Copasa shares dive on preliminary tariff review

Published April 20th, 2017

Shares in Brazilian water concessionaire Copasa traded down 22% this morning after ARSAE, the regulator in its home state of Minas Gerais, disappointed the market when it announced the preliminary results of its tariff review.

The main gripe seems to have been ARSAE’s assessment of the regulated asset base on which the company will be allowed to earn a return, which came in at BRL9.6 billion ($3.1 billion), considerably below the market’s expectation.

Despite this, there was a relatively favourable outcome in terms of the real weighted cost of capital (13.02%), while the regulator also confirmed that it will authorise the pass-through of the royalties paid by Copasa to six local municipalities.

“This is clearly good news,” wrote BTG Pactual analyst João Pimentel in a note to clients. “Sabesp, for example, loses ~R$400mn/year in payments to the São Paulo city hall fund.”
The final tariff verdict is due in June.