This is the group’s first investment in Brazil; company now plans to take part in new projects in the country
08/15/2022
The Italian group INC, which won the auction of the public-private partnership (PPP) of the Belo Horizonte beltway on Friday, makes its debut as a highway concessionaire in Brazil. The company now plans to take part in new projects in the country, said Nicola Trovato, the company’s representative.
“We are studying other bids, but I cannot say which ones,” he said after the victory. The company currently operates roads and railways.
INC has been trying to join Brazil’s infrastructure market since 2019. That year, the company even studied the PPP of the Salvador-Itaparica bridge, but ended up not participating in the auction, which was won by a consortium made up of the Chinese groups CRCC and CCCC. “After that, we stopped activities due to the Covid pandemic. Now we put our efforts into trying to win [the Belo Horizonte beltway PPP] and we succeeded,” he said.
The group, which is based in Turin and controlled by the Dogliani family, operates as a construction company, but also runs two important road concessions in Italy.
Among analysts, the entry of a new foreign operator into the Brazilian market was being pointed out as unlikely given the challenging economic scenario and the election year. “A foreigner coming to Brazil at this moment is surprising, but the project is very strong. It has contractual characteristics that provide financial support,” said Massami Uyeda Junior, a partner at Arap, Nishi & Uyeda Advogados, which supported INC in the auction.
In the auction, the company made an offer of a 12.14% discount over the amount that the state will pay. As a result, it defeated the bids of its only competitor, China Railway Construction Corporation (CRCC) group, which offered a discount of 10.2%.
With the discount, the Minas Gerais government will have to disburse R$2.4 billion. This discount applies to the consideration (R$91.1 million) to be paid in the first three years, and the initial contribution for the work (R$2.1 billion). In addition, an additional payment of R$211 million will be made, which will be directed to a contingency account for the project. Part of the money comes from the compensation agreement signed between the state government and mining company Vale linked to the damage caused by the Brumadinho tragedy.
With the victory, INC will have to move forward with the beltway project from scratch. Initially, the project will be 70-kilometer long and require investments of R$4.1 billion considering the construction work and the necessary expropriations.
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Fernando Marcato — Foto: Silvia Zamboni/Valor
The construction is expected to start in 2024, according to Fernando Marcato, the state’s infrastructure secretary. The contract with INC is expected to be signed in a month and a half, and the environmental permit and executive plan stage is likely to take at least a year and a half.
In total, the beltway is likely to be 100-kilometer long. The remaining 30 kilometers needed to complete the project may still be added to the contract upon economic rebalancing. For this, an additional contribution from the state will probably be necessary, which could come from the new compensation agreement the Minas Gerais government is negotiating with Vale, related to the Mariana tragedy, Mr. Marcato said. An additional contribution of R$2.1 billion is likely to be required.
*By Taís Hirata — São Paulo
Source: Valor International