After spending some time in limbo, the high speed rail (HSR) project has effectively been resumed by the government. By the end of this year, according to Valor, the state-owned company Etav, recently created to coordinate the project, will make an international bidding to hire the company or consortium to take over the preparation of the engineering executive project of the bullet train. The decision to promote an international competition is due to the fact that Brazil lacks skilled labor force for this type of project. The government expects that domestic companies partner foreign engineering companies to take part in the bidding.
The study that will help to deepen technical issues and to remove doubts about the feasibility of the train intended to connect Rio de Janeiro, São Paulo and Campinas should take at least a year to be completed. Preliminary estimates indicate that the engineering project will cost about $266 million, an amount that will be paid with resources from Etav.
With the arrival on the scene of the new state-owned company, the National Land Transport Agency (ANTT – Agência Nacional de Transportes Terrestres) will be responsible for the realization of the two auctions to hire the consortia to take over work. Valor found out that the first notice to bid – which provides for the hiring of the train operator and technology that will support the project – is ready and only awaits a green light from the Ministry of Transport to be disclosed and submitted to public consultation. It is expected that this publication takes place later this month. Once the consultation is done, which should take at least 45 days, ANTT will review the suggestions, and then issue a final text. The auction, however, can only occur six months after such disclosure. This period shall be given in order to the companies interested in the project to get their questions answered and proposals formulated. The lack of time to analyze the project was the main argument made by the companies to give up from previous attempts to bid works. In practice, the new schedule changes the date of the first HSR bid, then planned to take place later this year, to the second quarter of 2013, i.e. almost a year from now.
In order not to waste any more time, Etav wants to do the hiring of the executive project in advance, anticipating studies as far as possible, while the auction defining the manager and the technology to be used in the enterprise is not held.
So, the chances of ANTT performing next year the second auction of the bullet train, to select the consortium that will oversee the construction of the entire infrastructure that will support the HSR, are remote. This is because, to publish the second notice to bid, the agency must have the executive project ready. In parallel, it must also obtain the preliminary environmental permit of the enterprise, which is granted by Ibama (Brazilian Institute of Environment and Renewable Natural Resources). The environmental agency has signed a term of reference with ANTT, releasing preliminary actions to enable work licensing. A group of consulting firms was hired by the agency and works in surveys of flora, fauna and urban impacts, as well as historical and archeological heritage.
Etav, as announced by the government, will be led by Bernardo Figueiredo. Former director-general of ANTT, Bernardo was invited to take over the position by Transport Minister Paulo Passos. Valor found that the board of the state-owned company will also have the participation of Helio Mauro França, which currently is the superintendent of the regulatory agency and has participated in the project from the beginning.
According to the government’s plan, Etav will have a share of approximately 10% throughout the enterprise. There is a possibility of this share to be increased, but this hypothesis is not considered by the Ministry of Transport at this time. In addition to funding the costs of the executive project, the state-owned company will fund socioenvironmental and expropriation costs of work, which are estimated at $1.47 billion.
After reformulating the entire notice to bid of the project, which went through three failed attempts to auction, the government changed the rules of remuneration to attract the private sector. According to the new model, the rate of return of the project as a whole was estimated at 6.32%. This index is close to the 6.46% set for the auction of airports and below the 8% defined in the federal highway concessions. The remuneration on capital invested by shareholders is 11.7% annually. Public funding of the project, which is led by the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social – BNDES), will reach about $11 billion. The HSR concession contract will last 40 years. According to the rules already known, the express travel time (without intermediate stops) between Rio de Janeiro and São Paulo will be of up to 99 minutes.
With the executive project, the government wants to answer, once and for all, basic questions such as the price of works and projected demand. The estimates for the construction of the bullet train range from $16.75 billion, amount defended by the government until last year, to more than $25 billion, according to calculations presented by contractors interested in performing works.
The technical survey will also show the financial potential tied to the real estate business alongside the 511-km route. The government’s intention is to demonstrate to each consortium what is the estimated value for the infrastructure lease and, especially, what is the real estate potential of the enterprise. The model envisages that the commercial business expansion generated by the bullet train stations, such as the supply of hotels, apartments and shops, among others, might remain in the hands of the consortium of contractors who will build the infrastructure project.
The government says that the French (represented by Alstom), German (Siemens), Japanese (Hitachi, Toshiba and Mitsubishi) and Korean (Hyundai and Samsung) are still interested in the enterprise.
The resumption of the bullet train project and the discussion of a more precise schedule of work shall be the subject of a meeting scheduled for next Monday, among the Ministries of Transport, Planning and Government Affairs. The HSR, which in the latest balance sheet of the Brazilian Growth Acceleration Program (PAC – Programa de Aceleração do Crescimento) was stamped as work in appropriate pace, was conceived by former president Luiz Inácio Lula da Silva to run in 2014, the year of the World Cup.
If the current schedule does not undergo any further changes, it seems that in 2014 there will be the start of works. With an estimated time of six years to be completed, the high speed train would be completed in 2020.
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