Brazil sanitation player Aegea gets US$3.6bn financing from BNDES

The largest private sector sanitation firm in Brazil, Aegea Saneamento e Participações, obtained 19.3bn reais (US$3.63bn) in financing from federal development bank BNDES, highlighting the growing importance of the country’s sanitation sector.

"One of the sectors that is likely to generate most business in 2023 for project finance players is sanitation, which has undergone a major transformation in Brazil and generated a lot of operations, and we are currently very focused on this sector," Daniel O'Czerny, director of global infrastructure finance for Latin America at Citi, told BNamericas.

The financing that Aegea obtained will help it cover funding needs that amount to 25.5bn reais for the coming years, after it assumed two major concessions in Rio de Janeiro state, BNDES said in a statement.

Brazil’s sanitation sector has seen a major increase in investments after a regulatory change in mid-2020 opened up more room for private companies to participate in tenders for concession contracts.

During the concession period for its two contracts with Rio de Janeiro, which started in November last year, Aegea subsidiary Águas do Rio will invest 40bn reais, including the payment of 15bn in fees to the local authorities. 

The large investment requirements and fees involved in the contracts are attracting major banks to the sector. 

“In the sanitation area alone in 2023, there is a need to refinance operations worth at least 15bn reais. This amount refers to financing operations that sanitation companies used for the payment of fees to local governments during the concession auctions, and now this financing needs to be renewed," Andréia Bentim, project finance director at Bradesco BBI, Brazilian lender Bradesco's investment banking arm, told BNamericas.

Banks are also looking at the sanitation sector with more interest as state and municipal governments are generally in favor of today’s more pro-market regulatory framework, Edson Ogawa, head of the project finance area at Banco Santander Brasil, told BNamericas.