Sanitation firm Saneamento Ambiental Águas do Brasil (SAAB) has won the block 3 water and sanitation concession in Rio de Janeiro state, offering 2.2bn reais (US$385mn).

The minimum fee was 1.16bn reais, but the auction was also less competitive than expected. The other bidder, Aegea Saneamento, offered 1.57bn reais.

SAAB is controlled by Developer S.A., Queiroz Galvão, and New Water Participações.

Major firms such as Igua Saneamento and BRK Ambiental Participações were contemplating participating previously but did not bid.

“I believe there are some factors behind the reluctance to compete. The first is that this block is the least interesting from an economic point of view, even though it is extremely important for Rio de Janeiro state as a whole,” Paulo Dantas, an infrastructure and project finance specialist at Castro Barros Advogados law firm, told BNamericas.

“In addition, there are a considerable amount of sanitation concessions expected to be offered in coming months, making companies more selective during this auction,” he added.

THE AUCTION 

In April, Rio de Janeiro auctioned four blocks, but block 3 did not attract bids.

Originally, the block comprised areas in western Rio de Janeiro city and the districts of Piraí, Pinheiral, Rio Claro, Itaguaí, Paracambi and Seropédica, covering around 1.9mn residents.

To attract interest, the state and development bank BNDES included 20 localities covering 2.7mn residents, plus the city’s western areas.

The state expects 4.7bn reais in investments during the 35-year concession.

“We already operate in some localities across Rio de Janeiro state, such as Niterói, and we are going to bring our excellence to these areas that we are going to start serving now,” SAAB president Cláudio Abduche (pictured) said after the auction.

According to Abduche, resources for the fee and investments will come from own cash and a bridge loan from a group of unnamed banks.

In April, Aegea Saneamento won the auction for blocks 1 and 4, offering fees of 8.2bn reais and 7.2bn reais, respectively.

Block 1 covers south Rio de Janeiro city, plus 18 other areas and a total of 2.8mn residents. It involves estimated capex of 8.3bn reais.

Block 4, covering Rio de Janeiro’s center and north, as well as the localities of Belford Roxo, Duque de Caxias, Japeri, Mesquita, Nilópolis, Nova Iguaçu, Queimados and São João de Meriti, involves estimated capex of 16bn reais to serve 7mn people.

Meanwhile, the consortium led by Igua Saneamento assumed control of block 2, comprising Barra da Tijuca and Jacarepaguá neighborhoods in Rio de Janeiro, as well as the municipalities of Miguel Pereira and Paty do Alferes, covering 1.2mn residents and expected investments of 2.8bn reais.

UPCOMING OFFERS 

Various states have auctioned sanitation concessions since last year, when a regulatory change made it easier for private firms to enter the sector, which was dominated by state-owned utilities.

Earlier this month, Alagoas state raised 1.64bn reais in fees from local and international players in auctions for 35-year water and sanitation concessions in 61 municipalities.

The concessions were offered in two blocks. Block B was awarded to the Alagoas consortium, led by local engineering firm Allonda Ambiental, while block C was awarded to the Mundau consortium, led by Cymi, a subsidiary of Spanish group ACS.

Recently, Ceará state opened a public consultation ahead of a tender notice it will publish for a sanitation public-private partnership. The 30-year concession entails sanitation services in 23 localities for 4.3mn residents.

Investments are estimated at 7bn reais, with 3.2bn reais to be invested during the first five years of the contract. The auction for the Ceará concession is expected for the first quarter of 2022.

Meanwhile, BNDES is conducting studies to evaluate sanitation PPPs or concessions in Paraíba and Sergipe states.

Separately, Rio Grande do Sul is advancing plans to privatize its water utility Corsan. The state, which will keep a minority share, seeks to raise around 1bn reais through an IPO, expected to take place during the first quarter of 2022.

https://www.bnamericas.com/en/news/saab-wins-block-3-of-rio-de-janeiro-sanitation-concession