1 CONFIDENTIAL

Sustainable Water Use and Infrastructure for the 21st Century

Green California Summit 2010

G.G. Pique, President and CEO

17 March 2010

Sustainable Water Use and Infrastructure for the 21st Century

Green California Summit 2010

G.G. Pique, President and CEO

17 March 2010

2 CONFIDENTIAL

Agenda

Energy Savings Around the World

Water Scarcity

Desalination as a Solution

Energy Recovery Technologies

3 CONFIDENTIAL

The severely dammed Ziz River, Algeria

Lake Tiberius, Israel (Sea of Galilee, Jordan)

Access to Sustainable, Fresh Water is Increasingly Scarce

• Climate change is causing widespread drought, compounded by population growth and pollution

• One child dies every 15 seconds due to water sanitation issues

Colorado River Basin

4 CONFIDENTIAL

TheWorldwide

Thirst for

Water is

Unquenchable

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• Water consumption outgrowing world population (9 billion people by 2050)

• Fast growing agricultural demand (crops, livestock and biofuels)

• 1 in 5 people lack access to safe drinking water –1.1 billion people

Worldwide Thirst for Water is Unquenchable

200

400

600

800

1000

1905 1925 1955 1975 1995 2015

Inde

x: 1

905

= 10

0

PopulationWater Withdrawals

Source: GWI, IDA

6 CONFIDENTIAL

Approximately 1 billion people worldwide, lack access to safe water supplies…

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Most of these people are in the developing world, where 98% of water-related deaths occur…

8 CONFIDENTIAL

Are We Safe in California?

The rains are coming with this next El Niño.

Right?

9 CONFIDENTIAL

Local Water Trends – Northern CA Sierra Precipitation

19231923

19761976

Long Term AverageLong Term Average

Wint

er 19

82--L

ast t

ime C

olora

do R

iver f

lowed

to th

e Sea

of C

ortez19231923

19761976

Long Term AverageLong Term Average

Wint

er 19

82--L

ast t

ime C

olora

do R

iver f

lowed

to th

e Sea

of C

ortez

Source: CA Dept of Water Resources(as of 3/15/2010)

2010 El Nino

2010 El Nino

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20+ Million Population Increase (1980-2010) Draining Colorado Basin Dry

http://www.usbr.gov/lc/region/g4000/hourly/mead-elv.html

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The cost of municipal water is exploding in stressed areas

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

* Water costs for San Diego, Monterey, Perth, Sydney, Barcelona M

unic

ipal

Wat

er C

ost*

$/m

3

1972 1982 1992 2002 2010

**February 2010, Monterey CA $7/m3

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• Reduces energy consumption by ~ 60%

• PX Pressure Exchanger™technology is up to 98% efficient

Low pressureseawater enters

the plant

High pressurepump flow 40%

Membrane

Highpressure

seawater

High pressureseawater flow 60%

Low pressurefresh water exits the plant 40%

High pressure reject streamflow 60%

Low pressure reject stream

Energy Efficiency Enabling Technology – ERI’s PX™ Device

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Unique Technology and Elegant Design

• Only one moving part

• Engineered ceramics

− Tremendous durability

− No corrosion

• Highest efficiency

• No scheduled maintenance

• Low life-cycle costs

• Minimal footprint

14 CONFIDENTIAL

Desalination—Affordable Solution

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00SteamElec. PowerMaintenanceCapex charges

* Water costs for San Diego, Monterey, Perth, Sydney, Barcelona

1972Thermal

1982SWRO

1992SWRO

2002SWRO

2010SWRO

Mun

icip

al W

ater

Cos

t*

$/m

3

15 CONFIDENTIAL

Seawater Reverse Osmosis (SWRO) is a Sustainable Solution

Desalination Energy Costs

Utilization ofPX Technology

10

8

6

4

2

01980 1990 2000 2001 2007

20 yearsDOWN 50%7 years

DOWN 61%

KW

h/m

3

SWRO Capacity

Sources: (1) Affordable Desalination Collaboration, Management estimates, GWI and IDA

2.5

2.0

1.5

1.0

.5

02002 2003 2004 2005 2006 2007

65 MGD

281 MGD

312 MGD

418 MGD

454 MGD

584 MGD

Cap

acity

(m3 /

d) (M

illio

ns)

Annual Installed SWRO Capacity

• Growing at 55% per year since 2002

• New desalcapacity pipeline of > 22 MM m3/day by 2012

• Lower SWRO energy consumption leads to increased desal capacity

• SWRO offers sustainable, secure supply of water ~$0.70/m3

16 CONFIDENTIAL

Capital Expense43%

Capital Expense43%

Operating Expense57%

Operating Expense57%

Desalination Plant Revenue Model–Privatization M3 water rate

ASSUMPTIONSPower Cost USD/kWh 0.09Debt Equity Ratio 80/20Debt Interest Rate 8%Equity Return on Inv 18%

Source: Perth Seawater Desalination Plant, 2008

Zero Greenhouse Gas Emissions

17 CONFIDENTIAL 17CONFIDENTIAL

Global Footprint — Sales, Service & Installations Global Footprint — Sales, Service & Installations

6,300,000 m3/day6,300,000 m3/day

890 MW of Energy890 MW of Energy

Sales OfficesSales Offices

PXTM Device InstallationsPXTM Device Installations

Sunrise, FL

HeadquartersSan LeandroCalifornia

Madrid, Spain

Dubai, UAE Shanghai, China

4.7 million tons of CO2 savings4.7 million tons of CO2 savingsNew Boston, MI

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Market Opportunities for Energy Recovery Devices

• SWRO and Brackish Desalination− Growth in these established markets growing on a global scale− US Capacity – More than 3 million m3/day ~ 30% global market

• Osmotic Power− Nascent market using ERDs in renewable energy generation− First pilot plant in Tofte, Norway, run by Statkraft− Energy Recovery devices ensure the net-positive production of

electricity “Osmotic power is clean, renewable energy, with a global potential of 1600 to 1700 TWh – equal to China’s total electricity consumption in 2002.”

- Statkraft CEO, Bård Mikkelsen

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Big Water Factories

Barcelona, AlgeriaSWRO Desalination Plant –

200,000 m3/day (each)

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Barcelona (Spain) 200,000 m3/day (53 MGD)

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Al Hamma (Algeria) 200,000 m3/day (53 MGD)

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Large and Medium Desal Project Builders

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Other Opportunities

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Modular, Portable Solutions for Smaller Communities

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Energy Recovery Inc

HEADQUARTERS/CERAMICSSan Leandro (San Francisco),

California USA

REGIONAL OFFICES Spain, China, Florida, UAE

PUMP ENGINEERING (New Boston) Michigan

USA

27 CONFIDENTIAL