port infrastructure attractiveness for private …...2013 law 12.815 05/06/2013 •new port law –...
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PORT INFRASTRUCTURE ATTRACTIVENESS FOR PRIVATE
INVESTORS Case study: Porto Itapoá
1 28/10/2017
IV CIDESPORT - 2017 Marja Weschenfelder Strategy & Innovation Porto Itapoá
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Project Phase Determinant / Risk Specific issue
Relevance for the port industry
The Brazilian
status
Precompletion
Activity planning + +
Procurement design + +
Technology + +
Construction budget and timetable + +
Postcompletion
Supply availability + +
Operation efficiency Inland connectivity ; Balanced modal split
++ - - - -
Market potential Long term growth ++++ ++++
The whole project life
Economic stability ++ +
Political stability Stable rules; Government commitment; Long-term master plan
++++ - - - -
Regulatory framework
Fair and open competition; Clearly written rules; Coordination / clear definition of roles
++++ - - - -
Environment + +
Business environment Efficient licensing process ; Bureaucracy in general
+++ - - - -
Capital availability Public grants; Funding schemes ++ -
Partnership ++ +
2
Source: Weschenfelder, Marja. The Brazilian port infrastructure attractiveness for private investors. Diss. MSc thesis for Erasmus University Rotterdam.
INFRASTRUCTURE PROJECT RISKS Project lifecycle approach
Note: the number of interviewees mentioning the issue: (-) if cited by less than 3 interviewees; (- -) from 3 to 4 interviewees; (- - -) from 5 to 6 interviewees; (- - - -) up to 6 interviewees. For those that stimulate investments in Brazil, it was applied the same criteria but the character was replaced with “+”. For the determinants that were not mentioned we added (+) because it seem not to repel private investors
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PRECOMPLETION RISKS How Porto Itapoá has mitigated these risks
Precompletion risks
Activity planning
Technology
Construction budget and timetable
Procurement design
Engineering Procurement and
Construction +
Project Management
The company has over 70% of the
global market share in port cranes
Actual
+ LPC Latina
+ Enger
1st phase of Expansion Plan
Mitigated risk Partialy mitigated risk
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PORTO ITAPOÁ (04/06/17)
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Phase 01 +100,000 SQM and +170 M
(Phase 01)
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POSTCOMPLETION RISKS How Porto Itapoá has mitigated these risks
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Postcompletion risks
Operation efficiency
Market potential
Labour force • Succession plan • Permanent personnel trainning
LINER AS A SHAREHOLDER
Rodoviário; 61,1
Ferroviário; 20,7
Aquaviário; 13,6
Outros; 4,6
The Brazilian modal split (%)
Source: PLANO CNT DE TRANSPORTE E LOGÍSTICA 2014 (pg. 32)
Access bottlenecks
Mitigated risk Partially mitigated risk
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THROUGHPUT
7.905
8.219
8.995
9.316 9.208
8.747
7.000
7.500
8.000
8.500
9.000
9.500
2011 2012 2013 2014 2015 2016
Brazil ( TEUs)
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40
270
465 466
559 548
-
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016
Porto Itapoá (thousand TEUs)
Source: ANTAQ – Estatístico Aquaviário
-5%
-1% -2% +20%
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THE BRAZILIAN PORT RANKING
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Porto Itapoá got operational in June 2011, however the port access to the BR-101 was ready one year later.
PORTO ITAPOÁ INLAND ACCESS
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THE WHOLE PROJECT LIFE RISKS How Porto Itapoá has mitigated these risks
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The whole project life
Political stability
Business environment
Regulatory framework
Partnership
Capital availability
Mitigated risk Partially mitigated risk
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CAPITAL AVAILABILITY
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R$ 330M
(2009)
*Loan paid in 2013
R$ 450M
(2013)
R$ 90M
(2016)
Refinancing
Project Finance
Complementary loan for expansion
Offtaker
Project finance loans became a risk management technique per se.
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PARTNERSHIP
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BUSINESS ENVIRONMENT Licensing timeline
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Licenses Year
Kick-off 1993
Land acquisition 1997
Environmental preliminary license 2003
Regulator authorization 2005
Environmental construction license 2008
Construction end 2010
Environmental operation license 2011
Total time elapsed 18 years
Source: Weschenfelder, Marja. The Brazilian port infrastructure attractiveness for private investors. Diss. MSc thesis for Erasmus University Rotterdam.
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POLITICAL INSTABILITY AND REGULATORY FRAMEWORK
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Political cycle Year Law Relevance
1990-1992 President Luis Fernando Collor de Melo. First president democratically elected
1990 Law 8.029, 12/04/1990 •Abolishment of Ministry of Transport and Portobras •Creation of Ministry of Infrastructure
1992 Law 8.422, 13/05/1992 •Abolishment of Ministry of Infrastructure •Creation of Ministry of Transport and Communication
1993-1994 President Itamar Franco. He replaced the previous president after impeachment
1993 Law 8.630, 25/02/1993 •Port Modernization Law enactment – Port Reform •Creation of Landlord and Fully Privatized port structures
1995-2002 President Fernando Henrique Cardoso (re-elected in 1999)
1995 Law 8.987, 13/02/1995 •The first public auctions of port concessions and leasing contracts
2001 Law 10.233, 05/06/2001 •Creation ANTAQ (regulator)
2003-2010 President Luis Inacio Lula da Silva (re-elected in 2007)
2007 Law 11.518, 05/09/2007 •Creation of SEP, new ministry exclusive for port matters
2008 Decree 6.620 29/10/2008 •Decree that imposed the “own-cargo” requirement
2011-2016 President Dilma Russeff (re-elected in 2015 Impeached in 2016)
2013 Law 12.815 05/06/2013 •New port law – repeal of “own-cargo” requirement •Public auction announcement
2013 December/2013 •TCU interrupt process of public actions. Adjustments on the bid criteria and technical projects were required
2016-actual President Michel Temer
2016 Law 13.341 29/09/2016 •Abolishment of SEP (Special Secretary of Ports)
2017 Decree 9.048, 10/05/2017 • Enlarged the concession contract term; • Repeal the public consultation and “25%” clauses for TUPs expansion
Source: by author.
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FINDINGS
The sponsors’ of Porto Itapoá seem to have successfully controlled the:
• Planning, design, technological and construction risks by hiring a experienced contractor, project manager, law firm and equipment supplier;
• Market risks by bringing a shipping liner as a shareholder.
On the other hand, the sponsors could not overcome the challenges linked to the:
• Unfriendly business environment;
• Political instability;
• Regulatory issues.
Which have affected the project’s ability to generate cash flows due to the related delays.
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