The Brazilian government has publicly disclosed the draft of the concession agreement for its planned R$29 billion (€11.3 billion; $16.3 billion) high-speed rail line linking the country’s two biggest cities. A 30-day comment period has now begun and officials hope to award the project next year so that construction may begin in 2011.
The goal is to create a 511 kilometre rail line with trains traveling at a top speed of nearly 400 kilometres per hour between the international airports of Rio de Janeiro, São Paulo and Campinas and at least two intermediate stops. São Paulo and Rio are the Latin American country’s first- and second-most populous countries, respectively, while Campinas is a city about 100 kilometres northwest of São Paulo.
The project, in the planning stages for several years, was given greater urgency recently when the International Olympic Committee awarded the 2016 Olympics to Rio de Janeiro. Officials hope to have the rail line, also known as the “TAV” completed by 2015.
In January the Brazilian government hired legal advisors to begin hammering out a concession agreement for the project. That agreement will be used to involve the private sector in building the rail line.
Brazil is looking to attract up to R$6 billion of private capital for the project, or about 20 percent of the total capital cost. That money can come from any combination of private investors, such as high speed rail operators, equipment suppliers and infrastructure developers, as well as private equity firms.
The government will contribute 10 percent and the remaining 70 percent will come in the form of debt financing that will be majority provided by BNDES, the Brazilian development bank, according to a preliminary financing plan shared with InfrastructureInvestor by the legal advisors.
The legal advisors, New York-based Shearman & Sterling and São Paulo-based Manesco Ramires Perez Azevedo Marques Advocacia, are designing the concession agreement so both foreign investors and the Brazilian government can participate in one investment vehicle that will build, own, operate and eventually transfer the project back to the government at the end of the concession. The length of the concession will be at least 35 years.
Howard Steinberg, a partner at Shearman, said the terms of the concession will be “balanced” so that “Brazil gets what it needs” and investors are reassured that their business won’t be compromised as a result of the investment: “We want to make sure that the technology will be available for Brazil to use in other railroads. But, obviously, technology is sensitive and we want to make sure that trade secrets are appropriately kept.”
“That’s a balancing act that’s still in progress and I think that’s the last step that’s going to get solved before the [final] concession gets issued,” he added.
Vitor Rhein Schirato, an attorney with Manesco, said the goal is to have the final draft of the concession agreement published in February and to begin the process of soliciting requests for qualifications and proposals in May. Technical and financial qualifications will be evaluated, he said, adding that “it’s a very, very new type of bidding process in Brazil” that is being tailored to the project.
Interested parties have 30 days to comment on the draft concession agreement, now posted on the website of the Agência Nacional de Transportes Terrestres, Brazil’s regulatory body for transportation.