So there’s water on Mars. Pretty neat, but can it save us from the water wars?


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As you must have heard, NASA announced last week that one of their orbiters had strong evidence to support the existence of liquid water on Mars. According to their readings, there are several places on the red planet where temperatures get warm enough (-10F) to melt some briny ice…allowing water to flow. It’s not much. But it’s there.

As a species, humans are continuously finding water in other worlds. Moons like Ganymede and Callisto are now rumored to hold huge oceans under their icy surfaces. Ironically, water’s becoming harder and harder to find at home.

Clean, fresh water is not as plentiful as you might think.

Fresh Water Crisis

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Earth’s oceans encompass 97% of the world’s water. Well, undrinkable salt water that would definitely kill you if it were all you drank. Of the remaining three percent, a whopping two-thirds is inaccessible – locked away in icecaps in glaciers. Only about 0.3% of our fresh water is found in lakes, rivers and swamps.

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It’s believed that fresh water will be a limited resource for many regions in the future; in fact, about one-third of the world’s population lives in countries experiencing water stress. If you’re taking a sip of H20 out of a plastic bottle, consider yourself privileged. There are a billion people out there today who have to walk at least three hours (or more!) to obtain drinking water. Yeah.

There are few countries (Sudan, Ethiopia) where literally all they have is contaminated water…

China is one country that’s definitely feeling the stress. The international definition of water stress puts the amount of water per person per year at 1,000 cubic meters – and China has less than a fifth of that amount for its people. The most populous nation in the world has 20% of all the humans out there but only 7% of the world’s fresh water.

It’s easy to see then, how water can become very precious. It’s also kind of scary.

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Right now there’s a ton of focus on oil. There’re a lot of resources out there that we don’t really view the same way but are just as essential, if not more. Water is limited, and everybody needs it. As water becomes scarcer, its value will go up. More and more of this blue gold will be needed as developing countries industrialize. Industry feeds on water and China’s (and others’) dreams of an energy revolution won’t materialize unless the country finds the aqueous resources to support it.

How Can I Invest in This?

While some countries are water-stressed, there are a few that are pretty water-rich.

Canada is one such country. Canadians have vast amounts of fresh water – a million lakes, ownership of the Great Lakes and enormous ice fields mean that America’s neighbors will likely never find their throats parched. In comparison to China, Canada has one per cent of the world’s population but 9 percent of its fresh water supply. On a per capita basis (per person) Canada has nearly 9 times as much fresh water than the U.S.

It means that Canada has a lot of room for water exports, eh.

So far, national conversation on the topic of water exports is muted, but there will come a day…

Canada has already banned any water from being diverted from the Great Lakes basin into the more southern states in the U.S. They’re taking steps to protect their natural resources.

States like California and Florida are experiencing water stress and are turning to desalination – a process of converting seawater into drinkable water, to meet their water needs.  At 65 cents a cubic meter for desalinated water, Canada would be able to step in and offer the U.S. a better pricing point.

water

The Canadian province of Quebec, for example, has over a trillion cubic meters of available fresh water and could sell less than a tenth of its water resources to reap a $6.5 billion bounty.

So there’s no doubt that there exists both the capacity and the possibility for countries, governments and companies to benefit from water exporting.

Take for example, Veolia Environnement (NYSE: VE): the world’s largest supplier of water services. They operate in 66 countries across the globe, providing drinking water to 110 million people. They had revenues of $22 billion in 2013. The company was founded in 1853 and continues to thrive today, housing 179,000 employees and winning large contracts from governments. In 2014, the company won water-treatment contracts in China worth half a billion dollars.

Or how about Watts Water Technologies (NYSE: WTS)? This company has been doing business in China since 1995 and is involved in every step of the development of water safety and water flow products. They design, manufacture and sell the technologies that water treatment plants require to do their jobs. This isn’t as direct a play as Veolia Environnement but as emerging economies lay new complex systems, these support-type companies will increasingly come into play.

When you break it down there are 3 different types of investments in this space:

  1. Water treatment: all our drinking water needs to be treated before being supplied to the people. Water-treatment facilities, then, are a necessity; look for public companies that have a history of operating in foreign markets to take advantage of this growth sector.
  1. Water-rights:  Companies with water rights stand to benefit as water becomes more expensive. There are companies (like Boswell Co. or Limoneira Co.) that own large swathes of farmland with water rights – making their holdings potentially very valuable. Boswell owns 150,000 acres in California alone.
  1. Water-infrastructure: this sector includes companies like Watts Water Technologies. They supply water-treatment plants with pipes or water-treatment systems or even develop land-irrigation systems that allow farmland to be effectively used.

Identifying key players in each of these sectors would be a great way to build a robust investment that attempts to play the upcoming water scarcity problem.

There’s a fixed amount and demand is growing. Now is a great time to invest in water, especially as the global community starts to wake up to the realities of how water is used and how much we truly need.

water


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