April 11, 2017 5:30 am JST

Sumitomo to dive into Brazilian water infrastructure

Japanese trading house sees market growth as Brazil lures private money

A sewage treatment plant in Sao Paulo.

TOKYO -- Sumitomo Corp. will enter the water and sewage management business in Brazil, where the market for such services is expanding amid a government-led privatization push.

A consortium including Sumitomo and Canadian investment company Brookfield Asset Management will invest in Brazilian engineering conglomerate Odebrecht, which owns waterworks and sewage treatment facilities in the country. Of the consortium's projected 70% stake in Odebrecht, Sumitomo's will come to 14%, or about $250 million.

The Japanese trading house will acquire 21 water and sewage facilities as well as four industrial water treatment plants sometime in April from Odebrecht. These operations serve around 17 million people, making Sumitomo's investment the largest of its kind in Brazil by a Japanese company. Sumitomo will send about 10 staffers to offer Odebrecht assistance in management and operations.

Sumitomo will also provide water service management expertise through partnerships with Japanese municipalities and private-sector businesses. The company is expected to supply equipment such as meters that can discover leaky pipes in need of repair and state-of-the-art sludge treatment devices.

Brazil's water and sewage market is estimated to be worth some $20 billion in 2017, making it the sixth largest in the world, according to British research firm Global Water Intelligence. The market is projected to grow to $29 billion in 2030.

As of 2015, 83% of Brazil's population had access to clean water and only half had sewage services. The Brazilian government wants to use private investment to increase both rates to over 90% by 2033. In 2007, the government established a national sanitation law that prevents the illegal use of water systems and makes it easier for private companies to enter the industry.

Sumitomo positions water and sewage operations as a growth area that can withstand economic swings and offer stable earnings, unlike its natural resource business.

After entering the water system business in Turkey in 1995, Sumitomo has expanded operations to such countries as Mexico, China and the U.K.

(Nikkei)

Sumitomo Corp.

Japan

Market(Ticker): TKS(8053)
Sector:
Industry:
Distribution Services
Wholesale Distributors
Market cap(USD): 16,170.9M
Shares: 1,250.6M

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