After privatization, Sabesp records more revenue, layoffs and leaks

The privatization of Sabesp, the country's largest sanitation company, was completed on July 23, 2024 , concluding a long process, with requests for Parliamentary Commissions of Inquiry (CPIs) and accusations of dismantling by workers' representatives.

The company says it is focused on implementing an investment plan of approximately R$70 billion by 2029, bringing forward the universalization of water and sewage services by four years. Since privatization, R$10.6 billion has been invested, according to Sabesp.

Sabesp's privatization process began in 2021, shortly after the approval of the Sanitation Framework, with a change in the company's contract model with cities. The company already had shares listed on the stock exchange, but 50.3% of the shares belonged to the state government.

In 2023, the São Paulo City Council approved the city's adherence to the new model. Since the city accounts for approximately 50% of the company's business, this adherence was essential to make the stake sale attractive to the private sector.

The sale was completed with the acquisition of 32% of the company's shares for R$14.7 billion, celebrated by the state government but criticized by the opposition. The asking price for each share was R$67, while the trading price for the shares was R$87 each. This week, the shares are trading at around R$110 each.

Equatorial Participações e Investimentos acquired 15% of the shares, becoming the leading investment firm, without facing competition . The remaining 17% of the shares were sold at the same share price (R$67) to individuals, legal entities, and company employees.

An active participant in the public hearings that preceded the sale, the São Paulo State Water, Sewage, and Environmental Workers' Union (Sintaema) believes that the loss of public control is one of the decisive factors, with the government and its departments having less say in strategic decisions. According to the union, the measure is likely to accelerate outsourcing and layoffs, reducing workers' pay.

"The mood here is one of apprehension. Many of the workers who joined the Voluntary Dismissal Plan (PDV) did so out of uncertainty about the future and pressure from their bosses," says the organization's president, José Faggian.

According to the union, the company has laid off more than 2,000 employees since privatization, 1,000 of them in the first quarter of this year, according to a balance sheet on Sabesp's website.

Sintaema also points to the risk of increased accidents due to the reduction in maintenance and rapid response teams. The company has experienced two incidents of large sewage spills into waterways, one near the Castelo Branco Highway and the other at the Guarapiranga Reservoir, one of the main water reservoirs in the metropolitan region. They also criticize the plan to universalize service by 2029, which, according to the organization, opens the possibility of excluding peripheral communities.

In January of this year, allegations of abusive charges prompted members of the Workers' Party (PT) to request a Parliamentary Commission of Inquiry (CPI) in the city's City Council. A few months after privatization, cases began to emerge of residents of Greater São Paulo receiving increases, some from R$70 to R$500 per month.

The proposal was not approved by the City Council. In Carapicuíba, Greater São Paulo, a commission was established in May of this year. It is still investigating the quality of service, rising bills, and similar situations in the city.

The company says it is undergoing a transformation process focused on efficiency, valuing people, and preparing for future challenges. "This movement is part of Sabesp's new strategy, which is committed to universal sanitation with quality, innovation, and sustainability."

In this process, it has changed its human resources policy and increased hiring on outsourced fronts, with an estimated generation of 40,000 direct and indirect jobs over the next two years.

"It's important to remember that part of the workforce reduction is due to employees' participation in the Voluntary Redundancy Program, launched at the end of last year. New technologies also optimize processes and deliver faster and more effective results, such as satellite-based leak detection and artificial intelligence-based asphalt replacement monitoring," explains Sabesp.

Regarding the reduction of approximately 10% in the company's staff, the Agency reported that it monitors and tracks any impacts on the provision of services based on contractual indicators.

“If inconsistencies are identified, appropriate measures will be taken, since the required quality levels must be maintained regardless of the concessionaire's personnel structure.”

One of the changes anticipated in the privatization process involves increasing profit distribution to shareholders. According to the consulting firm Instituto Água e Saneamento, the company's dividend policy has changed. Until last year, dividend distribution was 25% of net profit. In 2026 and 2027, it will be 50%, potentially reaching 75% in 2028 and 2029, and 100% starting in 2030.

The increase in profit distribution is reflected in the increase in cash flow to shareholders, as demonstrated in the company's latest balance sheet. From R$1.18 billion at the end of 2024 to R$1.95 billion at the end of the first quarter. The company's share capital also increased, from R$36.9 billion to R$38.3 billion.

The increase in revenue reflects the expansion of the customer base, growth in consumption, the change in Firm Demand contracts, the tariff adjustment that occurred in May of last year, before privatization, and structural measures.

At the same time, Sabesp has strengthened its social initiatives. Since the end of 2024, the number of beneficiaries of the social tariff has grown by more than 70%. The company's balance sheet shows an increase in its customer base, as well as an increase in tariffs, which reached 18% for industrial customers.

To achieve universal access, the company has increased its external funding. In a statement, they stated that they have sought financing in the market to secure the necessary investments while maintaining financial stability.

"The funding raised helps enable large-scale projects, expand access to services, and meet contractual and social goals." One of these strategies, approved this month by the company's board, was the issuance of R$1 billion in debentures.

Before privatization, oversight of Sabesp's services was centered on environmental agencies such as Cetesb and area secretariats. After privatization, oversight of Sabesp's services was transferred to the São Paulo State Public Services Regulatory Agency (Arsesp), which is responsible for all state privatization processes.

According to Arsesp, to deal with Sabesp, the agency updated regulations and improved its regulatory instruments, focusing on meeting the goals of universalizing basic sanitation in the State of São Paulo, as well as the quality of services provided and the implementation of planned investments.

The following measures were taken: review of oversight procedures; adjustments to the social tariff regulation; and improvement of methods for monitoring contractual indicators. The first public report on the new concession is scheduled for the end of 2025.

This Wednesday (23), the government of São Paulo announced the start of the Tarifa Social Paulista program, which expands access to discounts on water and sewage bills for socially vulnerable families living in municipalities served by Sabesp.

The program will have three categories, with discounts ranging from 22% to 78% on fares.