OPERATOR SERIES: Brazil's Aegea expanding its footprint

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Tuesday, March 14, 2017

Brazilian company Aegea, which manages water and sanitation services through concessionaires, is about to start work under two new municipal sewer concession contracts in the country worth a total of 2.38bn reais (US$700mn).

In November, the company won a 684mn-real tender launched by Espírito Santo state water utility Cesan. Based on the lowest price per m3 of treated sewage, Aegea won the contract with a bid of 1.16 reais, about 18.3% below the ceiling price of 1.42 reais per m3.

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The 30-year public-private partnership (PPP) involves the expansion, operation, and maintenance of the existing sewer system in the municipality of Vila Velha. Work includes laying 643km of wastewater pipelines and building and modernizing treatment plants and pumping stations.

The goal is to reach near-universal sewer service by the 10th year of the contract, increasing coverage to 98% from 56%. Vila Velha currently has 479,664 residents and its population could increase to around 600,000 by the end of the concession in 2045, according to Brazil's statistics agency IBGE.

Aegea subsidiary Pro Lagos in Rio de Janeiro (CREDIT: Pro Lagos).

Meanwhile, the company is battling for a 31-year PPP contract to achieve universal water and sewer service coverage in the metropolitan region of Piauí state capital Teresina, which requires 1.7bn reais in investment.

Although Aegea was deemed the winner of the concession in October, the awarding of the contract is being disputed by local waterworks company Aguas do Brasil which had also bid for it.

Based on the highest canon payment offered, Aguas do Brasil actually outbid Aegea with an offer of 182mn reais. But Aegea, which had offered 160mn reais, ended up winning the contract based on what was deemed to be a better technical proposal, something that did not sit well with Aguas do Brasil.

The firm has complained to the state's audit court and asked for the process to be put on hold. A decision should be announced shortly.

One of the goals of the concession is to achieve 90% sewer service coverage in the city by 2031 and 100% by 2047. Municipal potable water supply coverage was 98% in 2015 and sewage collection and treatment coverage was about 15%.


This year Aegea intends to continue influencing the market as it developed a PPP model – with technical support from PricewaterhouseCoopers – for a 1.85bn-real waterworks concession which should see a bid call by the end of June. To be launched by Rio Grande do Sul's water utility Corsan, the 35-year PPP involves providing and expanding sewage collection and treatment services in nine municipalities surrounding state capital Porto Alegre. A winner will be selected based on the lowest price offered

Aegea coverage area (CREDIT: Aegea).

2016 EARNINGS


Last year, the company's net profit fell 10.4% to 103mn reais, while net operating revenue rose 24.8% to 992mn reais and Ebitda increased 14.9% to 462mn reais. The drop in profit was influenced by an increase in operating costs and expenses, which rose 35% to 530mn.

As for billed water volume, it increased 9.5% to 223Mm3. While potable water volume rose 11.6% to 145Mm3, wastewater volume was up 5.7% to 74.2Mm3, according to a results statement.

Aegea, which is part of the Equipav Group, operates in 48 municipalities in 10 states. Of the company's subsidiaries, Águas Guariroba came in first in terms of gross revenue last year, accounting for 48% of the group's total. It was followed by Prolagos, Xingu, and Mirante.

Aguas Guariroba in Mato Grosso do Sul state capital Campo Grande (CREDIT: Aguas Guariroba).