Recently created Brazilian sanitation company Cristalina Saneamento is planning to assume a total of 10 concessions contracts in the sector, which will require combined investments of around 5bn reais (US$931mn).
The company is currently holding talks with local and international investment funds to raise the money to finance its plan.
Cristalina was created by three partners: Paulo Uebel, former secretary of debureaucratization, management and digital government in the administration of President of Jair Bolsonaro; Yves Besse, an executive who has worked at Veolia, Suez and CAB Ambiental; and Daniela Pinho, who was the financial director of CAB Ambiental.
Uebel, vice president of the firm, talks with BNamericas about the company’s plans and his views on the sector.
BNamericas: What is Cristalina’s business model?
Uebel: Cristalina Saneamento is a company that was created to develop projects and partnerships in the sanitation area. Our intention is to search for concession contracts in small and medium-sized municipalities.
The regions that are the focus of our activity are Rio Grande do Sul, Santa Catarina, São Paulo and Minas Gerais states.
BNamericas: What are the company’s investment plans?
Uebel: In the next five years we want to have 10 concession contracts in our portfolio in the sanitation area. Through these contracts to be assumed, we have plans to invest a total of 5bn reais [US$931mn].
BNamericas: Where are you raising funds for these investments?
Uebel: Our source of funding is national and international investment funds, all focused on long-term [investment] in the infrastructure area.
BNamericas: During your talks with national and international funds, what have been the main opportunities and focuses of attention in the sector mentioned by investors?
Uebel: The main driver for the growing interest of private sector investors in the sanitation sector is the regulatory changes we have had in Brazil. This new regulation has brought greater security to investors.
Regarding the associated risks, the main point of attention for investors is electoral cycles. Every electoral process that takes place, whether for state, municipal or presidential elections, makes investors more cautious.
Another point for investors in the sanitation area has also been the hike in interest rates, which makes project financing more expensive.
However, despite these risks, we see that there is continuity in the concessions and PPP agenda with the projects being offered.
BNamericas: Talking about the interest rate, how is the funding of the sector currently carried out?
Uebel: Right now, what we see is that projects in the sector are, on average, financed 30% with equity and 70% with debt operations. I think that the evolution of this sector will mean that in the future we will have about 20% of the projects being financed with equity and 80% with debt.
BNamericas: According to a recent study by Abcon [association of water and sewage concessionaires], the market share of the private sector players in the sanitation sector has risen from 7% to 9% since the regulatory changes in mid-2020. Do you see room for further growth?
Uebel: In my opinion, the participation of the private sector will more than double in the next five years.
We will have more companies entering the market. We’re a new company and I see that there is interest from other companies, even from the construction sector, in entering the sector.
After a period with the entrance of new players, I believe that after this five-year period we should see the beginning of moves to consolidate [M&As] this sector.
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The Brazilian state is looking to raise at least 4.1bn reais with the privatization of Corsan.
The concession contract will include both construction and operation of the new airport.
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