[00:00:00] Speaker A: 643 billion euros, or US$700 billion.
That's how much Europe plans to spend on stormwater infrastructure through 2036, according to Bluefield Research's new stormwater forecast data for Europe.
And it falls nearly 70% short of what's needed to maintain the system going forward.
Yikes. Foreign.
And this is episode number 142 of the future of Water podcast, and today we're going to talk Australia, the driest inhabited continent on Earth, population growing faster than its water infrastructure can keep up with, and a digital water market that is about to more than double over the next decade. It's one of those markets that doesn't always make the top of global conversation, but it plays an outsized role in the global water sector. Today I'm going to sit down with Lee Ramsey, a senior analyst at Bluefield Research, who spent significant amount of time mapping exactly what's happening on the ground in Australia, the utilities of vendors, the technology trends, and the competitive dynamics that are reshaping how Australia manages not only its most critical resource. I guess it's our most critical resource, universally speaking.
We're going to cover a lot of ground, from a $17 billion market opportunity for smart metering rollouts covering nearly a third of the national population to surprising players cracking into some of the biggest contracts. And we'll close with what I hope is what can the rest of the world learn from Australia's experience?
We'll do that and then after that we'll get into what caught my eye this past week. As we have done, we've shifted it towards the back end of the podcast. But also real quickly, I want to follow up on mailbag number 141, which is the last episode question that keeps coming up and honestly failed to address it kind of got by me for some reason.
Question is, are we headed towards a federal funding cliff? Well, the short answer is yes.
But rather than go into all the detail here, I just recorded a Bluefield on Tap segment with Dave McImpsey. I do this every month with him on the Water Values podcast, and that's one of the questions that is the question we addressed.
Are we heading towards the federal funding cliff? So where we dig into the market is about what are we worried about. We share some perspectives on hardware engineering and publicly traded IOUs, what it may mean for them. So there's a little bit of a cross sell, admittedly, but you can learn more on the Water Values podcast on your app. So just go to that look for Dave McGimpsey and then as always, you can just reach out to me directly OR
[email protected] this is a big question that keeps coming up increasingly for a number of different reasons, whether it be utility concerns, whether it be publicly traded companies feeling pressure from Wall street and trying to come up with an answer to why their business is doing great, or maybe not doing so great.
A lot going on there.
So that being said, let's get to Lee Ramsey and talk about what's happening in digital water in Australia.
All right, so I'm joined here by Lee Ramsey. Lee, what's going on? Where are you these days?
[00:03:43] Speaker B: I am in Boston, looking forward to some warmer weather. Hopefully if we can get past this rain and get into some sunshine.
[00:03:50] Speaker A: Yeah. With our new format of the podcast, I used to always started to always talk about the weather and I kind of liked it because at some point I was going to use AI to go through every transcript to kind of gauge what the weather was like from at least in two week increments.
Maybe I should do that. So thanks for bringing that up. I mean, it's, I don't know, it's sunny, I'm across the river from you, but it's sunny and cool. Yeah, but that's the way it goes. All right, well, what is not cool necessarily, although they're heading towards winter and that is Australia.
So we've done a deep dive, particularly looking at digital solutions and sort of the landscape forecasting Australia as a whole. So let's just, before we dive into some details, let's talk a little bit about why. Why Australia? Why do we care about it? I mean, it's what, a country of 35 million people. How many people live in Australia? 35 million?
[00:04:53] Speaker B: Even less, around 24 to 26 is.
[00:04:56] Speaker A: Yeah, okay, so I'm overstating. So California is bigger than Australia by actually a pretty big chunk if that's the case. So what makes it worth looking at or watching globally, particularly in terms of broader water management, but also digital as well?
[00:05:15] Speaker B: Yeah, absolutely.
So first off, Australia, I'm sure you mentioned this is the driest inhabited continent in the world. And recently it lived through the decades long drought that ended in the early 2000s. And this really forced coordinated action at a national scale.
So whether it was from the policy side to capital deployment, everyone really worked together to overcome this drought.
And the digital solutions that we're seeing today are a reflection of that ongoing response to past and future droughts. Because in Australia, when talking to folks, it's not really in. If there is a next drought, it is a win. And it's a reality that is fast approaching. Utilities like Hunter Water in New South Wales and Taz Water, just this in the past couple of weeks have gone under water restrictions or are tapping into other backup water resources. So it's really an ongoing effort to maintain water security and that's one of the big things that makes it a really exciting place to watch.
[00:06:24] Speaker A: Yeah. I think Australia, collectively, I mean, it is interesting. It's sort of like you watch every school kid wears a hat to school because of the sun, you know, and they've had ozone problems in the past. They were under the ozone hole back in my. I guess it was my youth at this point, but. But I think at the water side of the equation. Exactly. Right. Collectively, they were going through the millennium drought. I mean, one could argue are they in just a broader drought as a whole? And it's sort of a little bit of up and down fluttering and so they're all looked at it. There's also been resistance. Right. Particularly when it comes to things like desal plants and the cost of desal. And they built these and then they shut them down or were running, you know, very minimum levels just to keep them operating and they weren't needed. But next thing you know, they don't have any water and they ramp them back up again. Yeah. And so they've got things in place like National Water Agreements and other things that, correct me if I'm wrong, that are sort of driving action as well, Right?
[00:07:26] Speaker B: Yeah, absolutely. So the National Water Agreement is a recent framework and that is really important on the policy side because it emphasizes evidence based decision making to build out a resilient future. So when, when we're looking specifically at digital solutions, it is really pushing and driving digital investment for utilities to capture data across their networks and just be smarter about the decisions they're making because quite frankly they have to, they have to make these decisions going forward.
[00:07:58] Speaker A: And do you think it makes a difference when you look at the utility landscape sort of at a high level? In the US we're looking at 49,000 drinking water systems, another 18 to 20,000 wastewater. The US the other extreme would be the UK, which just has a small handful, just over a dozen. Where does Australia sit in that sort of number mix?
[00:08:23] Speaker B: Yeah, it definitely is leaning more towards the UK style landscape. So there is a lot more concentration in urban utilities and the tier one utilities, which for us we assume is utilities serving more than 1 million in population. There are eight tier one utilities that account for 60% of the total market value.
So there's a lot of concentration. And then even breaking that down Even further, just three cities, Sydney, Melbourne and Brisbane alone, account for 40% of the forecast spend. So it's a very concentrated market in that way.
And winning these utilities can mean a lot for vendors, but also they are setting the benchmark for digital solutions in Australia.
And what we see these large utilities doing will certainly cascade down to the remaining smaller and medium sized utilities in the rest of the country.
[00:09:22] Speaker A: All right, so let's size the market. So with that being said, I think that's super helpful. Highly concentrated, three cities make up a big chunk of it. Like you said.
What are the dollars? What kind of numbers are we talking about?
[00:09:38] Speaker B: Yeah, so the total value, cumulative value from 2026 to 2036 is at $17 billion. And all of these numbers are in US dollars, we should probably note early on, but kind of breaking that down, the market is more than doubling from, from over this time span, starting at 958 million this year. And we project it to grow to 2.4 billion.
And this really just harps back to the sense of urgency that these utilities are under.
[00:10:11] Speaker A: And these are digital solutions we're talking about. Can you give me like real quick like, what does that cover?
[00:10:17] Speaker B: Yeah, absolutely. So Technically it covers 35 different segments, but when you think about it, a lot of the meat in that is in your foundational digital solutions, including things like CMD data systems that are going into your plants and remote pump stations, as well as everything from customer meters to network monitoring devices and any of the software that is helping to make use of that data or model the networks as well. So definitely covers a lot.
[00:10:46] Speaker A: Yeah, I think that's, I know maybe one of the frustrations of our marketing team. It's like really 35 segments. You know, everything from like you said, SCADA systems down to cybersecurity, customer management and so on. So. All right, well let's sort of even, let's look even beyond. You mentioned drought and water stress.
Largely speaking, what are the less maybe obvious structural pressures forcing utilities to digitize faster than they might otherwise choose to?
[00:11:19] Speaker B: Yeah, so like a lot of other places across the world, aging infrastructure is a crisis in Australia.
So Sydney Water, which is the largest utility in Australia serving 20% of the population, has stated that over 50% of their network is over 50 years old. This is also backed up by the fact that non revenue water at those large urban tier one utilities has risen 25% in the last five years.
So definitely is an issue that's taking place across the country.
One thing that I found really interesting is that recently Water Corporation in Western Australia has stated that their allocating $120 million to maintenance over the next two years to target leaks and aging infrastructures. And this is a part of their broader to over $2 billion budget for the next two years. So not only are we seeing these operational issues, we're seeing utilities putting money and resources to these problems as well currently.
And this kind of bleeds into the next thing that's happening which is those financial pressures.
If we're looking at a 10 year scale we can see that operating expenditures have declined but so have utility revenues. And this is against the backdrop of rising capex. So capital expenditures have risen 83% over the last 10 years and the drop in operating costs have not made up for that.
So there's really a lot of pressure on these utilities and it's, we're seeing it happen again in real time. So Taz Water, they had their four year capital program that they sent out for approval and they proposed $1.6 billion in investments over the next four years with an 8.8% increase in prices.
Regulators got back to them and said no, instead propose instead proposed slashing the cap and OPEX by half and lowering the price increase to just 4%.
So you have these financial pressures where they need to make these large investments and they're also grappling with this issue with the cost, the rise in cost of living. So they're really getting squeezed from both sides and regulators are really forcing these utilities to be efficient about their capital allocation.
[00:13:46] Speaker A: Yeah. So I mean I assume that you mentioned 8.8% or whatever.
I mean I assume part of that is just like global, just inflation and sort of the state of the world today. And that's why they were going high with the expectation and now given what's happened happening with sort of the Iran conflict, whether that was part of the deal or not. It is now because prices seem to be seems like they're going to remain high for a while and so I don't know, it's interesting. Is the regulator being realistic as well? I mean they've got their own stakeholders.
[00:14:24] Speaker B: Totally. Yeah. And I mean just this morning I heard on the news Australia is an importer of oil mostly they don't have refineries and capabilities themselves. So definitely is something that was not a part of the analysis when we were writing this report but is going to be even More important moving forward.
[00:14:44] Speaker A: And then it's also, I mean, there are other things that out there. So you, you've mentioned sort of leakage or infrastructure, aging infrastructure, you've mentioned financial pressures and then there are other things like, I mean, population or workforce, right?
[00:15:01] Speaker B: Yeah, absolutely. Population is expected to boom in Australia, particularly in the urban areas where they're projecting water consumption to rise by 73% over the next 30 years, which is huge when you think about all of the droughts that we were just talking about previously.
And on the flip side, looking more towards the rural areas and also across the country, but in particular those more rural areas, the workforce dynamic is definitely at play as well, where they have aging workforce and high vacancy rates. So those digital automation pieces are going to be important in those areas as well, moving forward.
[00:15:46] Speaker A: All right, so that kind of addresses the problem or set of problems. How are utilities, this relatively consolidated group of utilities, how are they leveraging digital technologies and solutions to address the problems?
[00:16:04] Speaker B: Yeah, smart metering is definitely the clear winner in how utilities are.
One we're in one of is the clear winner in the big steps that utilities are taking to combat these issues.
So Sydney Water and Southeast Water are currently undergoing full scale rollouts of smart meters and that accounts for almost a third of all of the connections in Australia.
And utilities are really positioning smart meters as a way to enhance their water efficiency by providing improved insights into the water demand part of the equation as well as enhancing their leak detection capabilities with more real time data and better engaging with their customers. So really empowering their customers with the data that they need to be smarter about their water use.
I know I mentioned Sydney and Southeast Water, but outside of these utilities of many of the other Tier 1 and Tier 2 utilities, so serving more than 100,000 people are following suit with pilot level implementations of these smart meters and we're likely to see the follow through with the full scale rollouts in the coming future.
And one thing that's really interesting on this from the vendor side is that competition is really heating up with these full scale rollouts and a lot of new entrants are signing large contracts with these utilities to meet the demand, which is really interesting.
[00:17:37] Speaker A: Yeah, no, I agree with you. That's one of the interesting aspects of it. So yeah, we'll get that to that in a minute. So.
All right, so smart meter and I would say metering as a whole. Right. When you look almost universally it is. You mentioned SCADA early on is like a, a foundational digital solution. Right. Metering is similar Right. Because it, we've talked about this, you know, in the office a lot and that is like these ecosystems that tie into metering. Right. It's the interface between the utility and the customer. It's more than just the cash register. That's, it's more than that now, particularly with smart metering. So that's a headline trend. You mentioned leak detection, but fixed leak detection is growing at according to numbers like 15 +%.
Customer engagement software is at about 24% and then AI native applications according to the report are at over 3, 13%.
So which segments should vendors be focused on if you had to choose?
[00:18:43] Speaker B: Yeah, absolutely. I think we should start by kind of maybe breaking it down.
And you're right, smart metering is really enabling a lot of these other solutions, whether impacting it directly or kind of tangentially building an environment of a more rich and robust data collection across networks.
So like you mentioned first off, fixed leak detection is huge. It, it is a key role in gaining water efficiencies by targeting losses throughout the system and preventing non revenue water crisis.
So looking at that there, Sydney Water and Yarra Valley Water in Melbourne are investing heavily in establishing network wide scale fixed leak detection, whether through district metered areas or since other acoustic sensors across their networks. So there's definitely an exciting move there towards supporting those full scale metering rollouts with even better data to be incredibly targeted in how they're addressing their leaks. On the other side, the customer engagement piece is another area that's growing from 5 million a year in 2020 to over 200 million in 2036.
And this is really enabled by the smart meters that are providing more data.
And like I said before, it's really empowering the customers to take charge and play their part in the conservation effort and help prevent another crisis, hopefully. But I think the undercurrent of everything that we're talking about and where the next move is is really in these AI native applications.
All across Australia they're building out monitoring systems right now that is collecting real time data and will really unlock and enable future opportunities to capitalize on the analysis that AI can do.
So one of the examples is asset failure analysis that's growing at a 20% CAGR.
And you can see that tier one utilities are really taking, are actively piloting this and are really taking advantage of the data that they're starting to collect across their networks. And so for me when I look at Australia, you know, there's a lot of exciting opportunity and network building here that I think is Just going to unlock a lot of software growth in the future as they look to further utilize it.
[00:21:21] Speaker A: Yeah, no, I think that's super interesting. So. And it makes sense that the tier one utilities, I mean, they're going to be more progressive, they have more resources in a number of different ways, whether it be financially resourced workforce to focus on the AI applications. But yeah, you're right. I mean, it's interesting at the UMC conference in Charlotte, one of the things that came out of it was someone had mentioned that actually AI and the role of AI may ultimately even have a greater impact or benefit to smaller utilities. Right. Because what it may ultimately do is cut into that enterprise software barrier, whether it be cost, whether it be understanding it, understanding the software and the applications that, you know, that's been a barrier for some small utilities. I'm not saying that's going to happen, but that did come up as a discussion point that was super interesting. And you know, at the same time, we know that the enterprise software companies are also moving in that direction as well. And it's not like they're going to stand by while CLAUDE or people dial into CLAUDE to solve their problems.
A super interesting point is the customer engagement applications. I mean, smart metering allows greater flexibility or applications for that. Right. It's more real time, it's moving information data more quickly. It also can present that data to customers rather than. And truth be told, I'm embarrassed to say this, but we're in a dispute with the water utility where I live right now about our water bill. And they basically come by every six months and check it. And so my water bill is. And then when there's a problem and there seems to be a leak, you have no idea about it. And they're asking for not a small amount of money saying, hey, you owe this much. It's like, I had no idea. But hey, that's, that's life. All right, so you mentioned vendor landscape. So competition, new players, different players.
It's pretty interesting to see what's happening. So we're seeing Chinese manufacturers cracking into the market with, with big or large contracts, engineering firms, they're sort of the de facto gatekeepers. I think that's, I don't want to say universal, but we've seen a lot of that in different markets.
So in the case of Australia, who are the players to watch what's. What jumps out at you, at least on the, on the value chain analysis?
[00:23:52] Speaker B: Yeah, totally.
So looking at the metering landscape, first off, Husong is a really interesting Entrant to see in the Australia market, they won large contracts with Southeast Water for their full scale smart metering rollout.
And the key to winning these contracts was really in Huzhong's adaptability and flexibility to integrate Southeast Waters leak detection sensors on the meters.
And so that's something that's really interesting to kind of keep an eye on. I think moving forward as other utilities follow follow suit with larger rollouts is how are these metering vendors adjusting or working with utilities to win these contracts?
And so the metering landscape is definitely heating up and is is one to watch.
[00:24:48] Speaker A: Can I jump in the. Yeah. So they're a Chinese player, right. And it'll be interesting to see what is that do that. I don't know. The world's gone crazy in so many different ways. But it'll be interesting to see what happens with like Chinese hardware. I mean that's their strength, right? Manufacturing strength. They've done it in other industries. I mean from my own personal experience, you know the solar market at one point it was dominated from 20002010 it was really dominated largely by Germans, right. They were the ones. And then the Chinese pretty quickly just used their manufacturing might to scale things but drive costs down. I don't know if that can happen in metering, but it'll be interesting to see what happens here. So sorry to cut in there, but what else you got?
[00:25:37] Speaker B: Yeah, moving down the value chain in metering specifically, Taggle is another really interesting local player.
So they're not a metering manufacturer but rather an installator and integrator.
So they provide end to end metering services from installation, connectivity, servicing and data management for small and medium sized utilities.
I think that this is a really interesting player to watch because they will play a key role in laying the foundation for the next generation of smart metering rollouts for the smaller utilities.
And I think also on this point it is important to note that these local installation and integrator firms are also really very strong partners with utilities of all sizes. So other ones in other areas like detection services or aqua analytics who are doing water leak detection or pipeline condition assessment on the wastewater side are other really important vendors that are key for vendors to be aware of because they're an important middleman similar to engineering firms. On our last point, so similar to like you said, a lot of parts of other parts of the world, the engineering firms in Australia are definitely playing a bigger role for utilities. So. So we're seeing a trend where utilities are signing long term partnership style contracts with engineering Firms, and these are five to 10 years to help deploy all of their capital. And they really are becoming even more important gatekeepers. So doing everything from project management to procurement to integration.
And this point is emphasized by the fact that in 2025, Tetra Tech acquired Sage Group, and SA Group is an automation, installation and integration player at the local scale in Australia.
And so you can see that engineering firms are expanding their capabilities and their value to these utilities to hopefully win those contracts and further embed themselves. And again, it's an important part of the value chain and vendors really need to understand this and, and see who the big players are for these utilities.
[00:28:08] Speaker A: Yeah, that was something that came out of some recent research and analysis we did and had to do.
Just tying it to other things we looked at, like aecom. Right. They've. They're looking to grow their advisory or consultative services sort of to get even further upstairs in places like the UK or wsp, I think, was the same thing. They've been acquiring companies.
And then Jacobs, that was another one. So they bought out the rest of pa. Its stake, remaining stake that they didn't own in PA consulting.
I think that's a big part of it. How did they expand their share of the pie, these engineering companies, to not only implement design and implement actions within the utility, but help program manage? Right. So if you do that, I think the margins are probably a little bit higher, quite honestly. But also then you get to decide sort of what direction the utility goes. No, it's super interesting.
So I think a big part of this, and this is something that goes around in the office here or offices at Bluefield, and that is Australia's.
It's an island. It's an island unto itself. But we've been talking about how progressive it is in many ways for various reasons. You know, climatically, infrastructure, age leakage, it's competitive. What can the rest of the world learn from Australia? And is this a preview of what everyone. I mean, it's like to me, I think Australia, with all due respect to Australia, I think California, like, they're very. They feel the same to me in many respects for a number of reasons.
What can the rest of the world learn?
[00:30:00] Speaker B: Yeah, absolutely. I mean, bringing it back to what we were saying at the beginning, the millennium drought was really a moment that forced a lot of action, a lot of coordinated action from the federal players to utilities and the people of Australia themselves being smart about their water.
And, you know, there's a lot of those obvious investments like the capital expenditures into diesel plants or Tapping into new sources of water.
And that is something that is replicable. And we're seeing other places that are suffering from the same level of water scarcity, replicating whether that's in American Southwest, Southern Europe, other parts of Southeast Asia.
And we're seeing that happen, we're seeing that similar playbook come to come to mind. But I think looking at a level deeper, I think Australia, where it's at now also shows that dealing with water scarcity issues is not just about making those one off capital expenditures into things that are obviously incredibly important part of the equation, but it's about continually building system wide resilience. And digital solutions are a key part in that, in increasing your water efficiency across the network. So that even as issues arise, you're just a little bit smarter and maybe you don't have to make those capital expenditures now. You could maybe defer them or maybe not make them at all if you really hone in on efficiency. But I think that's kind of the big takeaway for me and that utilities, it's not just about those big investments, they got to keep working, which is really important.
[00:31:53] Speaker A: Yeah, I think it's a really interesting, I think we've all thought it was an interesting market when we look at digital markets globally. Right. I mean whether it's.
There are two ways to skin the cat. One is just total dollars per market. So, so let's just sort of walk me through it. What are the big ones? So the US is obviously big.
Where else would you get dollar wise?
[00:32:17] Speaker B: Uk, France, Germany, Spain, the big players in Europe are definitely up there as well.
[00:32:24] Speaker A: And Australia as well. Right. Australia is one of the more progressive. Not only it's got, you know, dollar wise, I mean it's not a huge market but at the same time it is really progressive. And so for that reason, you know, it feels like, and I think this is what you're saying, a lot of players are looking at Australia going in. I mean you mentioned a Chinese company, you mentioned a local player and you mentioned a US based company.
So I know a number of clients are looking at Australia as a growth opportunity and then how many. And it feels like just from our perspective, a lot of Australian companies come to us. They're also trying to learn what's happening around the rest of the world.
And so there is a bit of back and forth and it's a market that has demonstrated its willingness and ability to deploy capital or resources towards technology and efficiency measures. I'm correct in saying that, right?
[00:33:23] Speaker B: Oh yeah, totally. Very innovative. I Mean, the big utilities all have innovation teams and they're even commercializing some of that innovation, like IOTA at Southeast Water.
But I think just to kind of tie it all together, what vendors and engineering firms are learning in Australia, they're building the capabilities to position themselves and export that playbook in other parts of the world. Like the other parts of the world that are dealing with water scarcity that I mentioned.
[00:33:54] Speaker A: Yeah, it's like a stepping stone, Right? I think that's a good way to look at it. No, I appreciate that.
All right. Well, this has been awesome. The report you've put out on Australia is awesome. I think the feedback's been great that I've heard. I think it looks great. It's really interesting. So if anybody's interested in that, you can go to bluefieldresearch.com but Lee is here to answer any questions you might have about Australia.
One quick last question. What's next on your agenda as far as as research and analysis goes?
[00:34:27] Speaker B: Yeah, well, folks can keep their eye out. US And Canada. Digital water forecast will hopefully be dropping in the next couple of weeks, but after that, we are embarking on doing some digital forecasts for the rest of the world. So that'll include 30 countries across Asia, Middle East, Africa and Latin America. So very excited for that.
[00:34:52] Speaker A: Yeah. And I think in Europe, our Europe team has the Europe forecast coming out relatively soon as well.
[00:34:58] Speaker B: Yeah, lots of forecasts.
[00:35:00] Speaker A: Lots of forecasts. All right, well, awesome. Thanks, Lee.
It's Friday.
It's May Day. Europe. Speaking of Europe, they're off, but thanks for coming on and this has been great and we'll talk again soon.
[00:35:14] Speaker B: Awesome. Thanks for having me.
[00:35:16] Speaker A: Take care of.
So that was fantastic. It's great to have Lee on. It's been a minute and I think she really knows what's happening in Australia. She spent a lot of time looking at this, talking to so many different players and continues to do so. As she said, Australia is one of the key markets, particularly for digital solutions from SCADA to metering and the other 33 different categories.
So if you have questions, you can always reach out to us. So before I let you go, I do want to talk about what caught my eye this past week. So I've honestly been sort of chewing on this for a little while. What really has caught. There's a lot happening from, you know, CRH acquiring Axios, from KKR to Azuria launching new products. It's really interesting, but I'm going to go higher level.
So our team at Bluefield, we just dropped. Our first quarter 2026 review of the top 50 publicly traded water companies and the headline number is pretty big. We're looking at about for the year I think the top 50 companies generated about $116 billion in revenues.
These are not all pure play water companies. So that 116 billion represents about 38% of these companies total revenues. But what's more interesting is underneath sort of the top line number the sector seems to be bifurcating a bit. The digital water and investor owned utilities they're more recently in the latest quarter growing at about 79%. The network and distribution companies seem to have contracted a bit.
And this really stands out at me is the companies that are more exposed to residential construction and agriculture are definitely struggling, whether it be because of tariffs. Now we'll get into Iran in a second but that's sort of where we are. I think the one thing that really jumps out is those that are plugged into data centers and municipal compliance spending seemed to be winning the growth engine that really no one had on there.
We were talking about this. No one had on their 2023 bingo card were AI and data centers. And so for example ecolab just paid $4.7 billion for a liquid cooling company. So that doubles its addressable market in the high tech sector data centers.
Almost overnight SPX Technologies is projecting a 50% revenue growth from cooling systems alone.
Liquid cooling requires high ultra pure water treatment and it's pulling in companies like Veralto in the market that I don't want to say barely existed three years ago, but it is moving fast. The bigger question is what does that mean going forward?
Whether you listen to podcasts, read the Wall Street Journal, Bloomberg Financial Times and you look at the capital spending for the high tech sector, how real is it? So what can actually be deployed versus what won't be deployed? It's definitely there are a lot the equivalent of wildcatters out there in a boom and so who's playing their cards correctly or not.
But there seems to be a canary in the coal mine that I think everyone should watch. I brought this up on the last podcast but and this shows forth at least in mention as far as looking ahead in our quarterly review and that is the Iran conflict so Khmera just and this is since we posted the top companies dec and that is their Q1 results just came out and revenue is down 4%. Their margins have compressed from I think 21 to 18% and their CEO directly cited the Iran conflict as an accelerant on an already fragile cost Environment, meaning there are concerns about tariffs. That's still lingering, what's happening with China and supply chains.
But then there's also other geopolitical factors at play, and Iran is only making worse. So Khmer sells chemicals into the municipal and industrial water treatment sectors globally, which means they also feel the macro stress maybe before it even shows up in other companies backlogs like, let's say, engineering companies.
And if you're global and not just the us, US companies are still somewhat insulated. You know, oil prices are up 37%. Europe natural gas is up 62%.
As I mentioned before, US average diesel prices are $5.40 a gallon. That's just the national average. If you go out west to California, it's closer to $6.50. So that's hitting chemical inputs, it's hitting logistics, and it's hitting construction, bids, operations all at once. So as I said before, be on the lookout for what this means. And as these financials start rolling out over the next couple weeks to month, looking at Q1, which will capture the Iran conflict, the numbers may look less pretty. So I hope not, but that is a concern.
That's what caught my eye this past week.
If you have any questions, you can always reach out to
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We are people. We are not AI.
We've got a lot of experience and like to dig through a lot of these topics. Speaking of, if you have any topics for this podcast future, whatever that is you'd like us to discuss, you can always reach out to us to talk about what's interesting to you because we're doing it for you.
As always, I do want to thank Kelly Talbot, Steph Aldock, Ryan Sullivan, Mike Gaylor and everybody who's participated in these podcasts. We are at episode number 142 which. Who ever thought that would have happened?
This is the future of Water from Bluefield Research.
Until we talk again, be well, be safe and take care.
