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What you need to know about COVID-19: October 9, 2020
A Quebec City company that reached back centuries for the inspiration for its space-age water cleaning technology has won a global industry award as it expands rapidly despite the pandemic.
H2O Innovation Inc. last week beat out a trio of other finalists to be named the 2020 Water Company of the Year, an honour conferred by Global Water Intelligence, an Oxford, U.K.,-based water industry publisher.
H20’s founder, Frédéric Dugré, got into the water business after being shocked by the Walkerton, Ont., e-coli contamination tragedy that killed six people two decades ago. The then-recent Laval University mechanical engineering graduate said he was facing bleak prospects in the mining industry as bullion prices sank to a 28-year-low.
“I thought if it’s not gold, it might be blue gold,” Dugré, 47, recalled by phone in a recent interview. “I heard indeed what happened on the radio about Walkerton and said, ‘Oh my god, how can this happen in Canada?’”
His first project served Lac Saint-Jean, Que., north of Quebec City. Now his company, with ticker HEO on the Toronto Venture exchange, has more than 750 water and wastewater treatment systems in North America, mostly in communities of less than 100,000 people, from San Diego to Palm Beach, Fla. Expansion into Spain was followed by a U.K. acquisition last year. Revenue increased 13 per cent to $134 million this year through June 30.
Capping it off, H2O Innovation beat out Chicago-based Culligan Water, Philadelphia-based Essential Utilities Inc. and Kurita Water Industries of Japan to win the 2020 Water Company of the Year, becoming the first Canadian company to achieve the honour.
“It’s voted by the industry, our competitors, our peers, people really involved in the industry who can fully appreciate how we compete and what we provide to customers,” said Dugré, who serves as chief executive and president. “In the last couple of years we did transactions and acquisitions that enabled us to really expand our international platform,” he said. “I think that’s one of the reasons” for the award.
The technological inspiration for the company’s processes came from an industry familiar in Quebec: maple syrup.
The process of reverse osmosis and membrane filtration — using pressure and screens with pores smaller than bacteria to remove contaminants — had been developed from the 1950s to the 1970s but hadn’t been widely adopted at the time of Walkerton by municipalities for their water supplies, Dugré said.
“When I did my research at the beginning I found out that membrane filtration was used to filter and concentrate maple sap,” he said. “It’s pretty nasty with a lot of sugars, sticky, a lot of organics, bacterias, and I thought, ‘If we can do this, we certainly can do it for surface water and drinking water and filter it.’”
The company’s first acquisition was a maple sap filtration equipment producer. But selling the concept at the time to water utilities was difficult because he was just 26 without experience, proof of concept or a completed project, and it took a few years to get the first system running.
“It was difficult at the beginning but time was our best ally to prove that we can execute, to prove that we can provide safer solutions to these communities,” the CEO said, noting the company still has a maple syrup equipment division. “Now we’re even expanding in birch sap, sugar concentration and cranberries.”
Dugré sees communities of less than 100,000 as the sweetspot for his business because they comprise about 90 per cent of towns. The pandemic has also reinforced the need for cleanliness.
The company benefited from 86 per cent recurring revenue to boost free cash flow to $12.3 million during the last fiscal year.
H20 Innovation will focus on adding to its operation and maintenance units by acquiring small companies, with annual revenues from $5 million to $15 million, financed from its balance sheet, the CEO said.
It exports products to 70 countries including the Far East and is in the midst of supplying special equipment to the world’s largest water desalination plant under construction, Taweelah, in the United Arab Emirates. It’s 10 times the size of California’s largest plant near San Diego and produces 900,000 cubic metres of water a day, he said.
“There is a lot of robustness and predictability in our business model that allows us to go through this crisis in a remarkable way,” he said. “Our intention is to continue on the same path to keep this (positive momentum) in earnings, quarter to quarter.”
Copyright Postmedia Network Inc., 2020