The firms that will clean up after Katrina

As the post-Katrina repair of New Orleans begins, it looks like the area is going to need an "unprecedented" clean-up, say David Adam and John Vidal in The Guardian. Many things have been exaggerated in the numerous reports that have come out of the area, but the so-called "toxic soup" is for real. Large amounts of toxic chemicals (oil and petrol from petrol stations, waste oils, hazardous household materials and pesticides) have been let loose in the chaos, as has a vast amount of raw sewage that would normally have been processed by Louisiana's many waste water treatment plants. The result is that a clean-up costing up to $100bn is going to be needed. For starters, the damage to the infrastructure is so huge that just to stop matters getting worse may mean a complete rebuild of the city's sewage treatment plants and sewers, and of its drinking water infrastructure.

This will be just the start of the action needed, says Tim Reid in The Times. It's going to take at least four months to pump the city dry of the billions of gallons still swamping it, and there is no real option other than to pump the water into nearby Lake Pontchartrain or the Mississippi River.However, the water will still be heavily contaminated (the US Environmental Protection Agency has had to waive the need for Clean Water Act permits to allow the pumping to start at all). Add to this the petrol, antifreeze, bleach, human waste, acids and alcohols that will have to be "washed out" of homes, factories, refineries, hospitals and other buildings, and it's clear that the authorities have a massive environmental headache on their hands. Without bio-remediation', the toxic waste in the Gulf of Mexico and wetlands along the Louisiana coast may still be there in years to come, and we can expect to see the death of fish and other wildlife on a "large scale".

But New Orleans isn't the only place that needs cleaning up: even before the hurricane hit, the Environmental Protection Agency had identified nearly 400 sites in Alabama, Florida, Louisiana, Mississippi and Texas to be potentially hazardous to human health, says The New York Times. These include sites such as the DuPont plant 60 miles north of New Orleans, which stores dioxins and other plants containing toxic materials that may have been "redistributed" by the winds and water. All Katrina has done is focus attention on the scale of the problem.

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No wonder, then, that more and more analysts are wondering if the next global boom sector is going to be clean-up and waste disposal, says Professor Peter Wilson in Investing for Growth. Our water needs cleaning, as does our air. We need to stop sewage seeping into clean water, we need to think about reducing light pollution and we need to control the gases that escape from our rotting waste. Any companies that can do any of this well anywhere in the world can hardly fail to do good business in the coming years. In the UK, this means that investors might look at the privatised utilitieswho manage the provision of water. Some, such as Severn Trent (SVT) and Pennon (PNN), have developed major waste disposal businesses. Also of interest might be Augean (AUG), which specialises in disposing of hazardous waste, and a few of the recycling firms such as Symphony Plastics (SYM), which is now developing a biodegradable plastic.

Three good punts in the sector

One stock of interest in the clean-up arena in the UK might be Hydro (HYD), says Professor Peter Wilson in Investing for Growth. It is a small company with a special interest in managing storm water and water filtration systems. The share price is down 40% from its 2004/5 peak, but with a price/earnings ratio of 13 times 2005 earnings and a 30% return on equity, it looks to have "great potential".

Nature Technology (NSO), which cleans oily water, common in car park and street run-offs, might also be worth a look. However, the shares have halved this year and the company is not currently making money, so only look if you have a hefty appetite for risk.

In the US, consider Global Development and Environmental Resources (GDVE), says Carl Waynberg in The GRIP newsletter. It is a a small environmental services firm that "corrects and directs compromised land and water back to its revitalised state". The company is cleaning up more than 30 polluted sites using enzyme technology, which breaks down contaminates from dioxins to oil into microscopic particles that are "easily bio-degraded". The shares have recently doubled, but Waynberg still likes them, pointing out that while he does not know if the firm will be helping with the Katrina clean-up, it would be a good choice, and getting a big contract "would be a big deal for this little company".