São Paulo state to cancel concession auctions

São Paulo state to cancel concession auctions

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The São Paulo state government intends to cancel the auction for a highway concession scheduled for July and may call off the bidding for at least three other projects due to the coronavirus outbreak, a government source told LatinFinance.

The Lote Litoral Paulista concession comprises four state highways – SP-088, Rota do Sol, SP-098 and SP-055 – that run along the coast between between Arujá and Miracatu. It involves an estimated BRL3.2 billion ($617 million) in investments over the course of the 30-year contract.

Earlier this month, the state government began talks with municipal authorities along the route to resolve issues relating to the placement of toll booths and the implications for regular road users. But after São Paulo Gov. João Doria imposed quarantine measures on March 21, the discussions came to a halt, leading the state government to decide to cancel the concession auction, the source said.

Lote Litoral was the second concession that was scheduled to go to auction under the state government's BRL37.6 billion infrastructure concessions program. The state government had planned to issue the bidding documents in March and hold the auction in July. 

Other concession auctions that may be postponed include Line 8-Diamond and Line 9-Emerald of the commuter rail system planned for September and 22 local airports, split into two lots, scheduled for October, according to the source.

"Even if Brazil recovers quickly and everything is ready for the auctions, it may not be sensible to organize an auction just after the crisis as the market will not be properly mobilized to bid," the source said.

For reasons unrelated to the coronavirus outbreak, the state government also plans to cancel a BRL2.5 billion concession auction for an intercity bus services scheduled for August after receiving requests to change the contract, the source added.

The state government has held one successful auction under the SP Parcerias program so far this year. In January, it awarded a 30-year concession for the Piracicaba-Panorama toll road, also known as Pipa, to Brazilian private equity firm Pátria Investimentos and Singapore's sovereign wealth fund GIC for BRL1.1 billion.

Just three weeks ago, SP Parcerias still planned to grant close to a dozen concessions in 2020 with roughly BRL25 billion in combined investments. Now, however, the source said it is now more likely that only three or four projects will go to auction this year.

As quarantine measures remain in place, and offices, schools and factories sit shuttered across the country, federal concession auctions are also expected to be cancelled or postponed as the economic fallout from the global pandemic leads possible bidders to shelve investment plans.

ANTAQ, the federal waterways transport agency, had to cancel last week the auction for a passenger terminal concession at the port in Fortaleza, the state capital of Ceará, due to the outbreak of coronavirus. But the Investment Partnership Program, or PPI, which oversees federal infrastructure concessions, has not announced any changes to the timetable.