Brazil nets over $14bn in record-breaking airports auction

The government got almost five times more money than expected for the concessions of Guarulhos, Viracopos and Brasilia airports. Argentinean, Brazilian, French and South African companies were part of the winning consortia.

Brazilian government officials must have broken into a quick ‘samba’ yesterday once the auction for the privatisation of three of the country’s most important airports ended. Because when it did, the government found itself with a R$24.5 billion (€10.8 billion; $14.2 billion) cheque for the three airports – almost five times more than the R$5.5 billion it had stipulated as the airports’ minimum price.

Brasilia Airport, which serves Brazil’s capital, got a huge 673 percent premium over its minimum asking price, with the state getting R$4.5 billion for the 25-year airport concession from a consortium made up of Brazil’s Infravix Participacoes and Argentina’s Corporacion America, the government said in a statement. 

Next in line was Sao Paulo’s Guarulhos Airport, probably the country’s busiest hub, which managed to obtain a 373 percent premium over its minimum bid price, courtesy of a consortium of Invepar (a fund controlled by two Brazilian pensions), local developer OAS and South Africa’s ACSA. The team paid R$16.2 billion for the 20-year concession.

Viracopos Airport, in the city of Campinas, ended up getting the relatively more modest premium of 160 percent over its minimum stipulated price, which translated into a bid of R$3.8 billion for the 30-year concession to run and refurbish the airport. A consortium of Brazil’s Triunfo Participacoes and France’s Egis Airport Operations was the winning team.

Markets reacted to the winning bids by pummelling the stock of many of the winning companies, with Daniela Bretthauer, an equities analyst with Raymond James, in Sao Paulo, telling Bloomberg that the winners “certainly overpaid, particularly for Guarulhos, well beyond what can be considered fair value”. In total, 11 consortia – including the likes of Ferrovial, Changi Airports, Fraport and OHL – participated in the auction, held at the Sao Paulo Stock Exchange.

The winning consortia will have to pay the combined R$24.5 billion in annual instalments, but that’s not the end of their spending on the three airports. In addition to the R$24.5 billion, the winners will also have to pay a share of annual revenue of 2 percent for Brasilia Airport, 5 percent for Viracopos and 10 percent for Guarulhos.

Additionally, the consortia have also pledged to invest R$4.6 billion, R$8.7 billion and R$2.8 billion to upgrade and modernise Guarulhos, Viracopos and Brasilia airports respectively. Part of those works to expand capacity will have to be concluded by 2014, in time for Brazil’s hosting of the football World Cup, with hefty penalties applying if consortia are late.

For the first six months, the winning teams will share operational control of the airports with Infraero, Brazil’s airports operator, which retains a 49 percent stake in each of the airports.  

Guarulhos, Viracopos and Brasilia airports are responsible for 30 percent and 57 percent of Brazil’s passenger and cargo throughput respectively.