As part of the new economic growth induction program, and complementary to the concession package for roads and railroads announced last week, the Brazilian government publicized today the draft for the public bidding and agreement for the concession of public service of railroad passengers transportation by high-speed train for the Railroad EF-222, from Rio de Janeiro to Campinas ("Bullet Train"). The adopted model (concession) is similar to the one recently used for some airport concessions at the beginning of this year.
The documentation will be available for public consultation until next September 24th. Until then, interested parties may place suggestions to the project and these will be analyzed by the National Agency of Terrestrial Transportation ("ANTT").
Brazilian or foreign companies, individually or in consortium, may participate in the public tender after proving, as a pre-qualification requirement, a minimum experience of 10 (ten) years operating high-speed trains. Differently from previous public tenders, the technical experience proof can be made by any of the consortium members or by a subcontractor, upon presentation of a definitive and long-term contract. This is an important change, as it requires that necessary technical experience is present in the consortiums, without however imposing that the holders of such experience make investments in the share capital of the companies that will explore the concession. This is a key change from the recent airport concession processes announced by the federal government.
Recently, the Brazilian Federal Government created a public company ("Etav") that, besides representing the government as a minority shareholder in the future assignee, is also responsible for the supervision and execution of the Bullet Train implementation works.
It is important to note that the draft of the public bidding resumes a philosophy applied during privatizations in the 90s, regarding markets considered strategic by the federal government. The draft establishes that the Federal Government, through Etav, will be entitled to a preferential stock of special class (known in the market as "Golden Share") that, according to Law No. 6.404/76, allows veto rights to the Government in the assignee strategic issues.
The winner of the public tender will be the company or consortium that presents the proposal with the best ratio between the value of the grant (payment to the Government for the service exploration) and the cost of the necessary works regarding the proposed technology. According to the draft of the public tender, the winner of the auction shall also onlend to Etav the technology to be used in the Bullet Train.
Investments of around BRL 33 billion are expected for this project and the auction should happen at the end of May, 2013.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.