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For R$ 22.7 billion, sanitation of Rio's municipalities is granted and residents will have universalization of water and sewage by 2033

04/30/2021

 The Aegea and Iguá consortia, represented respectively by broker Ativa and by BTG Pactual, were the winners of the auction organized by the Brazilian Development Bank (BNDES) for three of the four regionalized concession blocks for water supply and sanitary sewage services in 29 municipalities in the state of Rio de Janeiro. The winning groups’ bids, added up, was R$ 22.69 billion, which represented a 134% surplus over the minimum amount stipulated for the service concession (R$ 9.7 billion).

  
In all, BNDES and the state of Rio de Janeiro received 11 proposals from consortia interested in the regionalized concession of the state’s 29 municipalities. Among the competitors were large companies, with national and foreign shares. Aegea, Rio de Janeiro Mais Operações de Saneamento, Redentor, and Iguá Saneamento were the consortia authorized. 
 
Block 1 was hotly contested among all four consortia bidding in the auction. Iguá consortium initially offered the highest bid (R$ 7.2 billion). From then on, there was fierce outcry competition between Aegea, Redentor and Iguá itself. In the end, the block comprising 18 neighborhoods in the southern zone of Rio and 18 other municipalities of the state was won by Aegea for R$ 8.2 billion – a 103.13% surplus. 
 
Block 2 was granted to the Iguá consortium for R$ 7.286 billion, a surplus of 129.68%. As this bid was 20% higher than the others, there was no outcry dispute. Aegea consortium, who had also submitted a bid for this block, opted not to open it after winning the first block. Block 2 includes Barra, Jacarepaguá and two other municipalities.
 
Block 3, which encompasses the western zone of the municipality of Rio de Janeiro and six other municipalities in the south of the state, was the only one not to receive bids, since Aegea used its prerogative to withdraw the bid it had submitted after winning Block 1.
 
The Aegea and Redentor consortia competed bid by bid for the concession of Block 4, but once again Aegea won the right to operate services in the downtown and northern zone of the capital, as well as in eight other municipalities. The consortium, represented by Ativa, offered R$ 7.203 billion for Block 4 – with a 187.75% surplus over the initial minimum price stipulated.
  
Aegea and Iguá will commit to promoting water distribution and sewage collection for 11 million inhabitants in 29 municipalities in the state of Rio de Janeiro, with infrastructure investments around R$ 27.6 billion during the 35-year contract. To accelerate the transformation of the reality of Rio’s population, the model developed by BNDES required that, of this total, R$ 23 billion be invested already in the first 12 years of the concession, that is, by 2033.
 
The concession will universalize the water service and provide access to the sewage network for 90% of the people in the region until the 12th year of contract. Today, only half of the population has sanitary sewage. The future contractors will also have to meet several performance, quality, and efficiency indicators in the provision of services, in addition to reducing water losses to a maximum of 25%. Today, the waste rate in the region is 40% of the water produced.
 
Besides those benefits, other positive externalities of the concessions stand out: the creation of 41,500 direct jobs; short-term actions for the environmental recovery of the Guandu basin and Guanabara Bay; and a minimum investment in the communities of the municipality of Rio de Janeiro of R$ 1.5 billion.
 
“This is a moment of victory for Rio de Janeiro after several decades of struggle. This project is about people, with 12 million beneficiaries. It is about dignity, health, universalization of basic sanitation services. It is about the environment, natural beauty and depollution. It is about education, about development, about reducing social inequality. Rio is finally receiving a unique opportunity to leave the 19th century and enter the 21st century,” celebrated Gustavo Montezano, President of BNDES.
 
“The social aspect of this process is remarkable, with 12 million people benefiting from piped water and sewage collection in Rio de Janeiro. The project will invest R$ 1.8 billion in interventions in underprivileged communities. Investing in sanitation is investing in health. The concession will generate R$ 30 billion in infrastructure investment, 26,000 direct and indirect jobs will be created in Rio alone,” said Cláudio Castro, acting Governor of the State of Rio de Janeiro. 
 
“When we manage, in an auction, to mobilize investment commitments of R$ 50 billion, this is transformative. From a transaction point of view, this is the second largest privatization transaction in Brazil, since the privatization of telecommunications. We perceive a very solid vote of confidence from the investor market, both from national and international capital,” said Fabio Abrahão, managing director of Infrastructure, Concessions and PPPs at BNDES.
 
“This moment marks the market freedom of our economy, the confidence in the market, and makes it clear that Brazil can do differently,” added the President of the Republic, Jair Bolsonaro, as he closed the event. 
 
BNDES and Sanitation – The auction for water and sewage sanitation in the 29 municipalities of Rio de Janeiro is the largest concession project in the sector ever undertaken and is part of a series of actions led by BNDES to improve services throughout the country. By the end of 2021, BNDES intends to structure projects for basic sanitation in at least nine other Brazilian states, with planned investments of around R$ 75 billion, which will directly benefit more than 38 million Brazilians.
 
About BNDES – Founded in 1952 and currently linked to the Ministry of Economy, BNDES is the main instrument of the Federal Government to promote long-term investments in the Brazilian economy. Its actions focus on socioenvironmental and economic impacts in Brazil. BNDES offers special conditions for micro-, small- and medium-sized enterprises, as well as social investment lines, directed at education and health, family agriculture, sanitation and urban transport.  In crisis situations, BNDES acts in an anticyclical manner and assists in the formulation of solutions for the resumption of economic growth.
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