By Brazil Stock Guide – Privatized water utility Sabesp (SBSP3) has transferred R$ 3.6 billion to sanitation and infrastructure funds serving 220 municipalities in São Paulo state, creating an additional source of funding for local projects ranging from urban drainage to flood prevention and environmental restoration.
Another 151 municipalities covered by Sabesp’s concession have yet to qualify for the transfers, but may join the mechanism once they establish their own funds and meet the regulatory requirements.
The payments are part of a broader structure designed to combine Sabesp’s direct investments in water and sewage infrastructure with locally managed spending on complementary urban projects.
Under the concession agreement, eligible municipalities generally receive an amount equivalent to about 4% of the net revenue generated by Sabesp within their jurisdictions. The transfers are expected to continue until the concession expires in 2060.
São Paulo City Accounts for a Large Share
The R$ 3.6 billion total includes both regular transfers and advances on future payments made as part of the transition to the new concession model.
São Paulo city received R$ 2.28 billion as an upfront payment in 2024, accounting for a significant share of the statewide total. The amount represented an advance on revenue that the capital would otherwise have received over subsequent years through its municipal sanitation fund.
The concentration reflects the size of Sabesp’s operations in the capital, which is by far the company’s largest market, as well as the specific terms governing transfers to the city.
São Paulo already had its own Environmental Sanitation and Infrastructure Fund, known as FMSAI, before the privatization. The new concession preserved the funding mechanism and allowed part of the future revenue stream to be brought forward.
That means the R$ 3.6 billion figure should be viewed as a combination of recurring payments and accelerated transfers, rather than solely as a new annual revenue stream.
A Long-Term Source of Municipal Funding
The structure gives municipalities access to a predictable source of funding linked to Sabesp’s operations in each city. Unlike federal or state grants that may depend on annual budgets or individual project approvals, the municipal-fund payments are embedded in the concession agreement and can continue through 2060.
The money can be used for projects including urban drainage, flood-control systems, restoration of degraded areas, environmental recovery, sanitation programs and improvements in underserved communities.
The funds are intended to complement Sabesp’s own obligations. While the company is responsible for expanding water supply, sewage collection and treatment, local governments may use their allocations for projects that improve the wider urban environment.
This is particularly relevant for drainage and flood prevention, areas that are closely connected to sanitation but usually remain under municipal responsibility.
151 Municipalities Can Still Qualify
Of the 371 municipalities covered by Sabesp’s concession, 220 have already obtained authorization to receive the payments. The remaining 151 municipalities must complete a legal and administrative process before they can access the funds.
Each city must establish a municipal sanitation fund through local legislation, create a dedicated governance structure and include at least one civil-society representative in its management. Municipalities must also maintain an updated local or regional sanitation plan. Final authorization is granted by Arsesp, São Paulo state’s public-services regulator.
The state government has been providing technical guidance to help local administrations structure their funds and meet the necessary requirements.
São Paulo state Environment, Infrastructure and Logistics Secretary Natália Resende said the mechanism could strengthen municipal investment capacity and accelerate projects in areas such as drainage, housing and forest restoration.
Local Projects Begin to Take Shape
Itatiba, located about 80 kilometers from São Paulo, is among the municipalities already using the funding mechanism. The city has deployed resources to support a pilot biodigester project, prepare a rural sanitation plan and help finance urban-cleaning services, including recycling collection.
Itatiba is also evaluating projects aimed at identifying and reducing illegal connections to the sewage network. The example illustrates how municipalities may use the funds for projects that extend beyond traditional water and sewage infrastructure while remaining connected to sanitation and environmental policy.
For smaller cities with tighter budgets, the transfers can provide continuity to programs that might otherwise compete with health, education and other mandatory expenses.
Sabesp Accelerates Its Own Investment Program
The municipal transfers are taking place alongside a sharp increase in Sabesp’s direct capital expenditure.
The company invested R$15.2 billion in infrastructure in 2025, up 120% from R$6.9 billion in the previous year.
Sabesp plans to invest about R$70 billion through 2029 as it works to expand water and sewage services across its concession area.
The company is required to achieve universal access to water and sewage services by 2029, four years ahead of the 2033 target established under Brazil’s national sanitation framework.
The investment program includes expanding distribution networks, increasing sewage collection and treatment capacity and connecting low-income neighborhoods and other underserved areas.
Two Complementary Investment Channels
The concession model effectively operates through two channels.
The first is Sabesp’s own capital-spending program, focused on expanding and modernizing water and sewage infrastructure.
The second directs part of the revenue generated by the utility back to municipalities, allowing local governments to finance drainage, flood prevention, environmental recovery and other complementary projects.
The R$3.6 billion transferred so far includes a large upfront payment to São Paulo city, but it also highlights the scale of the municipal funding mechanism embedded in the concession.
As more cities qualify, the program could broaden the distribution of resources across the state and strengthen the ability of municipalities to invest alongside Sabesp.
The longer-term significance of the model lies less in the initial headline amount than in the recurring flow of funding it can generate through 2060 — provided local governments establish the structures required to receive and manage the money.
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