São Paulo – After a notably slow 2014 in terms of logistics infrastructure auctions, in 2015 the federal government will have the task of unlocking new projects in the sector, an issue considered essential to stimulate increased investments and encourage the resumption of economic growth in the country.
The focus should be on the railways and ports segments, essential for improving the competitiveness of Brazilian production and in which no progress has been observed so far.
The government's target is challenging, bearing in mind rising interest rates, declining credit, large investors facing investigations within the scope of the Lava Jato operation and the main competitors developing strong investment programs linked to projects already acquired.
The unanimity between sector agents and experts is that it will not be a year of many auctions and practically nothing should be offered in the first half – the exception is the concession of the Rio-Niterói Bridge, now operated by the private sector and whose current contract ends in May. For the rest of the projects planned or under study by the federal government – such as concessions for more highways, railways and port leases, in addition to the resumption of privatization of airports -, the expectation is that there will be, perhaps, one or another bidding process, in the second half. A more significant volume will remain for 2016.
“There won't be much (to be granted in 2015), because there is an understanding that the economic team will work on the public deficit. I see that it is going to stop, there is nowhere to go”, says the president of Triunfo Participações e Investimentos, Carlo Alberto Bottarelli.
“We have zero expectations for 2015,” says an executive from another group of concessions, who spoke on condition of anonymity. “First, the government has to put the brakes on order and recover market confidence through tougher measures, increase revenue and lower costs, and it has to create a sincere surplus”.
Professionals from the UBS analysis team also consider that, based on current macroeconomic conditions, the government may postpone the schedule of auctions for new projects, which add up to around R$ 100 billion.
The managing partner of Pezco Microanalysis, Cleveland Teixeira, argues that, in addition to carrying out fiscal adjustment measures, the government should review regulatory models and strengthen regulatory agencies. “2015 will be the year to put the house in order and things will be put aside, I don't see the possibility of large new investments in infrastructure before the middle of 2016”, he assesses.
Return rate
Changes may also happen in more consolidated sectors, such as highways and airports. In this case, investors expect an improvement in the internal rate of return (IRR) on new concessions. After trying to define a rate and facing a clash with the main investors in the sector, the government was forced to give in and modify some assumptions of the projects to allow for a greater return. Now, industry sources say new talks are underway aimed at a further increase.
Market professionals are also starting to consider a higher IRR. “In view of current market conditions, returns (TIRs) may be revised upwards in upcoming auctions,” said UBS analyst Rodrigo Fernandes, in a report. Clearer signs should be seen in the auction for the Rio-Niterói Bridge, but, for the UBS analyst, the amendment to the contract of the concessionaire Autopista Régis Bittencourt, signed at the end of December, reinforces expectations, as it indicates a disposition of the regulatory agency in negotiating with companies.
Source: Estadão Content
By: Luciana Collet
