Ten Minutes with Xylem CEO Matthew Pine on Water Use in the AI ​​Boom

ENR: What can you tell us about the partnership with Mexico and Monterrey, and do you hope to see more of these types of public-private agreements?

Pi: I would love to see more of these partnerships. We’ve partnered with Amazon to help you with your water management goals. sometimes, [the company] will make investments in the cities where [it doesn’t] even operate due to major [water] questions It is good business to help in terms of water management goals and to help communities overcome water scarcity.

In this case, we had done some work in Monterrey in the past, and 18 to 24 months ago, Mexico City was almost [out of] water, and they were transporting water to the neighborhoods. In addition to the drought, more than 50% of the water treated in Mexico City does not reach residents or industry, because [the city’s water system] it has major water leakage problems.

Amazon partnered with us and made an investment in Monterrey and Mexico City to implement our digital platform called Xylem Vue to help cities “sense” their networks and manage pressure, because managing pressure is the first thing you want to do to manage leaks. By putting our platform in place, managing the pressure and then helping to pinpoint where the leaks are, we [anticipate saving] 1.3 billion liters of water annually in a couple of different districts in Monterrey and Mexico City. We are also looking for other opportunities like this around the world to scale this type of approach. We need many more projects like this, but this is a good start.

Xylem is involved with the relatively new Water-AI Center of Excellence. Can you tell me a little bit about that? Why is the group important?

I was involved in [Water Environment Federation conference] WEFTEC last year to help get it started. I participated in a panel discussion with the EPA’s former head of water, Radhika Fox…and we had a conversation about the importance of artificial intelligence in shaping the future of the water sector. Xylem is in the process of joining this group. I think this group is important because you bring together different components that are in different parts of the value chain, whether it’s utilities or industry or technology providers like us, to have a conversation and help develop standards and best practices so that we can better address some of these big issues like water scarcity and water affordability.

I think the group is in its infancy, and over the next few months we will have a much firmer agenda than we think we can achieve together. But you know, I think these conversations are important to bring together the different stakeholders in the value chain, because if we don’t communicate, we’re not really going to be able to address some of the big challenges that are out there. I think Xylem will bring a unique point of view to the group, because we are uniquely positioned to play across the spectrum of water infrastructure, from water treatment to water movement to water metering and managing that infrastructure.

You mentioned the development of standards and best practices. Do you think that the water sector is still a bit closed at the moment?

I think we only come together to be able to collaborate, for example, on water reuse [will help]. The Water Reuse Association, with Amazon and others, has worked [push for] bipartisan legislation on reuse. We have received support in the US House of Representatives and now [it’s being introduced] in the Senate by Sen. Ben Ray Luján (DN.M.), and we are seeking a Republican co-sponsor. This is the kind of thing this coalition can achieve. Many times, the industry does not invest because of the returns [are slow in coming] or there are capital constraints. The legislation provides for a tax credit for water reuse.

How much of Xylem’s portfolio includes data centers and AI, and do you expect it to grow?

In the four-wall data center, it’s only 1% of our revenue. But what is a growing part of our business is what I would call the AI ​​ecosystem, and that’s outside the four walls of a data center, which is power generation, semiconductor chipmaking, and mining. Those three sectors have a big indirect connection to the data center, and so we’re working very closely on what I would call high-growth verticals, to help companies in those sectors manage their water more effectively.

Do you fear that, despite best efforts, the United States is ill-equipped to handle the demand?

I definitely think there is a real concern. Worldwide, 320 trillion liters of wastewater are produced each year, and we only use 6% of it. About half could be reused. so about 160 trillion liters of water can be economically reused, and we’re just not doing it.

We have these big problems, but I’m optimistic that this fourth industrial revolution called the New AI Economy could be a tipping point to help us transition to a more water-safe world. That’s my hope, that [AI-driven water demand] it gives us the attention we need to make the investments. The technologies already exist and the groups involved in the Water AI Center of Excellence are coming together to help with public-private partnerships, and [other ways] to work together, I am optimistic [we] it can focus on the solutions that exist to deal with the problems and eliminate them [water scarcity] and also build more resilience in existing communities around the world.

What’s next for Xylem overall? What are you most excited about moving forward?

There are many things that excite me. We’re in the middle of a transition—it’s kind of a three-act play, if you will. The first act is really about optimizing our operating model, [because if we] simplify Xylem, so we can simplify water, making it easier for us to serve customers and to commercialize our solutions. Second, through that simplification, building a growth engine and attacking opportunities, whether it’s water quality, PFAS, water scarcity and resilience, or helping to stop leaks to really build that growth engine in our company to address some of these issues. Third, we have an incredible balance sheet and are looking to continue to add technologies to our portfolio that can help us make the water industry more resilient.

In the second half of last year, we made about $250 million worth of acquisitions, and we have a lot more to come. Our goal is to deploy approximately $1 billion of M&A capital each year to help these technologies and companies scale their solutions globally.