1. Brazil has a large population concentrated in the southeast, including over 80 million people in São Paulo state alone. Sabesp provides water and sanitation services for over 23 million people in São Paulo state. 2. Brazil has undergone major institutional changes in its water and sanitation sector in recent decades, including establishing a regulatory agency and allowing for more private sector participation and market financing. Progress has been greater where utilities are stronger. 3. Sabesp has successfully reduced non-revenue water through large infrastructure programs and targeted community projects. Strong corporate governance and listing on stock exchanges have allowed Sabesp to invest billions in upgrading systems.

1. Reducing NRW through
regulation and utility reform:
insights from the Brazilian
case
Fernando S. Marcato
NRW Workshop
Montego Bay, Jamaica
05/30/2012

2. Summary...
1. Basic information about Brazil
2. The water & sanitation sector in Brazil
3. Regulation and solid utilities: adequate environment
to reduce NRW

3. 1. Basic information about Brazil…

4. The Brazilian federation...
North
Population is concentrated
Northeast in the southeast (millions)
São Paulo 41.26
Rio de
15.98
Janeiro
Minas Gerais 19.59
Espírito
3.51
Santo
Midwest
Total 80.36
Southeast
Almost 43% of
South Brazilian population
(192million)

5. Where Sabesp operates...

6. São Paulo Metropolitan Region – SPMR...
• Area – 8,051km²
• 39 cities
• 20 million people - 10% Rio Tie
tê
Rio Tie
tê
of brazilian population
• Poor water quality and
lack of water
• Complex water
resources management ,
facing many disputes

7. 2. Institutional changes of the Brazilian
WSS...

8. The major institutional changes of the last
decades...
1970 Planasa 2007 – new water & sanitation law
Concession contract
Program Contract
Self regulation
Regulatory agency
Public financing
Market financing
Focus on the construction
works Focus on the client
Competitive environment
Natural monopoly
Water as a very scarce resource
Water as a free good

9. Greater progress has been made where
utilities are stronger…
Water service Wastewater service
< 40% < 10%
40,1 a 60% 10,1 a 20%
60,1 a 80% 20,1 a 40%
80,1 a 90% 40,1 a 70%
> 90% > 70%
Source: SNIS, 2007

10. Brazilian population with access to water
and sewerage collection (%)...
Percentual da população brasileira com acesso a água e esgoto, %
78,6
63,9
44,0
33,5
30,2
11,8
Houses with accessàto the
Domicílios com acesso rede geral Sewerage treated
Esgoto Tratado Houses with accessàto water
Domicílios com acesso rede de
general sewerage network
de esgoto network água
2000 2008
Fonte: IBGE, Diretoria deNacional deCoordenaçãoBásico 2000/2008
Source: IBGE, Pesquisa Pesquisas, Saneamento de População e Indicadores Sociais, Pesquisa Nacional de Saneamento Básico 2000/2008.
Nota: O percentual de municípios com tratamento de esgoto, em 2000, refere -se àquelas que o coletam e tratam.

11. WSS in Brazil: the shares of the state and
private companies ...
24% State companies
Private companies
6%
Municipal
70% companies
Source: GO Associados/ABCON

12. State companies provide services for 70%
of Brazilian population…
Cosama-PA
Cosanpa-PA
Caema-MA
Caern-RN
Cagepa-PB
Casal-AL
Caerd-RO Embasa - BA
Caesb-DF
Sanecap - MT
Copasa-MG
Cesan-ES
Sanesul-MS
Cedae-RJ
Sabesp-SP
Sanepar-PR
Casan-SC
Corsan-RS

13. High levels of NRW...
• Northern region NRW exceeds 60%
• Average NRW in Brazil is 37.4%
• Average NRW in Latin America is of approx. 50%

14. Gains with NRW may reach US$ 10 billions
until 2025...
Reduction Potential Gains
NRW Expectation
(%) (R$ Mi)
Cenario 1
37,4% 18,7% 50% US$ 22,316
– Optimistic
Cenario 2 –
37,4% 23,2% 38% US$ 17,565
Base
Cenario 3 –
37,4% 27,9% 25% US$ 12,521
Conservative
Source: Carlos Rosito. Prepared by GO Associados

15. 3. Solid utilities lead to successful NRW
programs…

16. The Sabesp case..
Regional Systems
Metropolitan Region
Basic Information Main Operational Indicators (1)
Foundation in 1973 Water Sewage
Employees: 16,800 Connections (million) 7.0 5.4
Serves the City of São Paulo and 364 out Coverage (%) 100% 79%
of 645 municipalities in the State
Treatment (%) 100% 72%(²)
Provides water to 23 million people and
sewage services to 19 million people Volume Billed (m³ million) 957,2 681,9
Also sells wholesale treated water to 6 Network (km thousand) 63,2 42,3
municipalities (3.3 million people) (1) As of June, 2009
(2) Treated sewage as percentage of collected sewage
Covers 60% of State's urban population

17. Sabesp has become a large water utility...
International
Domestic
115.0
108.4
63.1
25.6
26.0 23.8
15.7
14.5 13.2
Veolia Suez RWE AGBAR Sabesp United ACEA Severn Trent SAUR
Utilities
Source: Pinsent Masons – water Yearbook – 2006- 2007
( ) includes 3,1 million clients in municipalities currently served on a wholesale basis

18. Strong Corporate Governance...
Strong Corporate Governance
• Mixed capital company
• Listed on the “Novo Mercado” and NYSE, leading to
high corporate governance standards
• 100% common shares
NYSE
24,6%
Bovespa
25,1%
State of São
Paulo
Government
50,3%

19. This has permitted Sabesp invest in large
programs…
Total investment plan of R$ 8,6 billions for 2009- 13

20. São Paulo Metropolitan Region –
Characteristics...
Formally Structured Regions
Consolidated infrastructure
Lower population growth
Higher per capita income
Higher per capita water
consumption
Peripheral Regions
Poor infrastructure
Difficulties to install water and
sanitation infrastructure
Higher population growth
Lower per capita income
Lower per capita average
consumption
Occupation of areas of water
sources

21. Specific programs such as Córrego Limpo
complement structural programs...
Before After

22. Parasópolis: a symbol of inequality...

23. Manoel Antonio Pinto street...
Before After

24. “Córrego do Brejo”...
Before After

25. Sebastião Francisco street...
Before After

26. Sabesp’s NRW programs…

27. The program for reduction of NRW…

28. Internal incentives for NRW reduction: positive
incentives…
• Specific department responsible for NRW reduction and
energy efficiency
• NRW reduction is one of the components of staff annual
bonus
• NRW reduction allows postponing investments to increase
water production capacity: better financial results for the
company, higher bonus

29. External incentives for NRW reduction: the big
stick…
• JICA (Japan International Cooperation Agency) and BNDES
(Brazilian development bank) finance Sabesp’s corporate NRW
reduction program:
 Subsequent defaults in meeting NRW goals may entail
penalties (the big stick)
• ARSESP (Regulatory agency) considers NRW as a cost that
needs to be managed efficiently by the Water utility

30. Muito obrigado!
Fernando S. Marcato – fsmarcato@goassociados.com.br
WebSite: www.goassociados.com.br
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