The PPP, concession auctions Brazil plans for September

Brazil is expected hold auctions for nine contracts in a variety of areas during September, with the most investments projected for highways, sanitation and power transmission. 

The contracts, in the form of concessions and PPPs, will be offered in auctions on Brazil’s B3 stock exchange.

The first auction of the month will take place on Wednesday (Sep 4) and is for the water and sewerage concession to be offered by Sergipe state. The 35-year contract involves projected investments of 6.3bn reais (US$1.1bn).

"This contract is likely to see fierce competition because, among other reasons, the federal government agreed to a request from the Sergipe government to allow the winner to pay a larger portion of the fee with debentures," Percy Soares Neto, founder of water and waste consultancy Ikigai, told BNamericas.

Water companies BRK Ambiental, Aegea Saneamento and Iguá Saneamento, along with investment firm Pátria Investimentos, submitted proposals and guarantees, according to a person familiar with the process who spoke on condition of anonymity.

Companies that win concessions or PPP contracts in auctions – based on the highest bid – were allowed to finance up to 50% of the amount offered by issuing the bonds known as debentures, which carry tax breaks, and now the government will increase this portion to 70%.

The minimum fee set by the Sergipe government was 2.03bn reais.

The other major auction planned for September will take place on September 26 and comprises a highway concession.

The federal government will hold the auction for the 30-year concession for the 595km Rota dos Cristais stretch of the BR-040/GO/MG highway between Belo Horizonte, capital of Minas Gerais state, and Cristalina in Goiás state. The concession involves 12bn reais in projected investments.

In August, Brazilian asset manager 4UM won the auction for the concession of highway BR-381 in Minas Gerais state, which requires estimated investment of 9.3bn reais. 

It marked the debut of 4UM, controlled by local families Marcella, Salazar, Federmann and Backhander, in the segment and it won the contract after offering a 0.94% discount on tolls, defeating another asset manager, Opportunity, which offered a discount of 0.10%.

"We are managing to attract new entrants to the highway sector by maintaining a constant dialogue with all participants, adopting improvements in the contracts to be offered," said Renan Filho, Brazil’s transport minister.

Meanwhile, electric energy regulator Aneel will hold its second transmission tender of the year on September 27.

The contracts to be offered are for construction and maintenance of 850km of lines and 1,600MVA of transformation capacity, as well as the provision of public service on 163km of transmission lines and 300MVA in transformation capacity. Estimated investments are 3.76bn reais.  

OTHER CONTRACTS 

The other contracts to be offered during September are:

- On September 13, São Paulo state will offer the concession contract for the management of its lotteries. It expects to raise up to 3.4bn reais in fees which will be used for improvements to health services.

- On September 18, the city of Goiânia, capital of Goiás state, will offer a smart city public-private partnership contract, with investment projected at 444 million reais in streetlighting, internet, video surveillance, security and photovoltaic power generation. 

- On September 19, the municipality of Sapiranga will offer a streetlighting PPP and the following day there will be an auction for a streetlighting PPP in six municipalities in Paraná state, namely Irati, Fernandes Pinheiro, Inácio Martins, Rebouças, Mallet and Tamara Soares.

- On September 25, São Paulo state will offer a PPP contract for the construction of 17 schools comprising the first of two lots the local government is planning to offer to build and operate 33 schools in 29 localities, involving investments of 2.1bn reais over 25 years. 

- On September 26, the city of Feira de Santana will offer the contract for implementation of the rotating parking system for vehicles in public places and areas belonging to the municipality, popularly known as the Blue Zone.