Copasa’s privatization could be completed as early as April, according to Itaú BBA, which raised its target price for the Minas Gerais state-controlled sanitation company’s shares to 55.90 reais from 43.20 reais. The new estimate reflects growing confidence that key political and regulatory steps are falling into place, supporting a transaction within the first months of the year.
The assessment was outlined in a recent report by Itaú BBA, the investment banking arm of Itaú Unibanco Holding SA (ITUB4.SA), as first reported by O Fator. Analysts Felipe Andrade, Luiza Candiota and Victor Cunha wrote that there are “political milestones that open the way for privatization by April,” pointing to legislative approval and advancing corporate procedures.
One of the main catalysts cited is the state law passed in December authorizing the sale of Companhia de Saneamento de Minas Gerais, or Copasa (CSMG3.SA). With the legal framework in place, the analysts said the project now moves into corporate, technical and governance phases required for the formal launch of the share offering. “The project now advances to the corporate, technical and governance stages necessary for the formal offering,” they wrote.
Itaú BBA also highlighted negotiations with the city of Belo Horizonte over the renewal of Copasa’s concession contract. Talks gained momentum last month and resulted in a memorandum of understanding that предусматривает an extension of the agreement through 2073, easing concerns over long-term revenue visibility tied to the company’s largest market.
Regulatory developments also played a role in the valuation upgrade. The report notes recent changes at Minas Gerais’ sanitation and energy regulatory agency, whose new foundational law expands its oversight to related services such as stormwater drainage and urban cleaning, strengthening the regulatory framework for the sector.
Earlier this month, documents related to Copasa’s privatization were submitted to the State-Owned Enterprises Coordination and Governance Committee, an executive branch body that must validate the transaction. Valuation studies prepared by Stocche Forbes, Ernst & Young and BTG Pactual will help determine pricing parameters for the deal.
Under legislation signed by Governor Romeu Zema, proceeds from the privatization must be allocated to obligations under Brazil’s State Debt Full Payment Program, known as Propag. Minas Gerais joined the program on Dec. 31 and, in exchange for refinancing its debt with the federal government, must invest between 0.5% and 2% of its liabilities in public policies, including education and infrastructure.