Challenging scenario, with strong inflation of construction costs, is unlikely to hinder competition
06/10/2022
Brazil’s new auction of airport concessions, scheduled for August 18, is expected to draw strong interest from the private sector. The challenging scenario in the infrastructure market, with strong inflation of construction costs, high interest rates and economic uncertainties, is unlikely to hinder competition, analysts told Valor.
The highlight of this 7th round is the block of Congonhas airport, in São Paulo. Any operator interested in the asset, considered one of the federal government’s “crown jewels,” will have to take some regional airports as well – 10 of them, located in Minas Gerais, Mato Grosso do Sul and Pará. This block of airports will receive R$5.9 billion in investments. The winner will be the one who offers the highest fixed concession payment – the minimum amount is R$740.1 million.
“It is hard to imagine that there will be no competition for a block that includes Congonhas. All the large groups that participated in the last rounds are analyzing it,” said Ricardo Fenelon, with law firm Fenelon Advogados.
This is an eagerly anticipated auction, said Fabio Falkenburger, a partner at law firm Machado Meyer. “Since this cycle of concessions began, all operators have been studying Congonhas. This asset has guaranteed air passenger traffic and great potential for commercial exploration,” he said.
The resilience of domestic flights after the peak of the pandemic also makes players more confident, said Daniel O’Czerny, head of global infrastructure finance for Latin America at Citi.
The participation of some groups is seen as certain, including CCR, France’s Vinci Airports and Spain’s Aena. Other large international operators already present in the country are strong candidates, including Switzerland’s Zurich Airport and Germany’s Fraport. The investment fund manager Pátria, which has been trying for some time to enter the airport industry, is not showing much interest, but is also considered a strong candidate.
The arrival of new players is not seen as likely, but considering the importance of the airpot in São Paulo, it is not ruled out either. Groups such as France’s ADP, Australia’s Macquarie and U.S.’s Houston Airport may take part.
The other two airport blocks included in the seventh round play second fiddle, but are also seen as good opportunities. The North block, which includes the airports of Belém and Macapá, will receive investment of R$875 million. The executive aviation block, formed by Campo de Marte (São Paulo) and Jacarepaguá (Rio de Janeiro), will draw R$560 million in construction works.
The North block is expected to draw medium-sized operators, such as Socicam. Vinci and Aena are also seen as natural candidates due to possible synergies with the airports they already operate. The French group has already won a first regional block in the North region last year, which includes airports in Manaus, Porto Velho, Boa Vista and Rio Branco. The Spanish company, on the other hand, has been operating six airports in the Northeast region since 2020.
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/K/Y/mqoR7tSSqyxUcVtjq7Zw/10emp-100-aero-b3-img02.jpg)
Ronei Glanzmann — Foto: Geraldo Magela/Agência Senado
Some analysts see the business aviation block as a question mark. But the government expects a successful auction, said Ronei Glanzmann, federal secretary of Civil Aviation.
“We have seen companies totally different from those that typically participate in auctions. It is a segment that involves three businesses: general aviation, real estate exploration and, especially in Jacarepaguá, fuel supply. The perception is that there may be multidisciplinary consortiums,” he said.
The scenario of economic instability, high interest rates and fast inflation of construction inputs have hindered infrastructure auctions this year, especially those of highways. In the case of the airport auction, market players say that these factors are unlikely to make it unfeasible.
For Elias de Souza, partner at Deloitte, the crisis scenario is likely to impact mainly the attraction of new operators. “I don’t think new groups will come for this auction. The current macroeconomic scenario requires more security. But those that already operate in the country know the local risks and are likely to bid,” he said.
According to a source that follows the auction closely, the advantage of airport projects is that the impact of cost inflation is somewhat lower and, in addition, operators have a greater variety of ancillary revenues. Mr. O’Czerny also notes that the range of airport operators already present in the country is much larger than in the road sector, which favors competition in the auctions.
Vinci and Zurich declined to comment. CCR said it is “attentive to opportunities.” Aena, Fraport and Pátria did not immediately reply to Valor’s requests for comment. Socicam said it is analyzing the projects.
Source: Valor International