Competitive Advantages
Our strong position in the Brazilian private sanitation market and future prospects stem from the following factors:
Well-established and cash-generating operation. Corsan is the largest sanitation company in the State of Rio Grande do Sul (Brazil), where it has operated for more than six decades with consistent results. Just one year after privatization, Corsan’s EBITDA margin exceeded 50%, reflecting the reduction of operational costs and expenses as well as the expansion of wastewater services.
Predictable cash generation and low revenue risk exposure. We operate an essential basic service with very inelastic demand. Unlike state-owned sanitation companies, our tariffs are contractually predetermined and indexed to inflation rates, ensuring stable and predictable returns for the Company and our shareholders.
In addition to sector-specific characteristics, Corsan stands out for its extremely low revenue concentration across contracts. The largest concession operated by Corsan is in the municipality of Canoas, which accounts for 6% of the company’s annual net revenue.
Potential for value creation. Corsan has great potential for growth and OPEX reduction. Under Aegea’s administration, we have initiated a transformation to capture these opportunities. These include:
- Fixing tariff in real terms with annual adjustments based on the IPCA inflation index. The renegotiations also ensured contract compliance with current legislation (New Sanitation Framework) and the extension of contract terms until 2062;
- Launching a Voluntary Dismissal Program to renew Corsan’s workforce and realign personnel expenses with market practices;
- Reviewing operational and treatment processes to optimize the use of chemicals and other inputs;
- Accelerating the migration of high-voltage electricity loads to the Free Energy Market, among other initiatives.
Economies of scale and synergies with the Aegea Group. Corsan is integrated into the Aegea Group, which operates in various Brazilian states. This allows us to achieve economies of scale in the procurement of supplies and services. Additionally, Corsan benefits from Aegea’s management technology (Aegea Operational Model – MOA) and utilizes the Aegea Administrative Center, which provides shared services across the Group.
Growth potential. Corsan’s primary challenge is to invest in the expansion of sewage coverage, reaching 90% by 2033. These investments will result in new water and sewage connections, generating new cash flows and revenue while reducing our leverage in the short and medium term after the investments are completed.
High quality and excellence in services provided and creation of shared value. We follow high service standards and employ the best technology available in the basic sanitation sector to control the quality of water we collect, process and supply. We have our own laboratories and also use outsourced labs to monitor the quality of treated water and sewage, as required by the Company’s internal standards and by law.
We have a department dedicated to combating losses in water distribution and which works on diverse fronts, from detecting leaks using cutting-edge software to investing in improvements and maintenance of the distribution network. On the commercial front, we work to identify fraud and renew the hydrometers in order to reduce revenue losses.
In order to replicate our business model, in 2014 we created the AEGEA Academy, our own educational institution, which trains people in order to add the best practices from the more experienced concessionaires to the new ones.
Our goal is to create value, together with all concessionaires, by employing efforts to promote health, environmental education and universal access to water and sewage treatment. These efforts need constant communication with local governments, communities and trade associations in the regions where we operate. We also implement social responsibility programs and initiatives dedicated to improving the Human Development Index (HDI) of the towns where we operate, with the focus on the pillars of Income, Education and Health.