Guilherme Ramalho Presentation.pdf - Brazil-US Business Council

Brazil
Infrastructure Investment Opportunities
Washington, DC 09.07.2010
Guilherme Ramalho
Infrastructure Advisor
Presidency of the Republic

PAC – Growth Acceleration Program
In 2007 – PAC 1
‣ To accelerate the pace of economic growth
‣ To increase employment and income rates
‣ To decrease social and regional inequalities
‣ To overcome infrastructure bottlenecks
In 2009, a new goal
‣ To reduce the impact of the international economic crisis –
countercyclical policy
In 2010, a new stage: PAC 2 – 2011-2014

GROWTH ACCELERATION PROGRAM –
PAC 1, 2007-2010
Infrastructure projects in three areas
US$ billion
Area 2007-2010 After 2010 TOTAL
LOGISTICS 54.5 28.9 83.3
POWER G&T 171.7 429.4 601.1
SOCIAL AND URBAN 146.8 18.0 164.9
TOTAL 373.0 476.3 849.3

GROWTH ACCELERATION PROGRAM –
PAC 2, 2011-2014
Preliminary investment forecast
US$ billion
Area 2011-2014 After 2014 TOTAL
LOGISTICS 59.4 2.6 61.9
POWER G&T 262.3 356.2 618.5
SOCIAL AND URBAN 221.0 - 221.0
TOTAL 542.6 358.8 901.4

INVESTMENT OPPORTUNITIES:
HIGHWAYS
RAILROADS
AIRPORTS
PORTS
URBAN MOBILITY
POWER GENERATION AND TRANSMISSION
HOUSING AND SANITATION

HIGHWAYS

FEDERAL HIGHWAY CONCESSION PROGRAM
Central-South Region –
54% of Brazil’s GDP
Length: 2,212.4 km
• BR-040/Distrito Federal-Goiás-Minas Gerais – 937 km
• BR-116/Minas Gerais – 817 km
• BR-101/Espírito Santo – 458.4 km
Total Investment: US$5.5 billion
GO
BR-040
DF
BR-116
BR-101
Concession bidding
2nd Half, 2010
MG
Belo
Horizonte
Governador
Valadares
ES
Vitória

CONCESSION MODEL
Internal Rate of Return: 8.0% per year
• Reference value used on the 3 rd Phase of the Federal Highway Concession
Program
Term of Concession: 25 years
Annual tariff adjustment according to inflation variation
Investments described in the Highway Usage Program
• Constructions required (recovery, duplication, lighting, and others)
• Constructions conditioned to the volume of traffic (to expand capacity)
• Performance Parameters: paving, safety, signage, lighting, user assistance,
and others.
Focus on service quality
Concessionaire performs the necessary investments in the most efficient way to
meet the Performance Parameters
*Allows the participation of Brazilian or foreign companies, financial institutions,
pensions funds and private equity funds, separately or in consortiums

BR-040/DISTRITO FEDERAL-GOIÁS-
MINAS GERAIS
Connects the federal capital, Brasília, to two
important cities: Belo Horizonte and Rio de Janeiro
Length: 937 km
Toll Plazas: 12
Basic Tariff
• US$ per 100 Km: 2.1
• Toll*: US$ 1.4
Total Investment: US$1.8 billion
GO
BR-040
MG
DF
Belo
Horizonte
Concession bidding
2nd Half, 2010
*Prices on January, 2007

BR-116/MINAS GERAIS
Important South-Southeast connection with
the Northeast
Length: 817 km
Toll Plazas: 8
Basic Tariff
• US$ per 100 Km: 3.1
• Toll*: US$ 3.5
Total Investment: US$2.3 billion
MG
BR-116
Governador
Valadares
Concession bidding
2nd Half, 2010
*Prices on January, 2007

BR-101/ESPÍRITO SANTO
Connecting corridor linking RJ, SP and BA states, tourism
hubs with high traffic volume. Crucial to cargo transportation
Length: 458.4 km
Toll Plazas: 7
Basic Tariff
• US$ per 100 Km: 3.7
Total Investment: US$1.4 billion
Concession bidding
2nd Half, 2010
BR-101
ES
Vitória

PAC 2 – 2011 – 2014 - HIGHWAYS
Preliminary investment forecast
Total - US$ 29 billion
Type of investment Km
Construction 8.000
Maintenance 55.000
Projects 12.600

RAILROADS

RAILROAD CONCESSION PROGRAM
Participation in bidding processes
• North-South Railroad
• East-West Integration Railroad
• High-Speed Rail

NEW CONCESSION AND USAGE MODEL FOR NEW
RAILROADS – In study by the Government
Separation of Infrastructure and Operations:
• VALEC is a public company which is the concessionaire for the
North-South, East-West Integration and Midwest Integration
Railroads
• Infrastructure management would continue to be under
VALEC’s responsibility, and totally separated from the
operation
• The operation concessionaire (logistics operator) would
acquire the right-of-way to use a preset number of tracks
• Goal is to optimize the usage of the railroad and reduce costs
due to the efficiency gains

NORTH-SOUTH RAILROAD – SOUTH SECTION
Port of Itaqui / MA
• 33% of Brazilian agricultural production
• 72% of agricultural land
• Large mineral reserves
• Outflow of the agro-industrial and
mineral production to four ports
Peru
Aguiarnópolis
Araguaína
Açailândia
Palmas
Alvorad
a Uruaç
u
Anápolis
Santa Fé do
Sul
Araguaína
Palmas
Açailândia
Aguiarnópolis
North Section
Length: 1,525 km
Uruaçu
South Section
Anápolis
Bidding for the logistic operator
1st Quarter, 2011
Estrela D’Oeste (SP)
Section to be Concessed
Concessed Section

EAST-WEST INTEGRATION RAILROAD
• Outflow of the agricultural
and mineral production
• Waterway integration
Port of Vila do Conde / PA
Port of Itaqui / MA
Length: 1,527 km
Figueirópolis (TO)
Ilhéus (BA)
Bidding for the logistic operator
4th Quarter, 2010
Port of Santos / SP
Port of Itaguaí / RJ

HIGH-SPEED RAILS PLANNED
Resende
36 million
inhabitants
São José dos Campos
Taubaté
Metropolitan Region of Campinas
Volta Redonda
Metropolitan Region of São Paulo
Metropolitan Region of Rio de Janeiro
Market Potential
• Metropolitan Region of São Paulo: 19 million inhabitants
• Metropolitan Region of Rio de Janeiro: 12 million inhabitants
• Metropolitan Region of Campinas: 2.5 million inhabitants
Campinas - São Paulo - Rio de Janeiro – 519 km
Concession bidding
4th Quarter, 2010
Economic Importance
• Rio de Janeiro and São Paulo States concentrate 45 % of Brazil’s GDP
• São Paulo is Latin America's biggest financial center, concentrating 70% of the stock market
• Rio de Janeiro is the biggest Brazilian tourism hub

HIGH-SPEED RAIL – HSR
Project scope
• Estimated investment: US$19.7 billion
• Deadline for entry into operation: 2016
Concessionaire responsible for the design, construction, operation and
maintenance, complying with technical performance parameters;
Auction to be open to all existing technologies
Compulsory technology transfer
Public sector participation: own capital and financing
Documentation available at www.tavbrasil.gov.br
• Technical studies on demand, alignment, geology, operation and economic-financial
modeling completed and available

HIGH-SPEED RAIL - HSR
Financial Modeling – General assumptions
Demand and Revenue: Studies made by Halcrow
Taxes exoneration: REIDI, and ICMS, PIS and COFINS exemption
Investment:
• 5 years
• US$19.7 billion
Term of Concession: 40 years
Government’s direct financing:
• Interest Rate: TJLP + 1%
• Term: 30 years
IRR
• For the project: 5.7%
• For the stockholder: 9.2%
Leverage level: 70% / 30%
Public participation (ETAV): US$0.6 bi (own capital) + US$1.3 bi
(expropriation)

TREM DE ALTA VELOCIDADE - TAV
HIGH-SPEED RAIL - HSR
Concession model
Legal model: concession of public service paid with
extraordinary revenues and tariffs
Object: public high-speed rail concession preceded by the
infrastructure construction
Term: 40 years
Tariff system: price ceiling adjusted by IPCA with pricing
freedom, provided the following condition is respected:
• Price ceiling for Economy Class: US$ 0.3 per km in the Rio de Janeiro - São
Paulo direct connection

PAC 2 – 2011–2014 – RAILROADS
Preliminary investment forecast
Total - US$ 26 billion
Type of investment Km
Construction 4.700
Studies 2.985
High Speed Train 1.991

WORLD CUP 2014 – HOST CITIES
Manaus
Fortaleza
Natal
Recife
Cuiabá
Salvador
Brasília
Curitiba
São Paulo
Belo Horizonte
Rio de Janeiro
Porto Alegre

RESPONSIBILITY ASSIGNMENT MATRIX
Issue
Ports
Passenger Terminals
Airports
Passenger Terminals and Lanes
Stadiums
Construction, reform and maintenance
Urban Mobility
Hotels
Responsible
Federal Government
Federal Government
States and Municipalities
States and Municipalities
Private sector
Federal
Government
financing

AIRPORTS

AIRPORTS
Guidelines
To provide airports a structure suitable for:
• Ensuring quality care and users’ comfort
• Meet the projected increased demand
Improving the conditions for operational safety:
• Lane, yard, control tower
• Technological upgrade of the operating systems
Total: 13 airports

AIRPORTS
Historical Demand
1997 : 0.3 passengers carried per capita (163.8 million)
2008 : 0.6 passengers carried per capita (189.6 million)
After 2003: growth of 10% on passengers carried per capita
Number of passengers: Million boardings + landings + connections
55
11
63
10
4% py
63
9
68
10
74
65 66
53 54 58
61
44
9
75
9
71
10
82
11
71
10% py
96
13
102
12
83
90
111
13
98
113
13
100
59
%
97
98
99
00
01
02
03
04
05
06
07
08
International
Domestic
Source: EMBRATUR

WORLD CUP HOST CITIES AIRPORTS
R$ Million, Preliminary
Airport
Belo Horizonte
Brasília
Cuiabá
Curitiba
Fortaleza
Manaus
Natal
Porto Alegre
Recife
Rio de Janeiro
Salvador
São Paulo
Total
Investment
408.6
748.4
87.5
72.8
279.5
327.4
568.9*
345.8
19.8
687.3
45.1
1,961.4
5,552.5
Considering Guarulhos
(R$1,219.4 million) and
Viracopos (R$ 742 million)
* Includes R$ 400 million from concessionaire’s investment

HOST CITIES AIRPORTS
Temporary Operating Modules (TOMs)
R$ Million
Airport
Amount
(R$ Million)
Size (m2)
Current operating
capacity (million)
Capacity increase
(million)
Opening
Ending
Brasília 4.0 1,500 8.0
Balancing to improve
the comfort level
August,
2012
June, 2013
Campinas 5.0 1,200 3.5 2.5
Guarulhos 32.5 14,000 25.0 3,.0
October,
2010
February,
2011
July, 2013
December,
2011
Guarulhos 23.2 10,000 25.0 2.5
August,
2012
June, 2013

AIRPORTS INVESTMENT
OPPORTUNITIES
AIRPORTS CONCESSION
PROGRAM
Participation in public bidding processes
• São Gonçalo do Amarante Airport

AIRPORTS CONCESSION
• Strategic location – closer to the
Northern Hemisphere – favoring
tourism and cargo transport
São Gonçalo do
Amarante Airport / RN
• Concession to operate the airport preceded by the
construction of the passenger terminal
• Fixed tariffs adjusted annually by a consumer price index
and revised every five years
• The higher value offered by the grant wins
• Prohibited
Bid announcement
3 rd quarter, 2010
• Participation of air transport services companies, directly or indirectly, on the voting
capital of the concessionaire in a percentage equal to or greater than ten percent
• Participation of the concessionaire or its shareholders, directly or indirectly, on the
voting capital of companies providing air transport services in a percentage equal to
or greater than ten percent

SÃO GONÇALO DO AMARANTE
AIRPORT
Demand projection – million
passengers per year
2010 2.0
2020 4.7
2030 7.9
2045 15.6

AIRPORTS
CONSTRUCTION AND MODERNIZATION - US$ 1.7 billion
Guidelines
To provide airports an adequate structure for:
• Ensuring quality care and users’ comfort
• Meet the projected increased demand
To improve the conditions for operational safety:
• Lane, yard, control tower
• Technological upgrade of the operating systems
22 PROJECTS – 14 AIRPORTS - US$ 1.7 billion
Ventures
Quantity
Passenger Terminals 11
Temporary Operational Modules 4
Lane, Yard, control tower 5
Studies and projects 2

AIRPORTS

PORTS

PORTS CONSTRUCTION AND MODERNIZATION
US$ 2.9 billion
‣ Build and modernize docks, piers, terminals, improve aquatic and land access
‣ Debureaucratization of port operations
‣ Passengers Terminals for the World Cup 2014
‣ Reduced logistics costs
‣ Better operational efficiency
‣ Increased competitiveness
‣ Encourage private investments
48 PROJECTS – 21 PORTS - US$ 2.9 billion
Ventures
Quantity
Dredging 12
Port Infrastructure 24
Logistics Intelligence Systems 5
Passengers Terminals – World Cup 2014 7

URBAN MOBILITY

URBAN MOBILITY
PAC 2 - Subway, LRT, BRT and bus lanes
‣ 1 st Phase – US$ 6.8 billion
‣World Cup - projects selected in December 2009
‣ Federal Government Financing
‣ Execution by state and city governments
‣ 2 nd Phase – US$ 10.2 billion
‣Public transportation systems in major urban centers
US$ billion
Investment
Union Budget 3.4
Financing 6.8
TOTAL 10.2

URBAN MOBILITY – WORLD CUP
Projects selection criteria:
• Directly related to the World Cup: to improve access to the
stadium, hotel zones and airports
• Existence of preliminary or, preferably, executive designs
• To comply with the World Cup schedule
• To be connected to the local transport network

URBAN MOBILITY – WORLD CUP
Summary per Modal
US$ Million
Modal Qty Project Value Financing
Subway 2 21 20
Bus Terminals 3 38 36
Monitoring 3 66 66
VLT 2 370 312
Bus Corridors 18 1,138 1,067
Monorail 2 2,449 989
BRT 20 2,735 2,098
Total 50 6,817 4,587

URBAN MOBILITY – WORLD CUP
Summary Worksheet
Host City Qty Project Value
US$ Million
Financing
Value
Natal 2 242 212
Brasília 1 214 212
Fortaleza 7 330 244
Curitiba 9 262 259
Cuiabá 3 283 267
Porto Alegre 10 308 287
Salvador 1 334 318
Recife 5 419 381
Manaus 2 903 470
Belo Horizonte 8 895 601
São Paulo 1 1,681 636
Rio de Janeiro 1 946 699
TOTAL 50 6,817 4,587

URBAN MOBILITY FINANCING – WORLD CUP
• Deadline: 4 years of grace period after signing the contract
20 years to repay after the grace period (30
years for public rail transport)
• Scope: Light Rail Trains (LRTs), Monorail and Bus Rapid
Transit (BRT)

ELECTRIC POWER
GENERATION AND TRANSMISSION

ELECTRIC POWER SYSTEM – GENERAL FEATURES
Installed Capacity – 105,066 MW
• Number of Customers – 64.6 million
• Energy Production – 463.2 TWh / year –
60% of South America
• Peak – 67,632 MW
• Transmission Lines – 96,207 km ≥ 230kV
Source: Ministry of Mines and Energy

ELECTRIC POWER GENERATION
• Annual tenders to contract energy in the regulated
contracts environment
• Hydroelectric power plants – energy to be delivered at the fifth
year after the tender
• Thermal power plants and others – energy to be delivered at the
third year after the tender
• Tenders planned
2010 8 HPP –3,288 MW – US$5.2 billion – 2nd half
2011-14 34 HPP – 32,440 MW – US$42.9 billion

ELECTRIC POWER TRANSMISSION
• Large interconnections
• To provide greater security and reliability to the electric power supply
• To complete the interconnection of the Isolated Systems to the National
Interconnected System
• To ensure the energy flow from large hydropower projects – Belo Monte,
Tapajós and Teles Pires
• To meet the expanding demand in all country regions
• Tenders planned
2010 1,500 km – US$666 million – 2 nd half
2011-14 36,686 km – US$16.2 billion

ALTERNATIVE ENERGY SOURCES
‣ From 2011 to 2014
‣71 Wind Power Plants – 1.803 MW
‣3 Biomass TPP – 224 MW
TOTAL PROJECTED INVESTMENT- US$ 5.5 billion

Alternative Energy Sources
Morro dos ventos I, III, IV, VI, IX
Rei dos Ventos 1, 3
Eurus VI
Cabeco Preto
Mangue Seco 1, 2 , 3 e 5
Wind Power
Aratua 1
Areia Branca
Miassaba 3
Araras
Buriti
Cajucoco
Barra dos Coqueiros
Coqueiros
Quixaba
Garças
Lagoa Seca
Vento do Oeste
Dunas do Paracuru
Taíba Águia
Taíba Andorinha
Icarai I e II
Colonia
Embuaca
Sangradouro 3
Sangradouro 2
Osório 2
Fazenda Rosário 3
PAC 2
Mar e Terra
Santa Clara I
Guanambi
Candiba
Alvorada
Pedra do Reino
Seabra
Macaubas
Guirapa
Igapora
Serra do salto
Ilheus
Pajeu do vento
Coxilha Negra V
Coxilha Negra VI
Coxilha Negra VII
Fazenda Rosário
Pindai
Planaltina
Porto Seguro
Rio Verde
Faisa I, II, III, IV e V
Icarai
Santa Clara II, III, IV, V e VI
Nossa Senhora da Conceição
Licinio de Almeida
Novo Horizonte

UTE Ferrari
UTE Santa Isabel BC
UTE Santa Luzia I
UTE São João da Boa Vista
UTE Bonfim
UTE Iacanga
UTE Ipaussu Bioenergia
UTE Decasa
UTE Pioneiros II BC
UTE Santa Cruz AB F.I e II
UTE Quirinópolis (1ª etapa)
UTE Quirinópolis (BC)
UTE Rio Brilhante F. I e II
UTE Chapadão Agroenergia
UTE Unid. Bio. Costa Rica
UTE São Fernando
UTE Clealco- Queiroz
UTE Angélica
UTE Unid. Bio. Alto Taquari
UTE Costa Pinto BC
Alternative Energy Sources
Biomass
UTE Colorado BC
UTE Noroeste Paulista
UTE Destilaria Andrade
UTE Ester
UTE Unid. Bio. Morro Vermelho
UTE Boa Vista
‘
‘
UTE Rafard BC
UTE Quatá BC
UTE Ben Bioenergia
UTEInterlagos
Cocal II
UTE Biopav II
UTE Flórida Paulista BC
UTE Barra Bioenergia
UTE Conquista do Pontal
UTE Noble
UTE Unid. Bio. Água Emendada
UTE São João Biogás
UTE Baia Formosa
UTE Vale do Tijuco
UTE Vale do São Simão
UTE São José BC
UTE São Luiz
UTE Porto das Águas
UTE Codora
UTE Paraúna
UTE Bevap
UTE Jataí
UTE Cachoeira Dourada
UTE Caçu I
UTE Lagoa da Prata F. I e II
UTE CBB
PAC 2
PAC 1
PAC 1 com conclusão
original após 2010

HOUSING AND SANITATION

“MINHA CASA, MINHA VIDA” PROGRAM
• 1st phase – 2009-2010 – US$30.7 billion
• Production of 1 million homes to families with income up to
US$2,784 – equivalent to 14% of the housing deficit
• Subsidies for low-income families (up to US$1,670 per month)
• Long-term government partnership with private investors
• Establishment of a Guarantee Fund to reduce risks and costs
• 2nd phase – 2011-2014 – US$40.3 billion
• Production of 2 million homes

SANITATION
• PAC 2
• Water treatment
• Sewage and waste treatment
• Projects and studies
• To expand sewage collection and treatment system
• Improve waste treatment and reduce environmental damage
TOTAL PROJECTED INVESTMENT- US$ 12.6 billion

“Brazil is not afraid to grow or to seek better ways. Brazil
believes in the free market, but also in the state-driven
development. Brazil will always seek the best for its
people.”
Speech by Mr. President Luiz Inácio Lula da Silva
Brazil’s Independence Day Celebration – September 7th, 2009

Brazil
PAC’s Investment Opportunities
Washington, DC – 09.07.2010
Guilherme Ramalho
guilherme.ramalho@planalto.gov.br
+55 (61) 3411-1212