Brazil’s Biggest Water Deal: Sabesp Circles Copasa

Sabesp Copasa is emerging as one of the most closely watched potential deals in Brazilian infrastructure. During Tuesday’s earnings call, Sabesp CEO Carlos Piani confirmed that the recently privatized São Paulo water utility is actively evaluating a bid for Copasa, the state-owned sanitation company of Minas Gerais that is being prepared for sale by Governor Romeu Zema’s administration. But Piani flagged two critical unknowns that could determine whether Sabesp proceeds: the outcome of negotiations over the Belo Horizonte concession contract, which represents approximately 40% of Copasa’s revenue, and the final design of the privatization auction. The Rio Times, the Latin American financial news outlet, examines how the post-privatization Sabesp is positioning itself as Brazil’s dominant water consolidator.

Sabesp Copasa: The Strategic Logic

Piani was direct about the appeal. “When we look at inorganic opportunities, we try to focus on big deals, and Copasa is the second-largest listed sanitation company in the country,” he said. The market views Sabesp as a frontrunner among at least four interested parties: French utility Veolia, Brazilian investment fund Perfin, and private operator Aegea have all been evaluating the asset since Minas Gerais published its privatization framework in late January. Under the plan, the state will sell its 50.03% stake through a public offering, with a “reference investor” permitted to acquire up to 30% of shares before the offer and increase that to 45% during it. The state may retain a maximum 5% stake and a golden share with veto rights.

But Piani’s enthusiasm came with clear conditions. He said the pace of decision-making around the privatization has been “a bit slow,” particularly regarding the Belo Horizonte concession renewal. Without clarity on that contract’s terms, he argued, any valuation of Copasa remains provisional. The auction design also matters: if structured to favor strategic investors with operational experience, Sabesp would have an advantage; if tilted toward financial buyers, the calculus changes. Governor Zema has said he aims to complete the sale by April 2026, when he must step down to pursue a potential presidential candidacy. Copasa currently has a market capitalization of roughly R$19.6 billion ($3.5 billion), and Minas Gerais could raise over R$10 billion ($1.8 billion) from selling its entire holding.

A Balance Sheet Built for Acquisitions

The Sabesp Copasa discussion is underpinned by a strong quarterly result. The company reported Q4 2025 adjusted EBITDA of R$3.37 billion ($600 million), up 10% year-on-year and 6% above consensus estimates, driven primarily by cost discipline rather than revenue growth. Net revenue rose a modest 2.1% to R$5.7 billion ($1 billion), with new customer connections partially offset by a doubling of subsidized-tariff users to 20% of residential accounts. Reported net income surged 87% to R$2.68 billion ($477 million), though the adjusted figure was R$1.9 billion ($338 million). Full-year adjusted profit climbed 22% to R$6.3 billion ($1.1 billion).

The more important signal for the Copasa bid is Sabesp‘s execution capacity. Capital expenditure hit a record R$15.2 billion ($2.7 billion) in 2025 — more than double the R$6.9 billion ($1.2 billion) spent in 2024 and four times the pre-privatization average. The company met its 2024–2025 universalization targets a month early, adding 97,000 new water and sewage connections. Leverage sits at 2.2 times EBITDA, with R$70 billion ($12.5 billion) in total investment planned through 2030. Piani also noted the Universaliza SP program, a São Paulo state initiative to auction sanitation services for more than 210 municipalities valued at roughly R$75 billion ($13.4 billion), where Sabesp intends to compete. The message is clear: Sabesp sees itself as a platform for national consolidation, and Copasa is the biggest prize on the table.

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