H2O Innovation just bought back the first WaterHub: a sewer mining, water reuse plant on Emory University's campus in Atlanta, built by the team H2O later acquired, yet never owned by it. So why would a company that has sold more than a thousand water treatment systems start buying them back? Guillaume Clairet, COO of H2O Innovation, walks me through the deal.

He calls it BBUOO: Buy Back, Upgrade, Own, Operate. And it's a lesson in the economics of owning a water utility asset: who pays for the plant, who owns it, who runs it, and who gets the upside when it is upgraded.

H2O Innovation is a North American water treatment company that has sold more than a thousand systems and provides operations and maintenance to over 600. Since acquiring NextEra Distributed Water in October 2024, under Ember Infrastructure's backing, it also develops, owns and operates water reuse plants called WaterHubs on campuses across North America.

Guillaume Clairet is COO of H2O Innovation and leads its shift from selling water treatment systems to owning and operating them, from the NextEra Distributed Water acquisition to the first deployment of its $200 million blue loan.

🌶️ KEY SPICES 🌶️

🏛️ Who actually owned the Emory WaterHub for ten years (not Emory, not its developer, not yet H2O Innovation)
🚽 How sewer mining works: an 18-inch campus sewer line, up to 400,000 gallons a day, a moving bed biofilm reactor, a greenhouse and 4,400 feet of purple pipe
💰 The $200 million blue loan with a consortium including Scotiabank, and why Guillaume still says the team matters more than the capital
⚡ Buy a plant on Thursday, cash your first revenue on Friday: why a buyback beats the 18 months to three years of a greenfield water reuse project
🌱 Do the hydroponic gardens actually treat the water? Guillaume's honest answer
📈 Five buyback deals in active discussion, $20 to $150 million each, and the water investing returns he calls fair (nobody makes a 75% IRR)

🥜 IN A NUTSHELL 🥜

What does BBUOO mean?
Buy Back, Upgrade, Own, Operate: H2O Innovation buys a water plant it already knows, upgrades it, and runs it as the long-term owner.

What is sewer mining?
Sewer mining taps an existing sewer line and treats the wastewater on site into non-potable water, which at Emory feeds the steam plant, the chillers and a few dorm toilets.

Why does ownership matter in the economics of owning a water utility asset?
From 2015 on, the people who designed and ran the Emory plant were not the people who owned it, while an owner-operator can fund upgrades such as more purple pipe or an MBBR-to-MBR conversion, and share the gains with the customer.

Is buying back water plants a good water investing thesis?
Guillaume argues it is faster than greenfield, with revenue from the day after closing and simpler due diligence on systems H2O engineered or operated, as long as returns stay fair rather than squeezing the customer.

What's next for H2O Innovation?
Over the next 12 months, Guillaume expects new greenfield projects, new acquired plants and new technology acquisitions, after bestUV joined the portfolio in May.

#️⃣ Mentioned Links #️⃣

H2O Innovation - https://www.h2oinnovation.com
My December episode with Guillaume, 25 Years of Acquisitions Built This Water Tech Powerhouse - https://www.youtube.com/watch?v=LOvJK8BnOJo

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