AEGEA Saneamento is part of Grupo Equipav, a family owned group that has more than 50 years of history operating in various sectors in Brazil. Currently, its main business lines are: (i) water and sanitation, through two fully owned subsidiaries, Aguas Guariroba and Prolagos; (ii) transportation, with a 75% stake in the Univias road consortium, which operates three road concessions (Convias, Sulvias and Metrovias) in the State of Rio Grande de Sul and two bus terminals (Terminal Rodoviário Ramos de Azevedo in Campinas and Terminal Rodoviário Antonio Mendes Canale in Campo Grande); (iii) agribusiness, holding a 41% stake in Renuka do Brasil, a sugar/ ethanol mill; and (iv) engineering and construction, through Equipav Engenharia, Minerpav and Sarpav.

The project is expected to cost BRL270 million, and consists of investing mainly in brownfield municipal water concessions, but also in acquisition of existing private concessions and sub- concessions. The proposed IFC Loan amount is BRL100 million. A parallel loan of an additional BRL 100 million is expected to be provided by other source of funding, while the remainder will be sourced from own resources of the Company.

61.98 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	49.58
Equity	12.40

* These investment figures are indicative

The company will invest in projects that result in improved water and sanitation services for the population of municipalities throughout Brazil. The company’s executives have experience in developing infrastructure projects in the north and northeast of the country, but also see attractive opportunities in other regions. AEGEA is pursuing projects throughout the country, by bidding on new concession and Public-Private Partnership (“PPP”) contracts and negotiating acquisition of existing poorly performing concessions. Currently, AEGEA operates the water and sanitation services in the city of Campo Grande in Mato Grosso do Sul state (through Aguas Guariroba) and in five municipalities in Rio de Janeiro state (Cabo Frio, Buzios, Iguaba Grande, São Pedro da Aldeia and Arraial do Cabo), through long-term concession contracts.

The Project is expected to increase water and sewerage service coverage in AEGEA''s service area, which is expected to expand throughout Brazil, including frontier regions. This increased coverage leads to positive health impact for the population, especially the poor. Diseases associated with poor sanitation decreased by 34% between 2005 and 2009 in Campo Grande, after AEGEA increased sewage collection and treatment there. This reduction of diseases results in lower absenteeism of students and workers, as well as reduced health expenditures, with substantial positive impact in the economy.

The Project will also lead to increase in population that receive water and sanitation services from a private operator and to reduced water losses and energy consumption. Indicators to be tracked will include: (i) total number of individual residential customers receiving new or improved water services; (ii) volume of sewage treated; (iii) volume of freshwater saved (reduced physical water losses); (iv) reduction in water losses (NRW - including commercial losses); and (v) reliability of water services (average hours of service per 24 hour period).

Together with other IFC investments in Brazilian private water operators, the Project will contribute to further acceleration of still incipient private sector participation in Brazil''s water sector.

IFC''s long tenor local currency-linked loan at the holding company level will allow the company to pursue additional investment opportunities, leveraging its resources with debt from local Development Finance Institutions at the subsidiary level, and replicating its successful business model elsewhere.

Furthermore, IFC engagement will help the company accelerate implementation of international best practices in the sector, and facilitate access to a broader range of financing options, including that of capital markets.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. AEGEA’s core business activities in water and wastewater treatment provide essential environmental services with proven public health benefits. AEGEA is presently demonstrating the ability to effectively manage potential environmental and social risks from its business activities through the application of international accepted practices to protect soil, water and air resources.