High oil prices change highway concessions rule

The price of oil, which was already on the rise due to the pandemic and soared with the war between Russia and Ukraine, led the Ministry of Infrastructure to decide to modify the next concession contracts.

The objective is to avoid cash problems for the companies in the first years of the contract, a stage that foresees the heaviest investments in works – oil is the raw material for asphalt, which represents a high cost at this stage.

In the notices for upcoming highways, the team of Minister Tarcísio de Freitas included the forecast for price adjustments considering a combination of two indices —IPCA, the official inflation index measured by the IBGE (Brazilian Institute of Geography and Statistics), and IGP-DI (General Price Index by Internal Availability), measured by Fundação Getúlio Vargas.

According to Natália Marcassa, secretary of Development, Planning and Partnerships at the Ministry of Infrastructure, this was a way out to try to compensate for the exorbitant high price of inputs, especially asphalt.

“We decided to merge the index with 70% of IPCA and 30% of IGP-DI”, stated Marcassa. “The IGP-DI manages to capture exchange rate variations that affect industry and construction inputs.”

For the secretary, the combination allows the inflation perceived by the concessionaire to be closer to its reality. Today, the contracts are 100% indexed to the IPCA.

The other option for mitigating unforeseen impacts on the price of inputs is the use of currency hedge, a kind of fund that can be used to reduce increases in inputs and which was already part of the rules of highway concession contracts.

“The winner will have to choose which option they want, and it will be up to ANTT [Agência Nacional de Transportes Terrestres] authorize or not.”

Marcassa affirms that this new tool was another way out to try to avoid the disaster that occurred in the concessions of the government of former president Dilma Rousseff, who did not foresee escape valves for situations of financial crisis in the country.

Many of these concessions are being returned because they face imbalances arising from the difference between revenues and expenses.

Today, one third of the expenses incurred by concessionaires are linked to the paving of roads and the asphalt component is directly affected by the high oil price.

Since January of this year, the accumulated increase in the Brent barrel has reached 60%, with the price going from US$ 89 to US$ 129 on Monday (7). On Wednesday, the price of the commodity fell sharply, as a result of the easing of tension between Russia and Ukraine, but it was still trading above US$ 110.

In January 2016, the barrel was quoted at around US$30.

Steel, which is also on the rise, accounts for another 32% of these disbursements.

The rise in oil prices is due to the pandemic, which over two years led the main countries to cut their production.

With the invasion of Ukraine by Russia, prices rose even more, for fear that the flow of the product could be blocked, according to market analysts — Russia is a major exporter of oil and gas and part of this fuel is destined for Europe.

The government included a new clause that allows indexing the readjustments by a composition of IPCA and IGP-DI
in the public notice for the Rio-Valadares highway (BR-116/493/465), between MG and RJ.

The auction is scheduled for May this year and the work foresees investments estimated at R$ 9.2 billion and maintenance and operation expenses of R$ 8.5 billion.

These disbursements will come from the duplication of approximately 310 km of lanes, 245 km of additional lanes and the construction of 65 footbridges, in addition to a rest area for truck drivers.

The new model will also be important for the success of the auction for the nearly 4,000 kilometers of Rodovias Integradas do Paraná, which will be auctioned this year and will require around R$ 40 billion in investments in works.

The project foresees the duplication of almost 1,800 km of highways, 486 km of additional lanes, 211 km of side roads and 185 km of shoulders. There are also 126 km of contours, creation of three escape areas, around 440 intersections and underpasses, 185 turnarounds and roundabouts, 195 footbridges, 357 special artworks and 73 km of cycle paths.

The government believes that, despite the presidential election, which usually compromises the project schedule, it will be possible to grant the BR-381/262, between Belo Horizonte (MG) and Viana (ES), which will require investments of at least R$ 8 billion. .

Known as the “highway of death”, it has gone up for auction twice without success. This time, the Infrastructure team analyzes to reduce duplications to try to make the project concession viable, reducing costs.