Winner: BRK Ambiental
In 2013, wastewater treatment was available to only 5% of the 4 million inhabitants in the state of Pernambuco in northeast Brazil, one of the country’s poorest regions. Six years later, thanks to the largest public-private partnership in Brazil, coverage has climbed to 40%, with a goal of 90% by 2037, according to Sérgio de Barros, chief financial officer of BRK Ambiental.
The company, the largest private sanitation company in Brazil, is in the midst of a BRL1.7 billion expansion, financed by IDB Invest, Caixa and Banco do Nordeste (BNB).
The project will expand and improve the wastewater infrastructure in 15 municipalities in the metropolitan region and Recife, which includes a new network with 107 kilometers of wastewater collection, pumping stations, and water treatment stations. The second phase includes additional treatment stations and 79,000 wastewater systems in homes.
“From a financing perspective, the challenge was to deal with these three different financial institutions with different perspectives and different aims,” says Barros. “Everyone had to be on the same page and understand the importance of the project.”
Luckily, Barros says, the loan participants “understood the project not only from a financing perspective but also a social impact perspective.”
The participation of development banks was crucial, given market conditions and the size of the project, according to Barros.
“Even though we’re getting better, we don’t have a very developed capital market in Brazil that would allow us to reach high tenors and huge issuance,” he says.
Still, there were challenges. State-owned Caixa provided BRL650 million for the first cycle of the project, but must limit its leverage to 70% of capital expenditures when using public funds. IDB stepped up to promise a total of BRL442 million in two tranches, with a 20-year term with a five-year grace period. BNB provides BRL578 million, also with a 20-year tenor and 4-year grace period.
SPONSOR: BRK Ambiental
LOCATION: Recife, Brazil
FINANCING TYPE & SIZE: $310 million project financing
BANKS: IDB Invest, Caixa, Banco do Nordeste
LAW FIRMS: Mattos Filho, Hogan Lovells, Norton Rose Fulbright, Machado Meyer