Episode Transcript
[00:00:00] Speaker A: It was 1905. A Milwaukee engineer had built a piece of equipment that was designed to fail.
It was a water meter.
Winters froze pipes and destroyed meters from the inside, typically. So he built a weak point, a soft iron plate. Mint erupts you first.
By 1910, the company was selling 3,700 meters a year.
That company, Badger Meter, still in Wisconsin, it never stopped building these early warning points. It's now a leading supplier of not only water meters. It's since added capabilities including remote reading, digital analytics, smart sewer capabilities.
It's also moved beyond the United States.
In 2025, sales were over $900 million.
Utilities in the United States lose almost 18% of their treated water to leaks every year.
One of the biggest challenges facing the water sector today, it's not moving water, it's finding out where it's gone.
I am Rhys Tisdal and this is the future of water. And we should talk about all the ways which companies, utilities and people are addressing the challenges and those opportunities in water. This is episode 148. That's a 148. And I got my partner in crime joining me today. It's going to be Keith Hayes out of Barcelona. It's been a minute since he was on, so we're going to talk about, honestly, the state of the water industry at the mid year point of 2026.
I think maybe even the last time I had him on was at the end of last year. So this is perfect timing.
So we're going to talk about what's happened, what's happening, and maybe what we think will happen in the water sector going forward.
So with that being said, let's get to Keith Hayes, talk a little bit about what's happening in the world of water.
All right, so I'm joined here by Keith Hayes. Keith, what's going on in Barcelona?
[00:02:04] Speaker B: Hey. We're still savoring the Spanish World cup win, Rhys. As you know, that one goal heard around the world, it's still reverberating very much over here in Spain.
[00:02:17] Speaker A: Yeah, I'm not gonna. I was actually in prep for this, for this call. I was kind of talking to Mike Gaylor who makes all of this happen. Sound wise, as far as a podcast, just sort of sending him notes. I kind of missed the World Cup. It's actually been a first, good first half of the summer. Lots of games. There were games on in the office, on the tv, but then we'd also have it obviously playing at home over the weekend. So hanging out with kids, there was always something to do. And it's kind of.
I don't want to say mindless, but you can engage or not engage and do other things while it's happening and watching. Yeah, I thought it was super fun. And I did go to Morocco, Scotland game, which was awesome because the Scots are awesome and the Moroccans are fun, too. So thoroughly enjoyable experience.
Even though the US stinks.
[00:03:11] Speaker B: Well, you know, though, I mean, it is the most global sport in the world. And as an American expat over here in Europe, I always love. Meant that the sport isn't bigger in the U.S. so this was, I think, one of those times over the past month where, you know, a lot of Americans did connect with the sport, no matter how well their team did or not. Just, you know, getting the. The vibes, the fanfare, having the Scots drink Boston Dry of beer, all that kind of stuff, all the human interest stories behind the players. I mean, just a lot. A lot of excitement around it. So that was good to see.
[00:03:47] Speaker A: Yeah, definitely worth it. And so I think the hopes are that it'll happen again in 2038 in the US the way they are sort of setting things up, we'll see. Who knows what FIFA is going to do? And I say that with a lot of cynicism in my thoughts, but. All right, but that's not why we're here. We're here to talk about the water industry. So I think it's. It's been a minute since we talked. I think even we may have only talked at the end of last year on the podcast. Maybe.
[00:04:17] Speaker B: Yeah, I was starting to feel left out, Reese. You know, everybody's cycling through the podcast, but I'm just sitting there waiting to get called off the bench.
[00:04:25] Speaker A: All right, well, here you are. So we're the halfway point of the year, and one of the things I wanted to do was maybe just kind of do a bit of, like, what's happened this year, what's happening now, and what do we see going forward?
Um, so there's no time like the. The dog days of summer to do this. So here, let me throw a question at you, and then we can go from there. So I say it. Others at Bluefield say it, but a lot of headlines say that. I mean, even when you go home, the. The water sector or water market is booming when you look at the headlines. But when you listen to CEOs, and you hear about wars, tariffs, high energy prices, PFAS and emerging contaminants and I guess, political uncertainty, which story is real? Is it booming, or are we in
[00:05:16] Speaker B: A world of hurt.
Right. So, I mean, I think this is the ongoing, maybe communications or messaging issue that the water sector has. I mean, it does permeate everything, and so it gets taken for granted. I mean, I think we've seen stats that like, you know, the sector itself is maybe X amount of billions, but it influences how the entire global economy works. So in some ways it's just kind of built in that. Yeah, of course they're worried about water here. Of course, you're not going to be able to run your hyperscale data center if you don't have access to cooling water. Of course, you know, drought and desalination plants being struck by drones near the Strait of Hormos is an issue for water supply for millions of people.
But you're right. I mean, and I think a lot of times when we hear about water, it's more about.
It's more about the risks. Right. It's about the threats than it is about the innovation and the positive side of things being improved upon.
I think from our point of view at Bluefield, because we've, we've picked our lane and we focus so much on the sector and we have been growing, we do see all the interest. We do see some folks that, or companies, entities that were less interested before either coming back to us or asking us different questions or showing more knowledge and nuance and how they understand the sector than they did some years ago. I think that does say something. And I think it's just that the underlying realities of climate change, to me, I think are definitely resonating, you know, because that's in the headlines all the time right now, particularly in the summer because of the heat dome that most of Western Europe has been under.
I think the hurricane season that we have earlier in the year, the flooding, you know, a lot of those natural disasters turn the focus on climate change, which then gets people thinking about water. So it's this inherent risk that needs to be addressed and there's demand for solutions to deal with that.
[00:07:23] Speaker A: Yeah, and I think you mentioned that. I mean, we're busy, right? I mean, so if that's an indicator, that's our own metric. But there's been a lot of M and A. I mean, I know you work closely with our consulting team and managing that.
You know, we've had been doing a lot of due diligence. So M and A deal flow is up.
We've seen that.
And that's, you know, it looks like it's going to be well above or decently above where we were last year. So I think whether that's pent up demand or interest or just dry powder that private equity firms need to spend. So there's been a lot of M and A in their regard, but there also been some strategics that have been active and it feels like people have or the market is sort of become accustomed to what is sort of like the noise of uncertainty rippling through the markets in different ways. A lot of things I already mentioned, whether it be energy prices and tariffs of the such.
So yeah, I think it is booming and I say this, I think almost at the end of every podcast there's no better time to be in the water sector.
There's climate issues, you can't live without it.
There's increasing demand. You mentioned data centers. So if someone had five minutes to understand M and A this year, basically on what we've seen at Bluefield, what are the couple of the deals that actually mattered or kind of symbolize what's happening?
[00:08:56] Speaker B: Yeah, so I mean I think when we try and look at deals a lot of times the big ticket ones that are hundreds or billions in value, they're combining multi sectorial business lines. Right. It's not just water, but still within that, I mean there have been a few that have definitely stood out, very focused on water. I mean CRH and Axios, that was around 700 million.
Ferguson and Flowworks which was 1.6 billion.
And another interesting deal, Ecolab acquired Cola Cool it or cool it for almost 5 billion.
And then maybe I'm stealing all your thunder here. There was the, the ABB roadtork deal which just happened, which given water is, you know, a fraction of the, it's about 20, 25% of the, of the total business for road torque. But that's, that's another deal very much impacting the water infrastructure industry and the supply chain.
[00:09:56] Speaker A: So
[00:09:58] Speaker B: those to me have definitely stood out.
We didn't have another viola Suez, but we've had multiple deals in the billions that are showing a focus on adding to the portfolios.
[00:10:11] Speaker A: Yeah, it's a good question. I haven't done the count yet. Typically at certain times of the year we look at how many billion dollar deals have there been in water. Sometimes there's one, there's two, there's three.
You know, the big one last year was the American Water essential. I think that came into the end of the year. So that was a big utility or IOU deal which is significant in the US I think the CRH axis one is really interesting. Right here's CRH who has a bigger footprint in water than I think even people recognize or realize. Right. They. They're really a hardware and equipment provider. They're providing sort of the, the backbone, the concrete parts and pieces that kind of, you know, go into the system. But they required Axios. And Axios was really a partnership between KKR and xpv, XPV Water, XPV out of Canada.
And it's a big deal. We had heard that this was coming for a while. We kind of knew it. One private equity back. But also there was just growing interest.
Axios had been a quote, rolling up positions. And it really is focused on water quality, also wastewater as well. I think they own nexum. And so I think it's just really interesting that CRH is expanding its capabilities beyond its traditional footprint.
I think one of the areas that it has said in its financials, I think leadership has said that they see water quality as a growth business. So I think that one really stands out. I mean, the Ecolab one is another good one. I don't know if you have any more detailed thoughts on any of the ones you mentioned.
[00:11:54] Speaker B: Yeah, I mean, with the Ecolab, I think it's just sort of doubling down on the data center business and figuring out how they can, you know, they've definitely gone a lot further than, you know, traditionally being known, maybe as a chemicals provider, but now having more systems and getting more into treatment, but also cooling water, being an adjacent market to that, and just water management of these installations that are going to be seeing a lot of growth. So that one stood out. Just sort of going further out on the value chain, addressing an adjacent market.
ABB and roadtork. I mean, that just happened about a week ago for us. I think this is interesting because it's taking a valve manufacturer and adding it into this huge portfolio of automation.
And so it's taking some of the nuts and bolts that are going to treatment plants around on the networks and adding another sophisticated layer of, I would say automation, sensors, analytics software into a massive, massive industrial player, which is app, which is very strong in oil and gas. Some of the products that Brotor has as well are definitely operating on oil and gas pipelines. So, you know, road torque is listed. So it's a pretty big deal to be folded into this huge entity, which I have to say I don't think we saw that coming. We've seen some other deals for smaller players like valve manufacturers, but this is a pretty big deal.
[00:13:29] Speaker A: Yeah, definitely didn't expect that one. And I like the Ferguson one one because We've done a decent amount of work and analysis on distribution companies.
You know, they are a key channel to market for hardware and equipment vendors. But it's interesting to see what Ferguson and Core and Main and Vesco and others are doing within the space. I mean, I've mentioned this before on this podcast and also with guests and talking about this, but we talk about gatekeepers in the water industry.
We've always sort of leaned on the engineers or noted engineers play a heavily influential role in decisions that happen at the industrial facility or at the municipal utility and what, you know, not only the designs but also what procure, what equipment systems are added. The Ferguson one is interesting. Right. One, they seem to be expanding more into industrial, so they're expanding their footprint a bit more through flow works. But it's just another example of these distribution companies expanding capabilities. Not just Muni, but also industrial. But then they are also providing aftermarket services, which is I think one of the flow works strong point. So they're doing operations and maintenance.
So it's just another level of added to the relationship with the customers that gives distribution companies more control.
[00:14:54] Speaker B: Yeah, and I think it is kind of the name of the game of trying to access those higher margin businesses that go beyond some of the hardware distribution, which I mean across the board you see, is prone to more commoditization over time, whether it's loggers or valves or you know, software, some, some types of software now. So getting into more of a services business, getting into a more recurring type relationship with the customers is, is huge. And I think a lot of these different companies that we look at are trying to figure that out.
[00:15:30] Speaker A: So changing gears a little bit here. So we've been seeing for months that private equity exits are coming, right? I think we've been talking about it because of the buildup of assets and maybe uncertainty in the market. Has the market reached a tipping point? What are we seeing in terms of private equity? What's your experience?
[00:15:49] Speaker B: Well, I mean my experience subjectively has been there's a lot of movement there. There is a lot of companies that. There are a lot of companies in the, in PE portfolios. There are a lot of PE companies that are getting more and more into creating an investment them around water, wastewater, trying to find an angle there. So it seems to be a pretty active market. You can argue. And we've heard a lot of arguments about how PE money maybe doesn't really belong in the water sector because the timelines are a lot longer. It's an industry which is much More conservative when it comes to adopting new technology.
Either way though, there is a need for capital for expanding operations, for, for scaling up and PEs have gone in with different, you know, bolt on strategies. And, and so, you know, I think the numbers, you had them here, 410 platforms versus 175 exits.
What did you mean by that? Actually Reese, look at this.
[00:16:52] Speaker A: Yeah, those are in my notes to you. I think the, one of the things we did. Let's step back, you know, so why this came to be just a little behind the curtain of what happens at Bluefield? We've had a number of clients, they're coming to us as you know, Keith, to acquire companies that are looking for assets like who's out there, who's, who's available for sale. What should we be thinking about? What should our strategy be? I mean, covers the whole, the M and A questions cover the spectrum.
But in one instance, relatively recently, I'd say it last year, it kind of, maybe it was the spark that got things going. But the question was what do PE firms own in the water sector? Can you give us a list of the firms? What do they own? When did they buy them? Because one of the big questions is not only what do they own, but how long have they owned them. Right? I mean there's the general rule of thumb for pe, depending on where you, what sector, but rule of thumb, three to five years, you know, the, the investors are looking for some sort of payback return. And how's that going to be? The market has gone wonky over the past couple of years. We've seen a number of continuation funds and you know, there's been high interest rates and trying to figure out what to do. But in doing so we have a running list that gets updated about once a month looking at PE activity in the water sector. And so currently we have about 410 companies in the water sector owned by private equity firms.
Then we look back and this is going back to 2015 or so.
We've tracked about 175 exits. Sometimes those exits are exits to strategics which we track. We also track which ones are going to other PE funds or firms.
So it's interesting to see that what is happening and it's hard to visualize on a podcast, but I can tell you that the gap between actively owned positions and exits is widening. Right.
I'm not a fool. That's partly, I think could be partly attributed to our data collection. We're getting better, capturing more deals that we didn't hear about even Smaller deals. But I think there is a reality. Right where to your point, it does take a while to get out of some of these deals and particularly in the environment over the past couple years, I think there was even, I don't know if it was Wall Street Journal or Financial Times. Yesterday I'd mentioned to you and the team that there are a number of private equity, there's sort of zombie funds. Right. There are some of these funds held by private equity firms, not specific to water, but they can't get out of them. Right. They're sort of just maintaining them, trying to figure out what to do. And there are a number of reasons for that. So how many of those exist in water?
Certainly there's some, but there are some successful PE firms. I mean the KK XPV is a good example, right. They're a pure play focused on water. That Axios deal was certainly a big one for them. They're partnered with kkr, but kkr, they've sold out. They'll move through. EQT is another player that we've seen obviously out of Sweden.
And then there are a host of others. You know, Science Capital is one, Ridgewood's another one.
Some of them are active in utilities, some of them are active in treatment and other solutions.
[00:20:22] Speaker B: Yeah, I mean I think fundamentally it's just the speed to scale, you know, buying a B2C software as a service company which is going to be 10 times its size in three years. You just don't really see that very often.
And that's a software example in water. But we, and we've looked at all kinds of stuff across the spectrum, right. We've looked at treatment technology, we've looked at O and M services companies, we've looked at chemical distributors.
When I say looked at, we've been on both sides of the table, both as sell side due diligence, but also been doing a lot of commercial due diligence lately. And there is that recurring theme of is this a platform or is this just kind of a point solution that we're buying. This is like a one off deal. It's going to be really hard to scale up. And I think as the industry evolves, there are things that happen in that three to five year hold period that make it easier or harder.
One of those is if the company's a water pure play, you're obviously at greater risk than if they're doing some stuff in power or you know, in oil and gas and that helps kind of hedge the slower adoption rate.
I think the other thing is a lot of these businesses that we've looked at, particularly the smaller ones, they're very geographically dependent.
So I'm talking about companies that we've looked at that are in the uk and the UK is a very unique environment with a privatized municipal water sector which moves in these cycles. And, and when companies build up around that, they find that when they move out of the UK it's much more difficult.
Or we're talking about companies that sell something that needs to be transported within a certain radius, which makes it really hard unless you start adding up geographic footprint and building out the footprint. Right. So whether it's pipe suppliers or different types of distributors, where it all hinges around the geography. Right.
And so, you know, there are some built in features that make it hard to scale, but at the same time, and why it's attractive is that we're all realizing that water is a scarce resource and it's also hyper fragmented, meaning there are many, many companies out there to be looked at. And Reese, you know, I mean, we've built so many databases around O and M providers or different types of manufacturers or distributors. It's just, you know, the list goes on and on of potential targets. The question is always in the back of your head, okay, how do we build this into something that's not somewhere between mom and pop or a gigantic conglomerate? And that's where you always have that kind of barbell description of what the market looks like.
[00:23:14] Speaker A: Yeah, scalability is definitely the hardest thing. Right. Do you have to go door to door or are there platforms out there for private equity firms to buy like you said? I think you noted a couple O and M services is interesting. Distribution is another one. Both of those are highly fragmented. Even when you look at what I think is our robust data sets, when you look at it relative to the rest of the market, it's like, wow, right? There's the addressable market for rollup potentially is huge. Not saying it's easy and maybe that's the bigger challenge.
So I'm going to throw this out there. I mean, hopefully listeners aren't tired of me talking about it, but I'm.
It legitimately concerns me. And so most water professionals, they're probably not waking up. At least when they're thinking about water, they're not thinking about Iran and geopolitics.
You're in Europe, I'm in the US So our perspectives are a little bit different. Right. What the pain is or what it could be, should they be worried about it? What do you think?
[00:24:16] Speaker B: I mean In Europe, definitely. I mean, there's an ongoing, very intense debate around how to transition away from fossil fuels as quickly as possible, I would say, because most countries in the eu, particularly in southern Europe, I mean, heavily reliant on LNG imports at this point. Or, you know, if you think about Germany and what their energy model was there, Europe has definitely reached a crossroads in terms of its energy supply.
And they haven't backed away from the renewable energy agenda. They haven't backed away, let's say, from this idea of hydrogen, green hydrogen. But that's going to take several decades to build out, as I think we, most people agree.
So in the interim, you're really trying to hedge your bets with alternative suppliers on the supply side and on the demand side, when it comes to the water sector, you need all that energy to run your treatment plants and your pump stations, et cetera, that you need to become as efficient as possible.
And so there is, I would say, definitely a lot of emphasis now, both on the industrial and on the municipal side, of trying to optimize how you're, you're using, how you're using energy, when you're using it, are you able to, you know, offset some of it with renewables, although that often does not cover everything that you need.
You know, I don't, I don't, I'm not having elevator conversations every day. Well, what's going on in the Strait of Hormuz over here in Spain? I mean, everybody generally is just gobsmacked and angry about the whole situation, particularly in Spain.
But, you know, there's also the, the issue of what's going on in these Gulf states as well. Right. That are highly dependent on diesel, for instance, and are those, a lot of those assets are at risk now.
And is there even more of a push to build in resilience to all kinds of factors? War being won now because climate change is already of a concern, but they're starting to think maybe things need to be more decentralized than they have been in the last couple of decades.
[00:26:39] Speaker A: Yeah, I think the world doesn't make sense to me. And I know in the U.S. so, I mean, I think when you look at it from this perspective. Right.
No one's really. The water sector is, I think, legitimately concerned. I think I said from the outset, at least in my notes, that 32 of the 50 publicly traded water companies that we look at every quarter, they're citing Middle east conflict as a risk. But then what is that risk? Right? I mean, in the US Diesel prices are through the roof. If you go out west, we're looking at 6, 650 a gallon, which, you know, it's like, what's, that's like 40, 50% higher than where it was, you know, five months ago. No one was expecting that oil prices because the memorandum of understanding is off. So we're, we're basically the war that was supposed to be paused as one, never ended. But we're moving forward.
So I'm really concerned about supply chains and the cost and I think a number, you know, back to the private equity question. You know, these utilities and maybe some industries or companies, they're going to get squeezed because of inflation.
So that presents a potential opportunity going forward and the need for capital.
Right. And if private equity has capital, maybe they can exercise it. But I'm getting a little bit out over my skis here, but I think the decile piece is another one. I mean, now we're talking about blowing up bridges and power plants. Well, what does that mean for drinking water in the Middle East? So, you know, drinking water in Kuwait, I think almost 90% is desalinated water, 70% in Saudi Arabia.
It's pretty significant. And that's a little horrifying.
And I don't have, you know, the problem is us. Right. You know, is it? I say that as an American. But in any case, the silver lining though would be that produced water reuse for oil and gas is like a, it's a, almost a $9 billion a year opportunity according to our forecast through 2036. So we're seeing it hasn't ramped up as much. You know, it's not like the old wildcatting days of, you know, 2015 when, you know, prices, oil prices went up, drilling went up. I think the market overall has remained fairly stable and moderate. It's governing itself really is a better way to put it in the sense that they've got debt to pay back. They built up over the years, but they're not going to, they're not going to sort of ride the bull. They're going to do what they got to do. And the US wants to be a big exporter, right. I mean, I think, you know, we're sending it to Europe now and Asia as well. So no one's immune from these shocks. So it'll be interesting. Yeah, and the companies themselves, I mean, we've seen companies like Ecolab and dupont, they've added conflict related surcharges to their, to their products and offerings. So there's no free lunch here.
[00:29:51] Speaker B: Yeah, yeah, no I think people tend to overlook the other, whether it's certain chemicals or fertilizer, other things that are going through that straight. And that's where you're really starting to see the, the ripple effect. It's not, it's not just oil and gas.
[00:30:04] Speaker A: Yeah. And I don't want to be a naysayer, but when we talk internally about the impact of things like this Europe, you know, in the case of Bluefield's business. Right. I mean, Europe is a strong pillar to our business and we have customers there and yeah. That I don't think people, Americans in particular don't understand the, the difference in gas and oil prices in Europe versus the U.S. i mean, in the U.S. we're swimming in it.
[00:30:35] Speaker B: Yeah. I mean that is that huge thing, you know, the industrial water insight service that we have and how we cover us and Europe is vastly different, obviously. And a lot of that is because of that.
The upstream oil and gas, the fracking water reuse, I mean, it is a huge opportunity. I mean, reuse in general, I would say in the US is such a much mature industry than it is in Europe, particularly for industrial. Right. I mean most of the reuse happening over here in Europe right now, like municipal wastewater reuse, that's all really for agriculture or irrigating city parks and that types of usage, much less for industrial.
And there's definitely something that particularly in southern Europe, we have to learn from these purple pipe networks that they've built out in the U.S. but again, you don't have a huge fracking industry which is making use of produced water.
It's very unique to the US and a testament to how the country has built out its energy independence or has prioritized it, even though obviously there's an environmental cost to that.
[00:31:49] Speaker A: Well, speaking of fracking and things that there was once upon a time where fracking was definitely the boogeyman of the US and that is AI and data centers. Right. So sort of changing gears. The new, the, the modern day fracking is AI and data centers where the public is extremely worried about its water usage. Is it using too much water and it feel, I don't know if the tide is turning, which, and maybe there's some Europe perspective as well. Has the conversation changed? What's the, what's your position on data centers? Because I will say it seems to be the topic du jour, whether it be in the news among our clients and in our research itself.
[00:32:37] Speaker B: Yeah, I mean, I think the public sentiment over here, whether it's UK or Spain or France and Germany, the public is definitely starting to put more of an outcry about. They just want more transparency around the impact of these facilities.
They want to understand how the planning and the whole process is being regulated.
And that's where it seems these technologies, hyperscaling firms have come in and very quickly signed NDAs, tried to get a spot in the transmission queue once they've secured land, and then they sort out the water issues later.
And then it's come out in a few isolated cases that they're using more water than they said they were.
So there's that. And those stories are trickling out.
I think that definitely some of the large tech companies have been responding to it by at least trying to message it more directly that they're not going to be signing as many NDAs or they are offsetting their water use with other types of projects.
And they're also trying to highlight a lot of the water infrastructure development that they are supporting, like leak reduction on a municipal water network, or try to find ways to reduce untreated discharges or whatever offset project they're trying to support.
But again, I think a lot of the concern is not so much understanding it, but just feeling like they're in the dark.
And so there's still a ways to go there. I mean, we just put out a really solid.
My colleague Zane Mobin, she just put out a really solid report on the Europe data center industry.
And that was one of the key themes like this is how these things are being planned. It seems to be moving very fast.
But let's bring some informed discussion here, particularly around the water footprint, because probably way more than two thirds of the water footprint of a data center is actually where it's getting its power from rather than on site.
And that's kind of a complex thing to talk about because, you know, you're looking at the data center and say, hey, that probably uses a lot of water. It's like, actually maybe it's not, but all that electricity that's getting piped into it that is using water. And we need to understand more about that.
[00:35:06] Speaker A: Yeah, and I think back to your earlier point, Europe in itself, back to the energy discussion, is going through its own transition, whether it be Germany getting rid of nuclear and coal.
How is, you know, Spain obviously has a lot of renewables. How is the energy mix, you know, how is it changing? And the same could be said for the U.S. even with the current administration. I mean, they're coal plants that are planned to be decommissioned. So they're the big Water users, they're old, they're inefficient.
So the way I see it is, okay, fine, there's this growing demand. So water usage, at least in the US has been trending down for a decade, maybe two decades. And that has happened as the market has moved towards more efficient water, efficient natural gas. That's expected.
We have an abundance of natural gas and moving in that direction. Renewables have also come online. Solar continues to be the fastest growing power technology in the U.S. if not, I don't know, maybe even the world at this point. You and I used to work in this space. So I'm kind of brings back memories.
So the, the question is, where's the opportunity or how is that opportunity changing? Like, what's the chemical demand in the power sector? How's that changing? Whether it be in the US In Europe? I think the other, you know. So the question with Zineb and Amber on the Last podcast at 147, we. The question was, is the water issue for data centers fake? Right. And part yes and no. Right. I think on site, it's not as big of a deal. Like you said, a third of the water or less than that is, is on site. And that market's changing as new data centers are being developed. They're using different types of cooling, liquid cooling and so on.
So they're becoming more efficient. I think they're being forced to, or compelled to transparency an issue.
I think that the public is using water as the tool to fight back against a number of other things. I think people are angry about their electricity prices because they have been rising in some cases.
[00:37:23] Speaker B: Yeah, look at Maine.
[00:37:25] Speaker A: Exactly. I mean, in New England, energy prices are through the roof in general, but so electricity prices are through the roof and it may be in hot spots. So you could nationalize the trend or not, but that's an issue.
They're. And they read about it in the papers. They're concerned about AI. Right. They're concerned about losing their jobs. They're concerned about its impact on society. They're concerned about, you know, big tech.
[00:37:52] Speaker B: How does it or does it not contribute to the tax base and generate jobs? Yeah.
[00:37:57] Speaker A: Does it generate jobs? And there are all these people making a lot of money, and I'm not.
So people are just angry.
[00:38:05] Speaker B: It's a lightning rod, you're right.
[00:38:06] Speaker A: Yeah. And so I think water is a, is a, is a good tool to kind of stick in front of a politician and say, we're getting screwed here. And by the way, we can't live without the water, and we can't pay more for water. So what does that mean? And I do think there is, you know, fundamentally, the tech sector moves so fast and the demands are so great, you feel it. And it's certainly a bubble of some kind, but municipalities in the water sector doesn't move that fast.
And so there is this, you know, while they may be running in parallel, it is definitely the tortoise and the hare as far as the, the pace of development goes.
[00:38:49] Speaker B: Yeah, yeah, yeah. And, but again, I mean, look, I, you know, obviously we're trying to be as objective as we can with this. I mean, we've, we've worked with some of these companies on different issues.
There's a lot of innovation and good that can happen from these companies getting involved and bringing their expertise to optimizing use. And obviously, I think the thing is, when we think we've sort of put data centers in this industrial space, they weigh heavily on the municipal network. So a lot of it is really, how do the municipalities respond to it in a way that is going to be kind of future proof. And I think that's what nobody really knows right now. These things seem to be growing so fast. There's no shortage of demand for compute and where that's going. And that gets into the bigger debate about are we in some sort of bubble right now that infrastructure bottlenecks are going to bring into reality.
[00:39:54] Speaker A: And I don't think that's in the municipal utilities DNA. I don't think it's there in their DNA. I think they're there to serve, right? They're in. The world has changed, right? People, industry, companies are more mobile than they ever have been. So there's greater risk than there was 50, 75, 100 years ago where you built your municipal utility, you built your drinking water treatment plants, you built your wastewater treatment plant, and you had your company, Procter and Gamble or Frito La or whomever they roll in, or Heinz Ketchup. They're relying on you.
It builds up and they don't go anywhere. But now, in today's world, particularly probably over the last 20 to 30 years, right, where things have moved to Asia, they've moved to other markets because of supply, more dynamic supply chains.
But I don't know if that's in. Like I said, with few exceptions, Loudoun county and Virginia is one exception. You know, they stand out uniquely as a utility that has been able to manage and work with data center companies. So it's, I don't know, it's pretty interesting. It's sort of, you step back sort of thinking philosophically about all of this and you know, it's not black and white so.
Well, if you had to invest behind one water theme over the next five years, not a company, not a market, which would you choose?
[00:41:20] Speaker B: Not a company, not a market, but a theme.
I think probably water quality.
Water quality. Because I think we're, I mean, you know, this is a long term theme, but it's just there's so much stuff that we're finding in the water. I'm not just talking about pfas, I'm talking about different micropollutants and not just water quality for drinking, but also for industrial processes.
Water in a way is like it is a thermometer or it's the, it's an indicator of an environment or if something else is healthy.
And whether it's, you know, the RO system inside your bottling plant or it's the water going into your data center or it's the water coming out of a wastewater treatment plant and there's so much technology out there, it's still a kind of a fragmented market.
There is a lot to be said for optimizing that regulation. I don't think has really caught up for it with it yet. Water quality is still like, you have to like file sometimes in paper, your laboratory into your laboratory information management system.
So I don't know if you saw this coming, but I think water quality is an interesting theme.
[00:42:43] Speaker A: Yeah. And I think we already mentioned them. There are a couple companies that are focused on that. It's not going away. Right. It's kind of one of those things like is my. And it's as a consumer of water like we all are, it's like you want to know that your water is drinkable and safe. Right. Even if the EPA is not monitoring it. And in the case of the U.S.
you know what else is out there? Right? There are. There's PFAs in there that it's not being monitored for now. Maybe it should be. Yeah, I think it's the, the opportunity is. Goes on in perpetuity. I think like I said earlier, it's scaling, you know, scaling the opportunity. Whether that's through on site treatment, whether it's centralized or decentralized mobile treatment.
That's another area at least as a business model or puts that we're interested in as well. So. No, I like it. All right, one last question for you. What's the biggest risk that CEOs are underestimating right now?
[00:43:42] Speaker B: Biggest risk that CEOs are underestimating. That's my repeating the question to stall for time while I think of the answer, because I don't have one prepared.
I would probably say a lot of it is probably these more upstream political risks that are really hard to factor into your business plan. And I'm talking about things like what's happened to the EPA at the federal level in the US or what may or may happen with implementation of water treatment directives and how that's how slowly that is moving over here in Europe, the pressure for industries to have to disclose. So I think. I think it's probably political risk that has implications for the regulatory drivers of the industry.
And that may sound pretty vague because I didn't want to tie it to a specific geography or area of the industry. But that is kind of the X factor in my mind, and it's way upstream of a lot of other stuff that we end up having to deal with.
So I think from my perspective, that is probably the biggest challenge in terms of trying to diversify your business around these different risk scenarios.
[00:45:10] Speaker A: Yeah, I'd say that's pretty good.
I'm not sure how I would have answered it, but I think that's a good one. And I agree with you 100%. We've talked about Washington. I think your point about Europe, I think people just want certainty or some security about that we're on this path and you deviate a little because of different things. But it feels like we're swinging like left to right, like drunken sailors hurtling down the road in a car headed towards a cliff where they're with blindfolds on.
[00:45:40] Speaker B: Yeah. And I mean, you know, in some ways it's crazy because you think, okay, you know what, the water is such a hyper local business. You shouldn't have to care about that. Right. It's just all about supply and demand and, you know, resource availability in that river basin or what have you. But I think what we're realizing with the amount of geopolitical risk out there is that, you know, there is this ripple effect that, okay, maybe I. I do treat my water this way in my town, but I don't have to anymore. I do or don't have to report more of, you know, contaminants in my water or I will or won't be paying 10 times more for chlorine treatment or whatever I'm using for my treatment technology. So, yeah, I think I'm making kind of a blanket statement here about political risk impacting regulation.
[00:46:36] Speaker A: I think it's real. I Think you're right on. And we could talk about the ins and outs of it forever and be depressed and I'm sorry I'm not in Spain. I was there a couple weeks ago, so. Should have talked about it then. We could have had it over. Talked about it over a drink, but. All right, well, Keith, that's my last question for you.
It's like I said, dog days of summer. That means Europe is. If it hasn't shut down, it's about to shut down. Including yourself. I know you got some time off coming.
[00:47:05] Speaker B: Yeah, looking forward to it.
[00:47:07] Speaker A: Hopefully the next time I get you on won't be December, which is highly likely, but maybe we'll talk before then.
[00:47:13] Speaker B: All right, well, we'll see how this, this episode does before you make that decision.
[00:47:17] Speaker A: All right, for all your listeners out there, we need lots of likes and lots of five stars and comments, nothing less.
So. All right, man. Thanks, man. We'll talk soon.
[00:47:29] Speaker B: All right, thank you, Rhys.
[00:47:30] Speaker A: Cheers.
All right, so that was great to have Keith on. I don't know, we're. We just get on and we. We're riffing, so apologies if we meandered a bit through the water sector, but that's sort of kind of conversation we have over dinner, like we did a couple weeks ago in Spain.
So with that being said, let's move on. So, as always, new format. At the end of the episode, I talk to you about what caught my eye this past week. Well, it's been a little bit ongoing over the course of the last six to 12 months, but Tim's Water, we're back in the UK. Tim's Water's lenders are offering the UK government a golden share quote unquote, golden share, giving ministers, that is government ministers, veto power over key decisions for the water utility. This is seems to be a last attempt at avoiding nationalization.
Why is that important? Because new prime minister coming into Downing street. That would be Burnham. He's cast some further doubt over the future of Thames Water. People are upset. This is a utility serving 16 million people carrying about 17 billion pounds, English pounds in debt.
And they continue to talk about it potentially running out of cash. I know they've got some debtors or lenders that are backstopping them for now, but what you're seeing is private capital stepping in. But the government may get a seat at the table, which is a little bit different than what was planned under Margaret Thatcher when this happened during the 80s. So how that unfolds, well, let's just talk about why it matters and that's what I'm thinking about first. It's maybe a step towards a hybrid model, not fully privatized, not fully public. So like I said, that's unique and definitely a shift given the political wins and public pushback of the utility that has been in violation for a number of different things, including wastewater discharges.
Secondly, I think to Keith's point earlier, political risk is now real and immediate. Nationalization.
It was. I think we thought of it as being theoretical because of the costs and the implications over time.
You know, a couple of years ago when we were looking closely at the UK market for some analysis regarding Thames water, but it seems to be on the table. So it'll be interesting to see how this unfolds in terms of the role of government. So, you know, the big takeaway for me is, you know, and why am I talking about this?
You may realize this many of our listeners are US based.
1. That's where I am. It's a lot of what we talk about.
We are speaking in English, but as I've said before, what happens globally in today's connected water market influences what happens locally.
I've said this to the national association of Water Companies. I've said it to clients, you know, you know, for investor and utilities in the U.S. and when we talk about consolidation, things like this that even happen in the UK or Cochabamba, Bolivia or Manila, if those privatizations don't go well, they are used as fodder for the media and the public in, in fighting back. It's not unlike data centers, what Keith and I just talked about. So like I said, what happens globally influences what happens locally in the water sector.
And this is a preview of how stressed water utilities may be and may have to be restructured going forward, not just in the UK, but even beyond it. Are there going to be more hybridized models?
I'm not so sure of that, but just food for thought.
So with all that being said, long conversation with Keith Hayes.
That's it for episode 148. And I'm going to emphasize that there's no better time to be in the water business.
And that is partly because.
Put out. Many thanks to Mike Gaylor, Ryan Sullivan, Steph Aldott, Kelly Talbott and all the Bluefield team of analysts and my partners in crime to jump on these podcasts to help out. None of this happens without them. They know what to say, they know how to say it and how to get the information onto your devices and into your cars and wherever you may be.
As always, if you've got topics you want us to dig into, reach out to us@water expertsluefieldresearch.com this is the Future of Water Podcast from Bluefield Research.
Until we talk again, be well, be safe, and take care.
Of j.
