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Alternative Energy - Tuesday, July 1, 2008

Tech:stocker - It May Not Be Christmas, But Energy Recovery's IPO is Close

Like toddlers the night before Christmas, we are as giddy as can be for Wednesday's IPO of Energy Recovery Inc. (EERI:NASDAQ). While three months is considerably less time than waiting a year, to have to wait this long for a venture-backed IPO hasn't occurred since 2003. And we believe Energy Recovery is worth the wait.

While this is not a "I'm going to be buying everyone I know a Ferrari" IPO that we saw many times in 1999, Energy Recovery has the potential to a least provide minor glimmer of hope to many investors, venture capitalists, and struggling entrepreneurs who are tired of working 18-hour days.

Recycling energy at water desalination plants is not our area of expertise. But living in a state whose population is growing faster than Wilson Phillips' waistline, Energy Recovery's product that ultimately reduces the energy expenditure of the power hungry desalination process. Water desalination processes have been around for many years but the reason the technology hasn't been adapted more universally is because of how much energy is expended in the process.

Of the 14,000 global desalination plants, Energy Recovery has sold their PX Technology devices to over 4,000 of them and have made significant in-roads in China where many experts agree is where tremendous growth (not on the same level as Wilson Phillips, but close) will occur in this industry.

Before we decided to place our buy orders, we at tech:stocker decided to take a close look at the competition. After taking a look at Calder AG, Fluid Equipment Development, and Pump Engineering, we see the three stooges of water desalination looking to battle the only respectable company in this space. According to the Web sites of each, Calder AG hasn't issued a press release since 2006, Fluid Equipment Development's site reminds us of the site that appears when you misspell Craig's List, and Pump Engineering's CEO apparently has nothing better to do but to issue poorly written press releases that state that the company may be receiving more funding. If this is competition, Energy Recovery can probably mail it in for a few years until a better team joins this league.

But being the big duck on a small pond still isn't enough of a reason to buy this stock nor is the company actually being profitable before they go public. Instead, we think the market is ready for an IPO from a company that has a good story right now and could have a better story in the future. While Energy Recovery currently doesn't the upside or potential of many Nasdaq household names, we think this company will continue to deliver profits and that will prove to be a valuable asset in this struggling economy.

While we won't need an Ambien to get to sleep tonight, we will be excited to see where this stock ends up tomorrow. We've waited too long for solid company like this to help our portfolio. In addition, he success of Energy Recovery's IPO could reveal a lot about the immediate future of the market and how conservative investors are going to be in the near future. We're hoping this stock will close in the teens tomorrow so we can buy our kids Hummers at Toys R' Us.