With the particles of dirt already aggregated into clumps and therefore acquiring more weight than the water, the decantation process begins, with dirt being deposited on the bottom of the decanting tanks.
Aegea operates in a market that encompasses 93% of the municipalities in Brazil, which are also served by local authorities or state basic sanitation companies – the private market currently accounts for only 8.7%. Nevertheless, the Company is forecasting intense growth, motivating it to follow its trajectory towards leadership in the water and sewage treatment services sector.
Two strategic fronts have been defined to grow the Company’s market share: gains in operational efficiency and expansion of the coverage area. In relation to savings of scale and optimization of resources, the concessionaires count on support from the Aegea Administrative Center (CAA) and Aegea Engineering (learn more). Also notable is the work of the Efficiency and Technology Center, which develops the Loss Management and Control System, and of the Loss Management Program, which covers actions integrated into the commercial, engineering and social responsibility areas (learn more).
Provision of public services through municipal concessions allows for long-term contracts and, within our contracts, we have a customer portfolio with 87.2% residential users, better distributing the portfolio of receivables and therefore making it more secure.
Private sanitation market (%)
Competitive advantages
Firmly based on differences that make it outstanding in the sector, Aegea mixes rationality to adapt to regulations with sensibility to identify the demands of society. Notable among its biggest competitive advantages are:
Exclusive action in sanitation | Efforts are focused on treating and distributing water and on sewage treatment.
Focus on performance | The business model is structured so as to achieve results and operational efficiency.
Capacity to raise funding | With access to capital sources in Brazil and abroad, the Company has become a vehicle with operational excellence for financial agents.
Flexible management model | Aegea is able to replicate a standard concession model, applicable to regions with populations of 13,000 to 854,000. This flexibility brings positive returns to shareholders and better quality services provided to the population.
Attraction and retention of talent | The Company invests in development of employees so that they can undertake challenges and grow professionally in pace with Aegea as it grows its presence nationwide (see the following item).
Aegea maintains a flexible management model, applicable to regions with populations of 13,000 to 854,000
One of the chief factors in Aegea’s growth is constant investment in its intellectual capital. In this sense, it is worth noting the Aegea Administrative Center (CAA) in Santa Bárbara d’Oeste (SP), which works with management of training and qualification courses. Through knowledge management, the Company’s standard concession model can be applied to new acquisitions, which also results in attracting and retaining talents.
In 2014, after maturing this method of operation, the Company set up the Aegea Academy, a new corporate education system that seeks to consolidate and spread competencies acquired in the water and sanitation sectors.
This structure is the result of in-depth studies done at the Nascentes do Xingu (MT), Águas Guariroba (MS) and Prolagos (RJ) unit and at corporate departments, such as the CAA. These studies allowed for a diagnosis of asset management and an in-depth staff analysis, aimed at noting the potential of employees and where they want to and can reach. That way, each employee can plan their career and learn the competencies that they need to develop.
In the first half of 2015, activities began at Aegea Academy with financial management modules for all trainees, directors and some managers. In the second half of the year, modules were administered related to maintenance planning and control and alignment between strategic planning and day-to-day tactics. A total of 317 employees took part in this learning. All received Academy certificates, with certificates issued by institutions recognized by the Ministry of Education (MEC) for undergraduate courses.
Aegea Academy is expected to consolidate in 2016, when it will have the capacity to educate up to 400 professionals. The Academy should triple in size by 2018.
Three-dimensional action Activities at Aegea Academy are structured on three dimensions: levels of knowledge (operational, tactical or strategic); degree of maturity of concessions (0 to 5 years old, 6 to 15 years old, and 15 to 35 years old); and types of assets (physical, human, information, financial and intangible). Courses are therefore developed in accordance with the particularities of concessions.
From the outset, Aegea has been based on ethical principles, shared with all employees, partners, suppliers and shareholders through the Code of Ethics. This is an instrument that heightens the transparency of the Company and its controlled companies in relations with stakeholders, in addition to clarifying standards of conduct for conducting business and making decisions.
Notable among the topics of the code are principles of social justice and respect for human rights; criteria for contracting suppliers and service providers; and government relations, especially regarding the creation of public policies and compliance with applicable legal standards and regulations.
Since 1997 – with the publication of Law No. 9,504, the so-called Elections Act – public service concessionaires are among the sources prohibited from making contributions, as listed in article 24. Notwithstanding, a decision by Brazil’s Federal Supreme Court (STF) in 2015 ruled that company donations to political parties are unconstitutional, communicating this theme much more clearly to society. Like its concessions, Aegea therefore makes no donations to political parties or to individual politicians. GRI G4-SO6 | G4-DMA Public policies
Further reinforcing its commitment to this theme, the Company invests in specific training for employees that have relationships with government and political bodies, while also maintaining the Ethics Channel, a portal created in 2012.
In 2016, Aegea Academy held an internal seminar on Compliance and Integrity, geared towards all Directors and key executives at all business units. This two-stage training course was aimed at educating the company’s leaders on bad business practices and corruption. The first stage provided an overview of this topic, with history, applicable concepts, principles, objectives and the main rules of the law. Focused on practical application to the Aegea Group’s operational activities, as well as to the professional routine of each participant, this stage also included case studies and analysis and discussion of typical situations.
In the second stage, the conditions established in D&O Insurance were covered along with the Aegea Group’s integrity policies, with an explanation of the ‘Manual of Ethics and Conduct’ and a description of how the ‘Safe Contact’ Reporting Channel works. The seminar culminated in the creation of the Integrity Management Group, made up of four internal professionals, from different areas of operation and regions, with the purpose of continuing the enhancement, expansion and spread of Aegea values and principles.
In relation to unfair competition, Aegea relies on Brazilian law and did not register any cases of this nature in the period covered by this report. GRI G4-SO7 | G4-DMA Unfair competition
Furthermore, to keep its operations aligned, the Company maintains a solid corporate governance and compliance structure, based on the principles of transparency, equality, accountability and corporate responsibility. Practices include maintaining an independent member on the Board of Directors, reporting of audited quarterly results and the action of committees to deliberate on specific topics.
Community relations are based on communication channels and sustainability programs
Stakeholder engagement
In order to guarantee greater transparency in reporting information and to strengthen ties with its stakeholders, Aegea has an Investor Relations (IR) area, responsible for publishing material facts, releasing communications to the market and holding meetings with market analysts to discuss topics related to the Company’s operations and performance. In addition, a phone conference is held on a quarterly basis to release results. GRI G4-26
Interaction with other stakeholders occurs through communication channels, the press and social media. In an effort to grow even stronger relations with communities, the Company maintains sustainability programs, such as Afluentes (Affluents) and Saúde Nota 10 (A+ Health) (learn more). GRI G4-27
Shareholders meet ordinarily once yearly and extraordinarily whenever necessary at the Shareholders’ Meeting. Based on proposals presented by the Board of Directors, the Shareholders’ Meeting is responsible for deciding on distribution of dividends, considering of financial statements and electing members of the Board of Directors.
Three shareholders’ meetings were held during the year. Notable among key decisions made this year are rectification of Aegea’s capital amount, re-election of members of the Board of Directors and others.
The Board of Directors is the highest governance body and its role is to establish corporate policies and guidelines and to supervise and advise Management on execution of strategic planning.
This body is made up of at least three and at most seven members, at least one of which is independent. All are elected (and removed) by the Shareholders’ Meeting to a one-year, re-electable term.
Click here and see the members of the Board of Directors.
Executive Board
The Executive Board is responsible for the management and operational and financial performance of the Company, always according to established guidelines and policies.
Directors are elected (and removed) by the Board of Directors, with the Executive Board having at least three and at most seven members, including one CEO and one CFO and Director of Investor Relations, with other directors having no specific designation.
Chief Financial Officer and Director of Investor Relations
Radamés Andrade Casseb
Chief Operations Officer
The Company’s governance structure is based on transparency and corporate responsibility
Committees
The Board of Directors (BD) is supported by four executive committees whose members meet regularly to study specific topics and advise on the creation of corporate policies and guidelines. These committees have three to five members, appointed by the BD to one-year, renewable terms. They are:
Audit, Risk and Finance Committee | Seeks to assure the quality and integrity of quarterly information and financial statements, as well as internal controls and audits.
Project Assessment Committee |Assesses risks and opportunities for projects that
are in the study phase as well as potential investments.
People Management Committee | Responsible for evaluating the organizational structure and executive career plans as well as job and salary policies, variable pay and retention of talent.
Regulatory Committee | Monitors regulatory themes in the sanitation industry and advises on operational strategies based on forecasting of scenarios and assessment of risks and opportunities for the Company.
Created to grow sustainably, Aegea operates looking to the long term. Although the Company does not have a system to measure the impacts of its activities, it does have a risk matrix and monitors global and national trends in an effort to forecast scenarios that may adversely affect its operations. Among the main risks monitored are:
Interest rate risk | Result of unfavorable fluctuations in the fair value of future cash flows as a result of the market’s interest rates. This is a significant risk, considering long-term obligations that are subject to variation. To resolve this risk, various scenarios are simulated based on the main financial assets and liabilities – refinancing, renewal of existing positions and financing – to establish reasonable change in the interest rate and calculate the impact on results.
Credit risk | Losses resulting from non-receipt of amounts negotiated with financial institutions, borrowers or contract counterparties. To mitigate this risk, Aegea conservatively manages its cash position and its working capital. At the end of the fiscal year, the Net Debt to EBITDA ratio was at 2.91x.
Liquidity risk | Chance of lacking resources to meet obligations associated with financial liabilities, which could result in early liquidation of assets. Periodically, assessment is done on mechanisms and tools that allow for funding to be raised in order to reverse positions that could be prejudicial to the liquidity of the Company and its controlled companies.
Macroeconomic risks | Financial conditions and the results of operations may be impacted as a result of interventions by federal, state and municipal governments in relation to public fees and other factors, such as inflation, monetary policies, economic and social instabilities, liquidity in the domestic financial market, changes in the price of electricity, tax policies and other events. Aegea has no control over these measures and is unable to predict them, but the Company does observe the national context and historical analyses in an effort to forecast scenarios and structure plans of action.
Default risk | Difficulty with collections due to users, including government organizations, having overdue accounts. Aegea has a low rate of default, due to initiatives such as Social Rates (learn more), which guarantee access to the services provided.
Climate risk | Periods of heavy rainfall can cause flooding in some supply systems, resulting in operational and financial impacts to the Company. Among occurrences are paralyzation of supply and additional costs to adapt the water treatment process. On the other hand, during intense droughts, lower discharge from springs and reservoirs can interrupt the population’s supply and require costs for use of alternative sources – such as implementation of water rationing and other measures – until provision of services is reestablished. Both factors can therefore cut into revenues, increase costs, result in legal actions and harm the Company’s image. GRI G4-EC2
Pollution risk | Contamination of water collection sources used to supply users is another factor that could create additional costs and harm Aegea’s reputation. Although water supplied to customers is subject to the potability standards set forth in federal and state laws, the Company is subject to contamination risks as a consequence of third-party actions, such as the dumping of chemical products in spring areas, use of agricultural inputs by rural landowners and other accidents. These factors may cause changes to the quality and quantity of gross available water, resulting in a need to use additional treatment materials and, consequently, increasing costs in order to meet demand.
Moreover, another factor that could compromise water quality is misuse of soil by rural landowners and mining companies, which may result in soil movement processes at spring areas, reducing the water’s capacity for use at the Company’s water treatment stations. There are also risks related to the environment, since any overflow from a sewage treatment station that affects neighboring properties could damage biodiversity and the Company’s image. The occurrence of one or more of these factors could have a relevant prejudicial effect on the Company’s business and results. That is why Aegea invests in expanding the sewer network to combat clandestine sewers, mitigating this risk.
Click here and find more information on risk management.
A commitment to sustainable development permeates all activities at Aegea, from governance to operation, and extends to suppliers, users, communities and other stakeholders. In a continual process of improvement, the Company has been formalizing its practices in this area. One of the most significant examples was the publication of the Sustainability Policy in 2014.
Split into three pillars, this policy steers establishment of strategic guidelines that result in organizational objectives. Upper Management carries out periodic assessments of the Company’s performance in order to verify the efficacy of management and achievement of targets.
Pillars
Guidelines
Economic
Improvement of financial results
Continued and sustainable enhancement of processes
Constant search for innovative solutions that add value to the business
Environmental
Prevention of pollution and environmental damage, as a result of direct and indirect activities
Continual search for energy efficiency
Sustainable use of natural resources, minimizing losses across processes
Social
Prevention of employee and third-party injuries and illnesses
Ethical and transparent behavior with stakeholders
Human development of the community with which the Company interacts, including employees
Management structure
To support the Sustainability Policy and guarantee fulfillment of proposed goals, Aegea maintains a management structure that aligns guidelines and monitors development of actions undertaken.
Sustainability Committee | Based on strategic recommendations, this body advises on planning of initiatives aimed at the Company’s sustainability, in addition to indicating investment priorities and monitoring development of actions.
Managers | Spread sustainability guidelines among their teams and lead application of initiatives planned with the guidance of the Sustainability Committee.
Internal committees | Work groups made up of employees and led by managers, executing initiatives and contributing to achieving the objects established in the Sustainability Policy.
Supported charters, principles and external initiatives
Aegea understands the responsibility of handling a natural resource and making it accessible to an increasing number of Brazilians. That is why over the Company’s history, it has signed agreements and supported initiatives to extend respect for the environment beyond legal requirements and obligations inherent to its action.
Equator Principles | A set of international guidelines proposed by the International Finance Corporation (IFC) and employed by financial institutions in lending.
Earth Charter | Considered an important educational tool for building a more just, sustainable and peaceful society.
Pact for Sanitation | Launched in 2007 by the Rio de Janeiro state government, it contains goals for expanding the sewage collection and treatment system. Prolagos, a company controlled by Aegea, supports this initiative.
Atlantic Forest Restoration Pact | With support through Prolagos, the pact’s mission is to articulate public and private institutions to restore the forest and preserve the biodiversity of the 17 states in this biome.
Participation in associations, councils and entities
Aegea keeps its doors open to communities in an effort to promote participatory management, through which everyone can contribute to improving their communities. One of the most significant examples is the Affluents Program, fostering dialog between the Company and community leaders (learn more).
Concessionaires also take part in associations, councils and committees at the locations where they operate, aimed at environmental conservation and other industry-related objectives. Among the main organizations supported, the following are noteworthy:
Prolagos (RJ)
Lagos São João Consortium
Lagos São João Basins Committee
State Water Resources Council of Rio
de Janeiro
Municipal Environmental Councils of Arraial do Cabo, Cabo Frio, Armação dos Búzios, Iguaba Grande and São Pedro da Aldeia
Águas Guariroba (MS)
State Water Resources Council
Environmental Council of the Environmental Protection Area of the Lageado Stream
Environmental Council of the Environmental Protection Area of the Guariroba Stream
Anhanduí River Environmental
Monitoring Committee
Águas de Mirante (SP)
Piracicaba, Corumbataí and Jundiaí (PCJ) Consortium
Intermunicipal Consortium of the Piracicaba, Capivari and Jundiaí River Basins
Relationship with the capital market
The Investor Relations (IR) team mediates the Company’s relationship with shareholders. The team can be reached daily by phone at +55 11 3818-8150, by e-mail at ri@aegea.com.br and online at ri@aegea.com.br and online through the Contact IR channel.
Material facts and market communications are published at the online IR address, always according to the Code of Ethics (learn more) and to the Reporting Policy. Visits to the units, quarterly phone conferences on results and meetings between directors and market analysts are also promoted in an effort to detail operations and discuss performance.
