Energy Diversification

Water Infrastructure Attracts Big Spending But Filtration has the Momentum

You highlight all the right issues that will need to be addressed, or will address us over the coming years if we do not improve our water infrastructure.

However, several issues leap out:

1. We have been hearing about the need for water infrastructure spending in this country for years. Every disaster (blackouts, bridge collapse, etc) is positioned as the catalyst for infrastructure spending. Is it fair to say this will be a 10 - 20 year spending ramp, rather than a near term (1-3 year) event?

2. Given that most water systems are government run and financed (through user fees and bond issuance), a recession could reduce tax revenue and push back these improvements? (Note -- As you point out, this could benefit high-tech band aid solutions like INSU.)

3. With respect to China, this needs to be flushed out, so to speak. The Olympics are almost here, so we can't use Beijing as an argument for why the Chinese need to accelerate spending. China just reshuffled its infrastructure leadership. Do you have any specific insight on how exactly China's water upgrades may play out? (What about companies like Epure and Doosan, with a big presence in Asia?)

4. Your water surveys are very interesting to consider. Of course, given the years of infrastructure expectations that have not materialized, have you back-tested these surveys over the years to see if the respondents are good predictors? Or do they suffer from center-of-the-universe syndrome as many bureaucrats do?

Final comment: It will be useful to see how solar energy spending by governments plays out over the next year or two. Will government spending cutbacks reduce the enthusiasm for these subsidies? Or will the focus on infrastructure and energy needs keep them subsidizing solar power? I am not arguing for solar power; rather pointing to it as an indicator of how tough economic times could lead to *reduced* infrastructure spending.