EPR raises over US$200mn to invest in Minas Gerais highway works

Brazilian group EPR, a joint venture formed by infrastructure firm Equipav and fund manager Perfin, raised 1.3 billion reais (US$236 million) via an issue of incentivized debentures to finance works in the Triângulo Mineiro highway concession package in Minas Gerais state.

The issue was structured with the support of development bank BNDES along with Bradesco BBI, a unit of bank Bradesco, and Banco Santander.

BNDES acquired 187mn reais of the debentures. 

“The success of the [debentures] offer shows that the market saw value in the investment and demonstrated a great appetite for the asset, so that BNDES acted in a complementary manner to private investors and other coordinating banks, reducing its participation compared to its initial commitment of a firm guarantee of 525mn reais to approximately 187mn reais. That is proof that Brazil has returned to investing in infrastructure under President [Luiz Inácio Lula da Silva] Lula," BNDES president Aloizio Mercadante said in a statement.

Companies in the area of infrastructure and sanitation in Brazil, which require long-term financing, have increasingly resorted to debentures to move forward with their projects, even in a scenario of short-term challenges due to high interest rates.

"Today in the country we have this availability of long-term debt for the infrastructure and sanitation areas. There are debt instruments today that have terms of 10 years, there is also BNDES providing credit, so these are situations that benefit infrastructure projects that are long term," Ricardo Carvalho, managing director of Fitch Ratings' Brazil corporate finance, told BNamericas.

"For years, the energy sector has created a scenario where credit is always available and the infrastructure sector is starting to follow this path as well. Because of this, I think that for the infrastructure area, these long-term lines will continue to appear, with investors continuing to finance the sectors," he added.

The EPR debenture issue matures in 17 years, according to the company.

There are two types of debentures commonly used in infrastructure: incentivized debentures, which offer a tax break to investors and have been available since 2011, and infrastructure debentures, which provide a tax exemption for the issuing company, which have been authorized since the start of this year.

In January-July, Brazilian companies raised 83.6bn reais via incentivized debentures, up from 63.8bn reais in full-year 2023, according to the Brazilian financial and capital markets association Anbima.

The sectors that issued the most debentures during the period were electric power, transportation and logistics, and sanitation, which raised 33.1bn reais, 20.7bn reais and 10.0bn reais, respectively, according to Anbima.

Triângulo Mineiro highway works

The proceeds raised by EPR will finance part of the obligations assumed by the firm after it won an auction in 2022 for the Triângulo Mineiro highway concession package. The contract was officially assumed by the firm at the start of 2023.

The package comprises 627km of highways and estimated investments of 5.9bn reais.

The 1.3bn reais raised by the incentivized debenture issue will finance the first investment cycle of lot 1, which totals 2.1bn reais to be invested until 2031. 

From the third year of the contract, the company will carry out structural works such as construction of 55km of additional lanes, 353km of shoulders and building 36km of divided highway, among others.

Approximately 327mn reais have already been invested in initial works and improvements since the beginning of the concession contract.