Special: Environmental Engineering
Growth fueled by trust
Foz do Brasil, Odebrecht’s environmental engineering company, welcomes the FGTS Investment Fund to its corporate structure and bolsters its growth in water, sewer and industrial waste treatment
written by: Daelcio Freitas with Juliana Calsa and Virgínia Valle
photos by: Edu Simões
“Ever since the girls were born, I’ve always given them tap water to drink, and I also use it to cook, with no worries. I don’t think we’ll be having any more water shortages, thanks to the work Foz do Brasil is doing,” says Lucinéia, who is still getting used to the concession company’s new name.
The water shortages Lucinéia mentioned used to be a common occurrence in Limeira, a city that was once known around the country for its orange production. Although it is located in the wealthy and industrialized region of Campinas, in this municipality, which is now known as an important gemstone production hub, chronic water shortages used to inconvenience the public and hold back economic and social development.
“I remember it well. We’d go two or three days without water. I had to get up before sunrise to wash clothes and cook. Those were very tough times. The water was yellow and dirty. There was no way we would drink water from the faucet in those days,” recalls Lucinéia.
The Limeira concession began in 1994, the year when Brazil was starting to overcome the negative impacts of the 1980s, the “lost decade.” The country was progressing steadily towards the stability of the Real Plan and was also making timid advances toward effective private-sector participation in public services.
In partnership with the French water company Lyonnaise des Eaux, Odebrecht took on the challenge of running the country’s first private water and sewer concession. Now, Odebrecht subsidiary Foz do Brasil is the sole shareholder, and can celebrate the achievement of running a company that has a public approval rating of over 90% and the lowest water loss rate in the country – 17%, compared with the national average of over 40%. Another factor that sets the municipality apart is 100% sewage collection, of which over 75% is treated, in a country where 27.3 million households still lack access to sewer systems, according to the 2008 PNAD (National Survey of Sample Households) of the Brazilian Institute of Geography and Statistics (IBGE).
According to Renê Soares Filho, President of the SAAE (Water and Sewer Service of the Municipality of Limeira), an independent municipal body that has become the regulatory agency for the concession, the success of these services is due to planning developed jointly by the municipality and the concession company, and the fact that the company views the city and public as clients, and treats them as such. “There’s no room for improvisation and everything is done according to an annual work plan. On a daily basis, the concession company always presents us with positive surprises. They spare no effort to provide the fastest possible service,” explains Soares Filho, who has lost count of the municipalities that seek him out to learn more about the São Paulo State city’s experience.
Limeira’s story is often the same as the recent history of Foz do Brasil, which began its activities in 2007 as Odebrecht Engenharia Ambiental (Odebrecht Environmental Engineering). The other pillar of the company’s development was operations in the industrial sector, through the experiences of Lumina and Cetrel-Lumina, which provide environmental engineering services to companies like Petrobras, Transpetro, Braskem, Quattor, Dow, ThyssenKrupp, Shell and Rhodia.
The Odebrecht Group’s environmental engineering program was then delegated to engineer Fernando Santos-Reis, who returned to Brazil in 2006 after an international career with Construtora Norberto Odebrecht (CNO). At first, it was up to Fernando to form the company with team members recruited from the Group and the job market, and structure assets previously allocated to CNO, such as the PPPs (Public-Private Partnerships) in Rio Claro, São Paulo; Salvador, Bahia (Jaguaribe Project), and Rio das Ostras, Rio de Janeiro, as well as Lumina itself.
During the structuring process, by 2008, as part of the investment program, the company acquired concessions in Mauá, São Paulo, and Cachoeiro de Itapemirim, Espírito Santo, whose investment programs had been stalled, and which, within the structure of Foz do Brasil, could begin investing in their own energy generating facility in Cachoeiro de Itapemirim and the water reuse system in Mauá.
New brand
While the company was being structured, Fernando Santos-Reis invited the Duda Propaganda advertising agency to create a brand with broad nationwide appeal for its sanitation businesses, as well as modernizing the Lumina brand. The agency took on the challenge of escaping the commonplace, and tested the name “Foz” and other possibilities with qualitative surveys conducted in four major Brazilian cities – São Paulo, Salvador, Recife and Rio de Janeiro.
The word “Foz” (estuary or falls, such as the Falls of Iguaçu) tested strongly among those interviewed and was broadly associated with positive feelings about an abundance of clean, fresh, pure water straight from the source. It is a name that communicates the promise of plenty of clean water and respect for the environment. The combination Foz and Brazil built up the perception of a large, credible company that can ensure the public’s safety and peace of mind through its capacity to work hard to improve their quality of life.
“The data gathered through this survey provided the basis for the elements used in this new brand, from the name to the typeface, colors and graphics. The blue circles in the logo set the Foz do Brasil brand apart from the other Brazilian water and sewer companies and contribute to the message of innovation, change and modernity. They also give the idea of movement and suggest synergy associated with the company’s technology,” explains Duda Propaganda director Ana Baruch.
The company’s business development and the possibility of bringing in a partner transformed Odebrecht Engenharia Ambiental into Foz do Brasil and enabled it to follow the same path as ETH Bioenergy, which adds “Odebrecht Group” to its name, another positive association identified in the surveys. “The surveys show that because it is an Odebrecht Group subsidiary, Foz do Brasil has the image of a can-do company that can deliver what it sets out to accomplish,” explains Fernando Santos-Reis.
Accomplishments
Relationships of trust and partnerships that have won the approval of its public and private clients have been key factors behind the numerous accomplishments the company racked up in 2008 and 2009. They started out with two business deals with the private sector: VSB (Vallourec & Sumitomo Tubos do Brasil) and Aquapolo, which represent a total investment of roughly BRL 700 million.
In 2009, Foz do Brasil won a contract to invest in and operate the Brazilian steel industry’s largest utilities plant, part of the VSB steel mill in the Minas Gerais county of Jeceaba, which will produce seamless OCTG (Oil Country Tubular Goods) – casing and tubing used in the oil industry. This project includes the construction, operation and maintenance of water, wastewater and waste treatment systems and the internal distribution of electric power in the new steel mill under a DBOT (Design Build, Operate and Transfer) contract.
According to VSB President and CEO Otávio Sanábio, Foz do Brasil’s spirit of partnership and capacity to come up with innovative solutions were key factors in his company’s decision to award the Odebrecht company this contract. “There were other important players in the running, but Foz do Brasil set itself apart from the competition by offering a solution that will allow us to focus on the steel business with complete peace of mind, because we have limited environmental management resources,” explains Sanábio.
The SPP (Specific-Purpose Partnership) responsible for the project will include Copasa, a Minas Gerais state sanitation company. The partners will also tender bids to provide water and sewer services in other counties in that state.
The Aquapolo Project, the partnership with Sabesp (Brazil’s leading sanitation company), will make it possible to carry out the largest water reuse project in the Southern Hemisphere and the fifth-largest of its kind in the world. A new treatment plant will use effluent obtained from the ABC sewage treatment plant, located on the boundary between São Paulo and São Caetano do Sul counties. It will produce water for industrial use at the ABC Petrochemical Complex, one of Brazil’s most important industrial parks.
Aquapolo will also be equipped to service other factories at the complex and the ABC region (an industrial area in Greater São Paulo), because the system will have a flow capacity of 1,000 liters per second, while the total requirement of the companies at the complex is 650 liters/second. In addition to cutting-edge technology, the project will include a 16.5-km pipeline that will be installed with a challenging deadline: just 24 months. To build the project, the SPP will be able to rely on the expertise of CNO, working under an EPC (Engineering, Procurement and Construction) contract.
“Wastewater will be treated so it can be used for industrial purposes, making more potable water available for human consumption and cleaning up the rivers. The time when industry used potable water is coming to an end,” says Eduardo de Melo Pinto, Regional Director of Foz do Brasil in the ABC region. Sabesp views this partnership as key to growing investments, production and jobs in the petrochemical industry. “It is an example of how two companies from the public and private sectors can join forces to protect the environment and drive development,” says Sabesp President Gesner Oliveira.
Partner
In 2007, the Board of Trustees of the FGTS (Brazil’s Government Severance Indemnity Fund) created the FI-FGTS (Infrastructure Investment Fund), which makes it possible for workers’ resources to be invested in infrastructure works, including basic sanitation projects. Regulated by Law no. 11.491/07, published when the Federal Government introduced the Growth Acceleration Program (PAC), the fund is intended to increase infrastructure investments and give a boost to Brazil’s economic growth.
According to the Federal Government, providing universal sanitation (water and sewer systems) in Brazil will cost BRL 270 billion. The IBGE’s PNAD in 2008 found that households with access to sewer systems rose from 51.1% in 2007 to 52.5% in 2008, an increase of just 1.4%. The Federal Government made BRL 19 billion available for sanitation through loan agencies between 2003 and 2008, but just BRL 2.8 billion were released for a very simple reason: there were no projects to finance.
In September 2009, after nearly a year of negotiations, the FI-FGTS acquired a 26.53% stake in Foz do Brasil, which added BRL 650 million to the company’s equity. It was the fund’s first investment in sanitation and its largest equity investment, although it also owns stakes in other infrastructure projects.
Added to Foz’s BRL 3.6-billion investment plan, these funds will immediately benefit 3 million people who already use the company’s water and sewer services in 19 towns and cities, in addition to residents of the counties where Foz do Brasil will be working in the future, either individually or in partnership with public-sector companies, thereby increasing the possibilities of further consolidations of the private sanitation market with a focus on creating new investment opportunities.
“Our expectation is to transform this partnership into a model that could set an example for the sanitation sector in Brazil. It does not matter if the partner is public or private. The important thing is to seek efficiency so that we can manage workers’ resources in a way that will make the difference in creating more jobs and providing universal sanitation,” says Paulo Furtado, Secretary General of the FGTS Board of Trustees.
“It is a pleasure for us to have the FI-FGTS as a partner in Foz do Brasil because we are both on the same page. We share the long-term outlook that this sector requires, and the challenging goal of bringing forward the universal availability of water and sewage treatment throughout Brazil by supplementing public investments,” observes Fernando Santos-Reis.
Espírito Santo
The efficient operations Paulo Furtado champions can already be seen in some of Brazil’s state-owned companies, which are benefiting from professional management and specific-purpose partnerships with private-sector companies. One example that is already attracting attention can be found in Espírito Santo, a state that decided to invest heavily in sanitation after bringing about the financial recovery of CESAN, the state’s sanitation company, in 2003.
Through the Clean Water Project, which is improving the lives of 1.2 million people in seven cities in the Vitória metropolitan region, the state capital is on its way to becoming the first major Brazilian city to treat 100% of its sewage. According to Espírito Santo Sanitation, Housing and Development Secretary Paulo Rui Carnelli, the state government’s will to solve the sanitation issue was bolstered by the fact that it had a company with surplus funds, which was key to making investments. “We are restoring an entire ecosystem, including several beaches and mangroves, which are essential to quality of life in this state,” he says.
A decisive boost for municipal governments
Paulo Rui recognizes the importance of the support provided by Foz do Brasil and Odebrecht, which are responsible for the operation and maintenance of the sewer systems and treatment plants in the metropolitan region. He believes that the factor that sets the partnership between Foz and Cesan apart is providing quality services instead of outsourcing, which is a common practice in some parts of Brazil. “The public and private sectors aren’t competing. Instead we have people doing a good job with a single goal. This partnership with Foz do Brasil has streamlined our project,” adds Paulo Rui.
Talented people making history
In the sanitation sector, Foz do Brasil’s strategy will always be to supplement the needs of public services by working with state companies and/or independent municipal service providers to leverage investments and make universal water, sewer and sewage treatment services a thing of the near future. “One of Foz do Brasil’s objectives is to play a major role in solving the ‘water crisis’ by working in water conservation and rebuilding and restoring degraded ecosystems and river basins,” says Fernando Santos-Reis.