Sanitation: Aegea is the target of clashes over tariff and service – 08/21/2023 – Market

Biggest winner of basic sanitation auctions held in the country in recent years, Aegea is now facing questions about the tariffs practiced by older concessions for the provision of water and sewage services.

In Campo Grande, the issue ended up in court, which granted an injunction to the Águas de Guariroba concessionaire, forcing the local regulatory agency to evaluate five requests for economic-financial rebalancing of the concession for alleged losses with decisions taken by the granting authority.

In Manaus, the CPI (Parliamentary Commission of Inquiry) opened to investigate the quality of Águas de Manaus services culminated in an agreement to reduce the company’s tariffs, also questioned by consumers.

They are two of the oldest water and sewage concessions in Brazil — the one in Manaus was signed in 2000, but acquired by Aegea in 2018, and the one in Campo Grande, in 2001. For specialists, they can serve as a warning for municipalities that are now beginning to privatize the sector.

In Campo Grande, Águas de Guariroba obtained an injunction at the beginning of the month obliging the municipal regulatory agency to evaluate requests for economic-financial rebalancing of the contract. The request says that the agency is silent in disregarding the 30-day period to evaluate the claims.

On the 10th, Agereg (Municipal Agency for the Regulation of Public Services) determined that the concessionaire should make public some details of its finances, such as interest charged for late fees, in an attempt to block further increases.

Águas de Guariroba is questioned by consumers due to the high profits obtained in recent years, while charging one of the highest tariffs in the country.

“Campo Grande has the highest rate among Brazilian capitals”, complains Lázaro Godoy, president of the state’s sanitation workers’ union. “[A Aegea] it has to return money to the people of Campo Grande.

According to the most recent data from Snis (National Sanitation Information System), Campo Grande had the sixth highest average water and sewage tariff in the country in 2021, behind Pimenta Bueno (RO), Itapema (SC), Paranaguá (PR) , Bombinhas (SC), and São Gabriel (RS), all also operated by private companies.

In 2022, Águas de Guariroba earned BRL 286 million, up 26% compared to the previous year. In five years, the concessionaire’s profit jumped 52%, already discounting the inflation of the period. Godoy points out that a previous rebalancing process already extended the concession period by 16 years.

Snis classifies Manaus as the ninth highest sanitation tariff in the country in 2021. The third CPI on the concession questioned information about the company’s service, which would contrast with the high number of user complaints, according to local parliamentarians.

Aegea won 7 of the 13 auctions in the sector after the approval of the new sanitation framework — the last of them in mid-July, contemplating a PPP (public-private partnership) in the area covered by Sanepar (Companhia de Saneamento do Paraná).

It assumed an investment volume of more than R$ 40 billion, most of them in the Rio de Janeiro concessions acquired in 2021, which made it one of the largest clients of the BNDES (National Bank for Economic and Social Development).

In a note, the company said that economic and financial rebalancing procedures “aim to maintain the conditions established in long-term concession contracts”.

“Extraordinary occurrences such as the global pandemic or investments made and not provided for in the contract are examples that must be dealt with in accordance with current legislation”, he concluded.

In an interview given to Sheet in July, the CFO (financial director) of Aegea, André Pires, defended that the profit margins of the Campo Grande concessionaire reflect the efficiency in the operation and expands its capacity to invest in other concessions, “taking this experience to other places”.

He claimed that sewage coverage in the capital of Mato Grosso do Sul rose from less than 30% to 85% of the population. “Hospital admissions in the city of Campo Grande due to waterborne diseases fell by 70%”, he adds. “We have no power to increase the tariff. It follows the original contract and is readjusted for inflation.”

About Manaus, the company says that “it maintains a constant dialogue with the councilors of Manaus and other inspection bodies”.

“Since the beginning of the concession, treated water coverage has been universalized, with the service reaching areas of social vulnerability, such as regions of stilt houses, alleys and new communities. Sanitary sewage jumped from 18% to 30% in five years”, to be continued.

Specialists interviewed by the report point out that the oldest contracts in the sector were based on a higher rate of return, in the face of greater uncertainties about the concessions, which last more than 30 years. Today, the possibility and profit margins would be so high.

But they consider that the lack of regulatory uniformity, since contracts are regulated by city halls or regional blocks, makes it difficult to analyze and monitor the evolution of services and the profitability of concessionaires.