Brazil highway operators get ready for upcoming auctions

Bnamericas Published: Tuesday, August 13, 2019
With the Brazil's federal but also many state governments facing fiscal restrictions after multiple years of weak economic performance, a pipeline of highway projects is on offer to private investors. And the largest highway operators are preparing to get a slice of the pie.
Some players have an advantage because they’re in better financial shape.
One of the largest groups, CCR ended the second quarter with less net debt than its peers of 2.5 times Ebitda. 
Buoyed by sound financial fundamentals the company can bid comfortably in upcoming auctions. 
“We are confident with the new opportunities, and we are pursuing new businesses,” said Arthur Piotto Filho, CCR CFO during a recent conference call with analysts. 
According to the executive, offers over 8,000km of highways until 2021 and 5,000km by 2022 contain projects interesting for CCR. 
The company will also evaluate participating in upcoming auctions in the airport sector. 
Founded in 1999, CCR is controlled by construction groups Andrade Gutierrez and Camargo Corrêa, both of which are investigated in the Lava Jato corruption probe.
CCR operates 3,739km of highways, via concessionaires CCR NovaDutra, which administers the highway linking São Paulo and Rio de Janeiro; CCR ViaLagos in Rio de Janeiro state; CCR RodoNorte in Paraná state; CCR AutoBan, CCR ViaOeste, CCR Rodoanel Oeste, Renovias and CCR SPVias, all in São Paulo state; and CCR MSVia in Mato Grosso do Sul.
Revenues generated in the highway segment represent around 70% of the company's total revenues; the rest comes from passenger transport and the airports sector.
CCR’s local rival  Ecorodovias has a higher Q2 net debt to Ebitda, 3.3 times, than CCR but remains a serious contender. 
“In terms of leverage, we don't have much concern. I would say our limits would be around 3.5 times. If you look at our cash position we still have stamina to be able to participate. In particular, two auctions that are planned for this year. We'll continue paying attention to costs,” said Ecorodovias CFO Marcello Guidotti, during a conference call with analysts, declining to elaborate on the highway concessions the company is interested in. 
Leniency Accord
On Monday, Ecorodovias signed a leniency agreement with prosecutors as part of a corruption scheme involving six Anel de Integração highway concessionaires in Paraná state.
As part of the agreement, Ecorodovias will pay 400mn reais (US$101mn). 
Ecorodovias, controlled by Primav and also owned by CR Almeida and Italian company Gavio, is one of the largest logistics and infrastructure companies in Brazil with around 6,000 employees, seven highway concessions, a logistics center, a port terminal and operations in six states.
Analysts are optimistic about Ecorodovias. 
“Prospects for new highway auctions and the possibility of the company negotiating its port asset (along with a possible capital increase) could unlock the value of Ecorodovias’ shares,” BB Investimentos analyst Renato Hallgren said. BB Investimentos maintained its 'Outperform' rating for the company. 
Triunfo Participações e Investimento has less muscle to participate in infrastructure concessions but is gearing up to focus more on the highway business. 
To get more funds to compete in the segment, Triunfo earlier this month sold its electric power assets to BlackRock‘s energy infrastructure funds and will also sell Juno Participações e Investimentos, Tijoá Participações e Investimentos and Centro de Soluções Estratégicas for nearly 170mn reais (US$42.9mn).
Recently, are presidential decree paved the way to  re-offer past infrastructure concessions for which investments did not materialize.
One infrastructures to benefit is the Viracopos airport concession in Campinas city, São Paulo state.
In May 2018, a local court approved a bankruptcy protection request from Viracopos’ concessionaire Aeroportos Brasil Viracopos (ABV). ABV is made up of local infrastructure company Triunfo Participações e Investimento, engineering firm UTC Engenharia and Egis. The concessionaire holds a 51% stake in the airport, while government airport authority Infraero has 49%.
In addition to economic troubles, Triunfo and UTC faced headwinds coming from the Lava Jato probe while ABV struggles with a 2.88bn-real debt.
Triunfo CFO Marcos Pereira said in a conference call that “the decree reduces the complexity to return past concessions, but we still need to evaluate indemnities linked with the return of this concession [Viracopos]…We are still evaluating the next steps.”

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