By Brazil Stock Guide – Equatorial S.A. (EQTL3) prepared a financial structure of up to R$7 billion for the privatization of Copasa (CSMG3), according to a board filing that brings into the open the company’s role in a race that also includes Aegea’s shareholders.
The document shows that Equatorial’s board approved, on May 21, the use of its controlled company Gerais Saneamento S.A. to hire bank guarantees from Bradesco, Banco do Brasil, Santander and Itaú in favor of the state of Minas Gerais.
The same filing also approved the issuance of up to R$7 billion in commercial notes by Gerais Saneamento, with an 18-month maturity, aimed at professional investors. Equatorial itself agreed to act as guarantor and principal payer of the obligations assumed by the vehicle.
The filing shows the company had formally prepared financing and guarantees for the Copasa privatization before publicly presenting the move as an official bid.
That matters because Equatorial had not previously made a direct market announcement saying it was entering the dispute. Until now, the company had used the cautious language common in competitive transactions, saying it was attentive to opportunities and did not comment on potential deals or acquisitions.
The board minute changes the picture. It had already put in place a financial structure linked to the privatization process.
Aegea in the Race
The dispute also includes a group linked to Aegea, Brazil’s largest private sanitation operator, through shareholders such as Equipav, Itaúsa and Singapore’s sovereign wealth fund GIC.
Aegea brings the profile of a specialized sanitation player, with direct operating experience in water and sewage concessions. Equatorial brings a different background: it built its reputation in power distribution and has been expanding its infrastructure footprint.
The company is also a shareholder of Sabesp, the São Paulo water and sewage utility privatized in 2024, after acquiring a 15% stake. A move on Copasa would deepen Equatorial’s exposure to Brazil’s sanitation sector and signal that its Sabesp investment was not a one-off transaction.
The race therefore brings together two different strategic models. Aegea represents the sector specialist. Equatorial represents the broader infrastructure platform seeking a larger role in water and sewage.
Minas Changes the Test
The disclosure comes as Minas Gerais resets the terms of the Copasa sale after initial proposals came below the state’s expectations.
The government disclosed a minimum price of R$47.23 per share for the offering. Until then, investors knew there was a floor price, but not the number. The new price made the cutoff explicit: if demand does not support at least that level, the privatization may have to be canceled, postponed or redesigned.
The transaction is structured as a secondary share offering. Proceeds will go to the state of Minas Gerais, the selling shareholder, rather than to Copasa’s balance sheet.
The sale initially involves 171.1 million common shares, with the possibility of an additional lot. But the privatization depends on two conditions at once: the minimum price and sufficient demand.
That creates a delicate balance for the state. A price set too low could expose the government to criticism for selling a strategic public asset cheaply. A price set too high could make the transaction harder to execute.
A Harder Decision
Copasa is one of Brazil’s most relevant state-controlled sanitation assets, with a strong presence in Minas Gerais. But the company also carries investment needs, universal service targets, municipal contracts and regulatory risks.
For investors, the question is not only whether Copasa is attractive. It is whether the asset is attractive at R$47.23 per share, under the governance and execution conditions attached to the privatization.
For Aegea, the answer depends on how much scale and strategic control the group can obtain. For Equatorial, the question is whether Copasa offers a second major step into sanitation after Sabesp.
The revised timetable gives the market little time to decide. The retail reservation period is scheduled to start on June 5, pricing is expected on June 11 and settlement is planned for June 16.