Sabesp privatization to attract large funds; market awaits definitions
The privatization of water utility Sabesp should attract large investment management firms, especially those with experience in the Brazilian market, in the opinion of players in the infrastructure sector.Groups that participated in the privatization of energy utility Eletrobras or at least studied the process are among the likely interested parties—which includes Singapore’s sovereign wealth fund GIC, Canada Pension Plan (CPP), and Brazilian 3G Radar.Among other potential investors are Brazilian firms familiar with the infrastructure sector, such as Pátria and IG4 Capital. IG4 Capital has even created an exclusive investment vehicle to study Sabesp, in partnership with U.S.-based Water Asset Management, which currently has a stake in the Brazilian water and sanitation company. The plan is to start raising a fund with exclusive focus on the offer, expected to be at least $1 billion once the privatization design is defined by the São Paulo state government.CPP, Pátria, and IG4 declined to comment on the matter. GIC and 3G Radar could not be found to comment.Large private-sector sanitation companies—Aegea, Iguá, and BRK—are not expected to participate in the process. According to analysts, Sabesp’s privatization design would not match these companies’ strategy, since they would not have full control of the operation and could not incorporate the asset into their portfolios. Furthermore, in some cases, shareholders’ mandate would not allow investment in a publicly traded company, such as Sabesp.Asked about market interest, São Paulo’s Secretary of Environment, Infrastructure and Logistics, Natália Resende, said there are different types of investors interested in Sabesp’s privatization. "We have been in talks with funds, infrastructure groups, and sanitation companies. Some have been seeking to form partnerships, we have seen movements like these."Despite strong market expectations, there are some uncertainties, especially regarding the operation’s design.Unlike the Eletrobras model, which involved greater capital dispersion, the São Paulo government plans to include the idea of primary shareholders, who would have greater stake and control over the business. This possibility is welcomed by large funds interested in influencing decisions. In the market’s view, this would require a stake of at least 10% in the company, a seat on the board of directors, as well as on key committees."Assessment depends on the design of corporate structure," said...
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