São Paulo sold control of Sabesp in 2024, raising R$14.8B to fund universal water

Sabesp, the water and sewage utility of São Paulo state, was profitable but trapped: Brazil's 2020 sanitation law required universal water and sewage coverage by 2033, a capex programme the state-controlled company could not fund from its own cash flow or the state's strained budget.

Governor Tarcísio de Freitas chose privatisation over gradualism. After the state legislature approved the sale in late 2023, Sabesp structured a global secondary offering registered with the SEC on Form F-3, pricing 191.7 million shares — including 1.79 million ADSs — at R$67.00 per share (US$12.14 per ADS) on July 18, 2024.

Demand was strong enough that underwriters exercised the full 15% overallotment: 220,470,000 shares settled on July 22, 2024, all sold by the state as selling shareholder. Equatorial Energia came in as the anchor investor, and employees and retail investors took reserved tranches.

The sale cut the state's stake below control while keeping a golden share, and repositioned Sabesp as a privately managed utility with a contractual obligation to universalise service in its concession area by 2029 — four years ahead of the national deadline.

The state sold 220,470,000 shares at R$67.00 (US$12.14 per ADS) — roughly R$14.8B gross — and ceded majority control to private capital.

The 2033 universalisation mandate created a hard deadline the state budget could not meet alone.

Pricing at R$67 with a full overallotment showed private appetite for regulated Brazilian sanitation assets.

An anchor investor plus employee and retail tranches spread political and market risk.

Privatisation tied capital access to service obligations inside the concession contract.

When a public mandate outruns the state's balance sheet, selling control to private capital converts an unfundable obligation into an investable one.

The offering was Brazil's largest equity deal of 2024 and became the template for other state sanitation sales. Sabesp committed to investing tens of billions of reais to reach full coverage in São Paulo by 2029, and its shares rose after the privatisation as private management set efficiency targets.