Brazil’s Corsan Must Raise Rate to Attract $2 Billion Investment

Cia. Riograndense de Saneamento, the government water utility serving Brazil’s Rio Grande do Sul state, said it must charge more to attract the 5 billion reais ($2.22 billion) of private investment needed to expand sewage services throughout the state.

The utility must be allowed to as much as double rates from 21 reais a client per month before investors agree to build waste-treatement plants, Tarcisio Zimmermann, president of Corsan, as the company is known, said today in a telephone interview.

Corsan collects about 12 percent of the sewage generated in Rio Grande do Sul and must invest as much as 10 billion reais in treatment infrastructure to boost that to 100 percent, he said. The utility wants private companies to shoulder half of those investments.

Tariffs for treating sewage “need to be much higher,” he said. “At the moment, the higher rate we get for distributing water is subsidizing” the cost of treating sewage.

The utility has received proposals from five of the nation’s biggest sanitation and construction companies to build sewage projects, he said. An auction for the development rights is planned for next year.

Corsan, based in Porto Alegre, plans to invest 4 billion reais in waterworks through 2017, he said. It’s invested about 1.5 billion reais since 2007.

The regulator “is open to discussions” over a rate increase, Zimmermann said. “Whether this will happen I can’t say because it’s an independent organ and it does its own studies.”

Federal law permits tariff revisions that adequately account for the costs of water supply and sanitation, Juarez Molinari, counsel president of Rio Grande do Sul’s regulator Agencia Estadual de Regulacao dos Servicos Publicos Delegados, said today in an e-mail. Utilities can boost revenue by reducing water losses in their distribution grids, he said.

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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