São Paulo to retain minority stake in water company

Tarcísio de Freitas, governor-elect of São Paulo state, announced details of a plan to privatize Sabesp, Brazil's largest water company in terms of revenues and population served.

According to Freitas, the initial idea is to offer private investors a controlling stake in the firm via a share offering, with the state retaining a minority stake.

"We don't have to quit the company completely. We can simply give up control, retain a [minority] portion, have a seat on the board, have a golden share and participate in strategic decisions. With that the company can gain value later on," Freitas told reporters.

Currently, the state has a 50.3% interest in Sabesp, while the remaining shares are traded. It supplies 28.4mn people with water and 25.2mn with sewerage services.

Since mid-2020, the sanitation sector in Brazil has been attracting great interest from investors, after the approval of a regulation that facilitated the entrance of private sector participants to an industry previously dominated by state-run firms.

Since then, a series of concessions have taken place in the sector and some state governments have assessed privatizations of their respective water utilities.

The most advanced planned privatization is that being carried out by the Rio Grande do Sul state, which has already announced the date and the minimum price for the auction to privatize water utility Corsan.

The auction is set to take place on the São Paulo stock exchange on December 20 and the reserve price to acquire full control of the company was set at 4.1bn reais (US$788mn). 

Earlier this year the Rio Grande do Sul government tried to privatize Corsan via an IPO, with the state intending to retain a minority interest in the firm. However, it eventually had to suspend the plans after the state audit court demanded corrections to the economic and financial model.