Brazil’s water and sewerage sector is gearing up for significant growth with at least three major concession tenders set for 2025. The upcoming bids will involve contracts for the states of Pará, Pernambuco, and Rondônia, with total investments potentially reaching 51.6 billion reais (US$9.2 billion), according to a report by BN Americas. These large-scale projects are being structured by Brazil’s development bank BNDES.
The largest of these projects is in Pernambuco, with an estimated investment of 25 billion reais, followed by Pará at 21 billion reais, and Rondônia at 5.8 billion reais. The final figures are still being finalized as the tender notices are completed.
Luciene Machado, BNDES’ project structuring superintendent, explained in an interview that the projects in these three states are already at an advanced stage and auctions could take place as early as the first quarter of 2025. “These contracts will be offered as concessions rather than public-private partnerships (PPPs),” Machado confirmed.
In addition to these projects, the state of Piauí is also preparing a significant water concession tender worth 9.57 billion reais, with an auction scheduled for October 30, 2024.
The passing of a 2020 regulatory framework in Brazil, which mandates universal water and sewerage coverage by 2033, has prompted a wave of private sector participation in the sector. State-owned firms previously dominated the landscape, but BNDES has since become the leading agent for structuring large-scale water and sewerage projects.
The sector has seen strong interest from various players. In a recent auction, Iguá Saneamento won a water concession in Sergipe with a 4.5 billion reais bid, beating major competitors such as BRK Ambiental, Aegea Saneamento, and Pátria Investimentos. The contract, valued at 6.3 billion reais over 35 years, drew intense competition, reflecting the growing appeal of the water sector to private investors.
To support these large projects, BNDES remains actively involved in financing, while promoting alternative funding mechanisms, including infrastructure debentures. “It’s very healthy to see more financing mechanisms coming into play,” said Machado, highlighting how the water sector’s attractiveness is also drawing the attention of capital market investors.
The Brazilian government recently expanded the use of debentures to finance water sector projects, increasing the proportion that can be used to pay tender fees from 50% to 70%. While some market participants welcome the change, others are concerned it may lead to higher fees that could eventually affect consumers. Machado, however, stressed the urgency of improving water and sewerage coverage, adding that “any measure is valid to speed up progress in this area.”