SAO PAULO – A new concession in the sanitation segment will take place this Thursday (2), at 3 pm (GMT), in continuity with the auctions in the sector since the approval of the legal framework, which opened the private sector to investments in the area. .
This is the auction of basic sanitation in Amapá, with the concession of the services of Companhia de Água e Segoto do Amapá (Caesa) to the private sector; interested parties delivered their offers on Monday (30), at the B3 headquarters in São Paulo. This will be the first major sanitation auction in the Northern region of Brazil.
The expectation is that the new concession will attract strong competition. It provides for a 35-year contract and around R$ 3 billion in investments, serving 800,000 consumers.
In addition, it will have a hybrid model as a criterion for choosing the winner, in which interested parties may propose a discount on the rate (maximum 20%). In the event of a tie, the definition of the winner becomes the highest award value, whose minimum amount is R$50 million.
As Levante Ideias de Investimentos highlights, the expectation is that traditional operators and groups that do not yet operate in the sector will participate in the event, through association with larger groups or groupings in consortia.
The great expectation, according to market analysts, is for Equatorial Energia (EQTL3), which appears as the “favorite” by many of them. In addition to Equatorial, the participation of traditional groups in the sector is expected, such as Aegea Saneamento, BRK Ambiental, Águas do Brasil, Iguá Saneamento and Conasa.
“Although many of these companies have won auctions recently, we believe they are still looking for more growth, taking advantage of still attractive returns and still good financing conditions. Consequently, the expected substantial competition could potentially lead to aggressive tenders”, assesses Credit Suisse.
In this scenario, Levante emphasizes that Equatorial has been showing interest in entering the sanitation sector, having participated in recent auctions, but not winning any project so far. In the evaluation of Itaú BBA, Equatorial is the most likely winner of the event, given the synergies with the distribution concessions.
Also seeing fierce competition and Equatorial as one of the main competitors, Bank of America highlighted its estimates for the auction. “We estimate a potential NPV [valor presente líquido] of BRL 800 million in our base scenario, but competition could reduce the value by generating high concession fees”, point out the US bank’s analysts in a report.
Arthur Pereira, Gustavo Faria and Murilo Freiberger, analysts at BofA, estimate that, based on the bidding documents, the project would have a real internal rate of return (IRR) of 8.2%, being unleveraged, and a NPV of R$ 400 millions. However, they see room for overcoming the authorities’ initial estimates.
Competitors will bid for the asset offering a discount on tariffs, limited to 20%, and an additional concession on top of the minimum R$50 million established.
If they assume a real IRR of 12% as the minimum rate, BofA estimates a bid of R$1.3 billion for an additional concession grant.
The scenario is “fierce competition”, but with opportunities. “The appetite for growth in sanitation projects has generated fierce competition in recent auctions, given the few opportunities in the past”, point out the analysts of the American bank. Bank of America has a purchase recommendation and a target price of R$28 per common share of Equatorial.
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