New readjustment for Transnordestina

The federal government is reviewing a request from Transnordestina Logística S.A. (TLSA), a company controlled by Companhia Siderúrgica Nacional (CSN), to readjust the project value of 1,728-km railroad that will traverse three states in the Northeast region (Piauí, Ceará and Pernambuco). Non-official information achieved indicates the request for 25% increase in the total cost, currently estimated in US$ 3 billion. If this readjustment is applied, the project would cost US$ 3.75 billion.

This would be the second raise in the total price of the railroad, which works actually started in 2008. At that time, the first readjustment was implemented (20%), justified by higher labor, cement, steel and fuel costs. When interviewed by Valor magazine, one year ago, Tufi Dahen Filho, CEO at TLSA, already commented on the need for a new readjustment in the railroad price, especially in function of equipment and labor (again) costs.

As the project controller, TLSA requests that the government authorizes a proportional raise in the value of the federal financing values expected for the works, which is inserted in the Growth Acceleration Program (PAC). When contacted, TLSA did not provide any comments on the new request for readjustment, currently being analyzed by the Ministry of Transports.

When contacted by Valor magazine, the press relations area of the ministry confirmed again that such enterprise is privately controlled, and TLSA is in charge of the Transnordestina costs. However, it commented that, as the project is included in PAC and is financed by the Federal Government – which might be a minor partner in the project –, the request is being considered.

From the current budget, U$ 1.73 billion will be financed, with US$ 1.5 billion from the Development Fund for the Northeast Region (FDNE), US$ 125 million from BNDES and 100 million from Banco do Nordeste. From the remaining US$ 1.28 billion, US$ 726 million proceed from CSN cash, U$ 460 million from Fundo de Investimento do Nordeste (Finor) and US$ 92 million from Valec state-owned company. According to the FDNE model, the government may become partner of the enterprise, by subscription of debentures, which can be issued by TLSA and then converted into shares.

A note issued by the Ministry of Transports informed that the public power does not refuse the analysis of requested related to the expansion of the financial support to the project, especially considering the eventual existence of factors non-manageable by the private partner. Thus, the Federal Government is analyzing the request from Transnordestina Logística related to the request for new supporting instruments for cost equalization.

In spite of the cooperative speech of the government, the relationship between TLSA and the federal government has not been so easy. The delay for releasing federal funds is frequently criticized by the company executive officers when questioned on the delay of works being performed by Odebrecht. The railroad completion has been postponed again, now to 2014, due to problems with expropriations along the Ceará section, which is virtually paralyzed for several months.

According to the press relations area at TLSA, the railroad must close 2011 with 150 kilometers of rails installed, less than 10% of the total project. Today, there are 15 work fronts in five work sites, where 10,000 people are currently working. The most advanced section, between the city of Eliseu Martins (PI) and Port of Suape (PE), must be completed by the end of 2013. Approximately US$ 1.62 billion have been already invested.

There was a recent request from the state government of Paraíba for the construction of a branch connecting Transnordestina railroad to the existing state rail network, thus enabling the connection between the city of Arrojado, in Ceará, and Port of Cabedelo, in João Pessoa. According to TLSA, the section in question would have to be re-modeled for mixed gauge along 490 kilometers. “This decision is up to the federal government,” the company completed.