1
Presentation of the Project
CEDAE
Investment Partnership Structuring Area (IPS) November 2020 2 Summary
1. Context
2. Project Overview
3. Schedule
4. Engineering Studies - Capex
5. Financial Modeling
6. Legal Aspects
7. Performance Indicators 3 1. Context // Disclaimer
DISCLAIMER
The conclusions presented here result from the analysis of quantitative and qualitative data, as well as from projections of future events, which are expected by the State Government of Rio de Janeiro, CEDAE and their advisors, at the time of the analysis. These future events might not occur and the results presented may differ from actual figures.
The use of different sources of information and the application of different data processing methodologies may result in differences between the content of this presentation and the content of documents that have the same purpose of this work.
The information contained in this presentation is merely reference information and should not be considered, in any way, as binding information for future concessions that might be tendered. 4 2. Overview // CEDAE
CEDAE is a mixed-economy State Company founded in 1975. It currently serves 64 of the 92 municipalities in the State with water supply services and 23 of the municipalities with sanitation services.
FINANCIAL DATA ► Total Operating Revenue: R$ 6.1 billion
► Average Practiced Tariff: R$ 4.66/m³
EMPLOYEES (Dec/2018) CONNECTIONS ► 7,500 (CEDAE + Contractors) ► Water: 2.374 thousand
► Sewage: 988 thousand URBAN POPULATION SERVED IN CEDAE MUNICIPALITIES ► Water: 12.15 million inhab. NETWORK EXTENSION ► Sewage collection: 6.02 million inhab. ► Water: 23,470 km ► Sewage treatment: 3.62 million inhab. ► Sewage: 8,271 km
Source: SNIS 2018, Financial Information 2019, RADF 2019 5 2. Overview // REGIONALIZATION
ALIGNMENT BETWEEN INVESTMENT, INSTALLED STRUCTURE AND POPULATION
Block 2: Barra, Jacarepaguá + 4 counties
. Pop: 1,2 Mi people Block 1: Zona Sul + 28 . Capex: R$ 2,7 Bi counties
. Pop: 3 Mi people Block 3: Zona Oeste . Capex: R$ 10 Bi + 6 counties
. Pop: 1,9 Mi people . Capex: R$ 2,6 Bi Block 4: Centro, Zona Norte + 8 counties TOTAIS: . Pop: 13,1 Mi People (90% CEDAE) . Pop: 7 Mi people . Capex: R$ 31 Bi . Capex: R$ 15,7 Bi . Counties / Cities : 47 6 2. Overview // Universalization Premises and Targets
The targets for universalisation of the services for the municipalities are as follows WATER 99% according to the deadlines in the table below.
5 years 8 years 10 years 12 years Bom Jardim, Cambuci, Cantagalo, Carapebus, Casimiro de Abreu (Barra de São João) Cordeiro, Duas Barras, Itaocara, Aperibé, Cachoeiras de Laje do Muriaé, Macuco, Magé, Maricá, Miracema, Block 1 AP 2.1 Macacu, Itaboraí, São Natividade, Quissamã, Rio Bonito, São Francisco do Gonçalo, Itabapoana, São José de Ubá, São Sebastião do Alto, Sapucaia, Tanguá, Trajano de Morais, Sumidouro, Vassouras, Miguel Paty de Alferes Block 2 Pereira AP 4 - Pinheiral
Eng. Paulo de Frontin, Itaguaí, Paracambi, Block 3 AP 5 Piraí, Rio Claro, Seropédica Belford Roxo, Duque de Caxias, Mesquita, Nilópolis Block 4 Japeri, Queimados, AP 1, 2.2 e 3 - Nova Iguaçu, São João de Meriti 7
2. Overview // Universalization Premises and Targets
Proposed adjustment of the expansion targets to the new sanitation framework
SEWAGE 90% according to the deadlines in the table below. - AP-5 Sewage is not included in the scope and AP 2.1 Sewage is already on target
5 anos 12 Anos Aperibé, Bom Jardim, Cachoeiras de Macacu, Cambuci, Cantagalo, Carapebus, Casimiro de Abreu (Barra de São João) Cordeiro, Duas Barras, Itaboraí, Itaocara, Laje do Block 1 - Muriaé, Macuco, Magé, Maricá, Miracema, Natividade, Quissamã, Rio Bonito, São Francisco do Itabapoana, São Gonçalo, São José de Ubá, São Sebastião do Alto, Sapucaia, Tanguá, Trajano de Morais, Sumidouro,
Block 2 Vassouras, Miguel Pereira Rio de Janeiro – AP 4, Pinheiral, Paty de Alferes
Itaguaí, Seropédica, Paracambi, Piraí, Eng. Paulo de Frontin, Rio Block 3 - Claro
Rio de Janeiro - AP 1, 2.2 e 3, Belford Roxo, Duque de Block 4 Japeri, Queimados Caxias, Mesquita, Nilópolis, Nova Iguaçu, 8
Next steps / Schedule
3 Public Hearings Public auction Public Consultation Period July and August 2020 June – August 2020 1st quarter 2021
Beginning Concession Period
Study stage and June – July 2020 Contract Signature selection of best Meeting with investors practices Publication of the Bidding Notice 4th quarter 2020 1st Semester 2021 Until June 2020 9 4. Engineering Premises // CAPEX - Block 1
1.000
900
800
700
600
500
400
300
200
100
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
ÁGUA ESGOTO
CAPEX WATER SEWAGE R$ 10 billion
CAPEX - SAA Bloco 1 Abstraction and CAPEX - SES Bloco 1 well 7.89% Lifts 10.38% 12.61% 2.67% Network and Piping 3.40% Connection 4.54% Lifts Treatment 11.01% 2.61% Reservoir Discharge 16.53% Network and 6.97% STP and Drying 18.61% Connection Hydrometer 1.32% 65.33% Other Other 3.03% Reinvestments 33.08% Reinvestments
Note: Non-binding reference values. Values in R$ Thousand. 10 4. Engineering Premises // CAPEX - Block 2
350
300
250
200
150
100
50
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
ÁGUA ESGOTO
CAPEX WATER SEWAGE R$ 2,7 billion
CAPEX - SAA Bloco 2 Abstraction and CAPEX - SES Bloco 2 well 2.10% 2.26% Lifts 5.84% 10.51% 2.87% Network and 3.99% Piping Connection 13.26% Lifts 1.22% Treatment 17.84% Reservoir Discharge 8.24% 20.52% Network and STP and Drying Connection 0.94% Hydrometer 2.70% Other 69.81% Other 37.90% Reinvestments Reinvestments
Note: Non-binding reference values. Values in R$ Thousand. 11 4. Engineering Premises // CAPEX - Block 3
350
300
250
200
150
100
50
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
ÁGUA ESGOTO CAPEX WATER SEWAGE R$ 2,6 billion
CAPEX - SAA Bloco 3 Abstraction and CAPEX - SES Bloco 3 well 1.56% 1.27% 6.05% Lifts 10.66% 4.34% Network and Piping 3.82% Connection 11.83% 0.29% Lifts Treatment
18.25% Reservoir Discharge 11.73% Network and STP and Drying Connection 50.01% Hydrometer 32.25% Other Other 44.69% Reinvestments Reinvestments 0.75% 2.51% Note: Non-binding reference values. Values in R$ Thousand. 12 4. Engineering Premises // CAPEX - Block 4
1.800
1.600
1.400
1.200
1.000
800
600
400
200
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
ÁGUA ESGOTO CAPEX WATER SEWAGE R$ 15,7 billion R$ 4.6 billion R$ 11.3 billion
CAPEX - SAA Bloco 4 Abstraction and CAPEX - SES Bloco 4 well 1.54% 3.05% Lifts 10.73% 13.34% Network and 3.77% Piping Connection 2.48% Lifts Treatment 21.43% Reservoir Discharge 16.34% 0.14% Network and STP and Drying 23.49% 8.01% Connection Hydrometer 66.07% Other 0.27% Other 1.50% Reinvestments 27.85% Reinvestments
Note: Non-binding reference values. Values in R$ Thousand. 13 6. Legal aspects // Legal security of the model
Termination of previous agreements and execution of new joint management instruments between holders and the State of RJ
Metropolitan AGENERSA municipalities
FRAMEWORK AGREEMENT
Deliberative Council
Concession Block agreement Interdependence of the 1
Metropolitan WATER SUPPLYOF Region State of Rio de Concession Block 2 Janeiro Non-Metropolitan Concession Block
municipalities 3
Concession Block Agreement 4 Management Agreement 14 6. Legal aspects // Modeling and best practices
Bidding Process: International Invitation to Bids divided into four lots
International Invitation Technical qualification Judgement Criterion Stages Inversion to Bids criteria
Highest Bid (65% of the fixed Bidding Process by B3 concession fee up front, 15% of Bid Security Proof of fundraising for the fixed concession fee within 2 infrastructure venture in any working days after the transfer of sector the operation and 20% after 3 Simultaneous bids for more than years of the transfer of the Bid Proposal one lot allowed operation Sum of certificates allowed
Qualification Use of the same quantities for more than one lot not allowed
In the event of a surplus quantity, the difference shall be used for the subsequent lot. 15 6. Legal aspects // Modeling and best practices
Bidding Process: The bidder may participate in one or more blocks
• Fundraising in • Fundraising in To participate in more than one lot, the Bidder the amount of the amount of must prove compliance with the technical R$ 1.59 billion R$ 1.066 billion qualification requirements for each one of the lots, and the use of the same quantity for more than LOT one lot shall be prohibited. LOT I II The excess value of a certificate may be used for qualification in another lot, provided that the rules for summing and minimum fundraising are respected. LOT LOT Sum of certificates allowed, provided that III IV at least one certificate attests to 20% of the • Fundraising in • Fundraising in value of the funding. the amount of the amount of R$ 702 million R$ 651 million The use of certificate with funding of less than R$ 15 million shall not be allowed. 16 6. Legal aspects // Modeling and best practices
Conditions precedent for executing the agreement
Incorporation of an SPE with submission of bylaws and shareholders' agreement
Proof of subscription of minimum capital and performance bond
Reimbursement of BNDES studies and B3 services
Proof of payment of 65% of the fixed concession fee
Appointment of the Arbitral Chamber linked to the concession agreement 17 6. Legal aspects // Modeling and best practices
Concession agreement for water and sewage services
Object: water supply services to users and collection, treatment and final disposal of sanitary effluents in the concession area.
Term: 35 years of operation + 6 months of assisted operation.
Concession area: 4 blocks composed by the urban areas of the municipalities served, in addition to the irregular areas of the City of Rio de Janeiro. Concession Remuneration: tariff revenues and revenues from supplementary services, after performance measurement and additional revenues.
Consensus: promotion of alternative dispute resolution mechanisms with attributions aimed at resolving technical differences.
Unbiased assessment: hiring an independent verifier and certifier to monitor the performance and investments of the concession. 18
7. Performance Indicators // Assignment of Responsibilities
Assignment of Responsibilities
The evaluation process involves 3 entities and comprises the measurement, monitoring and calculation of the indicators as follows:
Concessionaire: Responsible for measuring the indicators, preparing the indicator reports and providing the necessary information to the REGULATORY AGENCY and the Independent Verifier.
REGULATORY AGENCY: Responsible for monitoring the CONCESSIONAIRE's performance and shall request and receive additional information from the Concessionaire whenever necessary.
Independent Verifier: Specialized company responsible for verifying the indicators report and carrying out the field investigations necessary for assessing the results measured. This is a company that has no links to the CONCESSIONAIRE, and which will verify the process and the accuracy of the data provided by the CONCESSIONAIRE, independently validating the performance achieved during a certain period of time. INDEPENDENT VERIFIER shall be hired in accordance with ANNEX V - MINIMUM TERMS AND CONDITIONS FOR HIRING INDEPENDENT VERIFIER AND CERTIFIER. 19 7. Performance Indicators // Calculation Methodologies
Measu Measure Performance remen ment Indicator Description Formula Measurement Units t Frequenc (Port.) Units y AG013: Number of water residential units with Urban Water Supply IAA 100*(AG013/ G003) % Annual potential connection Service Index G003: Total number of urban residential units
100*(AG006 + AG006: Volume of water produced Distribution Loss AG018 - AG010- AG010: Volume of water consumed IPD % Annual Index AG024)/(AGOO6+AG AG018: Volume of imported treated water
018-AG024) AG024: Volume of service water
NRCtime: Number of complaints regarding the SCI = Continuity of water continuity of supply met on time (48h) Water IDA 100*NRCperiod/NRC % Annual supply NRCRegister: Number of registered complaints and registration requests QD 006 - Number of Samples for residual chlorine + turbidity + colour + odour at the WTP outlet IQA Water Quality Index 100*QD007/QD006 % Daily QD 007 - Number of Samples for residual chlorine + turbidity + colour + odour at the WTP outlet with Operational Performance IndicatorsOperationalPerformance non-standard results ES003: Number of sewerage residential units with Urban Sewerage IAE 100*(ES003/ G003) % Annual potential connection Service Index - IN047
Sewage G003: Total number of urban residential units 20 7. Performance Indicators // Calculation Methodologies
Measurem Performanc Measurem Description Formula ent Measurement Units e Indicator ent Units Frequency A - Number of 24-hour composite samples for
measurement of BOD5
Sewage Treatment
IQE 100*A/B % Monthly Compliance Index - IN 100 B - Number of 24-hour composite samples for measurement of BOD5 with non-standard result A: Irregular Areas Service Amount invested in irregular areas Water & Sewage IAI 100*A/B % Annual Index B: Expected investment amount, according to the project schedule
User Satisfaction Index - 100*QSA/QS QPA: Satisfaction surveys that meet quality standards ISU Annual USI T % Management QPT: Total satisfaction surveys Performance A - Number of services performed within the period Indicators Efficiency Index for established in the Service Order RDR Network or Water Branch 100*A/B % Annual Clearance Repair - NCR B - Total number of services
A: Number of facilities with valid operating license or Documents Regularity 100*QLV/QI IRD Annual concession Index - DRI T % Environmental B: Total number of facilities Performance A: Number of installations performed and in operation Dry Weather Collector according to the schedule Indicators CTS 100*A/B % Annual Performance Index - DWC B: Number of installations established in the schedule Portal BNDES www.bndes.gov.br
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