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
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
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
PORTO ITAPOÁ (04/06/17)
Phase 01 +100,000 SQM and +170 M
(Phase 01)
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
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%
THE BRAZILIAN PORT RANKING
Porto Itapoá got operational in June 2011, however the port access to the BR-101 was ready one year later.
PORTO ITAPOÁ INLAND ACCESS
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
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.
PARTNERSHIP
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.
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.
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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