CCR seen as favorite to win São Paulo’s US$3.5bn highway concession
Despite a third quarter net profit contraction, Brazilian infrastructure company CCR has emerged as the favorite to win the country’s largest ever highway concession.
São Paulo state will auction on November 28 the concession for 1,273km of highways, involving investment of 14bn reais (US$3.5bn).
“We will evaluate this concession, certainly, with high interest. But this is a complex operation as it involves a giant amount of investment and we need to reach an equation to guarantee return for our shareholders,” CFO Arthur Piotto Filho told a conference call on Tuesday.
His comments came in response to analysts' remarks that implied the company is the favorite in the auction.
“CCR's asset diversification strategy has proven to be a resilient business model,” BB Investimentos' equity team said.
“The auction of Piracicaba-Panorama (Pipa) highway in the state of São Paulo will take place at the end of November and, since CCR is the favorite to win the bidding, there has been a positive momentum for CCRO3 [CCR's ticker symbol] performance,” it added.
Analysts put CCR ahead because of the company's strong cash position and because a local rival recently won a big concession, impacting its financial muscle.
At the end of September, Ecorodovias won concessions for 437km of the BR-364/365 federal highway between Uberlândia in Minas Gerais state and Jataí in Goiás. The company must invest 4.57bn reais over the next 30 years.
RESULTS
CCR's quarterly net profit contracted to 340mn reais from 365mn reais in 3Q18. According to the company, the lower profit results from rising costs and expenses due to punctual factors.
FOREX HEDGING
São Paulo state hopes to attract multiple participants for the highway auction.
Considering the needs of foreign investors, the contract includes a foreign exchange hedging mechanism. The World Bank's private sector arm, the IFC, has also been involved in designing the concession.
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