Energy Recovery Inc, the clean-tech shining star, went public last week nearly 15 years after setting up shop in 1993. It will trade under the ticker ERII.

ERII is the world’s leading manufacturer of energy recovery devices for water desalination. Their product, the PX 220, is one of the most economical ceramic pressure exchangers, a device that desalinates sea water using a technique called Sea Water Reverse Osmosis.

As I explained in my Forbes Column, Hydro-Alchemy, in the 1960s, desalination for a cubic meter of fresh water used to cost $10. Today, thanks to the PX, it costs only $0.46. PX captures the energy that would otherwise have been discarded in the reject stream of the sea water reverse osmosis process and pushes it back into the system, thus reducing costs and making the seas an economic source for generation of fresh water.

ERII has had quite a roller-coaster ride so far. The company would not have survived traditional VC funding models and has come so far only thanks to private investors, who put an estimated $24 million in the 15-year project. You can read about their exciting journey to success in my earlier interview with their executive chairman, HP Michelet.

ERII crossed revenues of $10 million in 2005. Its revenue grew by 88% to $20.1 million in 2006 and by 77% to $35.4 million in 2007. The operating margins have also shown substantial growth from the 10% margins in 2005 to over 26% margins in 2007.

The market potential for ERII is tremendous. The converging forces of rapid urbanization, global warming, rain pattern changes, depleting ground water levels and the increasing requirements of emerging markets such as China and India are ensuring increase in demand for ERII’s products. Water desalination, finally, is becoming both a viable and attractive alternative to address the world’s depleting clean / drinkable water reserves.

ERII’s products have so far seen maximum adoption in Spain, Saudi Arabia and Algeria. They are also making strong inroads into China and India. They have offices in Shanghai, Madrid and Oman. [I wrote about India’s water desalination opportunity in my Vision India 2020 post, Gangotri.]

In Middle East and Africe [MENA] the PX is creating a capacity of 2,064,843 m3/day across desalination plants in Algeria, Hariyah, Saudi Arabia, UAE, Oman, Egypt, and Turkey. In India, a Chennai plant with a 109,712 m3/day capacity is breaking the market open. In China, a capacity of 302,700 m3/day is being created across plants in YeuQing, YuHuan, Dalian, Shengsi Island, Qingdao, Zhuanghe, Tianjin, and Rongcheng. Approximately 37% of these projects have been completed so far.

The financial market recognizes ERII’s potential and their IPO ended the two month streak of eight IPOs that didn’t gain on their first day of trading. The stock began trading last Wednesday after the IPO of nearly 14 million shares priced at $8.50 per share. ERI raised about $68.7 million in gross proceeds from the IPO. The stock opened 29% higher at $11.00 and closed for the day at $9.83. It went up to $13.25 on Tuesday, and is trading in the $11.20-$12.28 range today.

On Tuesday, ERI announced the addition of Raychem founder Paul Cook to its Board of Directors. Paul Cook is a legendary entrepreneur with deep background in the field of Material Science and Industrial innovation. I did an interview with Paul called “Lessons for Cleantech Entrepreneurs” last year, which is worthwhile reading if you want to understand the journey that ERI has ahead of itself. It is also reassuring to see Paul’s vote of confidence in the company.

Disclosure: I have also bought a chunk of IPO shares in the company, if that piece of trivia is of interest to anyone.

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