Authorization of the Procedure for the Total Privatization of AySA and Amendment of the Regulatory Framework for the Provision of the Public Water Supply and Sewerage Service.
Public Law Department Report | Authorization of the Procedure for the Total Privatization of AySA and Amendment of the Regulatory Framework for the Provision of the Public Water Supply and Sewerage Service.
On July 22, 2025, Emergency Decree No. 493/2025 (hereinafter, “DNU 493/2025”) was published in the Official Gazette. Through this decree, the following instruments were amended: (a) Emergency Decree No. 304/2006 (hereinafter, “DNU 304/2006”), by which Aguas y Saneamientos Argentinos Sociedad Anónima (hereinafter, “AySA”) was established, and (b) Annex II of Law No. 26,221, which sets forth the regulatory framework for the provision of the public water supply and sewerage service (hereinafter, the “Regulatory Framework”).
Subsequently, on July 23, 2025, Decree No. 494/2025 was published in the Official Gazette, by means of which the procedure for the total privatization of AySA was formally authorized.
The main aspects governed by the new regulations are summarized below:
A-Procedure for the Total Privatization of AySA
1-Possibility of Divestment of the State’s Equity Participation in AySA. Decree No. 493/2025 amends Article 2 of Decree No. 304/2006, which governs the shareholding structure of AySA. Under Decree No. 493/2025, the National State is authorized to dispose of all or part of its equity interest—amounting to 90% of the company’s share capital—pursuant to the mechanisms and procedures set forth in Laws No. 23,696 and No. 27,742[1]. By contrast, prior to this amendment, Article 2 expressly provided that the shares held by the National State were non-transferable and that the State’s ownership percentage could not be reduced by any corporate action.
2-Approval of the Privatization Procedure. Decree No. 494/2025 authorized the procedure for the privatization of AySA through the sale of all shares held by the National State, representing 90% of the company’s share capital.
This decree provides that the Ministry of Economy, with the involvement of the Special Temporary Executive Unit “Agency for the Transformation of State-Owned Enterprises,” shall adopt the necessary measures to carry out the privatization process, including the following actions:
-The sale of at least 51% of AySA’s total share capital to a strategic operator, through a national and international public bidding process pursuant to Article 18(1) of Law No. 23,696.
-The sale on domestic stock exchanges and markets of the remaining shares held by the National State that were not sold under the preceding mechanism, in accordance with Article 18(4) of Law No. 23,696.
Decree No. 494/2025 expressly provides that this divestment process shall not include the preferences set forth in Article 16 of Law No. 23,696—i.e., preferences granted to (a) existing shareholders and (b) employees of the entity subject to privatization, of any rank, who are in an employment relationship and are either organized or become organized under a Participatory Property Program, cooperative, or other legally established intermediary entity. Nor shall the process contemplate the implementation of a new Participatory Property Program.
Finally, the decree establishes that the Ministry of Economy, acting as the enforcement authority, shall (a) adopt the necessary measures to ensure that the chosen privatization method does not impair the continued provision of the public water supply and sewerage services, and (b) enact any complementary regulations necessary to implement Decree No. 494/2025, with the involvement of the Special Temporary Executive Unit “Agency for the Transformation of State-Owned Enterprises.”
B-Amendments to the regulatory framework for the provision of the public water supply and sewerage services.
The main amendments introduced by the DNU 493/2025 are as follows:
1-Economic Regime: Determination of Financial and Economic Equilibrium. The new framework establishes that the economic regime of the concession shall be based on the determination of the financial and economic equilibrium of the concession contract, which shall be deemed achieved when the applicable prices, tariffs, and subsidies for the public service cover reasonable and efficient operating costs, service management remuneration, applicable taxes, and the investments required for infrastructure maintenance and expansion. The previous version provided that the concession’s economic regime would be based on the determination of operating, investment, maintenance, administrative, and commercial costs.
Furthermore, Article 72 of the previously applicable regulatory framework is repealed. Said article established that the concession would be deemed to be in economic and financial equilibrium if the tariffs for the services provided allowed for the recovery of all associated costs, including operational, investment, tax-related, and financial costs (if any), as contemplated in the approved plans and incurred in an efficient manner.
2-Tariff reviews. In line with the above, the Water and Sanitation Regulatory Agency (ERAS, for its acronym in Spanish) is now tasked with conducting both regular and extraordinary economic or tariff reviews to ensure that the financial and economic equilibrium of the concession contract is maintained. To that end, ERAS must carry out an annual verification of the investments made, ensuring that by the end of each tariff cycle, only the final year’s investments remain to be verified.
3-Social Tariff. Although the concept of a social tariff already existed in the Regulatory Framework, before DNU 493/2025, the new decree provides that the social tariff must not impair the financial equilibrium of the concession contract. It also provides that the granting and renewal of the social tariff will be subject to the rules established by ERAS.
4-Tariff for Complementary and Unregulated Activities. The amended Regulatory Framework now expressly provides that the concessionaire shall charge tariffs not only for the public service but also for regulated complementary activities[2], as established in the regulatory framework, the concession contract, and by ERAS. The concessionaire may carry out regulated complementary activities necessary for fulfilling its purposes, with prices set by ERAS. Additionally, the concessionaire may undertake unregulated activities[3], provided that such activities do not compromise the provision of the public service or harm users. These activities will be subject to market-based pricing.
5-Right to Suspend Service for Non-Payment. The revised Regulatory Framework authorizes the concessionaire to suspend service for residential users in arrears for more than 60 days and for non-residential users in arrears for more than 15 days from the second due date. Prior to suspension, the concessionaire must issue a payment notice—electronic notices are permitted—at least 7 business days in advance of the second due date. Previously, the concessionaire was only authorized to restrict—not suspend— service for residential users after two consecutive billing periods of non-payment; suspension was only allowed for non-residential users.
6-Right to Conduct Technical Reviews and Audits. The concessionaire is granted the authority to technically review and audit all works carried out within the regulated area, including approving the technical feasibility of such works to ensure they can be operated by the concessionaire. This power was not previously included in the regulatory framework.
7-Right to Pledge Concession Revenues as Collateral. The concessionaire may now pledge revenues derived from the concession to secure repayment of financing obtained for the provision of the public service, subject to the limitations set forth in Article 243 of the Argentine Civil and Commercial Code. This right was not previously contemplated.
8-Prohibition of sub-concession. Article 22 bis is introduced into the Regulatory Framework, expressly prohibiting the concessionaire from sub-conceding the public service.
9-Statute of Limitations for Debt Collection. Article 80 bis is introduced to the Regulatory Framework, establishing a five-year statute of limitations for legal actions aimed at collecting debts arising from the provision of the public service by the concessionaire.
10-Non-Tariff Subsidies. Previously, the Regulatory Framework allowed for (a) specific consumption subsidies and (b) non-specific subsidies. Following the amendment, it now also allows for non-tariff subsidies for users who lack the financial means to cover connection costs to the water supply and sewerage system. Any such exemptions or subsidies shall be borne by the National State, the City of Buenos Aires, the Province of Buenos Aires, or the respective municipalities, as appropriate, under the conditions determined by ERAS. These subsidies must not undermine the financial and economic equilibrium of the concession contract.
11-Recovery of Unamortized Investments. Article 117 is amended to include the concessionaire’s right to recover the value of investments made during the term of the concession contract that remain unamortized in the event of termination, rescission, or early cancellation of the contract. The method for calculating such recovery shall be detailed in the concession contract.
12-Arbitration for Dispute Resolution. Article 109 bis is introduced, allowing for arbitration as a method of resolving disputes between the grantor and the concessionaire. The procedure for the appointment of arbitrators, their fees, and other arbitration-related matters shall be set forth in the concession contract.
13-Strategic Improvement Master Plan. A Strategic Improvement Master Plan, to be developed by the Planning Agency (APLA, for its acronym in Spanish), is introduced to establish technical strategies for developing the basic infrastructure necessary to expand the public service. The Plan must incorporate criteria of technical feasibility and cost-effectiveness, considering population density and other geographic factors.
The Plan will be a technical and non-binding document, serving as a guideline and foundation for the Concessionaire’s Action Plan. It must be reviewed by APLA every five years and delivered to the concessionaire at least 90 days prior to the required submission of the Action Plan.
At the request of the concessionaire, ERAS, the APLA advisory committee, or the User Oversight Body, and upon duly justified extraordinary circumstances, the Plan may be amended by reasoned resolution of APLA.
14-Sanctions regime. The new Regulatory Framework establishes that (a) the concessionaire undertakes the concession at its own technical, economic, and financial risk and shall be liable before the National State and third parties; (b) neither the granting authority, nor the ERAS nor the APLA shall be liable to third parties for the obligations assumed or to be assumed by the concessionaire; (c) the concessionaire may be subject to sanctions including warnings and fines, and the concession agreement may be terminated in the event of serious breaches, following a prior notice granting a reasonable period for remediation; and (d) infringements shall be deemed formal and shall be constituted regardless of the intent or negligence of the concessionaire or of the individuals for whom it is responsible.
In addition, it is established that any minor infringement not subject to more severe sanctioning treatment shall be punished with a warning. The imposition of sanctions shall be without prejudice to the obligation to return or compensate any amounts unduly received from users or to indemnify any damage caused to the National State, users, or third parties.
15-Expanded Reporting Requirements. Previously, the concessionaire was required to submit only a Monthly Technical Service Level Report and a semiannual report detailing income and expenditure. DNU 493/2025 now requires the submission of the following: (a) quarterly financial statements certified by an independent accountant (external auditor); (b) audited annual financial statements and management reports; (c) any economic, financial, commercial, investment, and regulatory accounting information ERAS may require and (d) any additional audited economic and financial information that ERAS may request in the performance of its duties.
16-Transitional Clause. Article 126 is added to the Regulatory Framework, allowing for a transition period of up to 5 years, post-privatization, for the gradual and orderly implementation of the new regulatory framework, in accordance with Law No. 27.742. This transitional clause aims to maintain the financial and economic equilibrium of the concession contract throughout the transition.
Please do not hesitate to contact us should you require any additional information.
[1] The remaining 10% is held by the company’s employees under the currently existing Participated Property Program.
[2] Article 5 of the new Regulatory Framework, approved by DNU 493/2025, defines regulated complementary activities as those complementary to the public service carried out by the concessionaire, whose prices are set by ERAS. Such activities include, among others, those established in Chapter III of Annex E of the Regulatory Framework.
[3] Article 5 of the new Regulatory Framework, approved by DNU 493/2025, defines unregulated activities as those carried out by the concessionaire outside the scope of the concession contract.