Alagoas utility to issue US$380mn debentures to fund sanitation projects

Brazil’s regional development ministry has authorized water and sewerage concessionaire Águas do Sertão to raise 1.96bn reais (US$380mn) through an infrastructure debenture issue to fund sanitation projects in Alagoas state.

The bond issue has to be approved by the ministry as it involves tax exemptions for investors.

Águas do Sertão, formed by local infrastructure firm Conasa and engineering company Allonda Ambiental, last year won an auction held by the state government for the concession to provide water and sewerage services in certain municipalities, covering a total of 614,000 people. 

Under the 35-year concession contract, Águas do Sertão plans to invest a total 2.09bn reais, of which 1.96bn reais will be raised through the issuance of debentures and 135mn reais from the concessionaire's own funds, the regional development ministry said in a statement.

Of this amount, 286mn reais is earmarked for water supply projects, 595mn reais for sewerage projects and 1.21bn reais for payment of concession fees to the state government.

For the water supply projects, the consortium will invest in building 74 wells, 32.5km of pipelines, 55 water lifts, one water treatment station, 146 reservoirs, and 374km of distribution networks, among others.

To expand sewerage services, it will build 1,080km of collection networks, 150,000 connections, 102 lifts, 107km of discharge, collector and interceptor lines, 32 wastewater treatment stations and 195 septic tanks.

Infrastructure debentures have been the most important financing mechanism used by sanitation companies to fund projects.

Since 2019, the ministry has authorized 45 operations by multiple firms in the sector to raise a total of 40bn reais in debenture issues.

Pictured: Piaçabuçu in Alagoas state