State Government of Rio Grande do Sul
Start of content

Rio Grande do Sul’s government launched the RS Partnerships program to stimulate concessions and PPPs

Publication:

Os quatro primeiros projetos do programa RS Parcerias: rodovias RSC-287 e ERS-324, Estação Rodoviária de Porto Alegre e Parque Zoológico de Sapucaia do Sul
Os quatro primeiros projetos do programa RS Parcerias - Photo: Palácio Piratini

[25/03/2019] To stimulate the development of the State, through private investments, in order to improve public services is the objective of the RS Partnerships program, which proposes the promotion of concessions and public-private partnerships (PPPs). The program was launched this morning (25) by Governor Eduardo Leite, at Palacio Piratini.

"At this special moment, we want to announce to Rio Grande do Sul, Brazil and the world that the state of Rio Grande do Sul has made a very firm and clear decision regarding its collaboration with the private sector. We are not coming up with a way to solve this problem. What we want to make clear is that Rio Grande do Sul is aware that the state government alone cannot meet all the needs of the population. Therefore, partnerships with the private sector are welcome, not only because they ensure the feasibility of investments, but because investments can be significantly facilitated when the various obstacles inherent to the public sector are eliminated,” the governor said.

The first projects were presented during the ceremony at Salão Alberto Pasqualini, as follows: concessions of RSC-287 and ERS-324 highways, Porto Alegre Bus Station and the Sapucaia do Sul Park Zoo, which will generate BRL 3.4 billion in investments over the next 30 years.

The four proposals have already been analyzed in a technical feasibility study, which began during the term of the former governor, José Ivo Sartori, and were approved by the Managing Board of the State Program of Concessions and Public-Private Partnerships (PPPs). There are still some steps to be completed before the preparation of the final bidding documents, such as the gathering of public suggestions for the highways and the Porto Alegre Bus Station. Regarding the Sapucaia do Sul Park Zoo, the process is more advanced, and the bid notice is expected to be published in the next few days.

New assets from Rio Grande do Sul for possible partnerships with the private sector are being considered by experts from the Department of Concessions and Public-Private Partnerships and are expected to be released in the coming months.

Governor Eduardo Leite said that all the roads currently managed by Companhia Gaúcha de Rodovias (EGR), in a total length of 752 kilometers (except for sections of RSC-287 and ERS-324, which are already included in the new concession), are being considered, as well as other roads regarded as a priority in the State Logistics and Transport Plan (Pelt), about 250 kilometers of state highways and 630 kilometers of federal roads.

However, the new batch of concessions or PPPs is not restricted to the road sector nor to the infrastructure sector. Waterways, the Port of Rio Grande, regional airports, construction and administration of schools, public buildings and prisons, equipment related to Culture and Tourism areas, among others, are being assessed by the government.

Responsible for the management of the RS Partnerships program, the Secretary for Governance and Strategic Management, Claudio Gastal, explained that one of the main advantages of the program is its predictability, not only for the population, who will be updated on the improvements to be made and their completion, but also for the private sector, which will count on a carefully prepared timeline, and will be able to make long-term plans for the State, which, in turn, will be more attractive and competitive.

Like Governor Leite, Gastal also stressed that the government does not intend to promote a discussion between the private and public sectors. “It can be the state, the private sector or the third sector (eg. NGOs). This is what matters for RS Partnerships and applies to all relevant areas of the State, from infrastructure to culture, with the purpose of complementing governmental actions, so that we can deliver better services to the population”, concluded Gastal.

First projects

The result of the feasibility study carried out by KPM/Manesco/Planos consultancy pointed to the need for road improvements, maintenance and duplication of RSC-287 and ERS-324 highways, with the implementation of toll plazas and user fees, which will require a total investments volume that exceeds BRL 3.3 billion over 30 years.

For comparison purposes, from 2014 to 2018, the state government invested BRL 195.7 million in RSC-287 (with funds from the Rehabilitation and Maintenance Contract– a Crema contract, and the collection made by EGR, the current concessionaire of part of the highway) and BRL 84.5 million in ERS-324 (with Crema funds only). If compared to the first five years of the future concession to the private initiative, as the feasibility study indicates, the investment will be BRL 477.240 million in RSC-287 and BRL 293.258 million in ERS-324.

Regarding the Porto Alegre Bus Station, it will be managed by the private sector for a 25-year period in the current site of the station. The financial contribution will be BRL 76,723 million to improve the station, with installation of self-closing devices and air conditioning in the waiting rooms, among other improvements. The criterion used for the economic-financial analysis of the project was the discounted cash flow and the internal rate of return (IRR), which was 10.43%.

The subsequent stages of the concessions include public consultations (online) and public hearings (on-site, in the regions covered) for at least 30 days. During this period, government experts will receive suggestions from the population and other interested parties. After analysis of all the notes, which may or may not alter the final content, the document will be completed and forwarded to the regulatory, oversight and control bodies, and the bid notice will be published.

This process is expected to occur in August this year, depending on the procedures in the sectors involved. With the publication of the bid notice, the last step, the competitive bidding tender starts. The process can be concluded by the end of 2019, with the determination of the winning bidders, as long as the bid notice is published up to August. 

The ordinary procedure is adopted in the concessions. This means that the government will not make any disbursements in this partnership. The difference in the concession model of the Bus Station is that it involves a payment for the grant, which is the permission to carry out a public service. According to the model, there is a payment of BRL 10 million in the first year; 5% of the gross revenue of the concessionaire from year 1 to year 4 of the concession and from year 5 to year 25, the winner will pay 16.4% of its gross revenue to the State.

The selection criterion adopted to define the winning bidder in the road concessions is the lowest toll fee offered, according to the principle of “modicidade tarifária” (a fee that ensures reliability, isonomic treatment and cost effectiveness) and the price ceiling set in the future bid notice. The same criterion was used in the recent concession for the federal roads of Rio Grande do Sul, BRs 101, 386, 448 and 290, whose bidding was won by CCR Group, as it offered a fee 40% lower than the limit set in the competition.

As for the concession of the Porto Alegre Bus Station, the selection criterion is the highest grant (value) paid to the State. This process is similar to the one adopted in recent concessions of the terminals of Salvador and Brasília.

The granting authority shall be responsible for supervising the service provided. In the case of the Bus Station, the granting authority will be the Autonomous Department of Roads (Daer) and, in the road concessions, the State Department of Logistics and Transport. The agencies will monitor performance through indicators set in the contract and will ensure the high quality of customer service.

RSC-287

Road stretch to be duplicated: between Tabaí, Venâncio Aires, Santa Cruz and Santa Maria
Extension: 204.51 kilometers
Private investment: BRL 2,277 billion
Concession period: 30 years
Toll plazas: 5

Toll plaza 1: km 47, in Tabaí
Toll plaza 2: km 86, in Venâncio Aires (existent), the current fee is BRL 7.00
Toll plaza 3: km 131, in Candelária (existent), the current fee is BRL 7.00
Toll plaza 4: km 177, in Paraíso do Sul
Toll plaza 5: km 214, in Santa Maria - Camobi

Maximum estimated fee per toll plaza: BRL 5.93

Planned works:
- Duplication of urban stretches in up to five years
- Total duplication of the highway in 11 years

ERS-324

Road stretch to be duplicated: between Passo Fundo, Marau, Casca and Nova Prata
Extension: 115.3 kilometers
Private investment: BRL 1.091 billion
Concession period: 30 years
Toll plazas: 2

Toll plaza 1: km 195, Passo Fundo
Toll plaza 2: km 279, Nova Bassano

Maximum estimated fee per toll plaza: BRL 9.64

Planned works:
- Execution of contour in urban stretches in up to six years
- Duplication of the urban stretch in seven years
- Total duplication throughout the concession period

Porto Alegre Bus Station

Private investment: BRL 76.723 million
Grant value: BRL 10 million to be paid in year 1; 5% of gross revenue from year 1 to year 4, and 16.4% of the gross revenue from year 5 to year 25.
Concession period: 25 years
Planned Works: modernization of the terminal and improvement of customer service, including air conditioning, escalators, security and monitoring systems, shelters in the boarding access to Trensurb, traffic improvements, among others. Seventy percent of the works are expected to be completed within three years.

Bid notice for the Sapucaia do Sul Park Zoo

Private investment: BRL 59 million
Concession period: 30 years
Planned works: improvements in animal management and modernization of the site. Also, 60% of the works must be completed in 3 years.
More details: the Sapucaia do Sul Park Zoo, which was also analyzed by the consulting firm KPMG/Manesco/Planos, went through public consultation and is in an advanced stage. The publication of the bid notice is scheduled for the end of the month. One of the main requirements for the winning bidder of the concession is to maintain the entrance fee charged to visitors at BRL 15.00, besides promoting the modernization of the site, with focus on the welfare of the animals.
To increase revenue, the winning bidder may invest in new attractions. The assets consisting of real estate, furniture, improvements, facilities and the collection of goods whose preservation and protection are of public interest because of their environmental, scientific and landscape value will be managed by the State Department of Environment and Infrastructure. The winning bidder will be the one who offers the highest grant to the State.

What is the difference between PPP, concession and privatization?

Concessions and public-private partnerships (PPPs) are administrative contracts between the government and a private company for the delivery of a public service for a specified time period. In the concessions (highways RSC-287, ERS-384, Porto Alegre Bus Station and Sapucaia do Sul Park Zoo) there are no government disbursements. The private company makes the necessary investments and assumes the risks of the exploitation of the object of the concession, and its remuneration is only based on user charges and/or the exploitation of any ancillary revenues (not fees). At the end of the concession, the assets will be reverted to the government, which, in turn, can manage them or grant them again. As for the PPPs, there is a counterpart. In this case, the company is not remunerated solely by user fees, as the government complements the company’s revenue to ensure lower fee rates or even exemption from payment of fees to the population. This is the case of Corsan's PPP. Privatization is different. In privatization, the government sells or transfers assets to the private sector for an indefinite period, e.g. the governmental project aimed to the privatization of CEEE, CRM and Sulgás.

Files attachment

InvestRS