Aguas y Saneamientos Argentinos (AySA) is experiencing a financial turnaround after President Javier Milei removed certain price controls, resulting in significant bond gains. The utility’s restructuring and increased consumer fees have led to complete operational funding for the first time in years. AySA may pursue a public listing or stake sale for privatization, with future performance dependent on successful implementation of these plans.
The debt holders of the state-owned water and sewage company Aguas y Saneamientos Argentinos (AySA) are experiencing significant gains due to recent regulatory changes initiated by President Javier Milei. Following the removal of certain price controls, AySA’s dollar-denominated bonds due in 2026 have increased more than 20 cents since Milei assumed office in December 2023, resulting in a notable total return of around 56 percent for investors over this period, compared to an 11 percent average for emerging market corporate bonds.
Milei, a proponent of libertarian economic policies, is seeking to reduce government involvement and deregulate sectors of the economy, including potentially privatizing state-controlled enterprises like AySA. The company’s financial health has improved, evidenced by a dramatic increase in consumer water bills in Buenos Aires, which have risen 344 percent since December 2023, allowing AySA to fully fund its operations for the first time since 2007.
Investor optimism has surged following Milei’s commitment to austerity measures, stimulating significant interest in Argentine bonds. His proposed reforms, including the privatization of AySA, have further bolstered bond values. Currently, AySA is undergoing a major restructuring, including leadership changes, a 20 percent workforce reduction, and improvements in operational efficiency, which have resulted in earnings of US$59 million for the third quarter of 2024 compared to a US$42 million loss a year prior.
The average household water bill in Buenos Aires has escalated to approximately US$27.76 at the official exchange rate. This increase has granted AySA the capacity to cover all operating costs through consumer fees, an increase from only 52 percent coverage the previous year. In terms of its privatization strategy, AySA is considering either a public listing or selling a majority stake through an auction, as discussions regarding these options continue among executives.
For AySA to move forward with its privatization, it will require regulatory approval and ultimately agreement from President Milei’s administration, which currently holds 90 percent ownership of the company. Although aspirations exist for AySA to become a privately managed entity, Milei’s broader privatization initiatives have recently faced obstacles, such as delays in the privatization of Aerolíneas Argentinas and a legal setback concerning the sale of the state bank. Thus, the future performance of AySA’s bonds hinges on the success of its privatization plans, with experts indicating its long-term sustainability relies on this transition.
In conclusion, Aguas y Saneamientos Argentinos (AySA) is poised for a significant transformation under President Javier Milei’s economic reforms, which have already led to increased profitability and investor interest. The company’s strategic decision towards privatization will be crucial for continued growth and efficiency. However, the path ahead is not without challenges, as regulatory approvals and market conditions will play determining roles in AySA’s future as a private entity.
Original Source: batimes.com.ar
