Federal Government starts railroad concession process

The Transport Minister, César Borges, and the Chief Minister of the Civil House, Gleisi Hoffmann, announced on this Friday (July 5) the completion of public consultations of the Açailândia (state of Maranhão) – Barcarena (state of Pará) Railroad. The final report of the public hearing of this stretch will be published this Friday on the Web site www.antt.gov.br. By July 15, the studies will be submitted to the Brazilian Court of Audit (TCU). The auction is scheduled for October 18 this year. This is the first railroad to be granted by the Investment Program in Logistics (PIL), which provides construction of 11,000 km of railroads divided into 11 stretches in the country.

The stretch will connect the North-South Railroad, from Açailândia (state of Maranhão), to the port of Vila do Conde, in Barcarena (state of Pará), and will enable a new high-capacity, broad-gauge transport corridor, mainly covering freights of grain, iron ore and bauxite. “This stretch is very important because it complements the North-South Railroad,” the minister explained. “The connection from Açailândia to the Port of Vila do Conde will be an output for Brazilian Midwest grain to the Atlantic Ocean toward the European, American and Asian markets through the Panama Canal,” Borges added. The railroad, whose length will be 457 km, will receive investments of $1.43 billion in the construction phase.

The implementation of this stretch, which will feature 70 special structures – bridges, overpasses and underpasses – will provide a new transport logistics of iron ore and development of exploration of other minerals. Moreover, the connection between Açailândia (state of Maranhão) – Barcarena (state of Pará) will enable a new option for the handling of general freight, such as oil and oil products, sugar, corn, ethanol, soybean and its by-products (meal and oil).

The rail connection will pass through 11 cities in the states of Maranhão and Pará, where live 793,762 inhabitants (IBGE/2010 Census). The project was conceived with the purpose of enhancing and integrating the national railroad system and establish its connection with the Port Complex of Vila do Conde, located in a strategic position in relation to the ports of Europe and the east coast of North America.

The railroads members of the PIL were designed in order to have an efficient performance standard, reaching project speed of 80 km/h, which will ensure quality to the rail transport. “The PIL is important, because it gets back the restructuring of the railroad network, which is crucial for the country,” said the Chief Minister of the Civil House. “The Federal Government started this recovery with the PAC (Brazilian Growth Acceleration Program), but the private sector is crucial in this process, to help us with the investments, the management and the speed of these works,” concluded Hoffman.

The concessionaire will be responsible for the construction, maintenance and management of infrastructure for a period of 35 years, but it must complete the construction until four years after the signing of the concession agreement. The internal rate of return (IRR) of the project was set at 8.5%. Furthermore, the company that wins the concession must ensure a certain capacity throughout the contract period, reaching 34.5 million tons year to its end.

Model

The stretch Açailândia (state of Maranhão) – Barcarena (state of Pará) marks the launch of the new rail model, where the infrastructure manager (the concessionaire of the stretch Açailândia – Vila do Conde) is dissociated from the responsible of transportation. This model creates conditions for increased use of rail transport by providing modern infrastructure and free access of those interested in transporting.

Valec will be the sole purchaser of the railroad capacity that will be available, via a public offer to the interested (independent rail operators, current concessionaires and users who wish to conduct their own transportation). The concessionaire will be responsible for any extension of this capacity in the event that the demand is above the initial capacity.

According to the Ministry’s projection, in five years the country will be equipped with a modern railroad network, capable of providing good quality transport at a reasonable cost. Efficiencies will be appropriated by society, since the new railroads will make the freight cheaper and the Brazilian products more competitive. The PIL railroads connect regions that already have high agricultural and mineral production (traditional users of railroads) and create the opportunity for attracting industrial freights. They also allow to connect the major urban centers of the country.

Currently, there are five railroad stretches in submission of grants – process of route disclosure for knowledge and manifestation of society. Four others already have this process completed. As this step is being completed, the stretches will enter into public consultation. By the end of the 1st quarter 2014, all stretches of the PIL will be auctioned.