BioLargo Inc. (BLGO:OTCQB) should benefit from the Environmental Protection Agency's (EPA's) new national requirement that public drinking water contain nearly undetectable levels of six per- and polyfluoroalkyl substances (PFAS), reported Oak Ridge Financial analyst Richard Ryan in an April 17 research note.
The cleantech firm has a technology, its aqueous electrostatic concentrator (AEC), that removes PFOA and PFOS chemicals from water and creates little waste in the process. AEC can be used to meet the EPA's new maximum contaminant level requirements.
"The recent EPA regulations should help drive investor attention to BioLargo's unique technology offering," Ryan wrote.
Target raised, Buy reiterated
The analyst also reported that Oak Ridge increased its target price on BioLargo to $0.50 per share from $0.45 due to higher comp valuations. Now, the California-based environmental solutions firm is trading at about $0.38 per share.
The difference between BioLargo's current and target prices implies a potential return for investors of 32%.
The company remains a Buy.
What must be done
The EPA's safe drinking water rule supersedes any and all state and local drinking water regulations; all jurisdictions must adhere to this federal regulation. It mandates that water utilities monitor PFAS, or forever chemicals. If these are found to be present in the public water at levels that exceed the new caps, the utilities must alert the public and decrease the contamination.
The timeline for compliance with the new regulation is this. Within three years of the rule's April 2024 passage date, utilities must complete initial monitoring. Within the subsequent three years, between 2027 and 2029, they must include the results of initial monitoring in consumer confidence reports and must begin regular monitoring for compliance. Utilities must be in full compliance by 2029.
Market opportunity
According to EPA estimates, about 6–10% of the nation's 66,000 public drinking water systems subject to the new rule will have to take action to comply. The collective cost to do so will be about $1.5 billion annually. Funding is available funding for this purpose, including monies provided via the Bipartisan Infrastructure Law.
"The large emerging market for PFAS removal and BioLargo's growing validation in this opportunity should not be overlooked," Ryan wrote.
BioLargo's solution
AEC is in the early stage of adoption and needs scale to significantly impact BioLargo's bottom line, Ryan pointed out. The company has one project underway for a municipality for which it is slated to install its AEC technology later this year. Management also is working to grow this line of business.
"BioLargo is developing selling and channel partners with known global entities," added Ryan. The pipeline of opportunities is large and growing."
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