Energy Recovery IPO Pricing Could Signal Better Things to Come

While last quarter, not a single venture-backed company hit the public markets, today’s IPO of energy-efficient water desalination company Energy Recovery could be a sign of better things to come. (Alarm Clock sure thinks so; it’s like Christmas morning over there.)

This morning, 14 million shares of Energy Recovery priced at $8.50 each, raising $119 million. The pricing came in at the high end of the $7-to-$9 price range, so the company’s IPO could kick off the quarter on a positive note. The company’s shares are due to start trading on the Nasdaq today under the ticker ERII. Update: ERII started trading.

The gear made by the 16-year-old San Leandro, Calif.-based company makes the desalination of sea water more energy efficient. Desalination has long been a very expensive and energy-intensive way to get drinking and usable water — previously confined to oil-rich nations, where energy is cheap and water is scare, explains the Economist. But with global warming and drought concerns growing, desalination is becoming a more popular way to find usable and drinkable water. Energy Recovery’s technology needs just 3.7kWh to produce a cubic meter of drinking water.

For the year ended December 2007, the company brought in revenues of $35.4 million, up significantly from $20 million in 2006 and $10.7 million in 2005. Energy Recovery is also profitable; it reported net income of $5.8 million for 2007.

It could be a really solid debut, as Kevin Kelleher points out in The Street:

In many ways, Energy Recovery has all the earmarks of a company that shrewd investors like to see in an IPO candidate: experienced, prudent management, a good history (16 years) developing an emerging technology; and a realistic view of both the hazards and promise of a rapidly developing market.