Initially named as one of the Brazilian companies interested in opening up the sanitation sector, Sabesp decided to focus its growth strategy on São Paulo, taking advantage of a loophole in the law that allows the signing of contracts without auctions.
The company is negotiating with São Paulo city halls the formation of special purpose companies controlled by the municipalities to assume the water supply and sewage treatment concessions.
The strategy is based on article 10 of the new sanitation framework, which gives municipalities the prerogative to operate services with entities created for this purpose. In general, states have preferred to bring together groups of municipalities to carry out tenders for the concession of the service.
With this gap, Sabesp’s management has been proposing the creation of companies, with the municipalities as controllers and retaining a minority stake, to participate in concession contracts without having to compete in bids.
“We came in with technology, with knowledge, with improved efficiency”, says the president of Sabesp, Benedito Braga. He did not want to anticipate the progress of the negotiations, but the Sheet found that there are already advanced conversations in four municipalities.
Sanctioned by President Jair Bolsonaro in July 2021, the new sanitation framework sets a deadline until 2033 for the universalization of water and sewage services. It also determines a series of rules for states and municipalities to establish contracts with service providers.
The new law has already accelerated service concessions across the country. The largest auction in this period consisted of three concessions for cities in Rio de Janeiro, with contracted investments of around R$30 billion.
Controlled by the government of São Paulo, but with shares traded on the stock exchange, Sabesp participated in only one auction after the approval of the new rules, for the city of Orlândia (SP), but lost the dispute.
The company renewed contracts under the new framework rules with 367 municipalities in its area of operation, equivalent to 99.7% of revenue. According to Braga, the main focus at the moment is to advance the universalization of this area, which has 76% sewage coverage.
“The plan is to clean up the house first. Then we will compete outside the state”, he says. The search for partnerships with nearby municipalities is a faster and cheaper alternative than the dispute in the sector’s billionaire auctions.
The new framework gave muscle to companies that already had participation in the sector, such as Agea and BRK Saneamento, winners of some of the bids already carried out by state governments. And it attracted new investment funds to strengthen the capital of companies.
On the radar of privatization programs for candidates for the São Paulo government, Sabesp celebrated last Monday (9) 20 years of trading on the New York Stock Exchange, participating in the closing ceremony of the trading session.
The event was used as a platform by the former governor of São Paulo and pre-candidate for the presidency by the PSDB, João Dória, who spoke during lunch with investors at the Fasano restaurant in the American city.
In a speech after lunch, Dória said that the project to clean up the Pinheiros River, one of Sabesp’s main investments, is an achievement not only for São Paulo, but for Brazil.
“It shows that it is possible to do it. And if it is possible to do it in Pinheiros, it is also possible in other parts of the country,” he said. “We have turned the impossible into possible”, he added, launching a campaign motto.
With the project, Sabesp added approximately 550 thousand households to its customer base, located in communities that were not yet served by the company. Braga says that, in addition to the social gain, the investment has a positive rate of return for the company.
The cleanup of Pinheiros is part of a larger project, to clean up the Tietê River, which the company is already working on in partnership with municipalities in the metropolitan region of São Paulo and, according to Dória, can be completed between 2026 and 2027.
The reporter traveled at the invitation of Sabesp
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
