The Brazilian government obtained much more than originally expected at Friday's auction of 12 regional airports, marking a success in the first step of its ambitious agenda of concessions and privatizations against the backdrop of serious challenges for public finances.
The government obtained a total of 2.38bn reais (US$625mn) in fees from the auction of 12 airports on the São Paulo stock exchange. The government set the total minimum amount of payments for the airports at 219mn reais.
The auction was the first in the infrastructure concessions program of President Jair Bolsonaro's government, which took office on January 1.
"The significant amount raised showed that investors have strong confidence in Brazil and also shows the success of the model we implemented in the auction," said infrastructure minister Tarcísio Gomes de Freitas in a press conference after the event.
The government offered the 30-year concessions in three blocks.
The first block, which combines Recife, Maceió, João Pessoa, Campina Grande, Aracaju and Juazeiro do Norte airports in the country's northeast, was the target of the biggest battle between the investors. These airports require investments of at least 2.2bn reais (US$578mn),
Spanish airport group AENA won the auction for that block, offering a fee of 1.9bn reais, well above the minimum of 171mn reais set by the government.
As this group comprises airports in the tourist-friendly northeast, it attracted high demand, as five other groups vied with AENA for the block, including international players Zurich Airport and Fraport.
"We entered the competition for this block strongly because our expertise is to act in areas with a tourism bias," Juan José Alvarez Gallego, director of the international area of AENA, told BNamericas on the sidelines of the auction.
Meanwhile, Zurich Airport won the auction for Vitória and Macaé airports in the southeast, paying a total fee of 437mn reais, almost 10 times the minimum price of 46.9mn reais. The investment required in the southeastern airports is estimated at 591mn reais.
"We already operate in other airports in Brazil and we want to expand our footprint here even more. The two airports we acquired are in a rich area in terms of oil and gas production and the recovery of this sector will fuel the operations of those airports," Stefan Conrad, the CEO of Zurich Airport Latin America, told BNamericas.
The concession for the third block of airports, in the center-west comprising the terminals serving Cuiabá, Sinop, Rondonópolis and Alta Floresta, was won by Brazilian group Socicam Terminais, which paid 40mn reais for the concession, well above the minimum fee of 800,000 reais.
The airports in the center-west require minimum investments of 770mn reais.
The companies that won the concessions will evaluate the financial mechanisms they will use to finance the investment requirements.
"At this point, we're planning to use our own cash to pay the fees and investments required during the concession period," said Gallego
Meanwhile, Zurich Airport wants to obtain financing via the local market.
"Our intention is to obtain the financing here in Brazil, using local currency. We're evaluating options, we can access a local commercial bank, we can tap [state-run development bank] BNDES and we can even assess tapping capital markets, for example, with the issue of debentures," said Conrad.
Brazil's group Socicam also plans to use financing available in the local market.
"We have a strong relationship with Itaú Unibanco, but we're also open to looking for other banks if it makes sense for us," Wanderley Galhiego Junior, manager of new business at Socicam, told BNamericas.
HIGH INVESTOR INTEREST
With the success of Friday's auction, the Brazilian government is looking to announce the details of a new round of other airport concessions in the coming days.
By 2022, the government wants to offer concessions for another 44 airports that are currently operated by airport authority Infraero.
"We're highly interested in Brazil and we'll evaluate our participation in the next auctions here, for sure," said Gallego.
Zurich Airport also intends to participate in the upcoming auctions.
"We have already been operating in Brazil for some years and we understand the risks and opportunities here very well," said Conrad.
The government also plans to accelerate concessions for railways, ports and highways.
After years of weak or negative economic growth and lower tax revenues, the federal government is facing severe fiscal restrictions, opening up room for the private sector to invest in infrastructure.
"We're very happy with the result of this auction and this indicates that our next auctions, not only of airports, but also for highways, ports and highways, will tend to attract great interest from local and international investors," said Freitas.