Pioneer experience in Espírito Santo will be a benchmark for sector

10/05/2022

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Ilson Hulle — Foto: Gabriel Lordello/Valor

Codesa, the Espírito Santo Port Authority that is now officially privatized, plans to expand the capacity of the state’s ports and draw new types of cargo. The new management team took over operations on September 21 and is already preparing four work fronts: the adaptation of the existing contracts; the search for new businesses for idle areas; the contracting of the construction works; and internal transformations in the company.

“The great challenge is to build a new business environment. We have a port with idle capacity and many people wanting to do business. The goal is to bring these investors into the port,” said Ilson Hulle, the company’s new CEO.

Codesa is Brazil’s first privatized port authority. Its controlling shareholder is the investment manager Quadra Capital, which won the auction in March this year. The privatization included the sale of the company and the signing of a concession that gives the group the right to operate the ports of Vitória and Barra do Riacho for 35 years.

One of the first tasks of the new management team, to be done in the first six months, is the adaptation of the contracts with the terminals to the private-sector reality from the state-owned reality. According to the privatization rules, Codesa cannot reduce the scope of any operation, but extensions can be negotiated.

“I don’t foresee very troubled adaptations. For the lessee, it can only get better. New areas and new cargoes may be included to expand the volumes of the terminals, something that was not possible before. There are already groups interested in making this type of change,” the executive said.

In the coming months, the guidelines for the expansion of the ports operated will also be defined. Especially in Barra do Riacho, there are empty areas likely to house new terminals. The plan is still being designed and will depend on the conversations with interested parties. The goal, according to Mr. Hulle, is to strengthen the cargoes already present in the ports, but new operations are also in sight.

Among the segments with growth potential, he cited grains, fertilizers, containers (possibly by grabbing cargo that goes to other states), steel, and oil and gas, especially to decommission oil platforms.

The executive also foresees the need for expanding the port’s capacity through interventions.

The expansion of railroad accesses is seen as crucial. According to the contract, Codesa will have to reform the internal tracks of the port. It will also be important to make investments to connect with the great railway network. Today, the ports already have an active connection with Vale’s Vitória-Minas railroad, but an expansion is necessary.

“We will establish contact with the operator [to request the expansion],” said Mr. Hulle. “The railroad is already there, but with a very reduced volume. It would be necessary to gain the capacity to give us a leap in volume, especially in grains.”

When contacted, Vale said in a note that it “periodically evaluates the need and feasibility of making investments in cases where there is a concrete increase in demand in the region.”

Regarding road access, the necessary renovation will also depend on investments that go beyond Codesa’s contract. It will be up to the company only to make the executive project for the construction works.

As for the waterway access, the authority itself will have to increase the capacity of the ports through dredging and other interventions. “We have physical restrictions for the entry of ships, but I see an opportunity to enable slightly larger vessels, which can expand the range of cargo possibilities in Vitória.”

This may be possible both through construction works and simulation studies of the entry and exit of ships, which may indicate gaps so that larger ships can enter the port in certain time slots, with some kind of restriction. “We will work to find the maximization point,” he said.

In all, the concession foresees investments of around R$335 million. The central works, which are expected to be done in the first two years, include reforms in the warehouses, the wharf and pier structures, and the port’s internal railroad.

In addition, Codesa will be tasked with renovating its internal structure. “Before, purchases were made by bidding. The company was privatized, but it does not have a supply team or a basic flow of purchase approval. We will have to create all these procedures and train people.”

Under the terms of the privatization, the 235 employees of the former state-owned company will have one year of stability. Codesa is also expected to open a buyout plan in the next six months.

The new CEO of Codesa is a native of Espírito Santo who began his career as a trainee 17 years ago at a terminal in the port of Vitória. Just before assuming the position, Mr. Hulle worked as a terminal director at Log-in, a company that operates in the port.

This is an unprecedented project for all involved. Quadra Capital, the controlling shareholder of the business, is having the first experience as a direct operator of an infrastructure asset, although the group had already worked with credit in the sector.

For the port market, it will be the first test of a private-sector port authority. The list of candidates to join the model is relevant: besides Santos Port Authority (São Paulo), other ports may follow, including Itajaí (Santa Catarina), São Sebastião (São Paulo), and Bahia.

“We know our responsibility. Codesa will serve as a showcase. We are challenged to do an excellent job. But the question of unprecedentedness was left to the day we signed the contract. Now, the focus is to make it happen,” said Mr. Hulle.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/