A group of banks will assess the excess shares held by Sao Paulo’s
state government in state water utility Sabesp as part of their
possible sale or use as a guarantee to secure financing from national
development bank BNDES, state governor Geraldo Alckmin has declared.
The state government controls 71.5% of Sabesp shares; the remaining
28.5% are floated on the stock market.
According to local press, groups in the running to carry out the
studies are Citibank-Unibanco, Goldman Sachs-Santander, Morgan
Stanley-Italy and UBS-Banco do Brasil, with a winner expected in the
Alckmin told reporters the winning group should
submit its findings in two to three months, and that depending on the
results, the operation could be carried out this year or the next.
Sabesp liquidity would be positive for the utility and investors, as a
large portion of shares would not be concentrated in the hands of the
A high degree of liquidity implies that a
company is not immediately going to fail in the event of a downturn in
its business or the economy.
Should the share sale proceed, one
factor that could sway investor participation is sector uncertainties
due to the current debate over a bill that would introduce changes to
the country’s waterworks regulatory framework.
The bill aims to
create a regulatory framework to promote public-private investment in
the sector and would give municipalities the power to put its
waterworks services out to concession.
Sabesp – Brazil’s largest
water utility in terms of clients – serves 368 municipalities out of
a total of 645 in the state. It plans to invest R3.9bn through 2006
that would be split equally between drinking water and sewerage works.