Brazil Infra Watch: Concessions, asphalt prices, Odebrecht unit plans

Brazil’s President Jair Bolsonaro authorized by decree the re-offer of past highway, railway and airport concessions, as promised investments did not materialize.

 

Although the decree covers all sectors in theory, in practice it applies to only specific past concessions.

 

During the Rousseff administration from 2011 to mid-2016, the government offered various highway and airport concessions.

 

In the highway segment, concessionaires promised to invest in maintenance and widening in exchange for charging tolls. But planned investments were not made because traffic remained below estimates due to the economic crisis.

 

The administration offered concessions for highways BR-101, BR-163 in Mato Grosso state, BR-163 in Mato Grosso do Sul, BR-040, and a lot containing BR-060, BR-153 and BR-262. These concessions faced problems and will now be on reoffer.

 

In addition, the presidential decree paves the way for the reoffer of the  Viracopos airport concession in Campinas city, São Paulo state.

 

In May 2018, a local court approved a bankruptcy protection request from Viracopos’ concessionaire Aeroportos Brasil Viracopos (ABV). ABV is made up of local infrastructure company Triunfo Participações e Investimento (TPI), engineering firm UTC Engenharia and Egis. The concessionaire holds a 51% stake in the airport, while government airport authority Infraero has 49%.

 

Along with the economic crisis, Triunfo and UTC faced headwinds due to their involvement in Lava Jato corruption investigation while ABV struggles with a 2.88bn-real (US$729mn) debt.

 

According to the presidential decree, all concessions to be returned will first be evaluated by respective regulators. The infrastructure ministry will have the final say and determine if indemnities must to be paid.

 

ASPHALT PRICES RISE

 

Concessionaires face another problem: persistent hikes in asphalt prices.

 

Between September 2017 and February 2019, prices rose 108% in Brazil, while the barrel of oil – the main raw material used for the production of asphalt – rose 33.3%, according to a study from transport confederation, CNT. 

 

High asphalt prices increase the likelihood of slowing highway and road maintenance.

 

“There is a huge impact on the transport industry and on society as a whole. Asphalt is one of the main products used in paving Brazilian roads. In a scenario where there are few resources for building and maintaining highways, when the price goes up a lot, the government can do less work,” CNT president Vander Costa said. 

 

Asphalt in Brazil is produced in refineries of state oil company Petrobras and  represents 40% of total maintenance costs for highways.

 

CNT demands more transparency in Petrobras’ price policy.

 

ODEBRECHT DIFFICULTIES PERSIST

 

Bioenergy company Atvos, a unit of embattled construction and engineering conglomerate Odebrecht, delivered this week a plan to creditors as part of its bankruptcy protection.

 

In May, Atvos filed for bankruptcy protection in a local court, looking to restructure nearly 12bn reais in debt.

 

Atvos is proposing a debt reduction financed via cash generation and not new financing.

 

Along with Atvos, various other Odebrecht units filed for bankruptcy protection.

 

Odebrecht is at the epicenter of the Lava Jato graft probe that uncovered fraudulently obtained construction contracts at Petrobras.