Pátria Investimentos can enter railroads and harbors

The asset management company Patria Investimentos decided to expand its operations in the infrastructure segment. Today, the focus is business linked to the private sector. The trend is that the range is expanded and that the company also makes occasional contributions in government regulated sectors.

According to Otávio Castello Branco, partner in charge of infrastructure, shares are under analysis especially in ports and railroads. “We are waiting for the legislation to define”, he says. There are also studies to expand its presence in the areas of sanitation and energy.

However, the choice of projects will be extremely selective. “We are only interested in entering projects that offer reasonable rates of return”, says Castello Branco. Pátria is not willing to bid for concessions that offer rates of return between 8% and 10% (average percentage in most public concessions currently in progress).

We can enter into new projects, which will create public structures from scratch in harbors, for example, and tend to offer much more attractive returns, says. As an example of more profitable public concessions, Castello Branco cites airports, where the best returns can be obtained, not from airport operation itself, but from a series of additional services that revolve around the passenger terminal.

In Pátria’s assessment, there was an effort by the government to improve the business environment in the public sphere, which is already reflected in the market and tends to attract more capital to the sector. Today, Brazil is investing 2% of gross domestic product (GDP) in infrastructure, when it should invest at least 6%.

Funds for new investments would come from the already existing P2 Brasil fund, specialized in infrastructure, which has a partnership with constructor Promon.

P2’s fundraising ended in 2011 and the fund gathered US$ 1.2 billion. Part of the funds was already invested in logistics for agribusiness and cargo (through NovaAgri and Hidrovias do Brasil), in the maritime construction and operation in the oil and gas offshore industry (Oceana), renewable energy (Latin American Power), sanitation (New Opersan) and telecommunications transmission (Highline do Brasil).

According to Castello Branco, entrance into railroads and harbors may occur over the next 12 or 18 months and may count with capital reinforcements from occasional consortia of investors who may want to be partners. Pátria intends to always work with majority stakes.

Beyond borders. The company has also evaluated new operations outside of Brazil, particularly in neighboring countries that become increasingly more attractive, like Chile, Peru and Colombia. Today, Pátria has investments in the energy sector in Chile, where supply faces severe constraints and there is great demand for projects that will improve energy security.

Along with Blackstone, Pátria also evaluates alternatives for Brazilian institutional investors to be able to access investment funds abroad. Blackstone, which acquired a 40% stake in Pátria in 2010, is one of the largest private equity investors in the world.