Paraná's ambitious plans: Privatization, concessions and PPPs to revolutionize public services

Paraná state in southern Brazil is planning to carry out a series of tenders and other deals in the coming months to award concessions and PPP contracts, as well as moving forward with the privatization of state-owned energy firm Companhia Paranaense de Energia (Copel). 

The contracts that are eventually signed with the private sector are aimed at triggering heavy investments in the state's infrastructure, water and waste services, as well as in the electric power sector. 

The privatization of Copel is one of the most eagerly awaited moves to be carried out by the government. The state holds just under 70% of the company's voting shares and slightly more than 31% of its total capital but is looking to reduce its total interest to 15%, retaining a so-called golden share. 

That will allow the government to have veto power over key decisions, although it would no longer be responsible for the day-to-day management of the company, with ownership planned to be diluted among various shareholders. 

In this interview, Paraná governor Carlos Massa Ratinho Junior tells BNamericas more about the privatization and discusses the state government's plans to shift some of its other key services to the private sector.

BNamericas: What are the priorities on the agenda of concessions, PPPs and privatization for the Paraná government?

Ratinho Junior: We have an infrastructure agenda that includes a series of opportunities for domestic and international investors. If ours isn’t the biggest infrastructure agenda in the country, it’s certainly one of the biggest in terms of projected investments.

In the coming months, we’re going to move forward with a series of tenders and I would like to draw your attention to the highway sector, among others. 

The bidding processes scheduled for highways involve lots from the highway concession program in Paraná state. This is the largest highway concession package in Latin America, with highways totaling 3,300km, divided into six lots and with total forecast investment of 55bn reais [US$11.5bn].

BNamericas: This year a specific date has already been set for the bidding processes for the concessions of highway lots 1 and 2. What is the schedule of the tenders for the other four lots?

Ratinho Junior: That depends on the transport ministry, which has been very proactive and rapid to take decisions.

It’s true that there are also other highway lots [for concessions in other Brazilian states] in the queue and that the federal government wants to offer too, but I believe that we will probably offer these other four lots in the next year [via separate auctions].

BNamericas: Besides highways, what are your other priorities?

Ratinho Junior: We also have plans to offer two more sanitation PPP contracts in the second half of this year, through [state water utility] Sanepar. These two contracts are already in the public consultation phase and should be offered via tenders by the end of this year.

They are large-scale PPPs. In all, the two contracts will serve more than 200 cities in the state.

BNamericas: Regarding the privatization of state-run power company Copel, what are the government's plans?

Ratinho Junior: Copel will become a corporation and I believe that between July and August we will be able to carry out this operation [the launch of the public share offering for part of the government’s interest] in the company, which is a great opportunity for investors to enter one of the largest energy companies in the country in terms of generation, distribution and transmission.

This agenda that I mention, regarding the privatization of Copel and the concessions and PPPs, also includes some important considerations, such as the fact that Paraná is a state with good financial, fiscal and legal security.

In recent years, Paraná's GDP has grown at twice the rate of the Brazilian economy and we now have the fourth largest state economy in the country.

BNamericas: Will the government retain a stake in Copel?

Ratinho Junior: Yes, we want to keep a stake of around 15% in Copel in addition to having the golden share, but our idea is actually to get out of the day-to-day management of the company.

BNamericas: Why is it necessary to privatize Copel?

Ratinho Junior: As a state-controlled company, Copel has lots of legal constraints that end up delaying decision-making and investments. Without these constraints, Copel has everything in place to become one of the three largest energy companies in the country.

Copel is already a company with good profitability and good governance. Because of that, in the last four years there has been a huge appreciation in the value of the company's shares.

BNamericas: You mentioned a deadline for offering shares. Is it still possible to carry out that offering in July or are there any legal impediments?

Ratinho Junior: It could happen in July. We’re waiting for a TCU [federal audit court] decision that will define the concession bonus to be paid by Copel to renew the concessions for three hydroelectric plants.

That decision is likely to be made by TCU this week and I hope it will be approved and from there we’ll be able to move forward with the process.

BNamericas: Does the Paraná government have any plans to privatize Sanepar too?

Ratinho Junior: At this moment, we’re not considering privatizing Sanepar.

We’re offering Sanepar's PPP contracts to accelerate investments. The company has a 60-year history and is very well managed. With these PPPs we want to gain more market and bring more services to the population.

In the future, as the market matures with sanitation regulation in place, we will assess how that will impact the company.

BNamericas: What are the state’s plans for public investments?

Ratinho Junior: We’ve already built a total of 43,000 houses in our public housing program and announced a 5bn-real investment in infrastructure for the coming years, with works on highways, viaducts and [construction] of third highway lanes. We’re also investing 1bn reais in a new road asphalting program.

In terms of sanitation, our state-owned company Sanepar will also invest at least 1.5bn reais this year alone. As the state progresses economically, the projects will also move forward.