Sanepar's US$2bn push toward universal water services coverage

Sanepar, the water utility serving Brazil’s Paraná state, is planning to invest 11.2 billion reais (US$2bn) by 2028 to achieve the goals established under national legislation that mandates universal coverage by 2033.

Wilson Bley Lipski, who became Sanepar’s president in June, talks to BNamericas about the investment and the likelihood of privatization of the company.

BNamericas: What is the status of the plans to invest 11.2bn reais? How much is being disbursed in each segment of the company's operations?

Lipski: The allocation of these investments is roughly 60% for the sewage sector, 36% for water, and 4% for other investments, including administrative functions.

There’s a strong desire on the part of the governor to accelerate investments and achieve the goals established under the regulatory framework before the deadline, as this would benefit both the company and the public.

BNamericas: How will the company finance this investment program?

Lipski: In accordance with our planning, we’re working with a combination of our own resources, issuing debentures [local bonds], raising funds from state-run banks, and approaching multilateral banks.

I would say that our investment plan is very consistent, our financial health is good and we have a technical team of exceptional quality.

An important point about investments is that as we make more investments, we also generate the possibility of attracting more revenue to the company.

BNamericas: What are Sanepar's initiatives in relation to complementary revenues, those that aren’t generated by the company's core business?

Lipski: The first initiative in this regard involves talks between Sanepar and the regulatory agency, so that we understand how much resources remain in the company, creating a good environment for interaction with the regulator.

We recently created a new business department where we established six areas to develop additional revenues within our existing potential.

For example, by being more effective in collecting more sludge, we have primary material, and this organic material needs to be better disposed of. Therefore, we’re working on biomethane, water reuse, initiatives linked to biofertilizers, and even fiber optic cabling.

We’re also exploring our capabilities to generate new revenue and understand where our own initiatives or partnerships, including PPPs, are most profitable.

It’s always important to keep in mind that these initiatives need to be profitable for the company.

At this moment, I don’t have an estimate of how much complementary revenue our operations could generate.

BNamericas: In May, Sanepar suspended the bidding process for three PPP water services contracts. What’s the current situation with them?

Lipski: Our business model for PPPs has been established, and under this model, we have four areas to be served through PPPs, with one contract auctioned but not the other three yet.

The planned auctions were suspended because a bidder claimed that a barrier clause preventing the same company from competing for the three contracts was unconstitutional, and they obtained an injunction in court.

Now, we’re waiting for the merits of this issue to be evaluated by the court, which I believe will be done after the recess [ending July 31].

If there’s a favorable decision for the bidder, we will evaluate the contract [and revise the rules in the notice], but I would say that our plan regarding the PPP model continues.

I would like to hold these bidding processes this year, but I can’t say for sure as it depends on external factors.

BNamericas: Could there be other changes to the PPP contracts, such as the number of localities served or projected investments?

Lipski: The characteristics of the PPP contracts have been established.

What we want with these PPP contracts is to ensure good public services. We believe that having PPP contracts open to different companies is the best approach, even to understand which contracts are performing best.

BNamericas: Would the privatization of Sanepar make sense if it were similar to the process the country’s largest water firm, São Paulo state’s Sabesp, is undergoing?

Lipski: The scenarios in the water sector vary significantly from state to state.

In Paraná, given our regulatory environment and business model, Sanepar appears to be an effective company. We operate efficiently as a state-owned company.

What I usually hear from the governor is that we focus on methodology rather than ideology. I see that each state has its own approach to resolving issues related to the water sector.

Of course, the new regulatory framework opens up the possibility of privatizations, but I believe that this analysis must be done on a case-by-case basis.