Brazil's BNDES boosts the non-recourse project finance model

Bnamericas Published: Friday, January 28, 2022
Brazil's BNDES boosts the non-recourse project finance model

Brazil’s development bank BNDES aims to increase use of the project finance non-recourse model for infrastructure projects.

"Under the project finance non-recourse model, guarantees are related to the cash flow of the specific project and not the companies’ balance sheet," Venilton Tadini, president of infrastructure association Abdib, told BNamericas.

“This model is highly important to fuel investments in infrastructure projects because it provides flexibility for infrastructure companies of all sizes, assuming more projects, not leaving all their guarantees limited to one or two large ones.”

Tadini added, “of course, the projects will have to be well-designed, even with the support of insurance and reinsurance companies to evaluate all risks, but this modality of project finance has been defended by us for a long time.” 

On January 27, BNDES approved a 200mn-real (US$37mn) non-recourse facility for small highway concessionaire Via Brasil MT 100 Concessionária de Rodovías.

The Via Brasil consortium won in 2018 a 30-year concession to operate 300km of highways in Mato Grosso state. Proceeds from the non-recourse facility will go toward a 300mn-real investment plan for the concession’s first seven years, improving a stretch of the MT-100 highway in Mato Grosso state.

Although non-recourse financing is common worldwide, Brazilian projects are mostly financed under the limited recourse model. Under this model, corporate guarantees are required from shareholders, reducing the number of projects that can be made viable and giving large companies an advantage as they can better handle multiple projects.

“We want to use BNDES to help further promote this modality of non-recourse project finance in Brazil and bring more banks to work together,” development, planning and partnerships secretary Natália Marcassa told BNamericas in a recent interview

Marcassa said this model is beneficial because it doesn’t require shareholder or bank guarantees and so could increase investments and attract more investors, including international ones, limiting project risks.

With the non-recourse model, BNDES wants to diversify financing options for companies and flank the government’s infrastructure concessions agenda. 

“The structuring of the operation in the form of a non-recourse project finance followed the best international practices and met the needs of a project whose shareholders are smaller,” Eduardo Nali, manager of BNDES’ infrastructure and highway concessions department, said in a press release.

“This brings challenges in obtaining corporate guarantees or even in accessing the financial market and negotiating bank guarantees at a cost that does not harm the project.”


The consortium includes local infrastructure firms Coneys Infraestutura, Zetta Infraestrutura e Participações, Construtora Rocha Cavalcade, Fremix Pavimentação e Construção, FBS Construção Civil e Pavimentação, and CLD-Construtora Laços Detectors e Eletrônico. It operates 112km of the MT-100 highway in Alto Araguaya and 188km of the MT-320 highway in Alta Flores.

According to BNDES, the value of the financing facility corresponds to just over 65% of investments the concessionaire will make in the first seven years. In addition to recovery of the highway's pavement, funds will also go to widening and building third lanes, among other works.

The company plans to invest 550mn reais during the contract period.

“The [project finance] operation was the result of more than a year of intense and joint work between the Via Brasil team and the BNDES team, backed by a deep due diligence process carried out by Arcadis,” Via Brasil MT 100 CEO João Couri said in a statement.

 “This is the first investment of this nature in Mato Grosso in the non-recourse project finance modality, which attests to Via Brasil’s belief in the project and in the state, opening the door to other local ventures with BNDES, which can be vital to make them viable at a time when the bank seeks to adapt its investment in smaller projects, as essential for Brazil’s development as the big ones,” added Couri.

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