Aegea again delayed its 2025 earnings release due to one of its subsidiaries failing to record accounts receivable that were overdue and, therefore, not provisioned, according to two sources familiar with the matter. The Brazilian water sanitation firm announced the latest postponement today (10 April).

The subsidiary in question is Águas do Rio, the first source said.

“The accounting adjustment in their customer portfolio is going to be higher than expected,” according to a third source familiar with the matter.

The problem may impact Aegea’s net debt-to-EBITDA ratio, according to the first source. Its net leverage is expected to be around 3.8x-3.9x, very close to the limit of 4x in certain debt covenants.

Aegea has around BRL 45bn in total debt, including off-balance sheet borrowings.

“They must be doing the math to avoid exceeding the limit,” the first source said.

“They may not be reaching an agreement on the concepts with the auditor,” a fourth source familiar said.

Aegea failed to report 2025 results on 31 March and rescheduled to 8 April and later to 9 April, when it also failed to present its numbers. Aegea first informed the market that the delay was due to adjustments to accounting practices and a reassessment of estimates, related to the management of the customer portfolio, with impacts on the 2024 and 2025 fiscal years.

In the announcement today, Aegea said the delay is due to the extent and complexity of the review process and that it would not affect the company’s liquidity position, cash generation, or compliance with financial covenants. It did not say when it expected to release the results.

Águas do Rio

The Aguás do Rio subsidiary is responsible for operating water and sewage services in 124 neighborhoods of the city of Rio de Janeiro and in another 26 municipalities in the state of Rio de Janeiro. It serves approximately 10 million people, with a concession term until November 2056, according to Aegea’s last reference form.

The subsidiary was created after Aegea, with Grupo Equipav, GIC, and Itaúsa, formed a consortium to participate in the privatization auction of CEDAE, the state-owned water and sewage company in Rio de Janeiro, in April 2021. The consortium won the auction for blocks 1 and 4 of the concession, paying BRL 8.2bn and BRL 7.2bn, respectively.

To operate these concessions, two Special Purpose Entities (SPEs) were established: Águas do Rio 1 SPE SA and Águas do Rio 4 SPE SA. These entities were later grouped under the brand Águas do Rio, according to the company’s reference form.

Aegea holds a majority stake in Águas do Rio, with 75% of the total capital and 50% of the voting capital. According to the company’s reference form, given the ownership structure, Águas do Rio’s financial results are recorded by Aegea through the equity method rather than full consolidation in its financial statements.

Although one of Aegea’s largest subsidiaries, iÁguas do Rio seems to be one of the weaker assets, according to a fifth source familiar. “They have lower EBITDA margins, well-known issues with high delinquency, and apparently a pretty expensive and poor-quality service,” this source said.

Águas do Rio 1 SPE and Águas do Rio 4 SPE have issued multiple long‑term debentures. Águas do Rio 1 SPE raised approximately BRL 5.6bn through three issuances, while Águas do Rio 4 SPE raised about BRL 5.5bn also through three issuances.

The earnings delays and the lack of transparency with the market have caused a decrease in Aegea’s credibility over the last few days, and driven bond prices lower, especially after the ratings were downgraded by Fitch and S&P.

Aegeas’s USD 800m 9% 2031 bond traded at 80 today, compared to 100.91 on 30 March, according to MarketAxess. Its USD 750m 7.625% 2036 last traded at 79.43 on 9 April, compared to 91.75 on 30 March. Aegea’s USD 250m 6.75% 2029 bond traded at 81.99 today, compared to 95.61 on 30 March.

Fitch and S&P highlighted that the failure to publish the results could be evidence of weaker transparency and governance-related problems.

The governance issue could affect the company’s ability and costs to raise new capital, which is important when it has a capex agenda tied to upcoming auctions and new assets, as reported. The situation also does not help the company’s plans to conduct an IPO, as reported.

When contacted for comment, a representative for Aegea sent the following statement:

“Aegea informs that the postponement in the release of its financial statements is due to operational matters related to internal processes of reconciliation, review, and reprocessing of accounting information, including the restatement of results from previous periods, with no impact on cash, liquidity, or covenants. The Company maintains strict governance, with oversight from the Board of Directors and the Audit Committee, and remains committed to transparency and the trust of shareholders and the market. The new date for the release of the results will be informed in due course.”