Story originally published on 03.14.2023, by Lucas Bombana, in Folha de São Paulo (in Portuguese)
The Via Appia Fundo de Investimento em Participações consortium won the auction to complete the works on the northern section of the Rodoanel beltway, held on Tuesday afternoon (14th) at B3’s headquarters in São Paulo.
Asset manager Starboard, which works in so-called distressed situations, usually involving companies in financial difficulty, is behind Via Appia.
It offered a 23.1% discount on the amount to be paid by the São Paulo state government as a public contribution to complete the works, which could reach BRL 1.4 billion.
Since toll revenue is not expected to be enough to adequately remunerate the concessionaire, the government undertook to make installment payments to offset the winning consortium’s expenses.
São Paulo Governor Tarcísio de Freitas (PL), with Marcos Bittencourt and Brendon Ramos, of the Via Appia Consortium, at the Rodoanel Norte auction – Rubens Cavallari/Folhapress
Thus, the PPP (Public-Private Partnership) model provided, as one of the criteria for choosing the winner, which consortium gave the largest discount on these installments, set at BRL 51.4 million per year.
Two participants, however, offered bids providing for a 100% discount on this consideration. As a result, the contest moved to a second phase, between Via Appia FIP and the Infraestrutura SP consortium, formed by EPR 2 and Voyager Participações.
In this second stage, the largest discount on the public contribution planned to complete the works, another payment to be made by the government, was taken into account. Via Appia proposed a 23.1% reduction, beating Infraestrutura SP, which offered 5.11%.
The SP Flow consortium, led by XP, and Acciona also competed in the auction, but offered discounts on the consideration of 60.03% and 12.90%, respectively, and did not advance to the second phase.
The tender was suspended by the courts on the eve of the scheduled date, but the São Paulo government managed to overturn the injunction.
Present at the auction, Governor Tarcísio de Freitas (PL) said he was confident that, with the auction, the northern section of the beltway should be ready within the expected deadline, in June 2026.
The announced conditions provide for a 31-year concession term, with estimated investments of approximately BRL 3.4 billion, according to the tender notice published in August 2022.
Of this amount, around BRL 2 billion is expected to go towards completing the works, with the remainder used for the operation and maintenance of the highway, which will be supervised by Artesp (São Paulo State Transportation Agency).
“It is a section that has been abandoned for a long time, which deserved funds and people to come in and work”, said Marcus Bitencourt, a partner at Starboard, adding that this is the asset manager’s first investment in highways.
Bitencourt also said that the Eastern section of the beltway, which connects to the Northern one, is operated by a company under judicial reorganization (SPMar), and that there will be “obvious operational synergy” between these sections once they are built.
“We want to have a good interaction with this other company to be able to help”, said Bitencourt, who did not rule out the possibility of Starboard investing in SPMar. “It all depends on the price.”
Unfinished works on the northern section of the Rodoanel, near the Fernão Dias highway, in São Paulo – Danilo Verpa – Mar. 13, 2023/Folhapress
A case considered a success structured by the asset manager was that of 3R Petroleum. The company resulted from several of Starboard’s investments in the sector, including the acquisition of Ouro Preto Óleo e Gás, an oil company founded by Rodolfo Landim, president of Flamengo.
Starboard’s successful investments also include Gemini Energy, a power transmission company sold in 2022 to Energisa for around BRL 820 million. A bet by the group that did not deliver the expected result was retailer Máquina de Vendas, owner of the Ricardo Eletro brand, of which Starboard became one of the main creditors in early 2019, but which, under pressure from the pandemic, filed for judicial reorganization in October 2020.
The last remaining stage of the beltway is 44 km long, covering the municipalities of Arujá, Guarulhos and São Paulo. Its delivery should ease traffic on the Marginal Tietê expressway by serving as an alternative for vehicles that merely cross the capital to access other highways.
In total, the beltway will be about 176 kilometers long. The first section opened was the Western one, in 2002, followed by the Southern section in 2010 and the Eastern section in 2014.
According to the planned model, the northern section of the Rodoanel will have no toll plazas, with tolls charged through sensors that calculate the amount due based on each vehicle’s mileage. The initial forecast is a toll of BRL 0.15 per kilometer traveled.
For drivers with an electronic tag, the toll will be charged through the device itself. Those without the device will need to access the concessionaire’s website to pay within 15 days of using the highway. After that period, a payment slip will be sent to the driver to settle the debt. If payment is not made on time, a fine for toll evasion will be issued.
An auction for the Northern section of the Rodoanel had been scheduled by the previous government of Rodrigo Garcia (PSDB) for April 2022, but was suspended one day before the scheduled date. According to the government at the time, the decision was due to the “uncertainties generated by the domestic macroeconomic scenario”.
To increase interest in the project and avoid another suspension of the auction, the internal rate of return offered to investors has now been raised from 8.93% to 9.99% per year.
Luiz Felipe Pinto Lima Graziano, partner at Giamundo Neto Advogados and concessions specialist, said that the victory of FIP Via Appia reinforces the perception of a trend towards greater participation by funds and financial sector companies in large infrastructure projects.
“While in the past there was a predominance of companies originating in civil construction, more accustomed to engineering and construction risks, today there is more significant participation by competitors with a financial profile. The works needed to complete the northern section of the Rodoanel are challenging and will require sophisticated engineering solutions, which may be outsourced to specialized companies, including by transferring part of the engineering risks to the builder”, said Graziano.
“The business conditions matured considerably, and the government made significant concessions because it needs to secure interested parties”, says Ricardo Levy, infrastructure partner at law firm Pinheiro Neto.
Levy adds that, in a high interest rate scenario such as the current one, persuading companies to take part in a very long-term business requiring billions in investment is even more challenging.
According to Levy, aspects related to the economic and financial balance over the project’s 31 years, as well as possible — and likely — disagreements between the private sector and the government over the state of the works and the need for investment, were addressed in order to overcome resistance and attract bidders to the auction.
Rafael Benini, State Secretary for Investment Partnerships, preferred not to state how much work remains to complete the northern section of the Rodoanel, but estimates at the time the work was halted five years ago indicated that around 85% of the work had already been completed.
Construction of the northern section of the Rodoanel began in mid-2013 and has been halted since 2018. The works were initially budgeted at BRL 4.3 billion but, by 2019, had already consumed around BRL 6.85 billion, becoming the target of investigations into suspected overpricing and corruption.
The contractors in the consortia, such as Coesa (formerly OAS) and Mendes Júnior, were hit hard financially by Lava Jato, filed for judicial reorganization and were declared unfit by the Federal Government.
On Friday (10th), Coesa filed a writ of mandamus to try to suspend the auction, but the request was denied by the courts. The company also tried to suspend the auction through a challenge filed with the TCE-SP (São Paulo State Court of Accounts), which was also denied. The company claims it is entitled to compensation from the state for investments it made in the works.
