annual report 2017

Water treatment station, Limeira, São Paulo

BRK AMBIENTAL

Brookfield completed the acquisition of 70% of BRK Ambiental in April 2017 with FI-FGTS holding the remaining 30%.

BRK Ambiental is the largest private sanitation company in Brazil. The company provides water and sewage treatment in 184 municipalities and recycles water to industries, through 26 Specific Purpose Companies (SPEs) operated under concessions, PPPs and service provision. The company provides jobs for over 5,000 employees in its operations and serves a population of approximately 15 million people.

The year 2017 was activity-intense for the company, from the switch to the BRK Ambiental brand, achieved in a record 100 days, to the adoption of a new organizational structure, evolving the business culture, preserving operational knowledge and excellence and adding a series of new processes and controls.

In May 2017, the company initiated the program to become compliant with the Sarbanes-Oxley Law (SOX), and this was achieved in February 2018. With respect to the quality of products and services, a new Water Quality Program was developed, centralizing and standardizing the procedures.

The company closed 2017* with net operating revenue of BRL 1.9 billion, a 9% growth over 2016. EBITDA reached BRL 786 million, 6% higher than the previous year. Investments totaled BRL 545 million, growth of 15% when compared to the BRL 473 million made in 2016.

 

 

OUTLOOK

BRK Ambiental operates in a segment that is vital to the health and well-being of the population and the protection of the environment. Brazil has had a historical deficit in access to quality sanitation and improvement requires significant investments. According to data from the Brazilian National Sanitation Information System (SNIS), 52% of the Brazilian population does not have access to sewage treatment, which represents over 100 million people. Regionally, the North has the least access, with only 11% of the population served by the sewage system, followed by the Northeast (27%), South (43%), Midwest (52%) and Southeast (79%). In addition, 17% of the population does not have treated water, while 37% of the treated water is lost, with an estimated cost of BRL 8 billion per year.

Currently, private sanitation companies serve only 15% of the Brazilian population, with BRK Ambiental representing around 40% of this percentage. The Federal Government’s goal is to universalize basic sanitation by 2033, which would require investments of approximately BRL 20 billion per year. Due to the well-known budget restrictions, this goal will only be possible with a more significant participation from the private sector.

BRK investments have already promoted major transformations in several cities and regions of the country. In Blumenau (Santa Catarina), the rate of treated sewage in 2010, when the company began its operations on the site, was only 4.8%. Today, this rate exceeds 40% and the universalization of the services should occur by 2027. In Uruguaiana (Rio Grande do Sul), the rate of treated wastewater jumped from 8% in 2011 to 90% and will be available for the city’s entire urban population in 2019. The municipality of Limeira (São Paulo), where this rate was only 2% in 1990, has already reached 100% of treated sewage. Palmas, the capital of Tocantins, is another city that has already reached universalization of the sewage networks. BRK defined an aggressive investment plan to advance even further, which foresees BRL 7 billion in investments over the next five years.

Aquapolo, São Paulo