Flocean AS

This Norwegian start-up helps countries adapt to the new climate reality with a breakthrough in desalination technology.

Executive Summary

• Flocean is a private Norwegian company that competes in the seawater desalination industry using reverse osmosis (RO) modules sited 500 meters below the ocean surface.

• Demand for freshwater is increasing due to demographic trends, climate change, and increased industrial usage. Supply is decreasing due to pollution, climate change, and overuse of slow-to-recharge aquifers.

• The cost of desalinated water has fallen over the last two decades mainly due to increasing energy efficiency of the now dominant technology, RO.

• Flocean is one of many participants in the desalination business and is a leader in subsea desalination. Its technology and commercial relationships appear more mature than its closest competitor, another Norwegian firm named Waterise.

• Flocean is a spinout of a family-owned Norwegian firm that has competed in the subsea pump and equipment business for four decades. Flocean’s equipment leverages the design, engineering, and business competence of its founder and his family’s business. Flocean looks to have drawn from its parent’s engineering talent and appears to have hired appropriately from outside for leadership roles.

• There are two main technologies for desalinating seawater, thermal and membrane. Both use significant amounts of energy and create other negative environmental impacts.

• Flocean’s siting of desalination modules on the seafloor at around 500m depth offers lowers energy use by 30-50% versus legacy methods and virtually eliminates other environmental impacts inherent in those methods.

• Given the foreseeable demand for freshwater and the structural carbon footprint advantages to Flocean’s RO processes, we believe the company and its technology has the potential to make a significant positive impact on attenuating greenhouse gas emissions. It also aids countries in adapting to climate change and helps restore sensitive marine ecosystems to health.

• The company plans to develop projects through a top-level holding company and raise money for individual projects through a combination of debt and equity project financing. This structure protects the Holdco from financial exposure to individual projects and should create good risk-adjusted returns for owners of the Holdco and of the project-level companies.