Energy Recovery, Inc. (NASDAQ:ERII) Q2 2020 Earnings Conference Call - Final Transcript
Jul 30, 2020 • 05:00 pm ET
we are working through the challenges of our new normal during this pandemic and adjusting accordingly. Second, our base water business continues to grow and show long-term resilience, and we continue to support the industry and the millions of people who rely on the fresh water created with the help of our technology. Third, the VorTeq is at a point where we must, in the near term, deliver value to our shareholders, either by monetizing the technology or by bringing an end to our spend. Finally, in addition to those clear challenges before us, we must think about the future. When I took -- when I look at Energy Recovery, I do not see a water company nor do I see an oil and gas company. What I see is a PX company. In fact, Energy Recovery is the PX company. Over the years, including the time spent on VorTeq, significant investment has been made to build our PX technology platform.
Let's turn to our Water business, which remains strong and dynamic despite the economic and operational challenges presented by the coronavirus. As evidenced by our recent water awards, our mega project channel continues to show strength and has been largely unaffected by events today. We are seeing a secular shift in desalination demand as water needs continue to grow globally owing to climate change, population growth and the industrialization. The need for more fresh water has not weakened during these tough times. That shows not only in our results this year today, but also in our backlog and pipeline. It is for this reason that we, again, affirm our guidance of 20% to 25% growth for the year.
COVID-19 continues to create uncertainties for our 2021 forecast. While we are confident that our mega project business will remain strong, the OEM channel has been more affected by the global economic downturn. Our current overall water backlog and pipeline support a flat 2021 up to modest growth of 5%. The relative near-term stability we are seeing underscores the strength of the overall water market. The fact is despite economic uncertainties, access to fresh water is a real and pressing need all around the world. Our pipeline and industry suggests -- industry forecast suggests that over the longer term, the secular shift in desalination demand remains intact, and we expect a rebound once the economic risk that exists today pass.
Additionally, we continue to see proof of the thermal to reverse osmosis technology conversion occurring in the industry, recently evidenced by our Al Jubail II announcement. That project is a thermal replacement and one of the largest project in our Company's history. As a reminder, from 1980 through 2018, thermal plant capacity of roughly 23 million cubic meters of produced water per day was commissioned. These plants will eventually transition to seawater reverse osmosis, either as plants approach the end of their useful life or before owing to the significant efficiencies and cost savings offered by reverse osmosis operations. This translates