Tender for 3 PPPs is expected to attract major operators; BRK, Acciona and Aegea are among those analyzing the project, sources say
The sanitation auction market is expected to see its first major project of the year on March 25, with the tender for three sewage concessions in Goiás, with combined investments of BRL 6.2 billion. The tender, conducted by the state-owned company Saneago (Saneamento de Goiás), is expected to draw market interest, according to people following the project.
The three Public-Private Partnerships (PPPs) cover a total of 216 municipalities, divided into the East, West and Central micro-regions. Some cities were left out of the concessions, such as the state capital Goiânia and Anápolis, considered core for the state company, according to its president, Ricardo Soavinski.
Also excluded were locations where the state company had no contract and four municipalities that had already been sub-delegated to BRK Ambiental in 2013 — the company is considered a strong contender in the tender due to its presence in the state.
Brookfield’s sanitation operator is present in the cities of Aparecida de Goiânia, Trindade, Jataí and Rio Verde — the first two are in the Central block and the others in the West block. The group is expected to seek synergies with its existing operations, as it did in Pernambuco. At the end of last year, the company won, in a consortium with Acciona, a large contract in that state, where it already had an ongoing PPP.
Sources say that, in addition to BRK, Acciona, Aegea, Iguá and Sabesp are analyzing the tender.
Soavinski expects “a lot of competition” in the auction. In market consultations held about six months ago, at least 12 groups took part, including large operators, investment funds and banks interested in financing the contracts.
“The PPPs should speed up [investment in sewage], expand capacity and accelerate the works”
— Ricardo Soavinski
The winner will be the bidder offering the largest discount on the amounts Saneago will pay the concessionaires.
The tender notice includes a barrier clause to prevent a single group from winning all three PPPs, as has been done in other auctions, such as Sanepar’s in Paraná. Under the rule, a single company may only win more than one contract if that contract does not attract interest from other investors.
When contacted, BRK declined to comment. Acciona said in a statement that it “is constantly analyzing opportunities in the infrastructure sector that are aligned with its business strategy”. Aegea said that it “closely monitors new opportunities, evaluating tenders throughout the country” and that projects “are analyzed on a case-by-case basis”. Iguá said it “follows opportunities in the sector that are in synergy with its current portfolio” and that “future projects are evaluated within strategic planning”. Sabesp did not comment.
The Goiás PPPs aim to ensure universal sewage services by 2033, according to the state company’s president. “The projects are meant to speed things up. It is as if Saneago were contracting in blocks, which expands capacity and accelerates the works. On the other hand, the state company will have more capacity to do what remains to be done in water, which is much less than in sewage.”
In the past, the company had considered an initial public offering (IPO), but without losing state control — which, according to sources, deterred investors. According to the executive, this possibility was shelved due to a lack of market conditions.
PPPs are seen by the market as an attractive and well-established model, which also makes it easier to convince investors. “There is always the risk of the company defaulting, but the project provides for a guarantee system with accounts funded by Saneago’s receivables. It is a model without major innovations, which tends to attract market players,” said Lucas Sant’anna, partner at Machado Meyer.
Rodrigo Bertoccelli, partner at Giamundo Neto Advogados, also believes there will be interested bidders, but points to challenges, such as the level of tariffs in the state and the challenging geography of the Cerrado. “Goiás has a high water tariff compared with other regions of Brazil, so the tariff impact of the investments is challenging and there is the question of how these economic and financial risks are allocated,” he said.
The project has also received at least one challenge, from the municipality of Itumbiara (GO). The municipal government claimed that its inclusion in the Central PPP is unlawful and that it did not formally join the regional block. The request has already been rejected by the tender committee, but it indicates that challenges may arise.
According to Bertoccelli, the risk on this issue is low, since disputes of this kind, related to regionalization, have already been settled by the Federal Supreme Court (STF). However, he notes that there is a significant possibility of challenges regarding the governance of the micro-regions. “The Goiás State Court of Auditors itself has already pointed out gaps due to the lack of social control instruments [in governance]. But it is nothing the sector is not used to; I do not see any exceptional risk that would lead to a surprise,” he said.
