Water loss in publicly managed centralized systems globally present a loss ranging between 40- 55% of all water produced. Approximately half that loss is captured in low metering rates and the other half is accounted for in physical losses.
Recently, a new breed of contracts, termed as performance contracts, have proliferated within municipal authorities, and regulated by all spheres of law. (Refer to Legal Due Diligence, Pelotas Contract).
The genesis of these contracts lie in the public sector’s inability to invest in technology and services given the absentia of debt bearing capacity coupled with archaic procurement laws.
While several players have begun to mobilize to target these opportunities, there has been a vacuum of well-funded and well-designed initiatives. The few that have been technically sound are sponsored by larger groups eyeing these contracts as stepping-stones into a full water / wastewater services concession.
CG/LA has designed a vehicle where we focus only on the performance contracts and have developed a pipeline of vetted opportunities in the Brazil. The opportunities tenure 60 month contracts, and all yield IRRs in the range of 45-45%, as exemplified by the due diligence on the city of Pelotas (project in execution).
Each project is set up as a special purpose company, where the engineering and technical procurement is outsourced. The company is strictly a management shell with a tax efficient structure to remit dividends to its shareholders. Investments can be made into individual SPCs or clumped together at CG/LA’s local LLC. CG/LA has developed both an engineering/ procurement team with seasoned professionals as well as a pipeline of investable opportunities.
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