Union will raise HST return rate

The govern will reduce the grant demand to raise internal return rate of the High Speed Train (HST), from 6.32% to a percent over 6.5%, which is predicted on railroad concession program. In fact, this change on HST auction rule will result on a billion reais discount on the business and is aimed on attracting investors.  After around six months from the Logistic Investment Program announcement, the government has been assuming more risks repeatedly and offering more profit in order to have the private industry as partner.

The concession programs on highways, railroads, ports and airports had significant changes, initially as better credit conditions and, more recently, in business risk reduction. In the HST case, for example, the government decided to let the auction for a future moment, assuring to the train operation concession winner that will cover any construction risk.

Initially, the government started to give in on financing conditions, with more terms, shortage or lower taxes. Getting even to the point of allowing the project finance model, which places the work itself as assurance, to offer credit to the concessions. However, even after these incentives, the potential investors revealed that, regardless of the financial return, they were not willing to take the risks. From that, the government also started to adjust the matters that affect the budget of the business itself as well as the return ranges.

By transferring the concessionary risks to the State, the govern places on public account the commitments that could be delegated to the entrepreneurs. According the regional republic Proxy Raquel Branquinho, who tries to legally suspend the high speed rail concession, in addition to the governmental mitigation of risks for the investors, the project has many technical failures, insufficient studies and can deeply raise the costs for the Union. “On the privatization model adopted by the current govern, the charges are passed to the society”, said the Proxy.

For the vice-president of the Brazilian Institute of Infrastructure Legal Studies (Instituto Brasileiro de Estudos Jurídicos da Infraestrutura – Ibeji), Augusto Dal Pozzo, the government has not planned properly these projects. For example, the technical and economic feasibility studies were not concluded before announcing the concession. And that is why the government has been obligated to revise its models as the process is developed.

“These ups and downs are a result of lack of planning, with loss for the public interest. The studies have the purpose of identifying is the project has been designed with financial feasibility, facing the risks taken by the private partner. They are important to find balance, ensure attractiveness and at the same time avoid excessive profits, otherwise you’ll prejudice the user “, he stated.

In the railroad industry, when the government presented the first invitation to bid, it was the government would accept to anticipate up to 15% of the income that the concessionary companies will have with the line construction even before they are finished, to ensure that there will not be lack of demand.

For the first highways that would be in auction in January (something that has not happened yet), BR-040 and BR-116, the government recounted and predicted a lower traffic, which, consequently, gives the competitors more clearance. In the case of airports, Infraero has committed to invest the grant values and even accompany the private partners in eventual capital increase in order to keep the granted facilities, something that wasn’t initially clear in the airport concession processes.

According to José de Freitas Mascarenhas, president of the infrastructure council of National Industry Confederation (Confederação Nacional da Indústria – CNI), the government may have mounted the concession packages without having time to evaluate the details.

“When the government starts willing to define the project payments, then the negotiation begins and the risk issue, which has to be revised “, said Mascarenhas. — In the HST, due to its size and features, this is raised to the tenth power.

Interaction with investors

The chairman of Logistic and Planning Company (Empresa de Planejamento e Logística – EPL), Bernardo Figueiredo, said that the changes on concession programs result from the interaction with investors, whom necessarily need to be heard.

“The program changes because it is, actually, been made. When you make a public audience, you have to be prepared to listen, or it would be a mere bureaucratic act. In the public audiences, you listen and acknowledge when to change and that is what is happening. I am making an interaction and adjusting what is appropriate”, told Figueiredo.

He also reasoned that no big work in the world infrastructure industry has been made without a big State participation.

“ Improving the projects does not mean you have changed the government commitment, which is to get face to face with the 30-year-old inertia period in which there were no investments in transports and start to change along with PAC. We are attracting private initiative, because the public management has limits”, spoke Figueiredo.

According to Figueiredo, the Union is assuming more risks exactly to reduce the final price for the users, indeed collaborating for a greater competitiveness of Brazilian production, with Brazil cost reduction.

“It is useless to have a new railroad, if using it the manufacturer pays the same freight of today”, stated EPL’s chairman.