The state government of Rio is betting on the interest of the main operators and private investors in the sanitation sector to end the year with another successful auction for concession of water and sewage services, next Wednesday, 29, on the B3. Since November, when the public notice for the concession of an area formed by neighborhoods in the west of the state capital and 20 other cities – currently served by the state-owned Cedae – was published, five companies have requested technical visits to evaluate the investment, informed the Rio government . The project will require R$4.7 billion in works.
As expected, the group of companies that carried out technical visits includes the main operators of water and sewage services in the country – Aegea, BRK, Iguá Saneamento and Águas do Brasil. In addition to them, the participation of the Japanese conglomerate Sumitomo in the list of interested parties drew attention.
THE state he was not able to contact Sumitomo representatives in the country until the end of this text. The Japanese conglomerate operates in several sectors – the headquarters of Sumitomo Chemical Latin America, a manufacturer of pesticides and additives for animal nutrition, is located in Brazil. In sanitation, the group invested in BRK, the sanitation operator controlled by Canadian infrastructure fund Brookfield. The Japanese corporation is not a direct shareholder of the operator, but invested US$ 250 million in the fund created by Brookfield, in 2017, to buy 70% of the shares of then Odebrecht Ambiental, giving rise to BRK.
When contacted, BRK confirmed that Sumitomo is a “co-investor” in the fund managed by Brookfield, but declined to comment on its interest in participating in the new auction for a concession in Rio. BRK already has a concession in the west of Rio, the Zona Oeste Mais Saneamento, which only collects and treats sewage in 22 districts. BRK owns half of the concessionaire. The other half belongs to the Águas do Brasil group.
The group Águas do Brasil also declined to comment on its interest in next week’s auction. In October, the company’s president, Claudio Abduche, told the Estadão/Broadcast that the concession project of the government of Rio de Janeiro would be a priority at the end of the year. A source accompanying the projects said, on condition of anonymity, that the group could participate in the auction “dragged” by BRK, since the concession area is the same where the two companies operate the sewage collection and treatment concession.
These services were granted in 2012 by the city government. The supply of treated water is under the responsibility of Cedae, which maintains a contract with Zona Oeste Mais Saneamento. The public notice for the concession of water distribution services in the region predicts that the future operator, chosen in next week’s auction, will succeed Cedae in this contract, in other words, it would make sense if the partners of Zona Oeste Mais Saneamento were to unify all services.
BRK and Águas do Brasil were left empty-handed in the first round of water and sewage concessions in Rio, auctioned in April, but at the time they opted to stay out of “block 3”, which gave rise to the new project that will be auctioned . The area of “block 3” was the only one, among the four offered in April, that was not interested. The project grew, after being reformulated by the state government and the National Bank for Economic and Social Development (BNDES), which structured the concessions. In the design auctioned in April, the block included six cities in the interior and the neighborhoods in the west side of the capital. There are now 20 municipalities in the interior, according to the concession notice.
From the beginning, the area of “block 3” was considered the least attractive. In addition to already having a concession for sewage services, the area includes several neighborhoods with lower purchasing power and irregular occupations. A characteristic of the region is the high number of households with social tariffs, said an executive with experience in the area.
Another characteristic of the west side of the capital is the action of militias in the favelas. After “block 3” ran out of interest, BNDES, sanitation companies and the state government have repeatedly stated that this did not account for the lack of proposals, but it is clear that militia action can be a bigger problem than that of drug trafficking gangs – which traditionally prevent the inspection of clandestine connections or collection actions. Investigations have already revealed that the militias have become more sophisticated in their activities, exploiting the cable internet to civil construction, with irregular sales of subdivisions and even the construction of buildings.
In addition, in the April auctions, “block 3” competed with areas known as the “fillet”, which include the neighborhoods with the highest purchasing power in Rio, with ready-made infrastructure in places with high population density, with certain and high income. The dispute for the three other blocks was fierce. Aegea and Iguá, the winners, agreed to disburse R$ 22.7 billion in grants – the fees paid to the granting authority – for the State of Rio and the municipalities.
After buying two blocks in Rio in April, Aegea became the largest private operator in the country, surpassing BRK. All at once, the company’s total customers jumped from 11.2 million to 20.6 million. In a statement, Aegea confirmed its presence at next week’s auction, “since it is interested in strengthening its presence in Rio de Janeiro.” A little more generic, without mentioning the auction in Rio, Iguá said, also in a note, that “it remains open and interested in ongoing or planned opportunities.”
For the Secretary of State for the Civil House of Rio, Nicola Miccione, the list of companies in the technical visits, with the presence of Sumitomo, is a sign that next week’s auction will attract investors. “We are confident. We think there will be competitiveness. We understand that the auction has become more attractive, with more municipalities”, said Miccione.
As in the April auctions, the new concession will be awarded to the company that offers the highest concession rate to the state government and the municipalities involved. The minimum amount is BRL 1.16 billion, but, given the expectation of competition, there may be a premium, as occurred in the first round – in the sum of the four blocks, the minimum grants were just over BRL 10 billion, compared to the R$ 22.7 billion collected in just three areas.
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