Impending Water Issue: GE's Saudi Deal

Brian Hicks

Written By Brian Hicks

Posted October 6, 2010

While the world’s water supply is down, your portfolio might go up.

A first ever global study – conducted by companies and universities around the globe – takes a look at the affect humans have on freshwater… and it isn’t pretty. Ranging from damns and reservoirs to irrigation and pollution, 5 billion people and 10,000 to 20,000 species are threatened by the damages of human activity to freshwater.

30 of the 47 largest rivers in the world showed at least moderate threats to water security – mainly from human impacts such a pollution and irrigation.

According to the study, some of the highest-level threats in the world are in the United States and Europe.

This research proves what we all were naively assuming in the back of our mind. We all think our relationship with water is good, but in reality the world is struggling. (We’ve discussed this before)

Water issues are popping up daily. In fact, just this week in Trenton, NJ a boil-water advisory for Trenton Water Works customers was issued. It was caused by muddy river water forcing a shutdown of pumps in the city’s water filtration system.

Just another example of borrowing fresh water….Who knows, with the way things are going this may lead to another water crisis.

The problem is evident and it’s increasingly becoming a prominent issue.

As said before, the water issue doesn’t stop at our nation’s border.  The Middle East and North Africa hold 5% of the world’s population, but just 1% of the water supply.

This is wan area where GE (NYSE: GE) thinks it can profit.  As of October 3rd,  GE signed a $700 million Saudi power and water contract. The agreement is for sustaining a reliable water supply and treating wastewater – an estimated $3.4 billion market in the next seven years, ending in 2016.

In addition, GE is expecting its sales of water-treatment products in the Middle East to grow at a double-digit rate this year, just like last year.

As an investor, this deal sparks some strategic thoughts. All I’m saying is if GE is banking on it, why can’t you?

-Michael Boytano

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