Public-Private Partnership

Transcription

1 Public-Private Partnership

2 Agenda - Concessions in Brazil - Surety insurance for concessions - Guarantee underwriting for concessions /Underwriting of concession guarantee s 2

3 History of concessions in Brazil 1995 Law No. 8,987 regulates public service concessions in Brazil 2004 Law No creates public-private partnerships in Brazil. 3

4 Comparison between common and PPP s concessions Item Common concession Administrative concession Pubic-private concession Law No / / /04 Amount Not regulated Minimum amount BRL Minimum amount 20 million BRL 20 million Term Not regulated Between 5 and 35 Between 5 and 35 years years Paid by the public sector In exceptional situations only Consideration Subsidy The contract establishes performance evaluation criteria Variable remuneration linked to performance Demand risk Applicable Mandatory Mandatory Applicable Mandatory Mandatory Borne by the concessionaire Borne by the public sector in most cases. Shared between the public sector and the private partner 4

5 Main types of concession Roads Airports Railroads Subways Ports Cleanup Urban cleaning Telecommunications Bus transportation In Brazil, Concessionaire s annual written premiums are estimated between USD 25 million and USD 30 million. 5

6 2015/2021 Brazil s main estimated investments Railroads USD 22,700 million Roads USD 17,300 million Ports USD 9,800 million The concessionaire s contract is one of the few renewable contracts Airports USD 2,200 million 6

7 History of surety insurance in Brazil 1993 Law No. 8,666 introduces surety insurance as a type of guarantee for public contracting The SUSEP issues Regulations No. 04 and 05 establishing the types, provisions and counterguarantees of surety insurance. Regulation No. 05 was exclusively issued to regulate the concession market 7

8 SUSEP Regulation No. 05/97 SUSEP Regulation No. 005, dated 23 May 1997 THE SUPERINTENDENT OF THE SUPERINTENDENCE OF PRIVATE INSURANCE SUSEP, as provided for in Section 36, Paragraph c, of Decree-Law No. 73, dated 21 November 1966, RESOLVES: 1. To approve the wording of the Policy, Conditions and Rates of Surety Insurance, particularly when it is issued by insurance companies, as required by Edicts and Concession Contracts from the public authorities, in the form of Annexes I to V which are an integral part of this Regulation. 8

9 History of surety insurance in Brazil 2003 The SUSEP issues Regulation No. 232, which establishes new provisions for surety insurance The SUSEP issues Regulation No. 477, which currently regulates surety insurance in Brazil. 9

10 SUSEP Regulation No. 477/ Period: 3.1. The policy period shall be fixed according to the following rules: I it will be equal to the term fixed in the administrative contract for project execution, services and/or purchases; II the policy will be written for renewable periods in case of concessions and permits for public service The renewals referred to in paragraph II of Section 3.1. are not automatic, they shall be communicated by the insurance company to the insured and policyholder through a written notice stating their explicit interest to maintain the policy, no later than ninety days before its expiration date. 10

11 Contract ARTESP (Regulatory Agency for Delegated Public Transport Services of São Paulo State) CLAUSE 29 GUARANTEES a. Performance guarantee for operating and maintenance functions; b. Performance guarantee for expansion functions; c. Guarantee of payment of the fixed valued referred to in paragraph II of Section The guarantees mentioned in Section 29.2, paragraphs a and b, shall have a minimum period of 12 (twelve) months. The guarantee mentioned in paragraph c of the same section will have a 18 (eighteen) month period In case of nonrenewal of the surety policy by the insurance company, the CONCESSIONAIRE shall submit a new guarantee, equivalent in value and conditions, before the expiration of the policy, regardless of the notice to be given Noncompliance with the condition provided for in this section, or the nonapproval by the CONTRACTING PARTY of the guarantee offered to replace the former, will constitute noncompliance by the CONCESSIONAIRE. 11

12 Contract DER PR ( Road Department of Paraná State) 1. As guarantee of the faithful performance of the obligations assumed for the execution of this CONTRACT (Performance Guarantee), the CONCESSIONAIRE makes a deposit in favor of the DER amounting to 5% (five percent) of the Estimated Value of the gross estimated revenues, according to the Toll Revenues Chart of the COMMERCIAL OFFER The Concessionaire submits the surety insurance policy for a period of one year, which can be extended for successive annual periods up to the extinction of the CONCESSIONAIRE s obligations, provided that the INSURANCE COMPANY expresses its formal agreement to extend it. If the INSURANCE COMPANY is not interested in extending the policy, they shall give notice to the CONCESSIONAIRE and the DER no later than 60 (sixty) days before the policy expiration date. It is also expressly established that in no case the above-mentioned rejection could be considered by the Insured as legal grounds to call on the Performance Guarantee. 12

13 Contract ANTT (National Surface Transport Agency) 11.1 The Concessionaire shall maintain the Contract Performance Guarantee in favor of the ANTT as guarantee of the faithful performance of the contractual obligations as follows: Periods and amounts Up to the handover of the improvement works provided for in sections to of the Road Exploitation Program ( PER): BRL 275,000,000 (two hundred and seventy-five million reais). From handover of the improvement works provided for in sections to of the PER up to the end of the Concession Term: BRL 150,000,000 (one hundred and fifty million reais). From the end of the Concession Period up to the end of the Contract Term: BRL 150,000,000 (one hundred and fifty million reais). 13

14 Contract - ANTT 11.3 At the discretion of the Concessionaire, Contract Performance may be guaranteed by one of the following options: Deposit, in cash or in federal public debt securities; Bank bond, as shown in Annex 3; or Surety insurance whose policy shall comply at least with the contents of Annex Bank bonds and surety insurance policies shall have a minimum period of 1 (one) year from their date of issue. The Concessionaire is responsible for keeping them effective on an ongoing basis during the Term of the Concession, and shall renew or update them as required at least 30 (thirty) days before their expiry date. 14

15 Contract - ANTT 11.5 Without prejudice to the other cases provided for in the Contract and in the current regulation, the Contract Performance Guarantee may be used in the following cases: When the Concessionaire fails to perform the investment obligations provided for in the PER (Road Exploitation Program) or to comply with the Performance Parameters, the Technical Parameters, or does not apply them as agreed to; when the Concessionaire does not pay the penalties provided for in the ANTT Contract and regulations; when the Reversible Property returned does not comply with the provisions set in the Contract including, but not limited to, compliance with the PER, the Performance Parameters, and the execution plan and other requirements set by ANTT; when the Concessionaire does not pay the supervision quota in due time, as provided for in paragraph 14.10, as well as any indemnification or pecuniary obligation related to the Concession for which the Concessionaire is responsible. 15

16 Underwriting - Contract - Counterguarantees - Incurred and Budgeted cash flow - Budgeted Income vs. Incurred Income - Budgeted Investments vs. Investments Made - Equity - Funding - Economic and financial position of the shareholders - Environmental Permits - Expropriation - Penalties Applied 16

17 Highest risks in a 25-year concession -Equity -Funding -Expropriations -Environmental Permits -Income -Large projects -Operating -Return of Reversible Property High Medium Low Medium 17

18 Concessions Sector

19 Contents Macroeconomic Market Share Financial Information Revenues per Road Variation in shares Conclusion Annexes Concessions Sector

20 Road Logistics Sector in numbers Macroeconomic Traffic GDP correlation 3,96% 3,16% 3,02% 6,60% 6,09% 6,19% 2,33% 5,17% 11,07% 7,53% 2,73% 3,88% 9,10% 4,10% 2,30% GDP Road Toll revenues vs. Paying vehicles (mill.) Amounts in million BRL ,33% -0,34% 0,90% Trends - Traffic Road Network Concessions 115% 105% 95% 85% 75% Unpaved Light Vehicles Heavy Vehicles Payroll Industrial Production 80% 12% 8% Paved Planned Government 70% 30% Private Source: Arteris RI, ABCR, DNIT, ANTT and ARTESP Concessions Sector

21 Road Concessions Market Share in km 4,488 3,226 2,438 1,935 1,642 1,054 1, Company A Company B Company C Company D Company E Company F Company G Other Market Share in km Railroad Concessions 13,128 7,080 4,238 1,674 1,621 Company ALL A Company VLI B Transnordestina Company C Company MRS D Ferrovia Company Novoeste E Concessions Sector

22 Net Income 6,016 Financial Results In million BRL 2010 x 2011 x 2012 x ,856 3,641 3,377 3,038 2,639 2, Company A Company B Company C Company D Company E Company F Company G Net Results Company A Company B Company C Company D Company E Income Breakdown Company F Company G Ports Railroads Other Airports Roads Company A Company B Company C Company D Company E Company F Concessions Sector

23 Debt breakdown Amortization schedule In million BRL Caixa Cash EBITDA CP em onwards diante Company A Company B Company C Company D Company E Company F Company G Net Debt/EBITDA Ratio Company G Company A Company B Company C Company D Company E Company F Concessions Sector

24 Company A Analysis per Contract Net income/km figures in thousands KM 218 KM 306 KM 223 KM KM 320 KM KM 401 KM 382 KM Concession Term- Years Concessions Sector

25 - Variation in shares in this period Index (baseline = 100) Variation in Shares /11/ /05/ /11/ /05/ /11/ /05/2014 Source: Info Money and UOL Economia Concessions Sector

26 Summary of Guarantees for Concessions - The product has been used for 18 years in Brazil - It is accepted by all Brazilian Concession Granting Bodies - It may be included in automatic reinsurance treaties - High insured amount - Responsible underwriting - Renewable portfolio - Low loss frequency, although the loss ratio may be high - Transparent provisions with well-defined terms 26

27 Thank you