Whether business or community, do-it-yourself water is IN DEMAND! We saw just how in demand when Water on Demand's G.M, Manuel Vianna, briefed us on the pilot… And long-time OriginClear and Water Industry veteran Bill Charneski confirmed the hot market segment for BIG growth potential. Can you guess what it is, and how it fits our WOD game plan? Find out in the briefing!
I'm Riggs Eckelberry co-founder, chairman, CEO of OriginClear. The government needs to continue to provide a lot of abundant clean water, but what happens to it after it's used when it's dirty? Do you know that 80% of all sewage is never treated, it's just dumped? That leads to water scarcity, but it also leads to a lot of disease and pollution, the ocean turning into something horrible.
At the same time, the cities and counties are not getting the funding they need to really treat the water and so they can't keep up. The solution is let the people who use the water clean the water. Water on Demand™ is investment in actual capital assets that earn income. Sign up to hear my weekly briefing every Thursday night. 5 p.m. Pacific, 8 p.m. eastern. Just put Oc.gold/ceo in your browser. Register for the briefing and I look forward to hearing more from you.
Riggs: Well, hello, everyone. And it's a pleasure seeing you showing up here. Water is the New Gold. Thursday, July 21st, 2022. Briefing number 170. Yes, there's a new beneficial income asset. It's called water, and we are the pioneers in that area. I wanted to quickly, I noticed this afternoon and I thought I'd show you this really interesting chart.
Where the opportunities are...
This was sent to me by CBInsights. Great newsletter, by the way. And yes, 50% of the volume of the S&P 500 is ten stocks. But what's interesting is the swarm to the left. Now it seems to me that the swarm is much more interesting than the big herd of these ten stocks. That's just my opinion. Of course, you keep make it simple and just play the big guys. But it seems to me that the opportunities are in the, what I think this newsletter writer called The Swarm.
Should you ride the wave?
Anyway, with that in mind, sent to us by our longtime investor Steve St. Angelo, an article from Fidelity Investments. So what about water stocks? Well, most important resource on Earth. We all know that you wouldn't be in this show tonight. And I actually don't know why there's a sand dune with the ocean. It's not exactly relevant, but that's okay. It's cute.
There are some issues not only in the American Southwest, which, you know already, but South Africa has having these day zero events. Italy is having extreme drought. And New Delhi is now rationing water. This goes on and on. There's water insecurity and it's growing.
Always does better
So let's take a look here. This is the S&P Global Water Index has always done better than the S&P 500. But I've also noticed that these big guys, these water companies, they tend to go with the overall market. And so, as you can see, they kind of took a hit most recently. So that's really because, of course, they are part of the Big Water game. And we think that there's opportunities outside of the big water companies, but nonetheless, it's always done better than the regular S&P 500.
Water loss would supply 10 largest cities
Moving on here. Yes, I've talked about this a lot, about water loss and clean water networks, declining water sources, aging infrastructure. How many times have I spoken about that and of course, natural disasters and contamination. "Due to leaks in pipes and other water infrastructure, the US loses enough water every year to meet the annual supply to its ten largest cities." This is why our water, our pump station business, which I covered last week with Dan Early, which is branded EveraMOD, is so important and is growing so fast because a lot of the leakage, a pipe may or may not leak, but a pump station is a connection point which has all kinds of joints and pumps and this and that.
And it is a major source of leakage. And we have these high density polyethylene envelopes which are under patent, worldwide patent, that provide a, up to 100 year life cycle for these pump stations. And since it's competitive pricing, competitive with the stuff that degrades after 20 years, the mostly cities but also large corporations, that need this kind of stuff, you know, basically where water has to rise up to another level, they say, "Well, what the heck, I might as well get something that's not going to leak for many, many years." So leakproof pump stations, I think, are the future and you're going to be hearing a lot more about that.
Okay. So we're in the news in a channel called PissedConsumer.com And this I was interviewed about how to recycle water at home. And I think you're going to like some of what we say. So let's jump right into it. These are the things I discussed, the clean water problem. What about California? What about at home? The cost of water recycling, water reuse, system maintenance and the ever present question what about bottled water versus having your own recycled water? So let's get right into it. I'm going to turn on the optimized view. Here we go. And make sure that the volume is high. Yes, that was the big fix. Here we go.
Start of presentation
ABC Newscaster 1: With the official start of summer, just a few days away. Scientists say a mega-drought across the western US could get even worse.
ABC Newscaster 2: Millions of people in the state are now under new, intense water restrictions.
KTLA Newscaster: All right. Millions of Southern Californians are now under new water restrictions amid the state's severe drought.
My name is Riggs Eckelberry and I'm the co founder of OriginClear, which is a company that is working hard to create innovative, disruptive ventures in the water industry. We're essentially an innovation hub, so we have conventional water companies that we've created in the industrial space. We also have new financial vehicles to create water as a service, which is a whole new area. And we also have a division that does nothing but Modular Water Systems™ to get away from the custom water equipment. You know, the water industry is in a way very, very backward. And so we have some technology that creates these Water Systems in a Box™, which is very exciting.
Michael: Hi. My name is Michael. Thank you for joining. Is the problem in America only or it's worldwide, clean water?
Riggs: There are several different levels worldwide, counting everybody. Only about 20% of all sewage is treated. Now, that's not true of OECD (Organization for Economic Co-operation and Development) countries, which do a good job of treating most of their water. But then you have places in the undeveloped world or developing world like Bangladesh, where there's virtually no water treatment.
And even a place that's a second world country like Mexico has very, you know, there's rivers in Mexico that look like a rainbow because there's a lot of dumping still going on. So I would say there's a big difference between the developed countries like America, European countries, Australia and the developing countries. But even America does not reach as high a standard as, for example, Italy.
I remember having vacationed in Italy several times around a lake that was surrounded with, I guess, an old volcano. It was surrounded by fields that went down into the lake. And yet the lake was pure, pristine, completely drinkable water, even despite. But in America, the fertilizer would have been going into that lake and creating all kinds of algae. So I would say that the best practices are in the European community. America does okay.
But then there's the factor of the recycling. And in that area, probably the world leader is Israel, where almost 90% of all water is recycled. The second in the world is Spain, with 20%. America is only 1%. And the reason for that is that we have an old sewage grid that only works one way. Just like the energy grid, you send your water to the city, the city processes it and then sends it into the ocean or a river or whatever. Treat it.
There's nothing wrong with the water, but the opportunity to recycle has been lost. And we're seeing that as an issue in places like California, where they're still struggling with outdated sewage systems and they're struggling, for example, in San Diego, they're trying to do this thing called toilet to tap. But because the central systems aren't built that way, it's involving billions of dollars. So there's some new approaches needed in places like California because the there's a there's an infrastructure problem, essentially.
Michael: So you think California problems can be solved with a little bit of money, a little bit of ingenuity, but it's not something that cannot be solved with water recycling.
Riggs: Water recycling helps tremendously. Now, here's, here is the gorilla in the middle of the room in California, and that is that agriculture represents about 80% of all use. So, yes, we're happy that citizens are taking shorter showers, etc., but the effect, the net effect is negligible overall. It's a good PR campaign, but the fact is that increasingly there has been a pivot toward high value crops such as nuts and so forth, which are high water users.
Now, granted, there's also been a lot of headway. There's been basically more movement towards high value crops, which tend to use more water, but also more water efficiency. But that's kind of dancing around the problem, which is, it's a desert and the high agricultural use in California. Unfortunately, you know, it's something like, what is it, $70 Billion a year. It's a ridiculous amount of money, that is. Here we go. No, I apologize. $20 Billion a year in exports for agricultural products and they have to irrigate. And there's vast amounts of water. Know, 34 million acre feet of water per year are irrigated. Well, an acre foot can easily take care of four households. So that right there is, you know, those 34 million means about 120 million people could be served with the same amount of water that is being used for irrigation.
Riggs: That the nature of the beast because, you know, 80% of all water used in California is agricultural. So at some point, I think California is going to have to confront that issue and deal with it and create as much creativity as possible. It's I'm reading the Public Policy Institute of California website here and the higher revenue crops such as nuts and grapes, which again use a lot of water, have increased as a share of irrigated acreage from 16% in 1980 to 33% in 2015 and up to 45% in the southern Central Valley.
So lots more use of water which generated more revenue, but actually farm water use was 14% lower. So it's good that they are doing they're working very hard to become more efficient. But there's limits. If you're going to use high water usage, when I take a bunch of grapes, most of those that bunch of grapes is water. And that gets taken. It can be reused. It gets taken to a grocery store and in New York City or whatever and consumed there. So that water leaves California and it can be reclaimed. So I think at some point we're going to have to confront the nature of the agriculture use in California.
Michael: I got you. So from your point of view, it's agricultural need for water, actually, what's taken most of the Californian water out. Regular consumers most likely are not going to suffer really badly. Meaning? Yeah, they have, what is it called? Sporadic turn offs and turn ons of water in their households. But it's not like they're going to end up in the complete desert without any water around them. Most likely, Californians will just spend less water on their agriculture. That's your point of view.
Riggs: I actually think that residential users are going to suffer because the government has already shown that they're going to start doing rationing. They're encouraging a lot. And by the way, the populations in California have been very, very supportive. Per capita, water use has declined from 231 gallons per day, 1990 to 180 gallons per day in 2010. And it's continues to fall. So, in fact, 2015, it was 146 gallons per day. So they're doing a fine job, mostly by reducing landscape watering.
But there's going to be requirements for long term reductions. If you are a big water user for landscape, I can tell you that because I've been a water user in California, your water bill goes crazy. So yeah, plant desert plants, of course. But what I'm saying is all that stuff is going to be you know, it's going to be hard for residential users and there's going to be sacrifice, but it doesn't accomplish that much in numerical terms.
The real gains are in the agricultural area. And unfortunately, $20 billion a year is a big vote. It is very hard to get rid of that revenue for California. So they're in a tough place. It's really, really hard for them to get to get rid of their, get rid of avocados and instead plant barley. It's going to be very hard.
Michael: I would like to move to the next subject. You've mentioned that water recycling equipment could be purchased and installed in a single household. Can you talk a little bit about it? What is it? Do you work with such equipment or can you just advise our consumers a little bit about water recycling for a single home?
Riggs: The best, what we deal with is, of course, we work at the housing development use level because let me just say something about single family. It's a very competitive market. There are systems for water recycling, for example, Fuji Water has an excellent system for making, taking you off the grid. And you don't need a sewage connection. If you have a single family home and they do a fine job, it's I don't know, ten, 12,000. It's, we don't we don't try and compete with that because they do a fine job already. And as you know, a whole home water purification is also very mature.
What we like to do is intervene at the housing development level to work with the developers and so that they have an opportunity to locate the entire development away from conventional water sources. And where OriginClear comes in is we have a program that enables them to not pay upfront for the equipment, but rather pay by the gallon as if they were still getting it from the city. So we call that Water on Demand™. It's, basically it creates water as a service. We have investors who purchase the equipment and then these housing developments can just enjoy the three parts.
Riggs: As I said, the incoming clean water, the treatment of the Blackwater and the recycling of what we call the gray water, all on a completely self-sufficient basis. And I think that's the future, because more and more residential requirements are outstripping the availability of sewage. Let's take, for example, Miami-Dade County, which built about, it expanded very fast without any kind of urban planning back almost 100 years ago. And what was installed was over 100,000 septic tanks were installed throughout the county. Very widely spread.
And so the county has come up with a proposal because septic tanks are terrible as the water levels rise due to saltwater intrusion, etc., it's become a problem. So they want to replace all those septic tanks with hard sewage. Well, that's $6 billion in today's money. Probably be about eight or ten by the time it's built, 20 years of disruption, etc., etc.
The better solution is to simply run a rebate program and let people install their own self sufficient water treatment. So these, the do it yourself water treatment, I believe, is the solution to a lot of problems in America and it enables a lot more utilization of the water, be it residential, industrial or agricultural.
Michael: With your plan price per gallon of water, how does it impact the consumers wallet? Is it less expensive? Is it more expensive? What is the pricing structure there?
Riggs: Price has been skyrocketing for water. Water rates are not very regulated. You would think they would be, but they're not. And so the water rates over a ten year period that I'm looking at here tripled versus ordinary core inflation. So water rates were already taking off even before the current inflationary phase. So and in some places they're as high as 14% of the residential budget, which is ridiculous. So that's another reason for people to become self-sufficient. You know, I never thought I'd say it, but the preppers were right. You need to have a plan for taking care of yourself in this current environment, and that includes water.
Michael: So what's your current price per water in some of your installations? How does it match up to the town's water in comparable locations? Is similar or is it 20% higher? Is it 20% lower or how does it compare?
Riggs: Well, there's two things. First of all, by adopting our water as a service program, we enable and we're really talking about businesses or communities. Right. So we're not talking about single family homes, but if it is residential, it will be a community of homes or it's a business. And those by committing to a long term contract for water service, they can limit their increases. So it's a way to cap the inflation increases by going into our program. So that's number one.
Number two, by doing their own treatment, they're able to reuse their water the way they normally cannot. And that and I'll give you an example. In a brewery, you can reuse about 50% of the water. Without using the water for beer, just for wash downs and steam vessels and so forth. And so if you can get a 50% increase in water use for every dollar you spend, that's a big that's a win. So I would say a combination of service contracts that cap the increases to some reasonable inflation index and also reuse of water to get more turns out of the water.
Michael: Does your system produce drinkable water as an end product? Is it the drinkable water?
Riggs: Exactly. Currently, we're about to inaugurate. Hotels are beginning to install whole hotel water systems and we have such a a hotel, high end hotel chain. Unfortunately, we can't disclose yet. They're launching in July with our system. And what they've chosen to do is all the water coming into the hotel is pure, whether it's for kitchen showers, anything. And that, I think is going to become a trend.
And so we have a well priced system that is certainly very affordable for a business or community that does the full reverse osmosis, which is what you need to get rid of those what's called the forever chemicals, the PFAS, as they call it, the things that are in Teflon and so forth. There's really only one way to get rid of those, and that's with reverse osmosis. And that's what you have to use to clean the incoming water.
In my home, for example, I don't have reverse osmosis for the entire home. I have just a plain 0.2 micron filter, but in my kitchen sink I have a tap that is RO water and that's what we drink from. And that's that's really what you have to do.
Michael: Another question I have. So the hotel installs your system. Do they install a duplicate system right next to it? What happens if your system breaks?
Riggs: Want this hotel, which I can tell you is located in it will be located in Nashville, Tennessee. You can always switch the city. Water will not kill people immediately. So it's not like they're going from pure water to no water. They're going from pure water for the brief amount of time that might be down. They'll have to be tap water. But remember that these systems on service contract, they're easy to swap out. We have local service providers who come in, they swap out the filters, whatever is broken down about it. These are very simple systems. It's just like a refrigerator breaking down. Generally, you have enough time before the fridge starts to warm up that you can fix it. Similarly, with incoming water, as I say, nobody, nobody loves a strange michael. Once upon a time we all drank here, drank tap water, and it was okay. That's now become a no no, but. You know, if it's two or 3 hours, 5 hours on tap water, it's not the end of the world.
Michael: My experience was water filtration is lots and lots of maintenance because filters get clogged up and they need to be cleaned. So that's my question. How do you address regular maintenance? How does it occur? This is a complex system and it needs to be addressed properly.
Riggs: People can invest in redundant systems that typically don't. That's the truth of it, because, again, you're not going from pure water to no water. You're going from pure water to treated water, which many, many people would say is old fashioned. People would say it's just fine. So we haven't run into people who are willing to invest in redundant systems, let's put it that way.
Michael: Quality wise, do you have any data comparing your water to bottled water being sold in the stores?
Riggs: Bottled water is typically purified using reverse osmosis. There is an issue with bottled water being in plastic and there's some data that that the plastic can contaminate the water, especially if you let the bottle get hot or that it get warm. So but there's not a huge difference in quality. I would say that if you have a standard bottled water that comes out of 7-Eleven. It will be reverse osmosis treated. It'll be pure and it'll be very similar to the water you can get from one of our water systems. The difference, of course, is that we're not using a ton of plastic bottles. I mean, that's the big difference.
Michael: Guys, watching this video, please sign up for best consumer channel. It means a lot. Like this video. And Riggs, thank you very much. Thank you for joining us today.
End of presentation
Riggs: So that was fun. Obviously it was being done mostly for print. So it was it was not full dress. But it's fun to be able to show you these interviews. It's also a cut down, as you can tell.
Okay. I'm going to jump right into the progress report on the Water On Demand Pilot. Here we go.
Start of presentation
Riggs: Good afternoon, gentlemen. I have with me Manuel Vianna, general manager of the Water on Demand Unit, and Bill Charneski, the long time [OriginClear veteran] Bill Charneski, who is consulting to Manuel due to his incredible depth of understanding of the water industry. Bill joined us many years ago. And in fact, I remember, Bill, you had the original idea of pivoting to water. You were the one.
Bill: I was the one to put you in this mess.
Riggs: Exactly. Because at the time, algae was running out of steam because the price of crude had dropped too far. And what do we do? What are we doing? Well, why don't we, we take the algae, the petroleum, the future petroleum out of the water. Why don't we do the same thing for the frack water? And in fact, we started getting into the whole clean frack thing, which then fell apart because there were further drops in the price of oil, which meant that nobody in the oil industry was spending a dime.
And that's when we of course got involved with the general industrialized water treatment, right, as opposed to the oil industry and that's where we've been ever since. Now we have a whole new generation going on here which is taking it a step further and creating water as a service, what we call Water on Demand™. It's also water as an asset, you might say. And so now we've been working on this for some time.
And Manuel, you've really been at the forefront of, first of all, modeling it. We're seeing how the long term contracts would work. You've also been exposed to some of the sample contracts from our partners. And then I suggested you start working with Bill to put out your feelers to the industry. So where do we stand in terms of those feelers and those exploratories to get the first pilot program going?
Manuel: So we have been doing a very, very premeditated process of exploring option optional avenues for developing commercial opportunities, right? We have several channels, so to speak, that we have been using. This is obviously, as you said, a new way of doing the business. You know, and we are looking for customers that actually can benefit from a deeper relationship with us, a closer relationship where we don't just bring capital, but we bring we take off their plate all the concerns about finding the right equipment, getting installed, monitoring it, operating it, etc. So we have been looking at, first of all, the obvious thing is we have looked at customers that were in the pipeline of OriginClear, whether MWS or PWT.
Riggs: MWS? Modular Water Systems.
Manuel: Modular Water Systems or in Progressive Water Treatment. Yes. The two, the two divisions that have sales pipelines and are having tremendous success. But they still have some customer leads that are in the pipeline, you know three quarters, two quarters ahead. And they're always two quarters ahead because the customers don't have the funds or, you know, quite frankly, sometimes a big CapEx for them. It's not their core business. And, you know, the management or the board looks at it says, now we're not going to spend that 600,000. Now push it off as much as you can.
So we're looking at opportunities to convert. And we've looked at a few of them and we are trying to be careful because obviously we're entering into long term agreements. You know, these things have ten years renewable for another ten years, etc. So you don't want to lock yourself into a bad arrangement where you're not going to be able to really provide the customer exactly what the customer needs. And, you know, it's not economically attractive for us. So we're looking always at those two sides. What value added are we able to give the customer in addition to just providing capital? And also how do the economics work for us?
And so we're looking in our own pipelines and we've been, we're having discussions, we've had several discussions. We haven't started a project yet from there, but there's opportunities there. And that's of course, it's in some level easier because there already have some sort of relationship or interest with OriginClear. And then we have looked at, there's OEMs out there that have...
Manuel: Original equipment manufacturers and distributors, etc. who actually they don't have financing capability. They are in the fabric, the design and fabrication business, you know.
So they're water companies like Progressive Water who are out there and have potential customers and they too could expedite those deals.
That's right. And they could could expedite. And so there's opportunities to partner with them. And we're in dialogue with a few of them, I'd say about a dozen that we've been talking to. And a couple of them have already brought us several projects to look at. And we're working on some of those right now. But, you know, it's, again, it's not a fast process because we are and sometimes these are the OEMs that these are the water companies are also, you know, moving towards a more networked business model, kind of a decentralized water that we all keep talking about. It's happening. But it does take time to build a relationship, to build a mutual understanding about mutual strengths and weaknesses and interests.
And so we haven't pulled the trigger on a big project yet. We are discussing one right now with a project that could be with the Envirogen Technologies® actually, which is a great partner. They've with the corporations going very well between the two companies and we may end up doing something together now, but there's other projects that we've you know, some of them.
Now, you were talking, is that the one where there's already existing sort of detached offices that need their blackwater quote unquote handled? Is that what the one,
Manuel: Right. Yeah. It's a customer that has multiple locations and they're unhappy with the current installation. The current facilities are not working well and they have a problem and they.
Riggs: Wait a minute. They are not on sewage. There's some kind of arrangement, but it's pretty crappy, if I may use that pun.
Manuel: Yeah, no pun intended. Right. Yeah. So it's mostly a lot of these locations they have are actually office locations. So it is really the effluent that needs to be treated is bathroom or kitchen type and you know, they're paying money to haul it away, lots of money. So if we can get in there and solve that problem for them, you know, that's what we're discussing. But there have been other situations where, for example, OEMs have come to us because they know we have capital, they know we have technical capability, they're trying to sell their own equipment.
But quite frankly, the solution that they have designed for their customer is not economically efficient. And also, we've come across a couple of cases where the capital investment is too high for the revenue that, you know, basically, in bluntly speaking, they don't, their equipment is not, you know, economically efficient. And there are better solutions. We have better solutions. And so there's then a conversation about, do you really want to sell, you know, is it more important to you to to place your equipment or to actually help that customer with the problem they're having and and, you know, address this solution in a cheaper way for the customer. So we're having those conversations as well.
Riggs: How do you say that's going, you know, suggesting to people that. They use our modular technology to achieve better efficiency.
Manuel: I think it peaks their interest. They're curious. And actually in a second I'm going to ask Bill to chime in here, because Bill has been a big player in actually talking with these other water companies. But so I think they're interested. Many of them are very curious about our modular technology and would like to fabricate based on our designs. We have not done any licensing deal yet, but as you know, we've been discussing internally, there is an opportunity there to increase revenues that way as well. So but ultimately, a lot of these water companies want to place their own equipment, and that's where they need help.
And so the discussion is, well, what are the value added? You know, do you want us to manage the project for the customer on an ongoing basis? Do you want us to organize and coordinate maintenance, servicing, etc.? You know, because obviously it's a bundle that the customer, to make the customers lives easy, we have to furnish a bundle of services, right.
Riggs: Yeah. But then that brings the additional problem of wait a minute, who's doing what and who's going to start pointing fingers at whom and as much as possible. This from my early years in computer installations where you didn't want to have too many vendors but rather have it all in one, like you handle the whole thing, period. I think that's probably what you're going for, right? That's right. That's right. And that's what the customer needs one neck to hold accountable.
And and obviously, as you as you can imagine, that just raises the stakes in terms of who we partner with and making sure that we're really comfortable with their quality and durability standards. Right. And it's, there is no shortage of people out there. And maybe Bill can comment on some of the conversations he's having. He has, he's a veteran in the water business. He knows a lot of companies. He's been talking to some of them. I don't know if you want to comment on, you know, the level of attractiveness of the proposal to these potential partners.
Bill: Sure. Be happy to. I think it's interesting to kind of break down these potential original equipment manufacturers in terms of what they offer and what size they are, because I think that does impact who are potential candidates for Water on Demand. There are most of the OEMs, let's put it this way, are really design and builders. They do not get into owning the equipment. They do not get into operating equipment perhaps except for some minor thing like remote monitoring or preventative maintenance.
Bill: And so there's there's those two categories of people who are just doing design and build and those that are doing design, build, own and operate. And so there's there's companies in both of those baskets, if you will, that I've been talking to. The ones who are doing, already doing the design, build, own and operate, they're still candidates for the Water on Demand because they may, their customers may need financial assistance or they may need some expanded service level or something like that.
In the other basket of original equipment manufacturers, there are large companies that are involved in that, that probably already have their own way of handling the own, operate in some regard or have the ability to finance. But the real opportunity is really the smaller OEMs. Those folks don't have the financial wherewithal to do it and don't have the... What they do have, though, is probably a backlog of customers who have received project proposals from the original equipment manufacturer.
A customer who may need to clean up their blackwater or may need to have a purified water system or wants to put in a recycled water system so they can use it for watering their golf courses or whatever it might be. There's a lot of small companies out there that, you know, that may only be 3 to $10 million in revenue that have a backlog of projects that could well take advantage of the Water on Demand. And that's primarily what I'm focusing on are those smaller projects.
Riggs: Yeah, well, I mean, what I get from this is that DBOO, design, build, own and operate is quite common in the larger sites. Right. For example, Seven Seas does the provisioning of desalination for entire islands.
Bill: Right. Correct.
Riggs: Well, that's, that's big. I mean, that's probably a ten $15 Million project. But the growth is in these localized, decentralized sites that are more in the 1 to $2 million range. And the big companies don't want to play with that because they have so much overhead. I'm guessing that it's really the smaller operators on the ground and us that are able to tackle these more localized opportunities.
Bill: I think that's exactly right. I think that the bigger companies aren't interested in a project less than a million or even a million or two. It's those big companies, you know, only want to deal with ten 20,100 million dollar projects. The small projects system fit in there, in their target market. And so it's really the smaller OEMs that we've been pursuing, more so.
There are a few that fall in between. For instance, there's a company called Aries Chemical that provides equipment and chemicals and has actually a division that does, that provides operators. It's operating on a 24 hour basis. So there are there are companies that are in that bid range, too, that are kind of an interesting mix for us. Interesting combination of design, built, own, operate. They do some of that, but they're still a small company, so they don't have the access to the financing.
Riggs: Yeah. I mean, this is interesting because it seems to me that there's a trend, obviously, towards companies doing their own water treatment for the reasons we've gotten into. Such as municipalities failing to, you know, like literally refusing in some cases to treat the outflow or the water rates exploding, as we saw in the case of Sonoma County, where a brewery was forced to literally do its own because it just got ridiculous.
So we're having this phenomenon of explosion of the sort we say middle class. The numbers are always in the middle class. That's the big belly. Right. But they don't have the financing structure to do it. And in many cases, leasing is inappropriate because it burdens the end user and so forth. So it's kind of an interesting, from what you're saying, it's kind of like a jigsaw puzzle where we're seeing where we can find the appropriate place to play with these guys.
You know, it's it's what companies always do. You find the niches that that satisfy your requirements and the requirements of the OEM. So yeah.
Manuel: And speaking of niches Riggs, we haven't talked about this yet, but another opportunity that we have been exploring is residential and particularly at the real estate developers with these big trends that are in society of going off the grid or getting out of the large urban centers. Developers have been building 100 house or 200 house communities. Some of them are off the grid, some of them are off of the sewage system. And so we, what we can do for those real estate developers actually is very valuable to them because we can bring a complete water solution. You know, we can treat drinking water, we can recycle water for irrigation and treat the the final wastewater. And we can do that very efficiently again, using our Modular Water Systems.
And so we we are in conversations with with three of them right now about working with them to take care of the whole water infrastructure. So in other words, a community creates its own decentralized infrastructure. It doesn't, And this, of course, enables these developers to go and buy land that's cheaper because it's off sewage. Right.
Riggs: Much cheaper.
Manuel: It's good for everybody.
Riggs: Right. Not only that, but the developer can just bypass the expense and push it on to the HOA, because it's all operating expense OpEx, right. So capital expense goes away, the developer pushes it to the HOA, HOA just starts doing its thing and it makes it very and I think they're probably trying to do the same thing with energy.
Manuel: That's right.
Riggs: Localized food production, all these interesting things because it's it's more and more clear that people do want to have some fallbacks when it comes to the the vital necessities of living. It's a scary thought, but we're kind of in that new world, right?
Manuel: Yeah, yeah, yeah. So that's been very exciting. And we have been looking. We're in dialogues with a couple of developers and as you know, these things take a lot of time because we've got to be in there at the design stage. And so it could be six months before the project is a go, a year before construction starts, two years before there's actually something there, right?
Riggs: Yeah. And that's why I think we've been exploring some hybrid models to put the money to work that we've been sitting here in capital, for example, the idea of, let's say, a municipality has approval for a particular project, but the budget hasn't been released. So we might let them have the machine now and and in a way defer that, but to defer payment because obviously it's a guaranteed sale, but they don't have the cash yet. Then we sort of bridge them.
These are interesting interim models, but of course we really want to get to the actual project. I suspect though that out of all the things you're looking at here, once one starts going, you'll start getting a whole bunch of parallel. You know, they'll start all kind of start firing at once. We have to overtake this lag. But since there's so many in parallel that you guys are working on that we'll probably see a lot of firecracker type. Ba ba ba ba ba bm type initiation.
Manuel: Yeah. Once the proof of concept is there and it's working. And you know, and also there's, there is a certain tempo to all these conversations as well. They're maturing. They're evolving. And as you said, many of them are probably going to hit at the same time. And God help us then.
Riggs: Right. So the whole scalability is this is why we decided we needed to be the financial specialists. You and I met, for example, the other day with a very good project manager who has, in fact, worked on a distributed water project where he was literally involved with that. And we're going to have to get several of these to be on top of these things, because even though we won't be building or maintaining, we certainly have to be the clients representative and also the investors fiduciary.
Manuel: Right. That's right.
Riggs: The fiduciary of the investor and to make sure these things go off. What I do think is going to happen as a result is a lot more certainty of these projects doing what they're supposed to do, given the amount of oversight we're going to bring. And it's just like bringing more oversight to finance. It only does good things to make sure there's no waste or loss. It's really interesting. How is, you modeled the, created a pro forma of how it would pencil out. I suppose you're tweaking the numbers as you learn more from these pilot situations.
Manuel: That's yeah, that's right. I mean, it's it started as a more of a theoretical model based on assumptions from industry averages, etc.. And as we move along, you know, we're learning all the time. So we know, we're basically getting more precise and more accurate in how we model it. So for example, one thing we'd be still using industry average is, you know, bill collection percentage. We still, because we're not yet billing water as a service right at Water on Demand but so that will will lag in terms of its reality check.
But many of the other things we're doing and and quite frankly, a lot of these discussions we're having with other water companies about potential projects they have are helping us because we learn from them what their typical ratios and typical economics are. And when we're working on a particular project we see what might work, what might not work. So it's it's it's an evolving learning process. But I think we have a pretty good fix on it now. And we just need to as we actually have contracts rolling over the years, we'll just simulate that learning as well.
Riggs: So in your view, there's there's of course, there's a lot of things that are going to take a long time. But is there one or two low hanging fruit that you think we might be able to get into relatively soon?
Manuel: Yeah, I think there's a few installations right now that we're discussing where I think we're in a in a preferred position to be the successful provider. So I can't, it's hard to say because these things move slowly at the client side. So it's hard to tell if it's going to be a month or two before we have clarity that we're going to do something or not. But, you know, I'm very I'm excited about the level of activity we have on the commercial front, and the prospects look very, very good.
Riggs: Well. Well, I appreciate that you have to both of you have to basically a put out the net and B, qualify these things and work them in and and do the whole relationship dance, which over time will create these multiple parallel activities and that you are looking at some short term opportunities because our, our loyal investors are keenly interested in and putting this fascinating business model to work. In general, are you seeing a lot of interest in the water industry for this model?
Manuel: Yes. I mean, there's a lot of I mean, my conversation, again, I will invite Bill as well. Perhaps this question is for Bill because you're out there surveying.
Bill: I've seen. Sure amount of interest, although it is not dissimilar to what we've run into before when we were looking at selling some technology. It's really going to be helpful once we get a couple of these Water on Demand deals closed and they're operating and we can point to them and all of a sudden I think that that will open up the doors a whole lot more. There is, definitely there is interest. It's just a slower process to begin with.
Riggs: Well, the water industry is not a risk taking industry.
Bill: It's slow.
Riggs: Lord have mercy. We know that. So, okay, so let's get the first couple to launch as soon as possible. As you say, Bill, we want the doubting Thomases to be able to put their fingers and really see that these things are for real. And I can't wait to get the next update. Let's let's touch base again in two or three months and see how you guys are doing. Okay.
Bill: Great. Okay.
Riggs: All right. Thank you very much. And enjoy the rest of the week. I appreciate your spending time with me.
Manuel: Thank you.
Bill: Thank you.
End of presentation
Riggs: And that is interesting update. And I wanted to just add a more recent update that I received from Manuel on the 19th. Concerning that location, they are a industrial operator. They refine and they do plastics and they have these six offices that are spread around. And he says the customer is in pain. This is the number two problem right now. Equipment not operating, unsightly situation, spending $1,000,000 a year to haul waste away. The smallest of the six locations is 4000 gallons per day. That's pretty decent.
And the contaminants to treat are primarily chlorine and E coli. So the E coli, of course, is a nasty little thing that if it gets into the ground water is not a pretty thing. So they they have a real pain point. It's moving quickly. It's with our partner and Envirogen, who's a wonderful company, UK company that's got presence in Europe and America. And they are able to do all that operations and maintenance that we don't want to have to learn in order to get rolling.
Crotchety Old Guys
So with that, all right. And I'm going to invite Ken to jump in for our last little crotchety old guys talk. The free wheeling discussion.
Ken: Well, I'm old. Crotchety old guy. Didn't, singular, not plural.
Riggs: Ouch. As you saw it. I mean, what we're doing is we're trying to kind of move the needle in an industry that is very, very deliberate. But by getting a lot of things in play and finding out where there's real pain, we're getting somewhere. And in fact, I'm working on something right now that Manuel might be able to devote capital to very, very quickly. I can't talk about it, but this is the highest priority, of course, and we're going to get somewhere with it.
Ken: So so we covered from the beginning of the tonights broadcast to the end, you know, Bill speaks, engineer speak. It's all that very it's that very careful, you know. But in conversations I'm having with guys like Dan and stuff who's a little bit more pragmatic.
Ken: He's his excitement is palpable. Yes, he...
Riggs: Bill will never be that way.
Ken: No, I know Bill is very, very cautious. And that's a quality that that we absolutely want. But it appears to be that more and more of the market is kind of opening their eyes. You know, when you're only talking to two or three channels, you're going to and you have multiple opportunities in just two or three channels, that's enormous. Right? So when this opens up to become just the way business is done, yeah, the sky's the limit.
What I found, what I, what I was really excited about is I'm wondering if there's any trademark violations that Fidelity got off on us this morning. They were using a lot of our stuff. I think it was like. Well, it was like, "Guys, we've been screaming about this for three years." So no, look, all joking aside, it was very, heartening to hear a mainstream, really juggernaut financial institution talk about basically use the term similar to water is the next gold, right? It was like, what about water? And I'm like, yeah, what about water? Right. So that was exciting.
Riggs: Well, they recognized.
Ken: Validation through the roof, right?
Riggs: Yes. They're recognizing aging, infrastructure, etc.. The solution is different. Like, well, we got to throw more money at the cities, but.
Ken: Right, right. Well, yeah. Okay. We'll have a conversation with them later on that. And they'll rewrite and offer a retraction perhaps.
Riggs: Yeah, we'll wait for Fidelity. As you know, you and I know we work with the early adopters, right?
Ken: I know, but I'm busy right now. Exactly. So one other thing I mentioned there was a there's a stunning. The statistic that I think we should communicate more that our leaking like a sieve infrastructure is losing enough water to annually completely supply our top ten cities in the nation.
Riggs: All of them.
Ken: That is a stunning, staggering, appalling grotesque. And you're right for those who understand that where those leaks are occurring, those leaks are occurring in 100 year old concrete pipes and hundred year old concrete well, ten year old concrete pump station. So there's right now and I had a conversation this morning with a family office, which I explain, I talked to you about. And I said to them, you know, there's a couple of million in these pump stations right now in the US. Every one of them is in some modest to advanced rate of disrepair. Right. And they're leaking water by the sieve. And I said, I don't here's what's funny. I said, I have no idea how much water it is, but it's an unconscionable amount. Right. And then here we have that statistic.
Riggs: Well, you're welcome, Ken. I mean, this. I am here to supply stats.
Ken: No, I snapped and you answered, and I appreciate it.
Riggs: Well, we've taken an hour, so I don't want to keep going. But you talk to Ken, you must simply put in your browser Oc.gold/Ken and he will fill you in on the exciting things happening. We are going to continue to give some great updates and by the way, I'm very happy with how the revenue numbers are. I can't talk about it. Obviously, the quarterly filing is on 15 August and we're doing fine in terms of schedules.
The first two months of the quarter, we are showing very, very good progress. So I'm feeling optimistic, guardedly optimistic, I might say, about how the numbers are looking. And we'll be continuing to discuss that. More announcements coming also on some tech wins that we're having that's following soon. So everybody stay tuned. And Ken, a pleasure as always, getting your your insight and your welcome for that stat.
Ken: Seriously, that's a great, great, it's sad, but it's also powerful. And I think that helps. You know, what that does? That makes it real for people, right? Because they don't think about farming. When you think about what's leaking, I just think it's a very, very it's a great data point for us to help express to the world to wake up to how serious this is.
Riggs: Wake up world.
Ken: Wake up world.
Riggs: All right, everyone. Well, thank you very much, folks. I don't think that... Nobody has been chatting. There's been a quiet day, Lord. Anyway, so that's fine because it is nine o'clock. It's been a long one, but I think constructive. Have a good night, everyone. Enjoy your weekend and tune in next week for more exciting updates. Talk soon.
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