A new fund focusing on water and waste-water treatment firms is looking for smaller Singapore companies to add to its portfolio.
Tigris Water Fund, which also looks at companies treating sludge and converting bio-gas to usable forms, is aiming to invest at least 85 per cent of its capital in Asia.
Launched in January, it is seeking to raise US$300 million (S$414 million) to US$400 million. It received commitments of around US$110 million in January from investors including Macquarie Capital and Eastspring Investments.
Mr Saud Siddique, executive chairman at Odyssey Capital, which sponsors the fund, said local firms in these sectors have an edge over regional ones.
Singapore firms design more efficient treatment systems and have more access to the kind of advanced solutions developed by local universities and companies, he said.
Building a plant and operating it normally involves a contract that allows the firm to run the facility for up to 30 years, allowing the business to recover its capital and earn profits. Tigris provides advice on how to develop such projects - which are new to many SMEs - manage risks and structure sound agreements on operating the plant.
Principal partner Daniel Yeung added that the firms also enjoy Singapore's reputation for reliability and quality.
Mr Siddique said over 90 per cent of the approximately 140 local firms in these sectors are small and medium-sized enterprises (SMEs).
These firms generally do not have access to long-term bank funding to build their own treatment plants. They lack the assets that can serve as collateral for such bank loans.
Such companies typically have annual revenue of between $10 million and $20 million and have usually been in business for five to 15 years. They have remained small mainly because they provide services instead of owning plants and operating them for the long term.
Tigris would help provide these companies with the capital for such projects, Mr Siddique said.
"Once you start to own the assets, your revenues and size really go up by a lot."
Building a plant and operating it usually involves a contract that allows the firm to run the facility for up to 30 years, allowing the business to recover its capital and earn profits.
Tigris provides advice on how to develop such projects - which are new to many SMEs - manage risks and structure sound agreements on operating the plant. The fund has not set a target on how much it would invest in Singapore companies, but is ready to put funds in local firms with viable solutions.
For local firms, the investable opportunities outside Singapore in emerging economies in Asia alone are in the "tens of billions of dollars", said Mr Siddique.
An estimated 60 per cent of Asian households do not have access to clean water or sanitation. Also, only 22 per cent of waste water is treated in South Asia, and only 38 per cent in the case of South-east Asia.
During the last two years, Odyssey Capital helped a local water treatment company secure funding for a project it was struggling raise finance for as it was too small.
As a result, the company was able to convince a financial institution to provide $5 million of funds to build and operate its own water treatment facility in China.
The project turned out well and, because of cashflows generated, the company was able to seek more financing.
The company's annual revenues have grown by at least 50 per cent since the funding was secured.