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PPPs & The Privies of Sambodia

Screenshot from 2015-02-18 15:17:02

Source: Diário do Centro do Mundo

Topic: Neither private nor public: The strange case of Sabesp

Reporters looking to unearth «paradoxical» governance issues at the state-controlled Sabesp — a portion of whose public shares float free on the BM&FBovespa — may also want to account for the public-private partnership mechanism, used frequently over the past decade in Brazil by various levels of government.

A quick news google on PPP and Sabesp, for example, yields the PPP Alto Tiête. Extra credit: poke around Sabesp +”economia mista.”

Sabesp is a [PPP] and publicly traded company with shares traded on the New York and São Paulo stock markets.The state of São Paulo owns 50,3% of the company’s shares. The rest are traded on the BM&F Bovespa (24.3%) and NYSE (25.4%).

Meanwhile Wikipedia, for example, includes a section on the privatization of water, while PPP Brasil is a useful source on the contracting details of Sabesp projects. An enterprising Wikipedian has provided an analysis of the PPP Paradigm in the Brazilian utilities markets.

DCM: One of these things is not like the other

This is the latest in a series of reports on the facts behind the water shortage in São Paulo. This is the fourth project financed by DCM readers using the crowdfunding tool Catarse. Expect fresh reporting on this same topic.

The history of the sanitation company Companhia de Saneamento Básico do Estado de São Paulo (Sabesp) begins 42 years ago, in 1973, when a public company was created by State Law nº 119 of 29 June, 1973. The state governor at the time was Laudo Natel, president of the São Paulo Football Club and in charge of unifying 11 hydroelectric plants, giving rise to the São Paulo Electricity Company (CESP).

CESP’s first president was General Luiz Phelippe Galvão Carneiro da Cunha, who left in 1977 to assume military duties, opening the way for engineers to take charge.

A year before the creation of Sabesp, water was distributed by the municipal SAEC. According to a study by the state planning secretary, SAEC wasted an estimated 30% of the water in the system and set out to reduce wastage by 20% during the 1980s.

In 2014, Sabesp has increased wastage by 36% even as the state suffers the worst drought in 84 years.

The reality of state-owned firms during the dictatorship changed with redemocratization in 1985 and the economic changes the Collor government would soon impose.

The next elected president, Fernando Henrique Cardoso, would come up with the idea of privatizing a significant portion of such companies, viewing this practice as a solution to all the problems of the world.

Water Resources Decentralized

Sabesp opened its shares to private investors in 1994 during the governorship of Luiz https://bbs.archlinux.org/viewtopic.php?id=35506Antônio Fleury Filho (PMDB). Fleury inaugurated the Tietê Project, a series of ill-fated attempts to depollute the Tietê River, which had become [an open air sewer] ,,,

Sabesp opened its shares to private sector investors in 1994 during the governorship of Luiz Antônio Fleury Filho (PMDB). Fleury inaugurated the Tietê Project, a series of ill-fated attempts to depollute the river, which had become an open sewer. At the time, Sabesp received a loan from variousinternational agencies, and especially from the Japanese bank JBIC.

The Tietê and Pinheiros rivers continue to reek almost unbearably.

The funds were not released by FHC until his successor, Mario Covas of the PSDB, took over the state. None of the four PSDB governments — Fleury, Covas, Serra, or Alckmin — changed any of the factors leading to the current disaster.

In 1995, Sabesp began decentralizing its management structure, based geographically on the different watersheds that supply the state. It was for this purpose that Sabesp was divided into business units suitable for different regions, complying with environmental and social demands imposed by the government in office at the time.

With that restructuring complete, Sabesp conducted its IPO in the Bovespa em 2002 and later succeeded in listing its shares on NYSE (in ADRs).

Sabesp, then: Was it privatized?

It is incorrect to say that the state-owned company was privatized because the state government is still the controlling shareholder. The free float was subscribed by minority shareholders. It would therefore be more appropriate to say that Sabesp a water management and sewer company of “mixed economy” [a public-private partnership –Ed.]

If Sabesp is a company with private investors, it also has an independent regulator to police its activities, as is the case with the national Water Agency (ANP) and Petrobras. Right?

Wrong.

For at least 5 years, since its IPO, the company lacks a regulatory system, except for groups such s the Brazilian Association of Non-Destructive Testing (ABENDI). This association was itself denounced to the state prosecutor for having approved contractors in 38 cases, without a public tender, and with whose executives the directors had direct relations. The case cost the public coffers at least R$ 1.4 billion in contracts for the containment of water leakage.

A regulator was created in 2007 by Law 1,025/2007 and ratified by Decree 52.455. The Sâo Paulo State Regulatory Agency for Sanitation and Energy, known as ARSESP, has ties to the state energy secretariat and representatives from ANEEL, the national electricity regulator, as well as water companies, piped gas and electricity companies in the state.

And so Sabesp is not completely privatized, but even so it took the company more than 5 years to conduct a full audit of its condition and performance. The directors of ARSESP are chosen by the state governor.

Sabesp and Its Contradictions

Vladimir Pinheiro, 46 was a co-author of the Federal Basic Sanitation law between 2003 and 2010. DCM spoke to him about certain contradictions that exist at Sabesp after the entry of private capital.

Pinheiro says there is a study by UNIFESP (federal university) which correlates the law with rising water prices that are outpacing inflation and therefore attractive to the stock market.

The author of the study is a professor of quantitative methods and social science. In the survey discussed above, “it is possible to verify that the rise in prices is directly related to the performance of Sabesp on the exchange.”

This issue of market performance is merely one indicator of a larger problem.

Pinheiro questions the “mixed economy” character of the company. “There are two models in this scenario. Either the company is private, with strong external oversight, or the ownership is public and not run for a profit. Sabesp is neither of these two things, because the earnings of the company are tied to the water that it sells. Sewage is included in the same calculation.

“Currently, upon receipt of a notice that São Paulo faces water rationing, Sabesp income and shares should fall. But that is not happening, to my surprise,” he observes.

Other global metropolitan areas handle the problem in an entirely different manner. In New York, a state-owned supplies water and is incorporated asa nonprofit. In Paris and Berlim, private companies furnished water and sewer service, and were recently nationalized. The name of the French company is Eau de Paris, which was privatized 20 years ago. Its attempt to raise fares received a hostile response and the company was finally returned to government control.the privatization of water,he governorship of Luiz Antônio Fleury Filho (PMDB). Fleury inaugurated the Tietê Project, a series of ill-fated attempts to depollute the Tietê River, which had become

Sabesp opened its shares to private sector investors in 1994 during the governorship of Luiz Antônio Fleury Filho (PMDB). Fleury inaugurated the Tietê Project, a series of ill-fated attempts to depollute the river, which had become an open sewer. At the time, Sabesp received a loan from international agencies, and especially from the Japanese bank JBIC.

The Tietê and Pinheiros rivers continue to reek almost unbearably.
Screenshot from 2015-02-18 15:17:02

Source: Diário do Centro do Mundo

Topic: Neither private nor public: The strange case of Sabesp

Reporters looking to unearth «paradoxical» governance issues at the state-controlled Sabesp — a portion of whose public shares float free on the BM&FBovespa — may also want to account more thoroughly for the public-private partnership mechanism, quietly used more frequently over the past decade in Brazil by various levels of government.

A quick news google on PPP and Sabesp, for example, yields the PPP Alto Tiête. Extra credit: poke around Sabesp +”economia mista.”

Sabesp is a [PPP] and publicly traded company with shares traded on the New York and São Paulo stock markets.The state of São Paulo owns 50,3% of the company’s shares.

Identifying paradoxical governance issues at the state-controlled Sabesp — a portion of whose public shares float free on the BM&FBovespa — may also want to account for this public-private partnership mechanism.

Extra credit: poke around Sabesp +”economia mista.”

Meanwhile Wikipedia, for example, includes a section on the privatization of water globally, while PPP Brasil is a useful source on the contracting details of Sabesp projects. A Wikipedian has provided an analysis of the PPP Paradigm in the Brazilian utilities markets.

But to the article.
DCM: One of these things is not like the other

This is latest in a series of reports on the facts behind the water shortage in São Paulo. This is the fourth project financed by DCM readers using the crowdfunding tool Catarse. Expect fresh reporting on this same topic.

A Sabesp é uma empresa de economia mista e capital aberto com ações negociadas nas bolsas de valores de São Paulo e de Nova York. O governo do Estado de São Paulo detém 50,3 % das ações da Sabesp. As demais são negociadas na BM&F Bovespa (24,3 %) e na NYSE (25,4 %).

Meanwhile Wikipedia, for example, includes a section on the privatization of water, while PPP Brasil is a useful source on the contracting details of Sabesp projects. A Wikipedian has provided an analysis of the PPP Paradigm in the Brazilian utilities markets.

This is latest in a series of reports on the facts behind the water shortage in São Paulo. This is the fourth project financed by DCM readers using the crowdfunding tool Catarse. Expect fresh reporting on this same topic.

The history of the sanitation company Companhia de Saneamento Básico do Estado de São Paulo (Sabesp) begins 42 years ago, in 1973, when a public company was created by State Law nº 119 of 29 June, 1973. The state governor at the time was Laudo Natel, president of the São Paulo Football Club and in charge of unifying 11 hydroelectric plants, giving rise to the São Paulo Electricity Company (CESP).

CESP’s first president was General Luiz Phelippe Galvão Carneiro da Cunha, who left in 1977 to assume military duties, opening the way for engineers to take charge.

A year before the creation of Sabesp, water was distributed by the municipal SAEC. According to a study by the state planning secretary, SAEC wasted an estimated 30% of the water in the system and set out to reduce wastage by 20% during the 1980s.

In 2014, Sabesp has increased wastage by 36% even as the state suffers the worst drought in 84 years.

The reality of state-owned firms during the dictatorship changed with redemocratization in 1985 and the economic changes the Collor government would soon impose.

The next elected president, Fernando Henrique Cardoso, would come up with the idea of privatizing a significant portion of such companies, viewing this practice as a solution to all the problems of the world.
Water Resources Decentralized

Sabesp opened its shares to private investors in 1994 during the governorship of Luiz Antônio Fleury Filho (PMDB). Fleury inaugurated the Tietê Project, a series of ill-fated attempts to depollute the Tietê River, which had become [an open air sewer]

Sabesp opened its shares to private sector investors in 1994 during the governorship of Luiz Antônio Fleury Filho (PMDB). Fleury inaugurated the Tietê Project, a series of ill-fated attempts to depollute the river, which had become an open sewer. At the time, Sabesp received a loan from international agencies, and especially from the Japanese bank JBIC.

The Tietê and Pinheiros rivers continue to reek almost unbearably.

The funds were not released by FHC until his successor, Mario Covas of the PSDB, took over the state. None of the four PSDB governments — Fleury, Covas, Serra, or Alckmin — changed any of the factors leading to the coming disaster.

In 1995, Sabesp began decentralizing its management structure, based geographically on the different watersheds that supply the state. It was for this purpose that Sabesp was divided into business units suitable for different regions, complying with environmental and social demands imposed by the government in office at the time.

With that restructuring complete, Sabesp conducted its IPO in the Bovespa em 2002 and later succeeded in listing its shares on NYSE (in ADRs).

Sabesp, then: Was it privatized?

It is incorrect to say that the state-owned company was privatized because the state government is still the controlling shareholder. The free float was subscribed by minority shareholders. It would therefore be more appropriate to say that Sabesp a water management and sewer company of “mixed economy” [a public-private partnership –Ed.]

If Sabesp is a company with private investors, it also has an independent regulator to police its activities, as is the case with the national Water Agency (ANP) and Petrobras. Right?

Wrong.

For at least 5 years, since its IPO, the company lacks a regulatory system, except for groups such s the Brazilian Association of Non-Destructive Testing (ABENDI). This association was itself denounced to the state prosecutor for having approved contractors in 38 cases, without a public tender, and with whose executives the directors had direct relations. The case cost the public coffers at least R$ 1.4 billion in contracts for the containment of water leakage.

A regulator was created in 2007 by Law 1,025/2007 and ratified by Decree 52.455. The Sâo Paulo State Regulatory Agency for Sanitation and Energy, known as ARSESP, has ties to the state energy secretariat and representatives from ANEEL, the national electricity regulator, as well as water companies, piped gas and electricity companies in the state.

And so Sabesp is not completely privatized, but it took the company more than 5 years to conduct an audit of its governance. The directors of ARSESP are chosen by the state governor.

Sabesp and Its Contradictions

Vladimir Pinheiro, 46 was a co-author of the Federal Basic Sanitation law between 2003 and 2010. DCM spoke to him about certain contradictions that exist at Sabesp after the entry of private capital.

Pinheiro says there is a study by UNIFESP (federal university) which correlates the law with rising water prices that are outpacing inflation and therefore attractive to the stock market.

The author of the study is a professor of quantitative methods and social science. In the survey discussed above, “it is possible to verify that the rise in prices is directly related to the performance of Sabesp on the exchange.”

This issue of market performance is merely one indicator of a larger problem.

Pinheiro questions the “mixed economy” character of the company. “There are two models in this scenario. Either the company is private, with strong external oversight, or the ownership is public and not run for a profit. Sabesp is neither of these two things, because the earnings of the company depend on the water that it sells. Sewage is included in the same calculation.

“Currently, upon receipt of a notice that São Paulo faces water rationing, Sabesp income and shares should fall. But that is not happening, to my surprise,” he observes.

Other global metropolitan areas handle the problem in an entirely different manner. In New York, a state-owned supplies water and is incorporated as a nonprofit. In Paris and Berlim, private companies furnished water and sewer service, and were recently nationalized. The name of the French company is Eau de Paris, which was privatized 20 years ago. Its attempt to raise fares received a hostile response and the company was finally returned to government control.the privatization of water,

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