the water industry. Is it all regulatory driven or is the energy industry looking for water treatment solutions based on their own environmental agendas?
A: Jud Hill, Managing Director of NGP Global Adaptation Partners, L.P
Ever evolving regulations will be a key underpinning for the viability of the water industry, just has it has been since the passage of the Clean Water Act in the 1970s. Generally speaking, regulations always continue to be more stringent. Regarding the energy industry, I think it's fair to say that essentially all responsible energy companies are being proactive in applying effective water management solutions. In most cases energy companies find that being a good steward of the environment is also good economics. For example, establishing effective ways to recycle frac water is in most cases a lot cheaper than "hauling in" and hauling out" large volumes of water and it is also better for the environment let alone reduced wear and tear on public roads…many of which are rural.
A recent example of increasing regulation was initiated by the Pennsylvania Department of Environmental Resources (PADER). The PADER recently ruled that frac water can no longer be discharged to public owned treatment operations (POTW's) causing all Pennsylvania frac water to be treated/recycled on site or trucked to Ohio for deep well injection…a much more expensive proposition.
Q: Investorideas.com
What do you see as the main points to pay attention to in the water sector for 2012?
A : Jud Hill, Managing Director of NGP Global Adaptation Partners, L.P.
I think we will continue to see a consistent move forward recognizing that water is no longer a "free good" but a valued commodity. Albeit the current "price" of water to all consumers is still extremely cheap relative to its value, we will continue to see the price of water increase as appropriate and proven solutions are more broadly implemented to recycle and reuse water.
It's always useful to remember the old quote from Ben Franklin, "We will know the value of water when the well runs dry"
About NGP Global Adaptation Partners (www.ngpgap.com)
NGP Global Adaptation Partners (NGP GAP) is a dedicated pool of capital that will draw upon NGP's 22 years of experience investing in natural resources. The broad themes linking NGP GAP's investments are all related to the need for the world to adapt to a changing planet, most specifically the nexus of energy, agricultural and water. Major, irreversible forces are causing this need: population growth and economic development, urbanization and unplanned coastal development, and climate change.
Judson Hill, Managing Director, NGP Global Adaptation Partners
Mr. Hill joined NGP in 2010 and serves as a Managing Director of the NGP funds. He is an industry leader in the water and environmental services sector. He has over 30 years of experience in both water and environmental service company operations as well as over a decade of private equity experience in the water industry. He leads NGP's efforts in sourcing, execution and monitoring of opportunities in the water and environmental services sectors. Prior to joining NGP, Mr. Hill was a Managing Partner with Summit Global Management, Inc. where he was responsible for all private equity investments in the water sector. From 1999 to 2008, he served as a Managing Director of Aqua International Partners and then The Halifax Group, both affiliates of the Texas Pacific Group. Mr. Hill's early career was with Atlantic Richfield and Westinghouse Electric Corporation where he held operating and executive roles in the environmental and water sectors. Mr. Hill received a Bachelor of Science in Biology / Chemistry in 1977 from Edinboro State University and a Bachelor and Masters of Science in Environmental Engineering in 1979 from the University of Pittsburgh. He serves as a Trustee of the Water Keeper Alliance.
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