HST auction shall be postponed once again

Despite all the silence of the Government about this issue, the postponement of the auction for the bullet train (HST) for the third time is already taken as certain. The reason this time is the end of the legal deadline for the National Land Transport Agency (Agência Nacional de Transporte Terrestre – ANTT) could publish the changes that were planned for the Invitation to Bid for the project. The Government already publicly admits the need to make some changes to the Invitation to Bid, but these changes would have to be published no later than 15 days before the date of receipt of proposals from interested parties; as this receipt has been scheduled for July 11, this means that the deadline ends today.

Even though the postponement is taken as certain, the Government does not plan to extend the auction date for much longer. The idea is that of a short postponement, maybe ten or 20 days, just enough time to solve these pending issues involving the text of the Invitation to Bid, said a well-informed source within this segment.

According to this source, despite the political wear that this third postponement will surely bring, the Government would be willing to bring down the price, as their priority is to ensure  the publication of a text that, after the auction, would no longer be a target of constant questioning and, hence, shutdowns.

The Government already knows that it would be a risk to proceed without making the alterations, as the Government itself has ensured some important changes, said the spokesperson of one of the most important manufacturers interested in this project.

Along with the changes that the Government has already announced will be done are items like the flexibilization of the locations for the construction of the bullet-train stations. Another change which has already been agreed with the business people interested in the project is the adaptation of the projects of transfer of technology. The method by which the technological know-how about the HST shall be transferred to the other company – probably through state company Etav – will be established by consensus within the Government and the building consortium, rather than being a unilateral decision made by the Government, as was envisaged.

The first postponement of the bullet train project was in December 2010, under the allegation that the interested parties still had lots of doubts about the project. The bidding was then rescheduled for April. On this second occasion, however, the companies said they needed more time to close commercial deals, which led the Government to grant an additional 90 days for the bidding to take place.

Over the last few weeks, the most important train manufacturers have had regular meetings with the construction firms to reach an agreement which would make it feasible for them to enter the bidding process. Even though the five largest heavy construction companies in the country, such as Camargo Corrêa, Odebrecht, Andrade Gutierrez, OAS and Queiroz Galvão, do not confirm this, there is an expectation that they may enter the business together as one unit, forming one single block. This situation could weaken the possibility of forming a second group to present any proposal with realistic chances of victory.

With a total track length of 511 km and strewn with controversy, the bullet train that is planned to connect Campinas, São Paulo and Rio de Janeiro has been budgeted at R$ 33.4 billion (USD 20.97 billion) by the Government, even though the price as estimated by the market is more than R$ 50 billion (USD 31.39 billion). According to the terms of the Invitation to Bid, up to R$ 20 billion (USD 12.55 billion) could be financed through the National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social – BNDES). Another R$ 3.4 billion (USD 2.13 billion) will be invested directly by the state company Etav, set up to fund the studies and also the compulsory purchases of properties. The developers estimate that the group that wins the auction must inject some own capital totaling about R$ 3 billion (USD 1.89 billion) to proceed with the operations in the first years of the work, a value which is considered high by the businesspeople.