Financial players join forces via new fund to support Brazil infra projects

Asset manager Pátria Investimentos has launched a new infrastructure credit fund to support projects in the energy, water, logistics and transportation, urban mobility, telecoms and public lighting sectors in Brazil.

Pátria Infra Crédito FIDC raised 1bn reais (US$200mn) from Brazilian development bank BNDES, Latin American development bank CAF, the IFC, which is a member of the World Bank, and other institutional investors. 

The new fund aims to raise up to 5bn reais in the long term, mainly from institutional investors.

According to infrastructure and basic industries association Abdib, Brazil’s infrastructure sector is expected to require 235bn reais in 2024 alone, excluding oil and gas.

A World Bank study found that Brazil’s infrastructure investment gap was close to US$800bn in 2022.

"There are very competent players [in the Brazilian market], and we want to grant credit to them, filling this gap," Alexandre Coutinho, investment director and senior portfolio manager at Pátria Investimentos, told BNamericas. 

With regard to energy, Coutinho said that there will not be a single solution for supplying the country, but a mix of sources, such as solar, natural gas, green hydrogen and onshore and potentially offshore wind.

"We don't have any operations in the offshore wind pipeline at the moment, but we're ready to move in that direction when we have to," he said. 

Natália Melo, director of capital markets and sustainable finance at BNDES, said that more investment will be needed in renewable energies, including offshore wind, to achieve carbon neutrality. "This is one of the segments we’re studying at the bank to support," Melo told BNamericas.

BNDES will contribute up to 500mn reais to the fund, which aims to provide long-term credit for small and medium-sized brown- and greenfield projects, especially in poorer regions, which find it more difficult to access traditional credit lines. 

The primary model will be non-recourse project finance, i.e. projects in which the guarantees given to the financier are the assets of the project and the expected future cash flows, without the need for a letter of guarantee.

According to BNDES, the fund's main differential is the ability to structure projects with greater flexibility, such as the possibility of taking on long-term debts, as well as the construction risk, without the need for a bank or corporate guarantee. 

Between 50mn reais and 100mn reais will be made available initially per project, complementing the work of development banks.

"We’ll be able to reach projects that we would never look at individually," Carlos Pinto, IFC's country manager, told journalists on Tuesday at the fund's launch event in Rio de Janeiro.

"The federal government and the Brazilian states have limited capacity, fiscal space is restricted, so the capital market is called upon to fill this gap," he added. 

Jorge Arbache, CAF's vice president for the private sector, highlighted that Brazil suffers from a high cost of capital and the lack of infrastructure to reduce production costs.

"That's why we're attracted to the idea of developing a pipeline of medium-sized businesses, especially in poorer areas, with an important impact on society," he said during the press conference.

In addition to the new fund, Pátria continues to raise money for its Infraestrutura V fund, which is focused on equity investments in infrastructure development projects controlled and managed by the group. 

The resources are allocated to areas such as energy, logistics and transportation, data infrastructure and environmental services. In line with this strategy, the fund's first investment is being made in a 30-year concession, which will demand 7.9bn reais for works on 473km of federal and state highways in Paraná state. 

Pátria has assets under management of around 140bn reais and a global presence with offices in 10 cities on four continents.