Brazil's Piauí state details US$1.65bn water PPP plans

Brazil’s Piauí state is planning to auction a 35-year, 8.6bn-real (US$1.65bn) water services PPP contract on August 14.

Interested companies must deliver proposals with guarantees by August 9 to São Paulo’s B3 stock exchange, where the auction will take place. 

Of the total amount, half must be invested in the expansion of waste coverage and half in water supply and necessary reinvestments, a state government spokesperson told BNamericas.

The bidder offering the highest fee to the state will win, with the minimum set at 1bn reais.

"The PPP contract covers 224 municipalities in the state, almost all cities, with the exception of the state capital and two other cities, which are already served by another contract. Currently, only 10% of the state's population, outside the capital, has access to sewage treatment services, which is why this PPP contract focuses on the expansion of sewage services," the spokesperson said.

State capital Teresina and the two other cities are currently served by public utility Agespisa.

The contract documents can be seen here.

The auction is expected to attract multiple participants, even though similar ones have become less frequent in recent quarters, after a wave of major contracts was offered following a regulatory change in 2020. 

"This PPP has a great need for investment in sewage in very poor areas of the state, which makes the project challenging even for contracting the labor force for construction. But with fewer contracts in the sector being offered to private companies in recent months, this will be an auction with strong competition between private sector companies," the executive of a water company, who is evaluating the contract, told BNamericas, requesting anonymity.

In 2020, congress approved a law mandating universal coverage by 2033. This law created space for the participation of private companies in a sector that had been dominated by public utilities. 

But the coverage rules are flexible when it comes to localities with deficient infrastructure, like the ones the planned PPP will cover. While the localities should get full potable water supply by 2033, the sewage services deadline is 2040.

Currently, 48 water projects are in the structuring phase countrywide, some of which could be offered to the private sector this year. Combined investment in the planned concessions and PPPs is 64.3bn reais, according to figures industry association Abcon compiled for BNamericas. The initiatives will serve more than 34.2mn people.

The country has seen 40 auctions since the regulation came into effect, offering 10 regional contracts and 30 municipal ones totaling 103bn reais in investments.