On Monday, Canada’s Pension Plan Investment Board (CPP Investments), the Canadian institutional investor that manages $475.7 billion in assets belonging to more tan 20 million Canadian pension holders, announced that it will invest R$1.18 billion (about $216 million) for a 45 percent stake in Brazilian water infrastructure provider Iguá Saneamento S.A. CPP Investments will partner with existing investors, including Alberta Investment Management Corporation (AIMCo), which manages $118 billion in provincial Albertan pension assets, and emerging markets alternative investor IG4 Capital.
Iguá is the third-largest private water and sewage treatment service provider in Brazil. The company is focused on acquiring concessions and forming public-private partnerships to build scale in the Brazilian water and sewage sector. It currently operates 18 concessions and contracts across five Brazilian states, and providing sanitation services for more than six million people.
“The opportunity to invest in a platform that can address the high demand for improved water and sanitation services in Brazil is a good fit with our diversified global infrastructure portfolio,” said Scott Lawrence, Managing Director and Head of Infrastructure, CPP Investments. “We look forward to working with our partners to support the growth of the business and improved services for municipalities in the coming years.”
CPP Investments will ultimately hold its 45% aggregate stake in Iguá through Iguá Fundo de Investimento em Participações Multiestratégia (“FIP Iguá”) and Mayim Fundo de Investimento em Participações Multiestratégia (“FIP Mayim”), the current direct controlling investment entities of Iguá that will continue to be managed by IG4 Capital without a change of control.
AIMCo will own an estimated 39% aggregate stake in Iguá through a direct interest in the company and an interest in FIP Iguá and FIP Mayim alongside CPP Investments and IG4 Capital. IG4 Capital will have an estimated 5% of Iguá at closing. BNDES Participações S.A. (“BNDESPar”) will also own a direct stake of up to 11% of Iguá at closing.
“We welcome the addition of a high-calibre investment partner such as CPP Investments,” said Ben Hawkins, AIMCo’s Senior Vice President of Infrastructure & Renewable Resources. “Iguá is well positioned for continued growth as a leading water and sanitation platform in Brazil and on behalf of our clients, we look forward to collaborating with all partners.”
“We are pleased to have CPP Investments joining AIMCo, BNDESPar and IG4 to provide funding for Iguá’s growth,” said Paulo Mattos, IG4’s co-founder and CEO. “After a successful turnaround, Iguá is now well positioned to be a strong competitor in the new auctions of concessions and privatization processes that will take place under the New Sanitation Law in Brazil.”
This is the second major private market transaction involving Brazilian water infrastructure in recent days. Last week, Brazilian alternative investments manager Vinci Partners announced that it had successfully closed R$256 million (about $46 million) in commitments for a new fund, “Vinci Infraestrutura Água e Saneamento Fundo de Participações em Infraestrutura” (VIAS), devoted solely to water infrastructure.
Upon announcing the fund, Vinci Partners hailed the capital raise as the beginning of a new strategy for its Infrastructure segment, focused on investing capital into the privatization of state-owned companies that provide water and sewage services for the Brazilian population.
Last July, Engineering News-Record reported, the Brazilian National Congress passed legislation aimed at making the country’s water and sanitation regulatory regime more accommodative to private investment. The report quoted Regional Development Minister Rogério Marinho as saying that Brazil’s sanitation system–and water treatment needs for over 1,000 Brazilian cities–will require $137 billion in investment over the next decade, a goal that the Brazilian is keen to incentivize through public-private partnerships and concessions.
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