Brazilian state eyes $600m of highway tenders

Two of the projects will be structured as federal highway concessions while the third will be awarded under the State of Bahia's PPP programme. The state’s head of planning, Romeu Temporal, expects all three project tenders to be launched in the first three months of the year.

The State of Bahia in Brazil expects three highway projects totalling more than $600 million to be put to bid in the first three months of the year, the cabinet head of the state planning department, Romeu Temporal, told InfrastructureInvestor.com.

Two of the tenders will be structured as federal concessions while the third will be structured as a public private partnership (PPP) under the state’s PPP programme. Concession-governed projects in Brazil do not guarantee fees or tariffs to private investors, while in PPPs the government typically does make such guarantees, subject to certain conditions being satisfied.

The two concessions will involve upgrading and expanding stretches of federal highways BR-116 and BR-324. They will be the first concessions awarded in Bahia under the Brazilian government’s concession programme and the Brazilian government’s second attempt at tendering both projects.

Requests for qualifications for stretches of BR-116 and BR-324 were issued under Brazil’s federal PPP programme in May 2007 but were delayed and ultimately not awarded. By contrast, Brazil has awarded 13 toll road projects in recent years as concessions.

Temporal estimates that BR-116 will require an upfront investment of R$840 million (€266 million; $366 million) by the winning bidder. BR-116 connects the state of Bahia with the state of Minas Gerais in the south. The length of the roadway included in the concession is about 554 kilometers.

BR-324 will require an upfront investment of R$110 million (€35 million; $48 million). The highway connects the state’s city of Feira de Santana with the Port of Salvador on the Atlantic coast. The length of the concession will be around 113 kilometers.

Both concessions will be eligible for financing from the Brazilian Development Bank and the World Bank, Temporal said.

The state of Bahia also plans to launch a tender for a PPP to develop four parts of its state road BA-093 around the Port of Salvador. The segments total $200 million and total upfront investment is expected to be $200 million, according to Temporal. If successfully launched, it will be the first PPP tender issued by Bahia in 2009. The state had been studying the viability of a PPP concession for the highway since 2006.

“We are investing logistically in the transport of the area of Salvador to improve the conditions for the petrochemical industry, which is a major sector of our economy,” Temporal added.

Like many other Brazilian states, including Mina Gerais and São Paulo, Bahia has pioneered its own PPP programme for state road projects as federal-level PPPs have repeatedly been delayed or scrapped. Brazil’s national PPP legislation came into effect in December 2004 but to date no federally-mandated PPPs have yet been awarded.

The World Bank’s International Finance Corporation is assisting Bahia with structuring the PPP contract for BA-093.

Bahia's roads: under development