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GE sees tide coming in for water business

General Electric Co predicts that water purification could grow from a drop in the corporate bucket to a major growth driver within years, just as its wind unit did. The largest US conglomerate has taken about a decade to build its water unit, which focuses on large-scale treatment and purification for municipal and industrial water users, through five takeovers costing about $4 billion.

With an estimated $2.5 billion in revenue, the water business remains a sliver of the $156 billion in sales the world's largest maker of jet engines and electricity-producing turbines is expected to generate this year. The unit's small size has lead some investors to wonder if GE might prefer to sell it to focus on businesses where it can better enjoy the benefits of scale.

But executives with Fairfield, Connecticut-based GE said water has the potential to become a major profit contributor.

“What GE tries to do is to align the company with some of the mega-trends, the mega-challenges of the world. Energy is one, healthcare is the other, and the third one is water,” said Heiner Markhoff, president and chief executive of GE Water & Process Technologies.

While arid areas of the world, from the Middle East to the southwestern United States, have long coped with water shortages, rapid population growth and rising environmental regulations are making water scarcity and purification a more prominent issue in temperate, wetter areas.

GE does not disclose the profits or revenue of its water business, but the unit has been hit by the global recession.

In a conference call discussing the company's 36% second-quarter profit decline, GE executives noted that service revenue related to the water business, which does not include equipment sales, fell 18% in the quarter.

While some of GE's businesses, like lighting and appliances, have developed over a century, others take off more quickly. (Reuters)