[00:00:00] Speaker A: What may end up happening is that the industrial firms, they could sort of play the Exxon Valdez card.
And this is future of water, which we talk about all the ways which companies, utilities and people are addressing the challenges and opportunities in water. This is episode 84. I think it's going to be a good one. I, because I'm joined today by senior analyst from Bluefield, Amber Walsh. So as many of you have heard her on the podcast, and I think I've mentioned her name other times. She spends a great deal of time analyzing water management and wastewater management across multiple industries. She also takes little deep dives into things like corporate sustainability, onsite reuse, market trends and forecasts across a number of sectors, whether it be data centers and semiconductors to pulp and paper and food and beverage, among others. But before I bring Amarin in the conversation like I did last episode, that was episode 83 with Charlie Seuss, I thought I'd share some news once again at the request of my colleagues. So that being said, let's jump into one news item I came across this week that I thought was interesting, and then I will bring Amar into the conversation. So let's hit it. So rumor has it, or the facts are stating that Venice is sinking, but also Rotterdam, Bangkok and New York are also sinking, but no place apparently, according to Bloomberg News, is sinking faster than Jakarta. As I was telling colleagues last week, solutions to overdrawing aquifers is really becoming a big opportunity that I'm not sure everybody's quite ready for. From Long island to Jakarta, it's going to cost money, it's going to take time, but also if it doesn't happen, we're going to have bigger problems. So in the case of Jakarta, that is Indonesia. Over the past 25 years, the hardest hit areas of the capital have subsided more than 16ft. The city has until 2030 to figure out a solution. So they say, or it's going to be a little too late to hold back to Java sea. As of now, one in three jakartans don't have access to piped water. So they're instead relying on thousands of illegal wells that are scattered all over the city, depleting aquifers, basically creating land subsidence. But also, I think their bigger question or bigger issue facing these coastal cities is we're starting to see in other areas, including places like Florida, that saltwater intrusion becomes a real thing. And then once you start having that, then your water drinking water quality from any groundwater is questionable at best. And then you're going to have to treat it, no matter what. So PT, Air bear sea Jakarta, which is the firm that's been tapped to expand water pipe access to 11 million residents. So basically what they're trying to do by 2030 is to connect all the city's residents to more centralized systems to the extent they can. So ABJ's new contract includes rights to operate five of the biggest water treatment plants and to sell more of its treated water supply through 2048. So it's a big contract, and reportedly, there's no downside to ABJ. The company stands in that around for almost $5 billion from the deal. So lucrative, but it raises a lot of questions. So why Bluefield? Do we care? Well, quite honestly, Jakarta doesn't have enough money to manage the water system alone. This is not unique. We see this all over the world, not only in places like Southeast Asia, but also North America. There are lots of cities that are having financial problems and getting squeezed, whether it be a big system or small system. The city, in the case of Jakarta, they're looking for a private partner. So they've tapped into private partners, and they do have a history of this that have raised a lot of questions in the past and a lot of pushback. So companies like Moya and Aquatico, but also suez and Tim's water out of Europe, have also managed water systems in the country, and there's been some sell offs of those concessions back and forth. So it'll be interesting to see how this plays out with ABJ. But there are also a number of approaches, quite honestly, being deployed globally to address overdone aquifers. One and first and foremost, in my mind, is reclaiming and reusing wastewater that in many cases can be. It's already being treated, in many cases to potable standards. So this definitely reduces demand on aquifers, and it's just more efficient use of water. Right. You're already treating. But also, in the case of Jakarta, fixing the leaking pipes where non revenue water is as high as 40%. So that's basically 40% of every gallon or liter, depending on your measurement. Doesn't matter, is being lost. So not only does this reduce available supply, it just costs money to pump and treat. It seems kind of silly. I don't think anybody in our personal lives would do anything like this. But yet we're okay with water utilities doing this and we're not willing to pay for it. So it's not just the waste, but also, if everybody's concerned about carbon and carbon emissions, well, guess what? I've said it before. Approximately 2% of greenhouse gas emissions originate from the water sector. It doesn't seem like a whole lot, but I would like everybody to think about all the news that they read about air transportation. It's the same. The water sector's greenhouse gas emissions are essentially the same as air traffic or aviation. So instead of just talking about using biofuels for planes, why don't we start talking about water and wastewater utilities becoming more carbon neutral, if you will? So why not water? So the opportunities abound. And they're not just in Jakarta, they're everywhere. So I thought this was an interesting news item. Great find in Blueberg, news that I saw that I thought everybody'd be interested in little farther afield in Southeast Asia. So with that being said, let's bring amber to the conversation. Let's talk a little bit about industrial water.
All right, so I'm joined here by Amber Walsh. Amber, how are things?
[00:06:22] Speaker B: Good. How are you?
[00:06:24] Speaker A: Pretty good. It's the holiday season, I think, feel I may have said this on the podcast before, but once you hit Thanksgiving, feels like we're living in two worlds. We're trying to close out this year. There's a lot of research happening, and then it's also planning for next. So it's never the happiest of times. It's just a lot going on. But that being said, let's make it happy. All right, so, Amber, in addition to, you've been digging into industrials and trends, whether it be market forecasts or industries in a number of different industries, you also provide clients with quarterly analysis of things to look out for. So every quarter you're digging into data, you're digging in the news, talking to people when it comes to industrial water management. So let's just start from the top. You just released a quarterly insight on this for clients. So what are some of your takeaways from this past quarter, and what are some of the highlights?
[00:07:22] Speaker B: Yeah, definitely. So just to start with, kind of a brief overview of what we saw this quarter. I'm sure we'll get into the details throughout this conversation. But first, tfos. We hear about it all the time, especially in the municipal market, but it's also applicable to industrial. We've also been keeping tabs on an evolving market in pulp and paper, direct lithium extraction, and also mobile water treatment.
We continue to track corporate sustainability efforts so largely focused on lighter industries. As tech companies, they're rolling out pretty interesting strategies to help meet their water sustainability goals as their water usage is rising. And then finally, we looked at m a so key deals involving pump manufacturers and also looking at advanced water treatment for.
[00:08:21] Speaker A: Mean. I know there are a number of different things you looked at, whether it be policy wise, like you mentioned m a things like pfas and just sort of market shifts overall. So why don't we, I think if I recall, and I'm going by memory looking back, I think you had like six key takeaways at the top of your quarterly review or insight. So what was most interesting, what jumps out to you if you had to, maybe over the holidays at dinner when you're sitting around with your family like, hey, what's going on at work? What are you going to tell them? What's most interesting to you, at least in this quarterly?
[00:08:58] Speaker B: Yeah, definitely. So personally I'm very interested in sustainability initiatives. So I think that's definitely what I'll be bringing up at the holiday table. But like I mentioned, we're keeping tabs of what companies are doing, whether it be partnerships, projects to meet their water goals. And we're seeing a rise of public private partnerships for water projects. So these industrial companies are partnering with water utilities and counting that water usage, that they're saving the water utility towards their corporate sustainability target. So that's been interesting to see because the industrial companies have more capital and so it's pretty beneficial to both the municipality and the corporate. So an example that we've been seeing is Microsoft partnering with Fidotech to install AI leak detection. So this has been rolled out in Phoenix, Arizona, London, Mexico. And the water loss that's saved, that's going to count towards Microsoft's water positive goal.
[00:10:02] Speaker A: Yeah. So it's interesting to see that. I mean, I know that was something, we did a research note on this, I think to a digital water service a while back. And that was one of the points that someone reached out to me separately asking specifically about that. They thought that was really interesting about how they were managing it. I mean, I guess it's almost like a portfolio approach, right? Sort of like buying carpet credits to offset. They're doing different things. In this case, Microsoft's partnering specifically with these utilities, which I think is interesting. So I like that one. So how about another one? What's another takeaway from the quarter?
[00:10:41] Speaker B: Another interesting market is the mobile water treatment market. And we did a research note on this with Najee House sour industries. So a quick plug for that if you want to go look at.
So NSI, they've been building out their mobile water treatment fleet and their strategy for that has been pretty interesting as they've capitalized on different restructurings of companies to get mobile water treatment units, whether it be Danaher spinning out Veralto, and they acquired containerized solutions from that. And then also when Fiolia and Suez were combining, they got units from that. So their strategy was to kind of target these changing companies. So that was cool. And it is interesting to see that these containerized solutions, they can treat things like pfas and then they can improve reuse. So there's different applications for them.
[00:11:48] Speaker A: It's interesting to see, truth be told, for the listeners, I'm working with a couple of colleagues on some analysis of some recent decentralized water mobile treatment.
The sour has been really active with Nyhouse is how they're saying it. But I should ask my son, one of his closest friends is Dutch, so I should ask him exactly how to pronounce it. So apologies for any mispronunciations on our end for Nyhouse. So Sara has been active. And then also Cambrian was just acquired as well by Pennybacker Capital. So that was sort of another reason we've been looking at it more recently. And so watching what's happening from decentralized treatment, it also partly ties into your previous point, and that is corporate sustainability. What are companies doing? So our general rule of thinking of Bluefield has been over time know is decentralized reuse or on site water management going to happen at greater scale for corporates or industries and even commercial, whether that be college campuses and maybe even hospitals. And our take is, yes, one, these organizations have a bottom line, which obviously is a driver. Two, they're facing operational risk, right. They're not immune to the news and climate. And also when it comes to if they're tied or hooked up to the municipal water and wastewater service providers, their rates are going up in some cases, particularly on the wastewater side. So like food and beverage, I know you look a lot at that, but rates are rising. So if you're, let's say, a brewery or a food and beverage company and you're delivering iBoD, TSS, suspended solids to the water utility, in some cases they may be increasingly overwhelmed. So it'll be interesting to see how this plays out over time. But we see corporate sustainability is also a big driver behind that, where they can sort of take control of it. I don't know if you have any thoughts on that.
[00:13:55] Speaker B: Yeah, no, definitely. I completely echo what you're saying. And also it is another aspect of this that's interesting is the investment piece, that these mobile units are attractive to investors because the vendor is maintaining the ownership of the asset, and then it's easily removed when the contract is terminated. So it kind of eliminates that risk in a sense. And then on the corporate side, there isn't that capital investment if you're leasing or doing that water as a service model, which is another cool aspect to mean.
[00:14:30] Speaker A: I remember even before Bluefield research, when I and my colleagues, some of which are here at Bluefield, we worked in the renewable power space. And one of the things we were looking at, in addition to just wind and concentrating solar power, but also solar pv, and there was the emergence in six, seven, eight. Memory is hazy at this point, but looking at the solar service provider model, and I think that's always been, I know that private equity in particular has been looking at decentralized solutions as an opportunity. And there are a number of reasons why it worked in solar. One, quite honestly, it's kind of a little bit simpler as far as sort of execution, and the economies of scale are a little bit better. One, once the price of solar modules went down, it's kind of the same thing from house to house. In the case of water, there are challenges, however. One is sort of, there's variable water, wastewater, sort of raw material, what needs to be treated there are different in many case. You may have to repipe, but that's why I think the larger commercial and or industrial facilities kind of make more sense. You do get some scale there, and that's why you're seeing companies like, looking at sort of the quarterly, but also some of the research we've been doing. Like I said, you've got Pennyback Capital h two innovation. Who was just acquired, I believe it was a blue wolf who acquired h two innovation.
[00:15:59] Speaker B: Ember.
[00:16:00] Speaker A: Ember, sorry. It was at the same time as the Synexon deal. I think I actually talked about this even on the podcast. But Ember acquired h two innovation. H two innovation has mobile treatment solutions as well. So we do see a real opportunity. The one thing in looking at the research, and I'm hopefully not talking too much about this, but I do get excited about it, is one of the advantages of the solar service provider model. There was, and still is a reliable long term federal tax incentive. Right? So you get tax credits for rolling these out, which was kind of, quite honestly, universal. So even if I want to install solar myself on my house, I can get a federal tax credit as long as I have a tax burden, which unfortunately I do, and I get a tax credit. And there are also state incentives. That hasn't happened in water, at least systematically in that regard. That is something actually we were working not long ago on with a client specifically trying to understand what would be the impact and what are the potential implications of some form of tax credit or tax incentives across the water sector to drive things such as this. It would drive industrial, more advanced industrial reuse and treatment. Maybe you just stick to the wastewater side, maybe you just stick to industrials, but it will drive private investment because it further adds to sort of the ROI, admittedly, of making these investments. Like you said, the upfront capital costs, let's say, of a cambrian system can be high, right, but once, and they're actually unique in that they have their energy and power, their WIPA model, where they're basically charging a flat fee or a known fixed fee over time for not only the water treatment, but also the energy piece of it as well. So I don't mean to steal your thunder, but I think this is a really interesting space. And I know, and I'm encouraging people at Bluefield, the analysts and research team, to dig deeper into this as we go into 2024. So be on the lookout for more research and analysis on that. All right, so let's get back on track. Amber, that was for those who don't know.
We ran off the rails there for a minute. So what's next?
[00:18:31] Speaker B: So PFAS, I mentioned it first off, but it does have an impact on industry, and it is a growing concern for industrial facilities on who's going to be liable. So industries of specific interest are chemicals, pulp and paper, textile mills, and semiconductor manufacturers as they deal with PFAS in their discharge. And we have continuous conversations with water solution providers just to get a pulse on what's going on. And every time recently, when we've asked what are key trends going on, PFAS is always brought up. So it's definitely a challenge facing the industry and a lot of unknowns as well. And so we've also heard that facilities that don't directly use pfas are concerned as well because a lot of them are connected to a municipality and there's pfas in that water, and then they may become liable for it because it's going through their facility and then they may have to remove it in their wastewater effluent. So lots of different things going on, and it'll be definitely interesting to see how this plays out and who's going to be liable and what technology is adopted, and there's just a lot to keep an eye on.
[00:19:53] Speaker A: Yeah, I guess concerns around circula and how pfas and these forever chemicals are going to be labeled, for lack of a better way to put it. Whether they're going to be hazardous or not is a real concern and seems quite honestly ludicrous that a water or wastewater utility should be held liable for PfaS, that they didn't put any of these in the environment. They're just basically a pass through mechanism. And I was at the EPA offices a month or so ago and someone made the comment that these utilities actually, they're the biggest sort of aggregators of forever chemicals just by nature of their position. So there they are, and then they're going to potentially be stuck holding the bag. My question to the person yesterday was like, this is crazy. This can't happen. And I think the issue is, when it comes to that, is what may end up happening, is that the industrial firms, they could sort of play, as was noted, the Exxon Valdez card, in that you just keep using the courts and the judicial system to keep kicking the can down the road. So basically using discounted cash flows, and as long as you can keep pushing those costs out over time, in the savings, in the near term, you can pay for the liability down the road, even if you ultimately are liable. But it could be a real problem that cities, states, utilities are going to be facing. And I think they're real concerns. But also to add context on the recent EPA actions which were finalized in October 2023, there's the Toxic Substance Control act. Rulemaking requires manufacturers back to industry, those manufacturers of PFAs and PFAs containing articles to report to EPA on the use, production volumes, disposal, exposures, hazards, and so that and the toxic release inventory rulemaking, which removes a de minimis exemption that previously allowed facilities to avoid reporting on PPA shoes and low concentrations. So there is an aim to increase transparency of it. There's a lot to be happening. And then I'll add one more thing as I keep running my mouth. And that is, I was just asked by shout out to Tom Freiburg at Atlantean Media. He just reached out to us and hopefully we can deliver. But that is, what's the prediction for PFAS? I think it'd be even beyond the US globally in 2024. What can we look out for, whether it be policy wise, but also what's happening with these industrial firms? There are more lawsuits in the making, on top of the ten or $12 billion that settlement that three m just agreed to. I think there's more coming down the pipe. So be on the lookout for that. I think that'll come out at the start of the year. So I know our team, particularly in Europe, will be helping out on that. All right, so for the sake of time, Amber, this is fantastic. So what I'd like to sort know, if you have any thoughts or analysis on, we'll leave the other takeaways to the quarterly for the clients, but also, if any listeners are interested, just let us know and maybe we can set up a conversation and talk about it in all seriousness, we're happy to do that. We like talking to people, even post Covid, we still like to talk to people, even face to face. So before I let you go, there's one thing that you do look at every quarter, and maybe you can give us an idea of, like, top line industrial figures. What is industrial production and or water? What are the water impacts overall? So what does it look like? You track that quarterly and provide exhibits even. So what's your take on that?
[00:23:50] Speaker B: Yeah, definitely. So we look at OECD industrial production index, and in August 2023, it was 1.3% lower than a year prior.
So we've seen that manufacturing has seen marginal declines in production output, limited new orders, weaker demand, but we are also seeing improved delivery times and stronger supply chains. So not all negative. And then we look specifically here at the US on sales in industries, and we've seen an average of about 10% declines year over year across ten key sectors. So again, not all that positive, with two key sectors, petroleum and coal products and mining, seeing declines over 29%.
So it has signaled significant slowdowns in these heavy industries. But it is also important to note that this data is slightly lagged. This was q two. So hoping for more positive trends in the coming months?
[00:25:04] Speaker A: Yeah, I mean, without a doubt.
Obviously, inflation is coming down. There are sort of employment numbers, at least in the US, that are showing sort of softening a little bit. But you never mean Ukraine. Russia is still going. Now we've got what's happening in the Middle east.
Yeah, it'll be interesting to see how it plays out. The lag effect doesn't give us full visibility into exactly where we are right now, but things do seem a little bit more settled and I think as a result, and also China, I don't want to leave out China. What's happening there?
They've been slowing a bit as well, but it's a holiday season, so people are buying stuff.
It's a new year. I think mentally, I think people are sort of optimistic to 2024. In talking to someone. A while back, the expectations were that m and a. Now that inflation seems to be under control, I don't think we're getting any more rate hikes. That's still sort of looming out there. Cost of capital is pretty expensive, but that things will be pretty busy and starting in early 2024. So we're optimistic.
[00:26:11] Speaker B: And to keep things to end on more of a positive note, we are seeing facility announcements continue to roll out. Automotive manufacturing, battery manufacturing for electric vehicles, data centers. We see announcements of those a lot. Food and Bev facilities. So there are new production facilities and lots of spend, capital spend happening there.
[00:26:37] Speaker A: Yeah, it depends on, quite honestly, what you read. Sometimes they'll say like, oh, all these battery manufacturing facilities, they're going to crush us. Why is the federal government paying for this? But at the same know they are new facilities and there is a shift of the energy transition is real in many. Well, Amber, not to drag it out anymore because otherwise they're just going to hear me talk.
Thanks for stepping up, particular on short notice. For those who don't know, I did sort of reach out to Amber not all that long ago and asked her, and she happily and willingly joined this conversation. So thanks a million for this, Amber, and we'll talk soon.
[00:27:23] Speaker B: Great. Thank you.
[00:27:24] Speaker A: Cheers.
All right. That was fantastic to have Amber on, and hopefully I didn't steal the show. I have a lot to say, particularly about things like mobile treatment. But just let everyone know the holidays are coming up, so the schedule at Bluefield is going to be, I guess, a little lighter. So admittedly, the logistics are getting tough for things like the future of Water podcast. But I wanted to give everybody a heads up that we're planning on sharing some more insights into the EU market, the trends, area of growth, drivers reuse. We've done a lot of research on that. We actually put out a reuse report not all that long ago on Europe, not only competitive analysis, but also market forecasts and sizing. And then our capex forecast for Europe is about to be rolled out. So be on the lookout for that. And I'm going to see next week if I can do a recording with Keith Hayes and Chloe Meyer out of Europe to share their insights not only on what's happened this year, but also what to look forward to in 2024. So be on the lookout for the next feature of Water podcast. So before we sign off here in Boston, Barcelona, and are in the holiday spirit, maybe let us know and we'd enjoy the opportunity for a meeting and maybe even break bread. Let us know I'm always happy to do it. Secondly, please give us a review. They really help. They help people know that actually people are listening to us and the feedback is positive. I can't tell you how many emails over the last six months we've gotten saying, hey, we heard you on the Future Water podcast. Also, it is a holiday season. Wanted to give a shout out to Dave McGempsey and the Water Values podcast. We've been partnering with Dave on that for some time, helping him with that show, distribute his newsletter and host it. And I get to go on once a month. So give listen to the Water Values podcast with Dave McGimpsey. That's an age old podcast in the water sector, and I think he's upwards of 250 episodes. I've lost track. We're at 84, so he's been at it for a while. And lastly, if you have any topic ideas you'd like us to discuss, let us know at
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Till we talk again, be well, be safe, and take care.
