Privatization of Sabespo was approved by the Legislative Assembly of the SP

Bill 1,501/2023 regarding the privatization of Sabesp was approved this Wednesday, December 6, 2023, by the Legislative Assembly of the State of São Paulo (Alesp) with 62 votes in favor and only 1 vote against.

“The approval of Sabesp’s privatization process is an important step forward for the State of São Paulo. This will help build a legacy of universal sanitation, water purification, increased water availability and health for all,” said Governor Tarcisio de Freitas.

The text, which is currently being agreed, states:

● Permission to privatize Sabesp through a public offering of shares;

● Commit to universal basic sanitation by 2029, including people living in rural areas and poor communities, and reducing tariffs;

● Creation of the Fund for the Support of Universal Sanitation in the State of São Paulo (FAUSP) to allow the reduction of tariffs;

● Determination of veto power for SP government to change name, headquarters, public activities and voting limit for shareholders.

The project received input from deputies. The 26 amendments were incorporated through the rapporteur’s four sub-amendments. Among them:

● devices aimed at guaranteeing a reduction in Sabesp tariffs through a special fund created by the state;

● Stability of the company’s current servers for 18 months after the actual privatization of the company;

● Inclusion of candidates from the legislative branch to the FAUSP Board of Directors.

“MPs discussed our proposal extensively and provided input that improved what we proposed. I am sure that this vote will be an important milestone in the history of the health and quality of life of the state’s population,” emphasizes Governor Tarcisio de Freitas.

What’s happening now:

After approval, the document will be approved by the governor and published in the Official State Gazette. In parallel, the SP government is talking to all municipalities about renewing concession contracts until 2060, ensuring the inclusion of the poorest and the necessary investments for universalization.

It also defines new rules for tariff revisions in a modern model that combines cheaper tariffs with incentives for new investments.

All these determinations should take place before the public offering of shares on the stock exchange, in the first half of 2024. The entire process is expected to be completed by July 2024.

Understand the Sabesp Privatization Project

1. What does universal sanitation mean?
According to the new sanitation system, universalization means providing 99% of the population with purified water and 90% with collection and treatment of wastewater. The new framework also calls for the inclusion of populations in integrated rural and irregular areas, such as favelas and the hills, which are currently excluded from services. There are many people who are not included in the official basic sanitary indicators. In the municipalities served by Sabesp, for example, we are talking about a million people.

2. Has Sabesp universalized basic sanitation?
Of the total number of households served by Sabesp, 98% have treated water and 83% collect and treat wastewater. But these figures still do not take into account the consolidated rural and irregular areas, such as favelas and poorer settlements, where about a million people now live. The challenge is to include them in basic sanitation in less than ten years, as set out in the new legislative framework for basic sanitation. In São Paulo, we will do this within six years thanks to the privatization of Sabesp. And this is important because, according to the World Health Organization, every reais invested in basic sanitation brings 5.5 reais in benefits to society, such as savings in health care costs and increased productivity.

3. Why privatize Sabesp?
The new sanitation legislation set ambitious goals for the universalization of basic sanitation: provision of 99% of treated water and collection and treatment of wastewater from 90% of the population by 2033. Both the rural population and residents of urban and poor areas should be included. in the service. In São Paulo, this means including more than a million people who live in rural or poor areas and still lack access to basic sanitation services. To achieve this goal, Sabesp has to invest twice as much as usual. With privatization, Sabesp can expand and anticipate investments to universalize sewerage and reduce water bills. In other words, the privatization of Sabesp will bring sanitation for all, faster, better and cheaper.

4. Could all this be done without privatization?
Without privatization, the government would have to finance 100% of the investment, and the immediate commitment of ensuring the collection and treatment of water and sanitation for all, with quality and lower bills for the public, would take longer. In addition, the government will have to borrow money from the budget to make universalization viable, leaving fewer resources for health, education and security.

5. How will it be possible to universalize and foresee goals in the field of sanitation?
Sabesp has already planned an investment of 56 billion reais to universalize sewerage by 2033 in the area covered now. However, to include rural and low-income areas, in addition to accelerating river pollution and network sustainability, these values ​​should rise to R$66 billion. This value includes the expectation of universalization until 2029. We are talking about R$ 10 billion more than Sabesp would have invested, and four years less than expected. This means that with privatization, investments will increase, sewerage will reach those who need it faster, and the water bill will still decrease.

6. How will the government reduce tariffs?
The government will create a Sanitation Universalization Support Fund in the State of São Paulo (FAUSP) and allocate 30% of the sale price of the shares in addition to the state’s profit in the campaign (dividend) for water reduction bill aimed at the poor. We are talking about something new in the sewage market: a fund with the resources of the state itself, either through the sale of part of the state’s shares in Sabesp or through its profits in the company, to reduce the water bill, especially for those who need it most. Public resources will be invested in people, as they should be.

7. Who will buy Sabesp?
Anyone with a brokerage account can buy shares in the company. In other words, the Sabesp shares currently owned by the SP government will not be sold to a single investor or group of investors, but will be discussed with all interested parties. This will happen through a public offering of shares called “follow on”.
Any citizen, including employees and customers of Sabesp, can purchase company shares. To do this, just go to the brokerage system and reserve shares. There are several that open accounts for free online. In addition, efforts will be made to ensure that part of the sold shares are purchased by investors who want to stay with the company in the long term and can contribute to the growth of Sabesp with their knowledge and experience.

8. Will Sabesp change its name?
No, Sabesp remains in São Paulo, does not change its name and continues to work in the basic sanitation sector. The bill before the state Legislative Assembly gives decision-making powers to the SP government to ensure that none of these situations occur.

9. What is URAE? Were they created to privatize Sabesp?
URAEs are regional blocks of municipalities that share the same water sources and sewage systems and can undertake more comprehensive planning with an emphasis on universalisation. Such regionalization is provided for by new sanitary and hygienic conditions. In the state of São Paulo, it was created with the creation of the URAEs, which are regional units for drinking water and sanitation. To give you an idea, a large part of the water consumed in the metropolitan area of ​​São Paulo is produced by the Cantoreiro system, which covers several municipalities, requiring regional management.

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