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The successful auction of the Companhia Docas do Espírito Santo (Codesa) may boost the other port privatization projects underway. However, market players are skeptical about the feasibility of getting them off the ground by 2022, especially the privatization of the Port of Santos — a much more complex project from a technical and political point of view.
The concessions for the ports of São Sebastião (São Paulo) and Itajaí (Santa Catarina) are smaller and simpler. That is why holding these auctions this year is seen as more likely, although there are also challenges.
The privatization of Santos is a priority for the federal government. The public consultation stage of the project ended last week, and the government plans to publish the public notice in November in order to hold the auction later this year. Any contract would be signed next year.
The auction model will be similar to that of Codesa. Santos Port Authority (SPA) will be privatized, and the administration of the port will be granted for a period of 35 years — R$1.4 billion will be spent on construction and R$14.16 billion on maintenance, mainly dredging. In addition, the winner will have to allocate R$3 billion to make the Santos-Guarujá underwater tunnel feasible — its construction and operation will be tendered separately.
The project has been the target of much interest from the private sector, but the perception of risk is also high. “There are many groups studying it, but it will be important that the government gives a reasonable time for the companies to study the final tender, because there are many risks involved. It is a complex port, which encompasses multiple interests, has many terminal contracts in effect, and the auction will have heavy investment obligations,” said Rodrigo Paiva, a partner at consultancy Mind-Infra.
For Thiago Miller, a partner at law firm RMM Advogados, “it is very unlikely” that the auction will take place this year. “The big determining factor of the schedule will be the analysis of the [public spending watchdog] TCU,” he said.
The disbelief about the viability of bidding for the port on time is shared by at least three other sources that follow the matter closely.
The government, however, guarantees that there is enough time to hold the auction in 2022. Fábio Abrahão, the head of Concessions and Privatizations of the Brazilian Development Bank (BNDES), said that the team will seek to hasten the project as much as possible to try and sign the contract this year — in the market, the evaluation is that leaving the act for 2023, in the next administration, creates an additional risk to the conclusion of the process.
“Privatization today is different from what it was in the 1990s. We no longer have that resistance from the population. In Santos, there are multi-billion investment obligations foreseen, the entire productive sector is convinced that it is necessary, and the companies have already understood the rules of protection [to current contracts]. It would be an uneconomical decision [not to hold the auction],” Mr. Abrahão, who oversees the structuring of the project, said.
The Codesa auction was the first privatization of a port authority in the country. The Brazilian port sector is already used to private or leased terminals, but the port authorities — responsible for the management and development of the common areas of the ports – are still state-owned and, historically, have been the target of partisan nominations and political interference.
Besides Codesa and Santos, the federal government has structured a portfolio of projects in the segment. “We are creating a new market,” Mr. Abrahão said.
The projects for the ports of São Sebastião and Itajaí, also planned for this year, follow a different model: there will be no privatization, only the concession of the ports. In addition, the new operator will have the right to explore not only the common structure, but also terminals — in the case of Codesa and Santos, on the contrary, there are restrictions on the participation of terminals in the auction, to avoid conflicts of interest.
The format was chosen because they are small ports with specific vocation and, therefore, there would be no feasibility for a concession only of the common areas.
Today, the port of São Sebastião basically handles soda ash, an input imported by the glass and soap industries, and is home to a Petrobras private terminal.
Considered challenging from an economic point of view, the project does not foresee minimum investments. The idea is that the new operator, once it takes over, has the freedom to choose the interventions. “The expected revenue is lower, but so are the expenses. There is less profitability and fewer problems, unlike Santos. It can attract niche markets,” Mr. Schwind said.
For Mr. Miller, there are two major challenges for the expansion of the operation in São Sebastião. The first is the need to build a second pier, further out to sea, to obtain more depth. The second is the lack of a land access to the port, something that will depend on the state.
The Port of Itajaí is geared towards container handling. The plan is to attract large shipping groups from the sector. However, it is also a complex project, with a high volume of investment (R$2.8 billion) and operational challenges. “It would be important to mitigate some very big risks in the public notice. Among the obligations, there is expropriation and purchase of private areas, which are not simple. For a private-sector group, it is a very difficult risk to assess,” Mr. Paiva said. Even so, he believes that the auction can be successful.
The Brazilian Development Bank has already started studies for the privatization of the Companhia das Docas do Estado da Bahia (Codeba), which is likely to follow a model similar to that of Santos and Codesa, but the process is just beginning. Besides this, the bank is negotiating to expand its portfolio, with projects that would be left for the next administration. “In the very short term it is estimated that other ports will enter. It would be natural to have Rio de Janeiro, and Pará would also be a good candidate to join the program,” Mr. Abrahão said.
Source: Valor International