Four blocks in the region are expected to reach the market by the end of next year

Following the auction of water and sewage concessions for the Maceió (AL) metropolitan region, which raised BRL 2 billion, the Brazilian Development Bank (BNDES) has four more sanitation projects in the Northeast scheduled to reach the market between the fourth quarter of this year and the last quarter of 2022. The schedule includes tenders for concessions in Paraíba and two more blocks of municipalities in Alagoas, as well as a Public-Private Partnership in Ceará. Total estimated investment is BRL 15.5 billion, benefiting a population of 8.28 million.

The investments projected for the PPP for sewage collection and treatment services in 23 municipalities in Ceará alone total BRL 8.6 billion. The auction is expected to take place later this year, between October and December. Data from the National Sanitation Information System (SNIS) indicate that in 2019 just over a quarter of Ceará’s population was served by a sewage network.

The choice of a PPP instead of a tender for sewage collection and treatment service concessions took into account a technical analysis of sanitation indicators, including the population’s access to drinking water, explains Fábio Abrahão, BNDES Director of Infrastructure, Concessions and Public-Private Partnerships.

In Alagoas, two other blocks of municipalities — in addition to the 13 cities in the metropolitan region included in the September tender — are expected to have concessions auctioned in the first quarter of 2022, according to BNDES’s schedule. “The ‘demonstration effect’ is worth a lot. Everyone looks at Alagoas and says: ‘I want the same’”, Abrahão sums up. Together, the new blocks comprise 89 municipalities. The injection of funds is estimated at BRL 2.9 billion.

Giamundo Neto Advogados partner Luiz Felipe Graziano highlights the market’s positive perception of the participation of state-owned Sabesp (in a consortium with Iguá Saneamento) in the Alagoas auction. “It was a very interesting signal. It opened up prospects for new players”, says the attorney. Investment funds are seeking smaller private operators and even well-managed state companies to enter the competition for concessions, Graziano says.

The structuring of the process for private sector entry into water supply and sewage services is at an early stage in Paraíba, with the hiring of consultants. “We are finalizing the contract with BNDES, which will structure a project in this important area of the State’s infrastructure”, said the governor of Paraíba, João Azevêdo (Cidadania).

In a statement, he clarified that BNDES will work together with the Paraíba Water and Sewage Company (Cagepa) to present “the best alternative” for funding, in partnership with the private sector. The initial scope set for the project is 96 municipalities. Cagepa provides services in most (81.2%) of these cities. According to BNDES, 2.2 million inhabitants will benefit, equivalent to 55% of Paraíba’s population.

In the North region, the development bank is in talks with the governments of Rondônia and Roraima. In Rondônia, the contract model to be signed between BNDES and the State — the phase prior to structuring — is under discussion. Negotiations with Roraima are also at an early stage.

At least until the end of January, the Bahia government was expected to tender concessions of the Bahia Water and Sanitation Company (Embasa). According to Valor, the state government informed BNDES that it had withdrawn. By email, Bahia’s Department of Water Infrastructure and Sanitation (SIHS) said it is studying “the best contracting modality for the studies on concessions of basic sanitation services.”

Scheduled for the second quarter of this year, the auction in Acre was canceled because the State decided not to offer the full concession of its basic sanitation services.

Story by journalist Rodrigo Carro, of Valor Econômico, published on 03.09.2021 (in Portuguese).