FCA will return 3,800 km of railroads to the government

The concessionaire Ferrovia Centro-Atlântica (FCA), controlled by Vale, received authorization from the National Land Transport Agency (ANTT – Agência Nacional de Transportes Terrestres) to return 3,800 km of railroad stretches distributed in six Brazilian states.

Among the stretches that should be returned by the company are seven that are considered economically unviable, such as the stretch connecting the cities of Ribeirão Preto and Passagem, in the state of São Paulo, and another six assessed as economically viable, such as the connection between the cities of Alagoinhas and Juazeiro, in the state of Bahia.

According to the concessionaire, the uneconomical stretches, totaling 800 km, have no regular traffic in years, and the company had already made previous requests to return them.

After market research, FCA and the federal government concluded that these stretches do not meet the current needs of the users of railroad transport, and thus they are no longer relevant for the new model of the Brazilian rail network, the company said.

The investments that would be made in these stretches will be converted into works sites where there is regular traffic of the FCA’s network.

Logistics. For the economically viable stretches, totaling 3,000 km, the return will be made due to a request from the federal government itself, which wants to include these stretches in the Investment Program in Logistics (LIP).

This program provides for the expansion of rail and road networks in the country and the concession of various stretches to the private sector.

According to ANTT, the amount payable by the company on account of degradation presented by the railroad will be converted into investments of $339.34 million that must be made by FCA in the Center-East network, which includes projects in Minas Gerais, Goiás and São Paulo, plus 15% as benefit for the public sector.

The economically viable stretches, whose return implies compensation for the company because of the loss of revenue, will go through inspection to review the state of conservation before the value is set.

FCA will remove the metallic material from the economically viable stretches to be returned, in 1,760 km of railroad, committing to reuse the rails in the remaining segments of the Center-East network.

The company ended the first quarter with a negative earnings before interest and taxes (EBIT) of $6.80 million, compared to the positive EBIT of $531,300 million a year earlier. Investments totaled $104.03 million in the first three months of this year, a growth of 77.4% year on year.