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

Pine: I would love to see more of these partnerships. We’ve partnered with Amazon to help it with its water stewardship goals. Sometimes, [the company] will make investments in cities where [it doesn't] even operate because of major [water] issues. It's just good business to help in terms of water stewardship goals and helping communities with overcoming water scarcity. 

In this case, we’d done some work in Monterrey in the past, and 18 months to 24 months ago, Mexico City was almost [out of] water, and they were trucking water into neighborhoods. In addition to drought, over 50% of the water that is treated in Mexico City doesn't make it to residents or industry, because [the city’s water system] has massive water leak issues.

Amazon partnered with us, and made an investment in Monterrey and Mexico City for us to deploy our digital platform called Xylem Vue to help the cities "sensor up" their networks and manage pressure, because pressure management is the first thing you want to do to manage leaks. By putting in our platform, managing pressure and then helping point out 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're also looking at other opportunities like this around the world to scale this type of approach. We need much more of these types of projects, but this is a great 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 at [Water Environment Federation conference] WEFTEC last year to help kick that off. I participated in a panel discussion with the former head of water at EPA, Radhika Fox ... and we had a conversation on the importance of artificial intelligence in shaping the future of the water sector. Xylem is in the process of joining that group. I think that group is important because you bring different constituents that sit in different parts of the value chain together, whether that's utilities or industry or technology providers like ourselves, to have a conversation and help develop standards and best practices so we can best address some of these big issues like water scarcity and water affordability.

I think the group is in its infancy, and over the course of the coming months, we'll have a much firmer agenda of what we believe we can achieve together. But you know, I think these conversations are important to bring different stakeholders across the value chain together, because if we don't communicate, we can't really tackle some of the big challenges that are out there. I think Xylem will bring a unique point of view to the group, because we have the privileged position of playing across the whole water infrastructure spectrum, from treating water to moving water to measuring water to managing that infrastructure. 

You mentioned developing standards and best practices. Do you feel that currently, the water sector is still kind of siloed?

I think just having us come together to be able to collaborate, for example, on water reuse [will help]. The Water Reuse Association, with Amazon and others, has worked to [push for] bipartisan legislation on reuse. We've gotten support in the U.S. House of Representatives and now [it’s being introduced] in the Senate by Sen. Ben Ray Luján (D-N.M.), and we're looking to get a Republican co-sponsor. Those are the kind of things that this coalition can get behind. A lot of times, industry does not invest because the paybacks [are slow in coming] or there are capital constraints. The legislation would provide a tax credit for water reuse. 

How large a portion of Xylem’s portfolio involves data centers and AI, and do you expect that to grow?

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

Do you have any fears that, despite the best efforts, the United States is not going to be equipped to deal with the demand?

I definitely think there's a real concern. There's 320 trillion liters of wastewater produced globally a year, and we're only using 6% of it. Roughly half of that could be reused. so about 160 trillion liters of water can be economically reused, and we're just not doing it. 

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

What’s next for Xylem in general? What are you most excited about going forward?

There's lots of things I'm excited about. 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 able to commercialize our solutions. Second is, 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 within our company to tackle some of these problems. Thirdly, we have an incredible balance sheet, and we’re looking to continue to add to our portfolio technologies that can help us help make the water industry be more resilient. 

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