Arquivos Brazilian Development Bank

Ceasaminas, CEEE-G, CBTU, and ES Gás are seen as moving forward despite elections in October; Santos Port Authority, previously a priority, is unlikely to be sold in coming months

07/14/2022

Fábio Abrahão — Foto: Leo Pinheiro/Valor

The Brazilian Development Bank foresees that it is still possible to sell at least four more state-owned companies this year. These processes are being structured by the bank: Ceasaminas (food supply center), power generation company CEEE-G, Belo Horizonte-based urban mobility company CBTU, and gas distributor ES Gás.

Brazil will hold elections in October, but they are unlikely to impact the sales processes, said Fábio Abrahão, head of concessions and privatization at BNDES. “These are projects in a more advanced stage, which have already gone through internal stages in the Executive and Legislative branches. So we see no interference,” he said.

Santos Port Authority (SPA), the company that manages the Port of Santos, was also high on the federal government’s privatization list, but the sale is unlikely to be concluded on time as well. “We want to launch the public notice this year in order to have the auction ready [for 2023]. This is a very complex process, which has to be done carefully,” Mr. Abrahão said.

The IPO of Companhia Riograndense de Saneamento (Corsan) was on the list before being canceled on Wednesday after the Rio Grande do Sul Court of Accounts (TCE-RS) determined the suspension of the process. The state government is now working on a new model to sell all shares in the company.

Corsan CEO Roberto Barbuti said it is still feasible to hold the auction in 2022, at least from a technical standpoint. The idea would be to launch the call for bids soon after the second round of elections, in October, and hold the competition in December.

The executive evaluates that the studies required for the new modeling are not that complex. The idea is to repackage the work done so far, he says. Some steps will not have to be redone, such as the negotiation with the municipalities. However, the new model must include public hearings and new rounds of talks with the market, since the profile of the interested parties tends to change.

In the sector, however, the prevailing assessment is that it will be very difficult to conclude the process in 2022, mainly due to the elections.

In addition to political turbulence, each specific project faces its own particular challenges of attractiveness and pricing.

The next privatization auction is expected to be that of Rio Grande do Sul-based CEEE-G (Companhia Estadual de Geração de Energia Elétrica). This is the second attempt to sell the company. The first one, in March, was canceled due to the lack of interested buyers. Since then, the public notice was reformulated, and the minimum value for the purchase of shares was reduced to R$837 million from R$1.25 billion. The delivery of bids is scheduled for July 26 and the public session for July 29.

Rio Grande do Sul holds a 66.23% stake in the company. In addition to acquiring control of the company, the new operator will have to shoulder a fixed concession payment of at least R$1.66 billion to take over the concession of the generation plants. CEEE-G’s assets total 1,270 MW of authorized power, or 13.3% of the state’s generation.

Another project expected to be launched in the coming months is the privatization of Belo Horizonte-based Companhia Brasileira de Trens Urbanos (CBTU), which foresees service concession for 30 years. The competition is expected to take place on September 15. However, the contract still lacks the approval of the Federal Court of Accounts (TCU), a public spending watchdog not related to Brazil’s Judiciary system.

The project is ambitious. In addition to changes in the current structure, it provides for the construction of Line 2 of the subway in the capital city of Minas Gerais. The contract includes investments of R$3.7 billion. Federal and state contributions are foreseen to make the project feasible. The federal government will inject with R$2.8 billion, while the Minas Gerais state will disburse R$428 million.

Interest in the contract has been high, Mr. Abrahão said. “In addition to local groups, there are new international players in the market and European companies.”

BNDES also plans to privatize ES Gás later this year – the auction is scheduled for December 21. The amounts involved in the operation were not disclosed. The gas distributor is controlled by the Espírito Santo state, with a 51% stake, and has Vibra Energia (former BR Distribuidora) as a partner, with 49%. Vibra has signaled its intention to sell its stake as well.

“It is a lean company, which operates a relatively small network. The advantage is the potential for expansion. Espírito Santo boasts a strong industrial base and domestic consumption capable of providing stability to the operation,” Mr. Abrahão said.

On the privatization list, there is also the sale of Contagem-based Ceasaminas (Centrais de Abastecimento de Minas Gerais), which operates six warehouses.

The BNDES head sees this as a smaller deal, but an important one. “There is a potential impact of transformation and huge efficiency gains.” He says there are several interested buyers, mainly logistics operators.

Besides the state-owned companies, the development bank plans to sell some properties, which are likely to be sold in lots – assets of Furnas, Eletrobras, and Cais Mauá, among others. These auctions could total R$1 billion by the end of the year, Mr. Abrahão estimates.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/

A cruzada inócua e cara de Bolsonaro contra o BNDES

The Brazilian Development Bank (BNDES) will invest up to R$2.5 billion in infrastructure funds, which will be selected through a competitive process. The state-owned bank opens a call for proposals this Monday to choose up to five funds. A maximum of R$500 million will be allocated to each of them. The bank expects, however, to draw at least R$5 billion more from the private sector through the effort.

Asset managers interested in receiving funds will have until March 4 to submit their proposals. The choice will be made by the bank, which will evaluate the fund’s investment thesis, governance and costs, as well as the manager and the team involved. The selection is expected to be concluded by the first half of this year.

It is a new investment mechanism of the bank. “The BNDES’s central objective is to increase its instruments for operating in infrastructure. We already have direct investments, financing, and now we want to allocate resources through funds,” said Bruno Laskowsky, head of shareholding, capital market and indirect credit at BNDES.

The plan is to boost both debt funds, destined to finance projects and companies, and equity funds, which will directly invest in the capital of the businesses. Of the five chosen, up to two will be debt funds and three equity funds.

The BNDES will give priority to investments in basic sanitation and urban mobility, segments that have a greater social impact. There is also a preference for funds from institutional investors (who manage third-party money) and with criteria for measuring social and environmental impact.

Mr. Laskowsky highlights two other focuses sought by the BNDES. The first is “project finance” operations, that is, in which the project is capable of “self-financing,” providing its cash flow as a guarantee. “We want to privilege the risk-taking of the project, and not necessarily the risk of the larger guarantor.”

The second goal is to lengthen the term of the loans. “We are looking for structures that follow the long-term timing of infrastructure projects, which is more like 15, 20 years, while the term of bank loans in general is 7, 8 years,” he said.

For this, the idea is that the funds are closed-end, with a minimum term of eight years, and up to 15 years (equity funds) and 20 years (debt funds), said Filipe Borsato, head of fund investments at BNDES. “The idea is, in the short term, to serve these companies and projects benefited, but also, in the long term, to bring institutional investors to the country and give them more security to put funds into infrastructure projects in Brazil,” he said.

The idea is for the BNDES to be a “relevant minority shareholder” in these funds, and for the allocation decision – that is, which projects or companies will receive the investments – to be made by the private-sector manager, the executives highlight.

“The choice of specific projects will be made by private-sector managers, not by the BNDES. Typically, the term for the allocation of funds is three to six years, so the benefited projects will be structured and selected over the next few years. It is not something thought out for the projects of 2022,” Mr. Borsato said.

For this reason, the fact that the process takes place in an election year will not be a problem, and potential changes in the bank’s direction is not a concern, Mr. Laskowsky said.

“We are talking about 15, 20-year projects. This goes beyond any administration. And the country has a huge gap in infrastructure. The math done when it comes to thinking about investments is: there are people prepared to execute the works, there are good project structurers, there is financing and there is demand. These factors are not trivial. Stability helps a lot, of course, but the central theme here is not electoral volatility,” he said.

As for BNDESPar the move is part of its “capital recycling” process, Mr. Laskowsky said. Since 2019, the development bank’s equity arm has been disposing of its shares in companies such as meatpacker JBS, paper and pulp maker Klabin and mining giant Vale, among others. The idea, the executive said, is to rebuild the portfolio having as guidelines innovation, environmental and social impact.

The investment in infrastructure funds will be a first experience in this investment model, which may be extended to other areas of BNDES’s operations. “This is the first call. We will understand how the process will work out. But one possibility is to give guidance, which could be annual, biannual, or triennial, and the bank will make subsequent calls in different strategic sectors, not just infrastructure,” he said.

Source: Valor international

https://valorinternational.globo.com/

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