Water- Stocks.com Interview with Jud Hill, Managing Partner, Summit Global Management Inc.

Water- Stocks.com Interview with Jud Hill, Managing Partner, Summit Global Management Inc.

The Case for Water Equity Investing 2010

Point Roberts WA, DELTA, BC –December 2, 2009 www.Water-Stocks.com, an investor and industry portal for the water sector within Investorideas.com, presents an interview with Jud Hill, Managing Partner, Summit Global Management, Inc., discussing ‘The Case for Water Equity Investing 2010’.

Summit Global Management, Inc. is an investment firm focusing on global water industry stocks and acquiring and developing water rights and entitlements throughout the world.

Water- Stocks.com Interview with Jud Hill, Managing Partner, Summit Global Management, Inc:

Q- Dawn Van Zant at Water-stocks.com

Jud, can you start with giving our readers some personal background on your entry into the water sector and your current firm, Summit Global and its investment strategy?

A- Jud Hill, Managing Partner, Summit Global Management, Inc.

I have been in the cleantech sector, particularly water, for 30 years…long before it was cool. I spent the first half of my career operating clean tech concerns at both Westinghouse and Atlantic Richfield as well taking a cleantech company, Thermatrix, public in the mid nineties. The second half of my career has transitioned to financial areas serving as the Managing Director of HSBC Securities focused on the water sector to the last 10 years in private equity with affiliates of the Texas Pacific Group, including Aqua LLC, a private equity fund focused exclusively in the global water sector.

Summit Global Management is a San Diego-based investment management firm with a strict Discount to Appraised Value philosophy of securities selection, designed to achieve consistent long-term returns while minimizing risk.

Our value discipline has encouraged an unrivaled, 30-year specialization in global hydro commerce and other industries directly impacted by water. Water has historically proven to be an attractive non-cyclical opportunity, and the current reality of exploding demand coupled with diminishing supplies suggests an increasingly compelling and persistent investment theme. We are particularly focused on finding long term investments in the areas of water rights/entitlements and in situ water storage.


Q- Dawn Van Zant at Water-stocks.com

You recently chaired the panel,' EMERGING ASSET CLASSES: WATER, CARBON AND THE GREEN MOVEMENT 'at the Global Financial Leadership Conference held in Naples Florida. Other noted green and cleantech speakers included T. Boone Pickens, Chairman, BP Capital Management discussing 'THE NEW ENERGY PARADIGM'. Can you give is the key points of your panel discussion- and did you walk away with any new insight?

A- Jud Hill, Managing Partner, Summit Global Management, Inc.

Sure, it was a very interesting panel. I think it was the first time that many of leaders in the global financial community had heard any in depth discussion regarding how critical a role water plays in global economies and how inexorably water and energy are tied together, For example, as we begin to dramatically ramp up biofuels as an alternative fuel source, we are only now beginning to appreciate that impact some of these alternatives (e.g. corn based ethanol) are having on water supplies. For example, it requires 100 times more water to produce a gallon of ethanol versus conventional gasoline and depending on the region can cause dramatic consequences relative to maintaining a sustainable water resource…let alone its impact of food pricing.

Another enlightening example is contrasting and comparing “peak energy” to “peak water”. Peak energy albeit important to national security and global economies there ultimately are substitutes to fossil fuels (e.g. nuclear, solar wind); however, water has no substitute and is a very local commodity. When an aquifer is pumped essentially dry and surface waters are dramatically depleted and/or contaminated the price of water will rise dramatically and not only will economies be affected but there may be dramatic impacts on human health effecting food supplies and access to clean water and sanitation.

The water/energy nexus has other important parallels, another example being, as we strive to reduce carbon footprints and conserve carbon, California uses over 20% of its energy to move water and in many areas, due to antiquated water lines as much as 30% of the potable water is lost thru infiltration. Simply said, if we want to save energy, we need to fix the water infrastructure.

As a consequence, water is only now beginning to be appreciated as an asset class, creating investment interest in owning the right to use water (e.g. water rights/entitlements) in those areas of the world that have defined regulatory frameworks and provide for private ownership, principally the western United States and Australia. This is sometimes referred to as “wet water” versus investing in the general water domain (e.g., pumps, membranes, utilities) or “hydro commerce”. Water has historically been under priced and with an inexorable growing demand and more rational pricing models being adopted I believe “wet water” will be a critical resource to have in a diversified investment portfolio.

Q- Dawn Van Zant at Water-stocks.com

In Summit's report, 'The Case for Water Equity Investing 2010' , (http://www.summitglobal.com/documents/SummitCaseWaterEquityInvesting2010.pdf) you go through the underlying drivers for investing in water , from supply and demand to, to geographic imbalance between sources and use, to aging and insufficient infrastructure to increasing regulation and heightened awareness . For our readers, can you summarize the points and let us know what you think the most significant driving force is?

A- Jud Hill, Managing Partner, Summit Global Management, Inc.

There are a number of key trends to watch. First and foremost is the basic understanding that water has no substitute.., unlike energy. and there is a fixed finite supply (only 2.5% of the worlds water supply is fresh and of that 70% is locked up in glaciers and permafrost). Secondly, water is heavy (7lbs/gal) and is very expensive to move and not surprising there are large populations where fresh water is in short supply (e.g. middle east, western US, China and India).

So like politics, water is local… and therefore not surprisingly very political and emotional asset. Accordingly that leads to water allocation and prioritization. Typically 70% of water supplies are allocated to agriculture with the balance going to municipal and industrial uses. And finally, as in any valued commodity, the controlling metric is price. As the price of water rises, which it is at an increasing rate, alternative options become cost effective, driving investment and opportunity.

These opportunities can be seen in a variety of areas. A few examples include the proliferation of desalination plants and membrane improvements, remote metering and more efficient irrigation techniques such as drip irrigation.

The other key trend to watch is what is being referred to as “virtual water”…the amount of water that is required to produce a specific good. For example, it takes 5,000 gallons of water to yield a bushel of wheat and 1000 gallons of water to put a hamburger on a bun. We are beginning to see both industries and countries consider the impacts of virtual water as a key component of sustainable development and growth,

Q- Dawn Van Zant at Water-stocks.com

Your report also goes into detail on the opportunities in the water investing universe. For investors looking at the sector - what are some key trends and events they need to be on the watch for to really move the stocks in the sector?

A- Jud Hill, Managing Partner, Summit Global Management, Inc.

We see strong fundamental drivers for sustainable growth and equity appreciation in global
“hydrocommerce,” investors have the opportunity today to invest in water companies at more attractive
valuations than have been available for a number of years.

Despite the negative short-term impact of the financial crisis, water equities are uniquely resistant to external economic cycles because of the decreasingly available supply and increasingly relentless demand for water. We believe water stocks represent an attractive alternative “store of value” in an uncertain world – a good place to save money for a rainy day.

The lure of water investing is not a new idea, but it is one that deserves fresh examination from the
perspective of the revised business expectations and new economic environment to emerge from the
wreckage of 2008. The intention of this document is not to promote a specific investment style or strategy,
only to be a broad overview of issues relevant to the serious investor in water equities.

People new to the concept of water investing are encouraged to read The Case for Water Equity Investing
2010 in its entirety in order to gain a complete understanding of the space, from its most fundamental
aspects on up.

In summary, it’s difficult to summarize in a few words other than providing some anecdotal metrics and examples. I would encourage your readers to take a few minutes and click thru to the link http://www.summitglobal.com/documents/SummitCaseWaterEquityInvesting2010.pdf I think they will find the information enlightening.

More info:
Conference info: http://www.gflc.com/

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For More Information Contact:
Water-stocks.com
Dawn Van Zant 800-665-0411
Email: dvanzant@investorideas.com
Web Site: www.InvestorIdeas.com www.water-stocks.com

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