Energy Recovery, Inc. · NASDAQ:ERII
Energy Recovery — Investor Presentation (September 2017)
30 slides from Energy Recovery's investor presentation, Sep 25, 2017
Slide 1: ERI Investor Presentation 2017
ERI INVESTOR PRESENTATION (NASDAQ; ERII) 2017 energy recovery) 4
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMEN This presentation contains forward-looking statements within the “Safe Harbor” provisions of the Private Securities Reform Act of 1995. Forward-looking statements in this report include, but are not limited to, statements about our expectations, objectives, anticipations, pl
Slide 3: Energy Recovery Snapshot
ENERGY RECOVERY SNAPSHOT, MA, Who We Are An energy solutions provider and technology leader in applying fluid dynamics and advanced materials science What We Do Create markets to preserve or eliminate pumps that are subject to and destroyed by hostile process fluids Convert wasted pressure energy in
Slide 4: VorTeq and MTeq Commercialization Updates
VORTEQ AND MTEQ COMMERCIALIZATION UPDATES: © VorTeq delivered from Caterpillar Kemper and equipment commissioning nearing completion © Private testing will commence in throughout October, inline with prior guidance © If private testing successful, M1 achievement in Q4 2017 © MtTeq schedule moderatel
Slide 5: VorTeq — A Matter of Engineering Not Physics
VORTEQ — A MATTER OF ENGINEERING NOT PHYSICS © System excitation (vibration / shaking) at elevated flow rates was primary failure mode — resulting in: Axial bearing failure —increase in friction, cartridge rotation impeded PX cartridge liftoff— PX not seated flush / correctly within housing, increas
Slide 6: Company milestones and history
Developed Pressure Exchanger Technology 2] Invested in R&D Established Market Leadership in Desalination Increased shipments of Energy Recovery Devices Worldwide *»0 New Corporate x Strategy and Management Team =p Signed 15-year license with Schlumberger Installed first Energy Recovery device in Sau
Slide 7: Investment Highlights
INVESTMENT HIGHLIGHTS cc Growth = Commercialize VorTeq technology = MTeq productintroduction and commercialization * Alderley agreement to further penetrate Saudi Aramco & greater GCC = Expand water desalination segment's total addressable market Perpetual Innovation = Pressure exchanger technology,
Slide 8: Core Technology — The Pressure Exchanger
CORE TECHNOLOGY — THE PRESSURE EXCHANG Sleeve / Rotor with ducts ra (only moving part) HIGH PRESSURE © energy recovery” Page &
Slide 9: Product Portfolio
PRODUCT PORTFOLIO WATER OIL & GAS CHEMICALS : Making Desalination Affordable Pressure Exchanger : 2 Hydraulic Fracturing: VorTeq eps IsoBoost Applications "= Gas Processing = Ammonia IsoGen Applications = Gas Processing = Pipelines 7 = Ammonia 18,000 Installations on 7 continents © energy recovery”
Slide 10: Ubiquitous Technology with Significant Opportunity
UBIQUITOUS TE OLOGY WITH SIGNIFICANT Continue to invest in R&D © 27.5% of OPEX in 2014 © 20.2% of OPEX in 2015 Pressure Exchanger: SLB Licensing Revenue Desal 2016 $54.7M Incremental Revenue Opportunii * 27.8% of OPEXin 2016, Derivative of i $2M Develop derivatives of Pressure Exchanger Technology e
Slide 11: New Product and Market Development
NEW PRODUCT AND MARKET DEVELOPMENT, High rates of flow High pressure ry | = differentials High capital intensity in the form of pumps E03 and ancillary ——- equipment 4) 4) 4] 4% Hostile process fluid applications Flow x Pressure Differential = E © energy recovery poge 11
Slide 12: Efficient Frontier of Product Optionality
EFFICIENT FRONTIER OF PRODUCT OPTIONALITY Desalination Early-stage Businesses / Real Options $15 -$20M FCFE VorTeq™ ~ 2015, exclusive licensing agreement with SLB Cash Cow/ Funding Mechanism ~--~> PX / VorTeq derivatives — target rich product development roadmap Return IsoGen™—2015, installed firstE
Slide 13: Go To Market Strategy
GO TO MARKET STRATEG Targeting 24 month development cycles, commencing every twelve months Next concept cycle begins a Consummate Derive Prototype long-term Manufacture value designand | strategic commercial Concept proposition manufacturing | partnership units Sizeand Consummate Initiate Conclude G
Slide 14: $4.1B Addressable Market Opportunity
$4.1B ADDRESSABLE MARKET OPPORTUNITY $4.58 $4.08 $3.58 $3.08 $2.58 $2.08 2 suse Mud Pumping: $1.08 $2.0B $058 $50M ° —— : : Water Upstream Midstream ‘Ammonia TOTAL New Opportuntiel WATER OIL & GAS CHEMICALS DEVELOPING 6 6 @e.,@ © energy recovery” age 14
Slide 15: Desalination
Slide 16: Desalination — Our First Disruptive Technology
DESALINATION — OUR FIRST DISRUPTIVE TECHNOLOGY The “PX Pressure Exchanger” = 18,000 PX devices installed worldwide = 25-year life with no maintenance = Dominant global market share = 60%+ gross margins Compelling short and long term market opportunity = Global water demand / supply gap = Expand prod
Slide 17: Emerging Markets: Upstream Oil & Gas
Slide 18: VorTeq Hydraulic Pumping System
VORTEQ HYDRAULIC PUMPING SYSTEM energy recovery Page 18
Slide 19: VorTeq Integration
VORTEQ INTEGRATION With VorTeq © energy recovery” ‘STRICTLY PRIVATE AND CONFIDENTIAL Page 19
Slide 20: Is VorTeq Disruptive?
IS VORTEQ DISRUPTIVE? With VorTeq Centrifugal Pump Model ing Pumping Model with 15 to 20 PD Pumps New Pumping Model with3 to 4 Centrifugal Pumps Centrifugal Pump Model $8M to $12M p/yr p/fleet* @ Reduced Maintenance: $3M to $4M p/yr p/fleet* e Decreased Pump Redundancy / Lower CAPEX: S1M to $2M p/yr
Slide 21: SLB Licensing Agreement Structure
SLB LICENSING AGREEMENT STRUCTURE © Agreement provides exclusive rights to ERI’s Vorteq™ Hydraulic Pumping System for on-shore hydraulic fracturing (Field of Use) = Commercializes the VorTeq™ technology with one of the industry’s most respected oil-field services companies © Highlights = Schlumberge
Slide 22: MTeq Mud Pumping System
MTEQ MUD PUMPING SYSTEM ‘MUD SoUDS CONTROL © energy recovery” Page 22
Slide 23: MTeq Unlocks Value for Operators
MTEQ UNLOCKS VALUE FOR OPERATORS Drilling Configuration with Mieq & Centrifugal Pumps Reduced Logistics Increased Productivity ¥ Lowerload requirements © Less rig-up and rig-down time ¥ Reduction in planned and unplanned rig downtime Reduced Operating Cost: Reduced R&M Increased pump life Fewer pump
Slide 24: Emerging Markets: Midstream and Chemicals
Emerging Kens ~ Midstream mene m icala\
Slide 25: Our Solution — Gas Processing, Ammonia, and Pipelines
OUR SOLUTION — GAS PROCESSING, AMMONIA, AND PIPELINES IsoBoost and IsoGen recover pressure energy and increase reliability of pumping systems = Save millions of dollars in energy over life of plant = Improve reliability, availability, maintainability = Decrease carbon footprint Licensing Agreement w
Slide 26: Our Solution — Gas Processing and Ammonia
R SOLUTION — GAS PROCESSING AND AMMONIA SWEET GAS ‘CONTACTO! HIGH HIGH HIGH | t — sour PRESSURE ©, PRESSURE PRESSURE 5 a PuMP PuMP PUMP RICH AMINE Panay "peneeeenans is qa ‘ica REGENERATOR VALVE EXCHANGER |. FROM REGENERATOR Wasted Pressure Energy & High Pump CAPEX © energy recovery” With IsoBoost S
Slide 27: Our Solution — Pipelines
OUR SOLUTION - PIPELINES Pumping station Terminal or refinery Vertical Pipelines Must Be Depressurized © energy recovery” With IsoGen gh Pumping station Pressure Generating Power Page 27
Slide 28: Strategic Imperatives
_ Strategic Imperatives - energy recovery”
Slide 29: Strategic Imperatives
STRATEGIC IMPERATIVES Commercialize VorTeq = Onschedule to achieve Milestone success in 2017 = Deployment estimated to commence in 2018 Product Innovation = Innovate and achieve proof of concept of new products that are derivatives of Pressure Exchanger technology every 24 months, in annual cycles =
Slide 30: Thank You
THANK YOU energy recovery) 4
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