Key Acquisition Transforms Water Treatment Company

Clearford Water Systems Inc (TSX: V.CLI, OTCQB: CLIRF, Forum) is on a mission. It’s a mission comprised of two elements: delivering superior water treatment solutions to the market, and rewarding its shareholders with the economic potential of this industrial niche.

With 25 years of experience and expertise accumulated in developing this technology, management was confident they had the right System in place to generate optimal results: the Clearford One® treatment system. The Company was awarded the Frost & Sullivan 2017 Best Practices Award for Enabling Technology Leadership in the Decentralized Water and Wastewater Treatment Industry. How and why is Clearford One® superior as a sewage/water treatment solution? Stockhouse readers will have to wait for an upcoming full-length feature article on CLI to see these advantages spelled out.

From a corporate standpoint, what was necessary was a structure for the Clearford business model that produced economics that made sense for owners, end-users, and (of course) Clearford itself. The Company already had two templates in place as potential models for Clearford One®.

In Everett, Ontario; Clearford sought to implement its sewage/water treatment model at the municipal level. In Kemptville, Ontario; CLI delivered its sewage/water treatment solution at the community level – for the residents of a single mobile home park.

After careful study, the Everett City Council rejected all bids. Everett decided that the higher user fees that would result under the current structure of Clearford One® could not justify the superior results of incorporating that sewage treatment system.

In Kemptville, the Company achieved a different result. The Fetherston Mobile Home Park urgently required a solution for its sewage treatment needs. Aging septic tanks had become an environmental and public health issue. Residents were facing eviction if they didn’t act quickly to remedy this problem.

Clearford One® was the solution. A ClearRecover® membrane bioreactor (MBR) system was installed at Fetherston. The system was expertly manufactured and installed by Koester Canada, in just seven weeks. Koester is a sub-contractor with whom Clearford has worked previously.

This was a lesson learned for management. Clearford One® technology works. That was the message of the successful project for Fetherston. On the other hand, to deliver this technology on a larger scale, the Company needed to find ways to incorporate additional efficiencies.

CEO Kevin Loiselle and the rest of the Clearford team put on their thinking caps. After examining the business model from all angles, the Company had its new strategy. To improve the economics of Clearford One®, CLI needed to provide a comprehensive water and wastewater solution, not just a sewer system. CEO Loiselle elaborates.

Clearford One® is the Company’s core technology that drives life-cycle efficiencies over conventional sewer and wastewater treatment systems. But even greater productivity results from a full solution approach to water management—and that requires full control of the products and services that support water infrastructure, from project financing to treatment plant supply to long term system operations.

Full control. There were two ingredients necessary to take this new model from the drawing board to successful execution:

1. Authority over all dimensions of the water and wastewater infrastructure solution
2. Capture of all revenue streams generated by the full-service solution

Management had successfully captured control of the entire Clearford One® solution. What remained was to generate the additional revenue streams that come with such comprehensive management.

The Company’s answer to these requirements is acquisitions. By adding additional service components under the Clearford umbrella (and delivering additional value to its customer base), CLI would be in a position to deliver enough value-added services so that the economics of Clearford One® would add up.

Clearford has just announced its first acquisition: Koester Canada Inc. CLI’s CEO connects the dots on this transformative acquisition:

This is the natural progression of Clearford’s unified water business model. The acquisition completes Clearford’s unique product and servicing offering and positions the Company for growth with sector-leading efficiency and reliability. By integrating the services, product offerings, and sales networks of Clearford, its subsidiary UV Pure Technologies Inc., and now the Koester Canada design-build and operating divisions, Clearford is in control of its core value chain, enabling the rapid delivery of water and wastewater solutions with a competitive advantage to propel the Company for growth in the North American market and beyond.

Going forward, Koester Canada is the crucial puzzle-piece that solidifies the economics of Clearford One®. But it’s much more than that. As part of the C$7.6 million purchase price; Clearford is acquiring two operating divisions: Koester Canada Design-Build Group and Team Aquatic Operations Group.

Of note, Koester’s Team Aquatic brings its own client base and existing revenues to Clearford. Team Aquatic currently operates more than 50 privately-owned communal water systems in Ontario. Anticipated revenues for Clearford in 2018 are a robust $10 million. A quarter of these contracts are structured under 5-7 year term agreements, assuring a steady revenue flow.

With this week’s acquisition, the Clearford One® solution now makes economic sense for the Company’s North American clients. This paves the way for Clearford One® to starting making cents for CLI’s shareholders.

That’s the immediate term. Longer term? Clearford has already made serious inroads into the world’s single largest sewage treatment market: India. More on that as well, in CLI’s upcoming feature.