Alto Tiete PPP

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On June 18, 2008 Aguas de Sao Paulo signed a 15-year contract with Companhia de Saneamento Basico de Sao Paulo (Sabesp), the Sao Paulo state-owned water utility, for Alto Tiete PPP project. The project consisted of the expansion of Taiacupeba water treatment plant from 10 m3/s ( 864 thousand m3 per day) to 15 m3/s (1,290 thousand m3 per day ), its administrative control for 15 years, and the construction of 17.7 km pipelines for water supply and service between the Alto Tietê river, four water reservoirs with total capacity of 70,000 cubic meters and treatment stations. The construction period was two years and Sabesp was the direct user of the water produced. The contract was the first PPP for Sabesp. The contract was awarded in early June 2008 to the consortium Aguas de Sao Paulo which presented the lowest tariff in a public tender conducted by Sabesp. The winning consortium requested 147 reais (US $80.7) per 1,000m3, 14.5% less than the maximum cost of 172 reais established in the bidding rules. Aguas de Sao Paulo was special purpose vehicle for the project and owned by CAB Ambiental and Galvao Engenharia. Two other consortia presented offers in the tender: SPE Tiete - comprised of Queiroz Galvao and OAS - which offered 167 reais per 1,000m3. PPP do Alto Tiete - comprised of Camargo Correa and Andrade Gutierrez - which presented a bid of 170 reais per 1,000m3. The winning consortium was to invest approximately US $197.9 million (395.7 million reais) during the first two years of the concession. The private sector contribution of 310 million reais was part of CAB Ambiental and Sabesp’s joint investment program in Alto Tiete which was estimated at 1 billion reais (US $549.5 million). In July 2008, CAB Ambiental took over the operation of Taiacupeba water treatment plant and other operating assets under Alto Tiete PPP project, but was still negotiating financing with BNDES and Caixa Economica Federal (CEF) for approximately 70% of the project cost. The remainder was to be financed through equity from the sponsor. The construction of new assets were underway by January 2009. Also in January 2009, BNDES approved a US$ 138.5 m (BRL 277m) loan to CAB Spat. Source: CAB Spat Figures converted based on the market rate, period average for 2008 published by the IMF.