Ceará auctions sewage service with estimated investment of R$ 6.2 billion

The government of Ceará scheduled for this Tuesday (27), at B3, an auction of the sanitary sewage service of 24 municipalities in the metropolitan regions of Fortaleza and Cariri.

The total estimated investments are in the order of R$ 6.2 billion, and the dispute should be fierce, even with the uncertainties about the economic policy of the next government.

Three major sanitation groups should fight for the assets, as the report found out last week: Aegea, Iguá and a consortium with GS Inima.

Another block with construction companies must participate together. When contacted, Aegea said in a statement that it “continues to evaluate all opportunities, respecting the company’s business model, which provides for a thorough study of each project and responsible investments.”

Iguá did not comment, and GS Inima did not respond to the report’s contact.

The project is a Public-Private Partnership (PPP) and was structured by the National Bank for Economic and Social Development (BNDES), with a 30-year contract term.

The selection criterion is the offer of the lowest value of consideration, and there is no grant. The auction will be divided into two blocks, which will serve around 4.3 million people in total.

State supply

In the model, the water supply will remain under the responsibility of Companhia de Água e Esgoto do Ceará (Cagece), which will pay the considerations and will be in charge of the commercial management of the sewage concession.

For Machado Meyer’s infrastructure partner, Rafael Vanzella, the project is attractive mainly because there is no grant forecast, as occurred in large auctions held recently, such as that of the State Water and Sewerage Company of Rio de Janeiro (Cedae) and the from Companhia de Saneamento de Alagoas (Casal), which had billionaire proposals.

“We are facing an opportunity that does not require the winner to pay the grant, even as a condition for signing the contract, which would remove the interest of financially less robust groups”, he evaluates.

“In this Cagece model, the chance of dispute increases.”

Dimension

In his view, this is the largest sanitation auction involving an exclusively sewage project – without the water tariff revenue.

“The project covers large municipalities, with operational challenges and the need for important investments, it is incomparable with recently tendered assets that adopted the PPP model of sewage”, he observes.

The partner in the infrastructure and regulatory areas of Demarest, Bruno Aurélio, says that, although the investment challenges are great, including from an engineering and construction point of view, a positive factor of the project is Cagece’s mature revenue history.

“It is one of the major sanitation projects in Brazil this year, which should attract a lot of interested parties.”

The lawyer points out that exclusive sewage projects are less common, given the difficulty of collecting the tariff: unlike the water supply, which can be suspended in case of default, in the treatment of sewage this type of procedure is much more complex.

“That is why it is important to have a solid guarantee structure to attract this volume of investments”, he ponders.

The information is from the newspaper. The State of São Paulo.