Government is still trying to overthrow the injunction that prevents the bidding process from taking place on Tuesday
12/19/2022
The Rio Grande do Sul government is trying to get the privatization of Corsan (Companhia Riograndense de Saneamento) off the ground this Tuesday, amidst legal offensives that are trying to stop the sale of the state-owned water and sewage company. At least one group — Aegea — has submitted a proposal for the asset. The offers were received last Thursday.
Besides Aegea, four other companies have studied in depth the company’s privatization: Iguá, Águas do Brasil, Equatorial (which already operates the state’s energy distributor), and the investment manager I Squared Capital, according to industry sources. However, the government has not confirmed the total number of proposals that have been submitted.
The state is still working to overthrow an injunction from the Labor Court that ordered last Thursday the suspension of the auction for 90 days, following a request from Sindiágua — the sector’s workers union.
Judge Marcos Fagundes Salomão ordered the government to present studies on “the socioeconomic, labor, social security, and social impact of the privatization process.” According to him, the goal is to prevent the repetition in Corsan of “the situations caused by the privatization of CEEE [energy distributor, sold in 2021 to Equatorial],” in which there were “mass layoffs” and “suppression of benefits,” he said.
For the government, the expectation is to get the injunction lifted in time to hold the public session on Tuesday. Last week, the state had already overturned two other decisions that prevented the acceptance of bids.
If the auction takes place, the competition will be held at the B3 headquarters in São Paulo. The group offering the highest value for the company will win — the minimum was set at R$4.1 billion.
In the private sector, there is no expectation of a fierce dispute for the state-owned company. Sources who have followed the process closely observed that the risks involved in the privatization are quite high.
The main one is the uncertainty about the 198 contracts with municipalities served by Corsan that have not been normalized under the new sanitation law. The fear is that, after the sale, these municipalities will try to break their agreements, generating a wave of legal disputes.
Another point of attention for the interested groups is the company’s huge labor and social security liabilities. Moreover, the transition in governments brings regulatory uncertainties arising from the implementation, still in progress, of the new legal framework for sanitation — a factor that affects the entire market.
Aegea, which already operates a PPP in the metropolitan region of Porto Alegre, together with Corsan, has been pointed out as the main candidate to take the asset. The company confirms that it has submitted a proposal.
The privatization of Corsan may become a paradigmatic case for the sanitation sector and serve as a reference to other state-owned companies, according to market analysts.
Rafael Vanzella, a partner at law firm Machado Meyer, observes that there has already been a previous privatization experience in the country, of Saneatins, in the state of Tocantins, in 2002 — currently controlled by BRK Ambiental (formerly Odebrecht Ambiental). However, this was a process with many peculiarities and regulatory exceptions, due to the recent creation of the state of Tocantins, which prevented the case from becoming a privatization reference to other state-owned companies in the sector.
“Now, Corsan may be a relevant laboratory for the model,” says Mr. Vanzella. “The result of the auction will be very emblematic for governments that may want to follow the same path,” he says.
*By Taís Hirata — São Paulo
Source: Valor International