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Brazil sanitation watch

Bnamericas Published: Friday, July 22, 2022
Brazil sanitation watch

The proliferation of sanitation projects in Brazil in recent quarters is now shifting towards the financing phase, as the sector continues to see significant numbers of projects and other movements, with a company privatization being one of the highlights.

The water and sanitation sector in Brazil has seen a raft of projects since the country's congress approved a new regulatory framework in 2020.

Under the new rules, utilities must provide full sanitation services in their operating areas by 2033 and local authorities must show that they have the financial capacity to achieve the goals of their sanitation plans.

CORSAN PRIVATIZATION

Just a few days after the Rio Grande do Sul state government suspended the process to privatize water utility Corsan via the sale of a majority stake in the firm in a share offering, the government is now intending to advance more aggressively with the move. 

"We were going to retain a minority stake in the company after the IPO, but now the decision will be to sell 100% of Corsan through an auction and this could take place before the end of this year," Artur Lemos Júnior, chief of staff of the Rio Grande do Sul government, told BNamericas.

"We're working on structuring this privatization right now," he added. 

The Corsan IPO was halted earlier this month because the state audit court demanded corrections from the government regarding the operation’s economic and financial modeling. 

SABESP 

Meanwhile, the board of the country's largest sanitation firm, São Paulo state-run Sabesp, authorized the firm to obtain financing for 760mn reais (US$138mn) from the International Finance Corporation (IFC).

"The funding will be allocated to works in the Novo Rio Pinheiros [Pinheiros River] program to expand sewage collection and treatment and clean up the river by December 2022, make improvements in sewage and water systems on coastal region of the São Paulo state and the construction of a pipeline in Greater São Paulo," the company said in a statement.

"Within the scope of this financing, Sabesp, in partnership with IFC, carries out the first blue loan operation in Latin America, with the resources to be used in investments to protect the ocean, natural water resources and urban water bodies. Blue loan is an innovative instrument by which funds raised are certified and monitored to ensure the sustainable use of ocean resources for economic growth, improving the quality of life and the ocean health," Sabesp added.

BNDES LOAN

Separately, state-run development bank BNDES approved 53.4mn reais in financing for Águas da Condessa, a concessionaire controlled by the SAAB group, which is responsible for the management of basic water and sanitation systems and services in the urban area of Paraíba do Sul, Rio de Janeiro state.

The BNDES financing will be used for initiatives such as the implementation of a sewage system, operational improvements aimed at reducing losses, reducing the intermittence of supply and modernization and expansion of the water supply system, the bank said in a release.

The bank's financing covers 95% of the investments expected for the first cycle of the concession until December 2025, or 56.2mn reais. Some 51% of the funds will be invested in the sewage system, 39% in water supply and 10% in other spending.

Águas da Condessa will use the financing to install 6.5km of treated water pipelines, a 4.3km water distribution network and build three treated water reservoirs, as well as adding 3,270 sewage connections, among other initiatives.

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