Investor Presentaiton
PANORAMA OF THE PRIVATE SECTOR'S PARTICIPATION IN SANITATION 2021
Proof of economic capacity
A NEW SOCIAL AND ECONOMIC FRONTIER FOR BRAZIL
Update of Decree 7,217/10
Another relevant standard to complement
the regulation of the new sanitation frame-
work is Decree 10,710/21. Published last
May 31, it establishes the methodology for
proving the economic and financial capac-
ity of drinking water supply and/or sewage
service operators to meet the universaliza-
tion targets of the new legal framework for
sanitation.
All operators who provide
their services based on pro-
gramme contracts (Govern-
ment operators), and provid-
ers who have been through
a tender process (private
operators), and shall include
targets for universalisation,
shall prove their economic
and financial capacity.
In a first phase, an accounting analysis is
performed, studying the financial situation
of the company, based on the company's
balance sheets for the last five years, tak-
ing into account factors such as assets, li-
abilities, income, and investment capacity,
among others.
The deadline for handing over the doc-
uments for this first phase ends at the
end of this year. By 31 March 2022 at the
latest, the local regulatory agency must
make a decision about the effectiveness
of this documentary proof of satisfactory
financial health.
After this first filter, the companies must
then show that they are able to finance and/
or pay the costs of future ventures, either
using their own resources or using funds
obtained through a financial institution. It
shall also be necessary to come up with a
feasibility study for universalisation and a
plan for capture of investments so the tar-
gets may be achieved.
In this second phase, it shall be possible to
apply regionalisation to contracts of con-
cession and establish Special Purpose En-
tities (SPEs) that are solid enough to take
on the projects as established. One possi-
bility is the establishment of closer partner-
ships between public and private. The time
frame for this second proof expires at the
end of 2022.
Decree 7,217, published on 21 June 2010,
regulates Law 11,445/2007 and refers to the
previous wording of the law. As the New
Milestone for Sanitation has profoundly
overhauled the legislation for the sector, the
text that regulates it must also be updated.
There are still some complementary reg-
ulations: rules for interruption of services,
the relationship of sanitation services with
water resources, planning, reference stan-
dards, social control, conditions of con-
tracts' validity, among others.
Other decrees of the legal
framework of the milestone
Created shortly after publication of Law
14,026/2020, through Executive Decree
10,430 of 20 July 2020, the CISB (Inter-min-
isterial Committee on Environmental San-
itation) has the aim of implementing the
federal sanitation policy, articulating pub-
lic agencies and state financial entities in
development actions for the sector. One of
the committee's tasks is to define the allo-
cation of Federal resources for sanitation.
The Committee is chaired by the Minister
of Regional Development, and includes the
Ministry of Economy, Civil Chief of Staff,
and the sectors of Health, Environment
and Tourism.
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