Auction is expected to draw at least one bidder after postponement, revamp
06/30/2022
Five groups mull taking part in the federal auction that will choose a company or consortium to build a beltway around Belo Horizonte, the capital city of Minas Gerais, through a public-private partnership. Acciona, Sacyr, China Railway Construction Corporation (CRCC), ECB (a subsidiary of the Portuguese group Mota-Engil) and Construcap are analyzing the project, sources say.
The auction, which was previously postponed and revamped, is expected to succeed this time and draw at least one bidder. Yet, the venture is seen as extremely challenging as market conditions remain very difficult amid soaring inflation and high interest rates.
The interested companies or consortiums will be able to file their bids on July 25. The action will be held on July 28 at the exchange B3, in São Paulo. The winner will be the group that offers a higher discount on yearly installments to be paid by the government to the concessionaire. The maximum amount is R$103.7 million.
In addition, the state of Minas Gerais will inject R$2.4 billion in the first moment to build the beltway. The funds come from the compensation paid by mining company Vale to the state government after damages caused by the dam failure in Brumadinho.
The auction had been scheduled for April this year before being postponed amid uncertainties about the project. Since then, the public-private partnership was revamped in order to draw bidders, sources familiar with the project say.
The main change was the reduction of necessary investments, as the construction works for two segments are no longer obligatory. The final version of the call for bids provides for the construction of the North and West sections, which total 70 of the 100 kilometers of the beltway and concentrate most of the traffic. As a result, the mandatory capital expenditure dropped to R$2.5 billion from R$5 billion.
The construction of the other two stretches (South and Southeast) is still provided for in the contract. The construction works will be included as an additional investment in exchange for a rebalancing of the contract – which could materialize through capital injection by the government, by contract extension, or another arrangement.
Acciona declined to comment. Mota-Engil and Sacyr did not immediately reply to a request for comment. Valor could not reach CRCC and Construcap.
The project is both highly encouraging and challenging, analysts say, because the beltway must be constructed from scratch. It is a multi-billion, complex venture – something rare in Brazil today, which draws flush engineering groups.
On the other hand, the risks are high, said Eduardo Ramires, a partner at the law firm Manesco Advogados. “It is a huge project, with large urban interference, many expropriations and an environmental permit process that will take at least two years. If the process is delayed, it is a problem, because it impacts all the planning and brings uncertainties to the financing structure,” he said.
*By Taís Hirata — São Paulo
Source: Valor International