Understand the auction for the North section of the Rodoanel – 03/13/2023 – Market

After ten years of the beginning of the works and five of its stoppage, the resumption of the works for the conclusion of the North section of the Rodoanel is about to happen.

Until this Monday night (13), when it was suspended by the Justice, the auction referring to the works for the conclusion of the last remaining stage of the ring road, of 44 km, covering the municipalities of Arujá, was scheduled for this Tuesday at 14:00 , Guarulhos and São Paulo.

The government may try to reverse the decision of the Justice to suspend the event, and maintain its realization this Tuesday.

The conditions announced provided for a concession period of 31 years, with an estimated investment value of approximately R$ 3.4 billion, according to the notice published in August last year.

Of this amount, approximately R$ 2 billion should be allocated to the completion of the works, with the remainder used in the operation and maintenance of the highway, which will be supervised by Artesp (Transport Agency of the State of São Paulo).

The winner of the dispute will have about three years to complete the works, with the works expected to be delivered in June 2026. The government predicts that, with the North section in operation, there will be a reduction of 30,000 trucks and 54,000 cars in the Marginal Tiete.

According to Rafael Benini, state secretary for Partnerships and Investments, the expectation is that between three and four companies will participate in the dispute, between national and foreign names.

The secretary says that none of the interested parties already operates with road concessions in São Paulo — CCR is the concessionaire for the West section, and SPMar, for the East and South.

An auction for the northern section of the Rodoanel was scheduled by the previous government of Rodrigo Garcia (PSDB) for the month of April 2022, but was suspended one day before the scheduled date.

According to the government at the time, the decision was due to “uncertainties generated by the internal and external macroeconomic scenario and high input prices, responsible for the highest inflation in civil construction in the last two decades in Brazil”.

To increase interest in the project and avoid further suspension of the auction, the government increased the internal rate of return offered to investors from 8.93% to 9.99% per annum. “We think it will be successful”, says Benini.

The auction model of the PPP (Public Private Partnership) predicts that the winner of the auction will be the one that offers the biggest discount on the annual payments to be paid by the government, of R$ 51.4 million per year —as the toll value should not be sufficient to adequately remunerate the concessionaire, the government makes a periodic contribution to offset the expenses.

The secretary also says he expects that, given the expected competition, proposals will be presented that fully cover the amount of the consideration. In this case, the highest discount on the public contribution expected to complete the work, of up to R$ 1.4 billion, will be considered for selection.

“There was a great maturation of the business conditions, and the government yielded a lot because it needs to guarantee interested parties”, says Ricardo Levy, partner in the infrastructure area of ​​the law firm Pinheiro Neto.

Levy adds that, in a scenario of high interest rates like the current one, the work of convincing people to attract companies interested in participating in a very long-term business that requires billionaire investments is even more challenging.

“The government did nothing to favor the companies, but simply to manage to create attractiveness for the business”, says the Pinheiro Neto partner.

According to Levy, aspects related to the economic-financial balance during the 30 years of the project, as well as to any —and likely— disagreements between the private sector and the public authorities regarding the state of the works and the need for investments were addressed in a to break down resistance and attract interested parties to the auction.

The extension of the deadlines initially established for the phased delivery of works, and even contractual termination, are provided for in the PPP model, points out the expert.

Benini preferred not to dwell on how much work still remains to complete the North section of the Rodoanel, but estimates at the time of work interruption five years ago pointed to a percentage of around 85% of the work already concluded.

The construction of the Rodoanel’s North section began in mid-2013 and has been paralyzed since 2018. The last time the Rodoanel was without progress for so long was between 2002 and 2007, a gap between the construction of the West and South sections.

The work for the North section was initially budgeted at BRL 4.3 billion, but, by 2019, it had already consumed around BRL 6.85 billion, having become the target of an investigation due to suspicions of overbilling and corruption.

The contractors that were part of the consortia, such as Coesa (formerly OAS) and Mendes Júnior, were financially hit hard by Lava Jato, entering into judicial recovery and being declared unfit by the Union.

On Friday (10th), Coesa even presented a writ of mandamus to try to suspend the auction, but had the request denied by the Justice. The company even tried to suspend the auction through a challenge request at the TCE-SP (São Paulo State Court of Auditors), but which was also denied. The developer alleges that it is entitled to compensation owed by the state for the investments it made in the work.

“The indemnity [à Coesa] for the construction of the Rodoanel is still under judicial discussion”, says Benini. Coesa “is trying to confuse things”, adds the secretary.

According to the projected model, the North section of the Rodoanel will not have toll plazas, with toll collection taking place through sensors that calculate the amount due based on the mileage of each vehicle. The initial forecast is that the rate will be R$ 0.15 per kilometer traveled. “It is the first project born without a toll plaza in Brazil”, says the secretary.

For drivers with the tag device, the toll will be charged by the device itself. For those who do not have the device, it will be necessary to access the concessionaire’s website to make the payment, within a period of up to 15 days after the traffic on the highway. After this interval, a bank slip will be sent to the driver for the debt to be settled. If payment is not made on time, a toll evasion fine will be issued.

In all, the ring road is about 176 kilometers long. The first stretch opened was the West, in 2002, followed by the South, in 2010, and the East, in 2014.