By: Leonardo Neri

Last Friday, April 30, the auction for the concession of the Rio de Janeiro State Water and Sewage Company (CEDAE) took place at B3 in São Paulo. This was the largest auction in the sanitation infrastructure sector in the country's history, with contracts involving approximately R$30 billion in investment over a 35-year concession period.

The concession plan was drawn up by BNDES and in it, the private sector undertakes to make investments in innovations and improvements, assuming the risk of exploitation. After the concession period, the assets return to the State, which may take over or grant them back to the private sector.

However, Cedae will not be privatized in its entirety, as part of it will still operate under the command of the state of Rio de Janeiro, which will be responsible for collecting and treating the water that will be purchased by the concessionaires for distribution to the population.

The auction was divided into blocks, which were auctioned separately. Block 01, comprising the South Zone of the capital and 18 other municipalities, with a minimum grant of R$4.036 billion, was won by the Aegea consortium, with a bid of R$8.2 billion after a fierce competition; the premium (additional value to the minimum required in the bid notice) is R$103.13%.

Block 02 was won by the Iguá consortium, with a bid of R$1.286 billion and the premium for the proposal was R$129.681. The Block encompasses Barra da Tijuca, Jacarepaguá and 2 other municipalities, and had a minimum grant of R$1.172 billion.

Block 4 covers 106 neighborhoods in the city center and north zone, as well as seven municipalities, and received bids from three consortiums: Aegea, Redentor and Rio Mais Saneamento. The winning bid was R$1.7 billion, a premium of R$1.87 billion. The initial bid was R$2.5 billion. Block 03, however, had no winner and, according to the Secretary of the Civil House of the Rio de Janeiro government, a new bid will be held soon.

The privatization of sanitation aims to universalize basic sanitation services by 2033, where 90% of sewage will have to be treated and collected and 99% of the population will have to have a supply of treated water, as provided for in Law 14.026 of 2020, the legal framework for basic sanitation. In the city of Rio de Janeiro, approximately 86% of the population in regular areas receives sewage collection service, however, approximately 66% of sewage is treated. As for the supply of treated water, the rate is approximately 99.16%.

The data corroborate the challenge faced by concessionaires, who will have twelve years to increase the access rate, since less than 70% of the population of the state capital has access to treated sewage.

With the new regulatory framework, it is estimated that more than R$700 billion could be invested, in addition to generating jobs for the population and improving the quality of life of these people, and that the concession of the four blocks in Rio de Janeiro will affect the lives of more than 13 million people.

Privatization will benefit the population, since data indicate that 9.5% of the population of Rio de Janeiro does not have access to drinking water, given the possibility of expanding access to the sanitation network. Furthermore, state control of companies hinders governance and the efficiency of services to the population, since companies are subject to political interference.

Proof of benefits to the population is tied to a series of periodic demonstrations that must be made by the concessionaires, under the risk of sanctions. Among them is the investment of R$12 billion in the first five years and, in 12 years, the mandatory investment of approximately R$25 billion. Furthermore, more than R$5.7 billion will have to be invested in the first five years in the decontamination of Guanabara Bay, the Guandu Basin and the Barra da Tijuca Lagoon Complex, and at least R$1.8 billion will have to be invested in community infrastructure.

Therefore, the obstacles faced by Cedae until now, such as the Geosmin crisis, a substance that alters the characteristics of the water supplied, the loss of almost half of the water released into the distribution network due to leaks caused by old networks or clandestine diversions, will be the challenges for the concessionaires, which must be monitored and controlled by their services.

We have observed that privatization indicates greater productivity in the work of water and sewage services, as well as an increase in service. However, privatization alone does not guarantee improvements in the sector. Therefore, the work to be developed by the concessionaires must be monitored so that these benefits are enjoyed effectively and efficiently by the population.