The Canada Pension Plan Investment Board (CPPIB) has called on Cescon, Barrieu, Flesch & Barreto Advogados to invest in its Brazilian water treatment subsidiary Iguá Saneamento after it won a concession for sewage assets in Sergipe with a 4.5 billion reais (US$807 million) bid.
Souto Correa Advogados helped Sergipe's state development agency Agência Sergipe de Desenvolvimento in the drafting of the contracts for the water and sewage concession won by Iguá.
On 10 September, CPPIB revealed that it plans to invest up to 2.2 billion reais (US$201 million) in Iguá – which the Canadian investor holds a 61% stake in, while AimCo owns the remainder.
That announcement came a week after Iguá won the concession for Sergipe Water and Sewage Microregion (MAES), which operates water treatment services in the northeastern Brazilian state of Sergipe.
The bidder acquired the asset from the state’s sewage business, the Sergipe Sanitation Company (Deso), which serves around 2.3 million people across 74 municipalities. Its services cover 95% of the state’s water and sewage systems.
Deso will continue to collect and treat water, before selling it to Iguá – which will distribute sanitation services to individual consumers and small companies.
In the auction, which took place on 4 September, Iguá outbid water companies BKK Ambiental and Aegea Saneamento and investor Pátria.
Under the contract, Iguá has committed to invest 6.3 billion reais (US$1.1 billion) in MAES, with 4.7 billion reais (US$781 million) to be invested in the first 10 years. Additionally, Iguá has agreed to ensure that water coverage reaches 99% of Sergipe's urban areas by 2031, 99% of rural communities by 2033, and that sewerage services are available for 90% of the state population by 2033.
Currently, 95% of the population has access to water supply and only 43% has access to sewage services.
The auction took place just days after CPPIB upped its stake in Iguá by 2.33%. The pension company acquired its original stake in the water and sanitation company in 2021. CPPIB relied on Cescon Barrieu that time too. The Canadian investor has around US$475 billion worth of assets under management.
Iguá provides water and sewage services across 18 states in Brazil, reaching six million people in total. Last year, the company raised US$796 million in a sustainable debt issuance to fund water and sewage projects in Rio de Janeiro.
Brazil’s water and sanitation sector has seen a lot of activity this year. This includes the privatisation of Companhia de Saneamento Básico do Estado de São Paulo (SABESP), worth US$2.7 billion, carried out by the State of São Paulo, marking the largest privatisation in Latin America so far this year. This came one month after Brazil’s largest privately-owned sewage service provider, Aegea, raised US$500 million in an offering of sustainable and sustainability-linked bonds.
Headquartered in Edmonton, AIMCo invests globally on behalf of pension, endowment, insurance and government fund clients in Alberta, Canada. At the end of last year, the Canadian investor counted US$117 billion worth of assets under management.
For the investment and stake increase
Counsel to Agência Sergipe de Desenvolvimento and the State of Sergipe
Souto Correa Advogados
Partners Rafaella Peçanha Guzella and Eden José Ferreira