Home Business Road Auction Has at Least 8 Stakeholders

Road Auction Has at Least 8 Stakeholders



Even in a context of strong political uncertainty and lack of optimism about the economy, Michel Temer’s first road concession auction has attracted the attention of economic groups, including foreigners. One month after the announcement, the Southern Integration Highway (RIS) had at least eight interested parties, including Italy and Spain last week.

The venture also has a Chinese group among the possible candidates. With a strong presence in the energy sector, China has not yet entered the highways business in Brazil. The auction is scheduled for November 1st.

The RIS is formed by stretches of four federal highways in Rio Grande do Sul: BRs 101, 290, 448 and 386. Altogether there are 473.4 km, including 98.1 km of the so-called Freeway, between Porto Alegre and Osório , granted in 1997 and with contract expired last year. At the moment, the road is under the responsibility of the federal government, which had to hire security for the toll plazas, which are inoperative. With heavy traffic, the Freeway is the main attraction of RIS.

Adjustments were made to the contract to avoid repeating the problems that the federal government administers on the other highways granted, especially those of the so-called Third Stage. Offered to the market in 2012 and 2013 in the Program of Investments in Logistics (PIL), some are recognized as unsustainable by the dealers themselves.

The elaboration of the RIS notice consumed two years of discussions. Half of this time was spent in discussions with the Union Court of Accounts (TCU). But the result is a reason for optimism in government. “It’s a mature contract,” said Tatiana Thomé de Oliveira, director of highways at the Investment Partnership Program (PPI). For her, the interest of foreign groups is the best demonstration that the rules were accepted by the market.

“It is the result of an apprenticeship not only with the PIL, but also with things that went wrong in the first stage,” commented the Secretary for Transport Development, Dino Antunes.

One of the main adjustments is the reduction of investments at the beginning of the contract. A central point of the PIL concessions was the requirement of doubling the whole stretch granted within five years. And it was precisely in this period of strong investment that the country plunged into recession, causing financial imbalance in practically all concessionaires.

Scalded by this experience, the government reduced RIS investment requirements, estimated at R $ 7.8 billion. In the first two years, only recovery and signaling works will be required. Duplications will only begin in the third year of the contract. And only a few stretches will receive this type of investment. In addition to a set of mandatory works, there will be others to increase the capacity of the highway that will only be made as the traffic reaches a certain volume.

PIL auctions were won by large construction companies, which on average agreed to charge tolls 50% cheaper than those estimated by the government. The high discount, combined with the recession, resulted in strong revenue frustration.

In RIS, Antunes says, a “mechanism against irresponsible bids” has been created. The maximum rate was set at R $ 7.24 and the auction will be awarded to the group that agrees to charge the lowest amount below it. But if the discount offered is more than 10%, the company will need to demonstrate additional financial capacity. The requirement will grow as the discount is higher. “The risk will be banked with its capital,” said the secretary.

The point that consumed the most time of discussion with the TCU was the inclusion of works not foreseen in the contract. The Court of Auditors wanted no such investment to be authorized. The government has contended that such plastering is impossible to maintain, even more so in a 30-year contract like RIS. It was agreed, then, that they could be included, but only in contract reviews made every five years.

For the president of the Brazilian Association of Highway Concessionaires (ABCR), Cesar Borges, “the environment is the worst possible” for the auction. “The whole system is in trouble, and the government is not operational to provide a solution,” he said. “As the investor looks ahead, how confident is the model?” Despite the uncertainties, he says he expects the auction to be successful. The information is from the newspaper O Estado de S. Paulo.

by Lu Aiko Otta