Sewers and subways: Telar tunneling its way to growth

Brazilian infrastructure firm Telar Engenharia e Comércio forecasts that its revenues will grow 10% annually in the next three years as it looks to take advantage of opportunities in the sanitation and subway sectors where the firm has great expertise. 

The company, which currently reports annual revenues of around 300 million reais (US$54mn) and has a backlog of 1.5 billion reais in projects, is also seeking contracts in other countries in Latin America.

Telar CEO Marco Antonio Botter talks with BNamericas about the company's plans.

BNamericas: What is Telar Engenharia’s market position?

Botter: Telar is a company that was founded in 1969 and has always operated in the infrastructure sector. I've been with the company for 45 years, having been here since I graduated.

We started the company from zero with my father, specifically working on underground operations, without doing anything to damage the surface. In other words, we work on projects involving water pipes, power cables and subway projects.

As the company grew, we also began to carry out conventional engineering works, but always closely connected to the sanitation, metropolitan rail and energy sectors.

We have contracts with the São Paulo Metro and also with CPTM as major clients. In contracts with the private sector, we also work on specific projects, such as the underground connection for the two buildings of the MASP museum on Avenida Paulista in São Paulo.

Our annual revenue is around 300mn reais and our project backlog is at 1.5bn reais.

We have a very technical profile, we don't carry out projects, but instead carry out the works.

BNamericas: In which regions have you worked?

Botter: We operate in several states in the country, São Paulo, Espírito Santo, Ceará and also Brasília.

Outside the country, we have an ongoing sanitation project in Barranquilla, Colombia, and we've worked on projects in Uruguay and Ecuador, always in the sanitation sector.

BNamericas: Where does Telar see the greatest potential for new business?

Botter: Sanitation in Brazil has always been an area with great potential, because the investment requirements in the sector are very large, since our water and sewage coverage rate is very low compared with other countries.

With the sanitation framework approved, with the establishment of water and sewage coverage targets for 2033, all of this investment potential is now advancing.

Before the sanitation framework, between 15bn and 17bn reais were invested in sanitation in Brazil per year. With the regulatory framework and universal coverage goals, these investments will increase fivefold. 

Of course, it's a challenge to have so many projects and investments taking place at the same time, but this means an extraordinary market for works.

In addition to sanitation, there's also great potential for expanding metropolitan rail projects, mainly in São Paulo.

BNamericas: The sanitation framework brought more privately owned companies to a sector previously dominated by state-owned firms. What differences are there in the way private and state-run companies contract services and works?

Botter: The major challenges in the sanitation sector have always presented a scenario where it wasn't realistic to think that solely the efforts of state-owned companies would be needed. The participation of the private sector was essential, as we're seeing now.

What changes, from the point of view of contracts with private sector companies, is the speed of implementing projects. State-owned companies have very rigid hiring processes and this affects the agility of processes. With the private sector, investment decision-making happens at a much greater speed.

It's also important to say that I don't think state-controlled sanitation companies will disappear, but we will see changes in the market.

Sabesp [São Paulo state-run water firm], which is in a privatization process, has included comments in its most recent notices indicating that contracts may change due to privatization, that is, there's already a sign that contracting procedures are likely to be more agile at Sabesp after privatization.

BNamericas: What about urban mobility, where are the opportunities?

Botter: We look at the entire country, but it's true that we have a very large concentration of projects in São Paulo, in the city of São Paulo and the metropolitan region, due to the size of the population and its economic importance.

In addition to São Paulo, I've also seen opportunities in the metropolitan rail sector in Minas Gerais state.

BNamericas: The proliferation of underground metro projects in São Paulo has been accompanied by increasing numbers of reports in local media that areas close to the projects suffer from geological problems, cracks in buildings and houses. Are there concerns about this from an engineering perspective?

Botter: There's an increase in the number of works in the city, with underground works through non-destructive engineering methods because the metro is arriving late to locations that have needed a metro connection for a long time and these areas already have high densities of residential construction, among other things.

In any case, these works cause disruptions around the projects, but I would say that none of the risks of these incidents aren't known to Brazilian engineering.

Of course, projects with these characteristics require close monitoring, because there are metro lines that are being built in the middle of urban areas. This requires very well-designed projects with the possibility of corrective ground soil treatment measures and close monitoring, but I don't see any risks linked to the lack of technical knowledge in these projects. I don't have any particular concerns about them.

BNamericas: Does Telar have plans to expand internationally?

Botter: We don't have vast experience in the international market. There are a few works we've done. 

Our first work in Uruguay, for example, wasn't long ago, but even with a somewhat limited vision of the international market, we have a subsidiary in Colombia where I see business opportunities. In Chile there's also an active market, in addition to Panama and Costa Rica.

In all these countries, the opportunities I see are for sanitation. The exception is in Panama where we're participating in a consortium for a metro project and we may have news about that contract by the end of the year.

BNamericas: Given the business opportunities you've mentioned, what are the expectations for the company's revenues?

Botter: We expect our revenues to grow by 10% per year over the next three years and to maintain a backlog around the size we have today.

It's also worth mentioning that, in our portfolio, we also have a PPP contract with São Paulo city hall for the construction of residential buildings, which we will manage for 20 years.

This PPP revives a vocation that we had in the past, which was as a concessionaire, so I would say that it makes sense to also look at some PPPs that are linked to our business expertise.