[00:00:00] Foreign this is the future of water. We talk about all the ways which companies, utilities and people are addressing the challenges and opportunities in water. This is episode 109 and I know it's going to be a good one. That's because today is just going to be me. I'm not going to lie. I had a colleague and a topic ready to go, but there was some news behind the scenes that we've kind of been hearing about in the grapevine, so to speak, that's given us pause. And so we'd rather give you the full story beginning of the year, Perhaps with episode 110 of a transaction that may be happening. But wanted we wanted to get a better feel for it so we could give you the full story.
[00:00:47] And yeah, hopefully that's fine. It's fine with us. Hopefully it is. So for you. So instead I'm going to be freeforming in a little bit, share some of my thoughts on 2024. But before we do that, you're going to have to bear with me just a little bit once again and let me talk about what's caught my attention recently.
[00:01:05] So as we all know, it's the end of the year 2024, so I'd like to give a shout out to all my colleagues at Bluefield. So for fun, I wanted to throw some numbers at you, which really showcase their accomplishments, but also how they're helping clients in a number of different ways. And so this year I was just sort of, while we're not quite there yet, we're pretty close to the number of deliver that we, our team put out this year was 86.
[00:01:29] Really positive feedback on a lot of those deliverables, whether it be research notes, insight reports, presentations. And I think there are also just a number of other things that are out there as well, whether it be blogs and webcasts and such. The number of insight reports we put out this year was 19. So real quickly I'll lay out some of my favorites. Let's say the US Stormwater Report was a fan favorite. Not only was it really hard to do because it's not just the water sector, we're talking about real estate, transportation, but also cities and municipalities and how they're managing stormwater across what is a boundaryless landscape. So really interesting report. We put out a Europe CAPEX report looking at water and wastewater in Europe across the EU countries. And so I thought that was a really good report, a good one to start out the beginning of the year. And I know that a number of clients in Europe for Those folks on Europe have really appreciated that. We rounded out the year with an industrial report for the US market looking at 16 different verticals, CAPEX, Opex, but looking at everything from facility counts to the trajectory for water management spend across these different verticals. So really interesting. Big shout out to my colleague Amber Walsh on that one. Congrats. We also recently put out a third party operations and maintenance report that's been really useful for companies that are either targeting that market or using it to better understand what the competitive landscape, whether it be Jacobs, whether it be Veolia, Informar, Gates to Innovation, a number of different companies, whether it be national players, regional players, where are they putting their efforts towards serving or supporting the US municipal landscape. Number of data dashboards Shout out to Akshay Deshmukh who actually works behind the scenes on a lot of data management for Bluefield. Put out 70 dashboards this year. I think that's with the more or less that number. So it's a lot of information, everything from project data, forecasts, macroeconomic data, commodity pricing. But all in all it's really focused on water, what it means for water. I be remiss if I didn't call out the capital improvement plans. We look at over 800 capital improvement plans to help companies that are targeting some of the larger utilities in the U.S. we also gave about 16 individual presentations to clients this year. So really positive year when it comes to that. A lot of work goes into them, not only building up the data to support those presentations, but I think our presentations are generally pretty good because we do look at companies strategies but also market sizes. We're not looking, we're not doing case studies and individual projects. We leave that to other people. And speaking of client engagement, one thing we do as part of our Insight services, we also call them corporate subscriptions. We have six insight services and across those we had about 292 individual requests from clients asking not just hey, you know, one question, these are looking at, you know, requests for data, requests for information, really requests for insights and perspectives from our analysts. So 292 out of 365, you know, is a pretty good year for us. Not only it kind of shows the breadth, but some of these are actually pretty significant in and of themselves. So they could be consulting projects in some cases. So really good client engagement. That's the advantage of being a client is you do get access to the analysts as a whole. So why do we care? Well, all of this highlights how hard Bluefield research team works. Give you the most in depth analysis of the water sector from Boston to Barcelona, from San Francisco to Paris and everywhere in between. And why do we do this? Well, we do it to help people like you, maybe, Whether it be the listener or the podcast. We did 24 this year. We've got a this is the 109th podcast episode. So we do this to help people, companies, people like you, like I said, and decision makers more confidently make decisions, make better strategies so they can approach what we call the future of water. That is the name of this podcast. So while we do things like, you know, project analysis and looking at drivers and inhibitors and what's shaping the market, that's the playing field in which we operate. What we really want to talk about is what does the future hold? Things like what is the role for digital technologies and solutions to address workforce management or energy management? What is the role of reuse and how will it be rolled out or be used or leveraged by not only utilities but also industries to be more efficient in their use of water? How are companies targeting the growth in data centers? So what does that mean for companies like Ecolab or Solenus? And what do they see going forward when it comes to water management for the global high tech sectors? So, like I said, big shout out to everybody who's been involved in this, done this before, and I'd be once again remiss if I didn't say anything. And that would be big thanks to Mike Gaylor, who helps produce this podcast and pull it all together. He's been a big help over the 109 episodes, including this one that we've done. Kelly Talbot, who's on behind the scenes helping not only production of future water podcasts, but actually all of those deliverables and all of that content that I just mentioned.
[00:07:17] Steph Aldock, who helps lead the show, so to speak, not just this show, but Bluefield as a whole on marketing, but also just operations as a whole. Ryan Solomon, who is sending out all the emails and helping all of our clients stay engaged with Bluefield. And then lastly, all of my colleagues, you've heard almost all of them on this podcast. So I would only encourage you to go back and listen to all the podcasts because even if it's a week to six months, one year old, it's probably still applicable. The water sector, there's a lot of good information out there, should I say? So go back, dig around and then you can learn who I'm actually referring to, all of these analysts. So with that being said, let's get to some of my thoughts for 2024 and what it all means.
[00:08:07] As I said from the outset, we're calling a little bit of an audible here because of some recent news, so probably a good time should be doing this anyway. So I seize on the moment. It was in the back of my mind, but wanted to raise a couple. I'd say I think five or six different issues that are influencing the global water sector that I thought were of note. They're not in any particular order. There might be some recency bias in some of them, but I'll go through them and hopefully they are of use to you as you think about 2025 and what it might mean for the water sector. So number one, Germany's economic challenges and the troubles emerging in the EU Germany's the largest economy in the Eurozone and it seems to be facing mounting economic and structural challenges that I guess are posing significant risk to its industrial base as well as infrastructure development. So despite the economic heft of Germany, the GDP growth hovers around 0.6% above pre pandemic levels. That was the data out of Germany. I was just looking through the data this past week. 0.6% in Q3 2024. So it's trailing peers like France and Spain which posted stronger year on year recoveries of 1.3% and 3.4% respectively. At the same time its economic vulnerabilities are extending way beyond its borders with the risk stemming from potential US trade tariffs, which is a problem for potentially everybody. The protracted Russia, Ukraine conflict. It's impacting EU energy prices. I've talked about this specific issue on the podcast. I think several weeks ago, maybe a month ago I was talking about Gazprom shutting off Austria and what that meant for European gas prices and their real issues when it comes to water utilities and the cost operating costs for these utilities as well as industries and water management and also wastewater treatment. But also the other thing is to be considered are the all of this puts pressure on what is a significantly large export driven economy. The resulting impacts are expected to bleed into not only it's already domestic infrastructure, but also globally. What does that mean for cost for hardware and equipment coming out of Germany? So what does that mean for Siemens or Busch or other companies that are developing products and exporting their chronic underinvestment? Public infrastructure in Germany continues to hinder modernization. That's reflected in the data 2.6 year on year decline in gross fixed capital formation and construction according to the German data. So residential construction is lagging well beyond non residential projects, Germany and Europe really do need to address these. They've got some systemic issues that are also driving up costs. They need to better balance decarbonization goals. Everybody needs to remember that they've in quick succession gone from a coal economy. They've wound down nuclear after Fukushima, they've driven up renewables.
[00:11:25] So that's the energy landscape itself has changed. And then the Russia, Ukraine issue and Nord Stream basically cut them off from gas, gas supplies coming out of Russia. So if you want to call these geopolitical pressures, sure. And then there's also just the economic realignment post Covid and what's happening. So I think more than anything you should be on the lookout for research coming from Bluefield Research and our EU colleagues. I know there's some things being worked on which quite honestly made some of these comments easier to make thanks to them. But I think the implications are real, not only just in Germany, but across Europe as a whole and what all that means and how many dollars are actually going to be able to be spread about when it comes to infrastructure. Keep in mind defense spending is going to have to increase in some Europe European countries, given the Trump administration's feelings about NATO and what it all means.
[00:12:23] So number two, one thing that's caught my mind is the EPA's report on vulnerabilities in cybersecurity. So a report by the EPA revealed that drinking water supplies for about 193 million people is vulnerable to cyber attacks. So the analysis identified that 97 out of 1062 evaluated systems serving 26.6 million people had critical risks or high risk vulnerabilities. When it comes to cybersecurity, the disruption could, as we know, could have devastating economic impacts and threaten safe drinking water. So the EPA continues to emphasize the need for a national cybersecurity strategy to protect water infrastructure. This is real and quite honestly, no one's doing anything about it. It's pretty scary when you think about what's happened. We've have seen cyber attacks hitting certain utilities. You know, I think the original one that everybody talks about is Oldsmar Florida, which I think there's some mixed background in the aftermath about what the real driver of what really happened was. But we've seen American water hit as well. At Bluefield, we've also added cybersecurity to our recent digital forecast. So it's worth looking at that to better understand at least what Bluefield's perspective is on CyberSecurity forecast for U.S. utilities and what it may ultimately cost. But sadly I think what ultimately is going to end up happening is that we are going to be reactive to the events and wonder what happened and be upset about it where. Whereas as I'm saying right now, we all know there's a problem and it needs to be addressed. Just no one quite is sure what to do and I haven't even talked about AI yet.
[00:14:17] Number three on my list of things that just came to mind and that is Tim's Water's financial challenges. Tim's Water, the UK's largest water company, continues to face significant financial instability with debt sneering about 19 billion pounds. So in 2024 I think it was mid year, Alphwat, the UK regulator placed Tim's Water in what I think they call as a turnaround oversight regime, subjecting it to greater scrutiny. The company was permitted to increase bills from 99 pounds to 535 pounds which was about 92 pounds less than it was proposed. Additionally, Tim's Water has been required to reduce sewage spills by 64%, cut leaks by 19% and decrease supply interruptions by 2/3 through 2029. So they've, they're being called to the altar, so to speak. At the same time in December, this story has been going on for some time and that is there are bidders for Tim's Water. So as of December these included Cavallis Capital and France's Suez Group. I think Suez was not going to take on ownership. They were really just on the operation side of the equation, maybe giving Cavallis some water street cred and sort of offering their services, which is a benefit to them as well. Another bidder for Hemswater has been Castle Water, which is a Scottish utility firm. The Hong Kong based company CK Infrastructure. It also owns Northumbrian Water and then lastly Brookfield Asset Management.
[00:15:52] So it's kind of amazing that people are looking to buy into the UK water market. There's a lot of disruption happening, a lot of questions, uncertainty not only just on the regulatory and financial side of all of these utilities, but also given what's happened in the aftermath of Brexit and the EU economy as whole. Energy prices, they're getting squeezed in a number of different directions. So I should raise that. On this podcast, Future of Water, my colleague Chloe Meyer was on and she not only shed what I would say was incredible light on what's happening in the UK market with AMP8 in the landscape and what's happening, but she also put it in rapport form. So if you're interested in More insights into the UK market, where that market is heading, what does it mean for the utilities, the regulatory environment, but also the things like digital infrastructure. She has it all. She's really looked at it in great depth. And I would say her report that she put out in the middle of the year was incredible. But also her podcast that we did, I think it was late July, maybe early August I thought was one of my favorites of the year, let me put it that way, number four on my list. Water sector M and A seems to maintain momentum according to my colleagues. The pace of transaction, it's moderated a bit relative to prior years. So at the time of this we haven't fully closed out the investor and utility deals. But then we just put out our Q4 quarterly, which is not the close of the year, it's just going up through maybe almost to the very end of the year. So 334water related transactions underscore, you know, investor confidence in the water sector. Drivers such as falling interest rates and infrastructure incentives really have created a favorable environment for deal making, particularly in the U.S.
[00:17:50] one thing that was interesting, and maybe this is also related to that, is the hardware and equipment segment which we track. We break these deals up in the number of different segments, but that's one that has really been on the rise. With 89 deals year to date, the hardware and equipment segment has led all categories. That has not always been the case. It's been driven by increased infrastructure investments, distributor consolidation. Some of these distributors, I think I mentioned the report earlier, if I didn't did one on emerging gatekeepers. My colleague Mike Miroff put out a report looking at the competitive strategies of companies like Cornmain and Ferguson and Vesco Water and how they're positioning themselves, particularly in the U.S. another one was DXP and Enterprises as well, and Wind Supply. They stand out because they've been really active when it comes to M and A. I think one other thing worth noting, like I mentioned that utility deal flow has been, I'd say moderate at best. It's probably going to come in well below its 5 and even 10 year average. There are a number of reasons for that. While Central States has been really active, Tom, we're not seeing the huge numbers that they've done in the past, but it's just been a little bit slower than it has been in previous years. So, you know, my colleague Megan Bondar will be looking at that at the very beginning of the year to showcase what's been happening across the investor and utilities and consolidation of not Just privates buying others, but it could be munis buying munis as well. We track all of that data, so be interesting to see what she comes up with. Fifth point I want to bring up is sort of companies focus on water. I've talked about this more recently, so if there's recency bias, this might be it. In 2024 there were several companies that continued or have begun to emphasize water as a strategic standalone focus area reflecting its growing importance on global sustainability and industrial strategies. One company made a relatively big splash at least in Europe and that is Georg Fischer, known for piping systems. What it has decided to do is divesting its non water related businesses and reinforce its commitment to water and wastewater solutions. Another one is Chimera, which is a chemical company. It's not only maintaining its focus on water treatment chemicals but it's also divested. It's oil and gas and it's restructured a bit. Whereas water makes up I think the biggest share of all of its business units. So water is taking on a bigger role within the company. Khmer is a Finland based company for alto. They were recently spun off as a water dedicated any or pure play as I would call it. It consolidated its position as a major player and water quality testing, monitoring and treatment technologies.
[00:20:48] So with the market demand for digitalization and automation and water management, I think Voralta should be in a pretty good position. Think they're now sort of getting out for now that they've gotten out from under Danaher and it's more diversified structure. It'll be interesting to see what happens with Voralta. We are waiting to see what happens with Dupont Water Solutions. It is going to be spun out. You know, there have been mentions over the course of the year that they could be potentially acquired by companies like Xylem or by Baralto as well or they just could go public. That happens a number of times. They, you know, use one path to build up the other and it'll be interesting to see what happens to DuPont Water. I think there could be in a really interesting position with things like PFAS removal and water scarcity in the industrial and municipal markets really driving their business as a water treatment provider. And then lastly, I said it a million times before, I'll say it again. Looking back at this past year, one of the biggest transformations or could be transformative events, should I say, are the US elections. We still don't know what's happening, although it feels like we've already switched administrations. The Biden administration has gone incredibly quiet While the Trump administration continues to make more noise in a number of different ways. So the 2024 US elections could have significant implications for the water wastew sector, as explored in our white paper we put out, I believe that was in the middle of the year. Changes in political leadership are expected to influence federal agency authority, regulatory frameworks, also public funding programs, things like state revolving funds and the Water Infrastructure Finance and Innovation Act. So wifia, I think, as people more commonly refer to it, these shifts could also affect private sector dynamics, including the role of privatization of public private partnerships and water services. Political environment raises questions about compliance requirements for utilities and industries. And as we talked about in the white paper, and it's one thing that really stands out more than anything, and that is what's the role of the Supreme Court, but also what does it mean for federal agency authority? So more specifically for the water sector, you could talk about the epa. Does the EPA have regulatory teeth or the ability to enforce regulations that have not been mandated unless they're legislated by Congress? So the Chevron deference decision that actually came over the past year, but that's really a result of the first Trump administration and his Supreme Court appointments. Without that, it probably wouldn't have done. Chevron deference has, if I recall, has been mentioned in about 19,000 different court cases as reason for relying on federal agencies and their expertise. So it will be interesting to see what happens going forward. So for a deeper dive into these dynamics, like I said, you can download for free. All you have to do is just give your email address. I don't think it's that complicated. And you can download Bluefield research as white paper if you just go to our White Paper page on our website. But also Greg Goodwin and I, my colleague, we put out a podcast, it was probably mid summer on what the implications are for the election as well.
[00:24:24] So those are, by my count, six things that have caught my attention this past year. It could go on and on. I just wanted to share some thoughts. This was a last minute decision. So hey, it's the end of the year and I thought it suited.
[00:24:40] So that's a wrap for our 109th episode. So thanks being part of the journey in 2024. Want to wish everybody a happy holiday, happy New Year and honestly a good time. As I look out the window and Bluefield Research's headquarters in Boston, it's snowing, so it's that time of year. Hopefully we'll get a white Christmas. That would be great. We're excited about 2024 and what the future of of water holds for the industry and innovations that lie ahead. So please stay tuned for more insightful discussions and expert interviews on the Future of Water podcast and Bluefield Research before we sign off. Was the last time I say it this year, so you might as well give it a listen. If you're in Boston or Barcelona, San Francisco or Paris or Chicago or New York for that matter, let us know. We'd enjoy the opportunity for a meeting. We have people in all those places. Please subscribe to Future Water Podcast and give us a review. It's helpful. It really is. Give us a five. Come on. All you got to do is open that Apple podcast app and click on the show and scroll down and hit star number five. I think it's pretty simple. Send us a Note to water expertsluefieldresearch.com with any topic ideas you'd like us to discuss in 2025. We're doing this for you. And lastly, tell a friend about it. This podcast and these water industry insights have been brought to you by the one and only Bluefield Research. To learn more about us, Visit
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