Auctions will be municipal and regional in scope, with estimated investments of BRL 72.4 billion

By Luiz Guilherme Gerbelli and Renée Pereira

In 2025, sanitation companies are expected to compete for 23 projects. The auctions will be municipal and regional in scope, with estimated investments of BRL 72.4 billion. The survey is by Abcon Sindcon, the association of private companies. According to the association, the largest projects by investment are in Pernambuco (BRL 24.799 billion) and Pará (BRL 18.5 billion). See the full list at the end of the article.

“There is a large set of things (about to happen),” says Rogério Tavares, vice-president of institutional relations at Aegea. “BNDES is the main player in this process, because the main structuring models that have already taken place were developed there. It has a large portfolio of processes under way.”

Aegea won the last sanitation auction held in the country, at the end of last month. The company won the concession to serve all the cities of Piauí, excluding the capital Teresina and Landri Sales. The concession lasts 35 years, with planned investment of BRL 8.6 billion. With this auction, 30% of Brazil’s municipalities now have their water and sewage services transferred to the private sector.

In an auction held at B3, Aegea won the country’s latest sanitation auction. Photo: Cauê Diniz/B3/Disclosure. Aegea has been one of the most competitive companies in the race for sanitation services in the country. It won blocks 1 and 4 of the Rio de Janeiro State Water and Sewage Company (Cedae) in 2021 and acquired Companhia Riograndense de Saneamento (Corsan) at the end of 2022.

The company’s shareholders are the Equipav group, Singapore’s sovereign wealth fund (GIC) and Itaúsa. It currently serves more than 31 million people in more than 500 cities in 15 Brazilian states. After winning Cedae in 2021, it became the largest private company in the sector in terms of population served.

In the view of lawyer Rodrigo de Pinho Bertoccelli, president of the Center for Studies on Integrity and Development (Ceid), the 2025 auctions will attract investors, but the main bidders are likely to be those already active in the sector who took part in recent auctions. “Accumulated experience and existing infrastructure give these players a significant advantage over new entrants.”

Bertoccelli says, however, that in smaller markets, such as municipal tenders, new companies are teaming up with others “holding technical track records”, that is, with operational experience, to form consortia and take part in the auctions. He expects new partnerships to emerge next year to raise funds and devise innovative strategies for large investments.

“In terms of financing, equity is strategic for paying the concession fees, while the ability to structure financing is essential to the success of these projects. In a scenario of rising interest rates, with alternatives such as debentures and development banks, among others, a financial partner becomes even more central to these projects.”

In addition, he adds, new investment funds have shown interest in the sanitation sector, which may further diversify the competitive landscape. These funds can bring new resources and practices, increasing the capacity to finance and implement projects.

The modernization of the sanitation sector’s rules has taken companies such as Aegea, Iguá Saneamento and BRK to a new level. But they have recently gained competitors. Companies that had never operated in the sector have become interested in the projects, as is the case of energy company Equatorial. The company acquired 15% of Sabesp, Brazil’s largest sanitation company, for BRL 6.9 billion. The transaction is part of the privatization process of the São Paulo state company.

Other names, such as the Spanish companies Acciona and Sacyr and asset manager Pátria, have also been present in recent auctions. “Several companies want to enter the sector. After all, meeting the universal service targets will require investments of more than BRL 700 billion. In my view, given the shortfalls in the sector, this amount exceeds BRL 1 trillion,” says Renato Sucupira, partner at BF Capital.

Originally published by Estadão (in Portuguese)