Brazil's Iguá Saneamento hires financial advisers to seek fresh cash

Brazilian sanitation firm Iguá Saneamento has hired banks to look at bringing in new shareholders and obtaining fresh capital to put the firm on a better footing to participate in future concessions, PPPs and privatizations. 

"As part of its efforts to optimize capital structure and capitalization alternatives for future growth opportunities, [Iguá Saneamento] is constantly evaluating future growth opportunities and is constantly evaluating market opportunities, including through structured processes such as that currently conducted by Morgan Stanley and Bradesco BBI," the company said in a statement.

"However, there are no binding proposals or advanced negotiations at this time," it added.

The company's comments came after financial daily Valor Econômico reported that the company was seeking to raise 3bn reais (US$556mn) through a capital injection from a new shareholder.

According to the newspaper, which did not reveal the source of the information, the banks hired by Iguá Saneamento have already started talks with at least four potential investors interested in investing in the firm, including Canadian funds Ontario Teachers Pension Plan (OTPP) and CDPQ and Brazilian groups Votorantim and Equatorial. 

The company is currently controlled by investment fund IG4 Capital, which has a 58.8% stake in the company, Canadian funds CPP Investments (14.9%) and Aimco (13.1%), and BNDESpar (13.2%). 

Since mid-2020, thanks to a regulatory change in Brazil encouraging the entrance of private sector companies into sanitation, which was previously dominated by state-run firms, a series of new investors have entered existing private sector companies to participate in the concessions, PPPs and privatizations organized by authorities. 

Iguá Saneamento, formerly CAB Ambiental, supplies water and sewerage services to various urban areas. it is split into six business units and serves around 7mn people. 

The company and its subsidiaries hold 18 contracts, including 15 concessions and three PPPS, to provide services in São Paulo, Mato Grosso do Sul, Paraná, Santa Catalina and Alagoas states.