// 1
Brazil, BNDES and Financing Infrastructure
Wagner Bittencourt de Oliveira
Vice-President
Agenda
// 2
Part I: The Economy
Fundamentals of the Brazilian Economy
Investment: current status and perspectives
Part II: BNDES
Part III: Financing of Infrastructure Projects
Infrastructure Division
Logistics Investment Program
Financing Infrastructure
Agenda
// 3
Part I: The Economy
Fundamentals of the Brazilian Economy
Investment: current status and perspectives
Part II: BNDES
Part III: Financing of Infrastructure Projects
Infrastructure Division
Logistics Investment Program
Financing Infrastructure
Brazil has solid fundamentals to sustain
economic growth
Stable legal and institutional framework;
Social inclusion has driven the domestic market;
Healthy banking sector unexposed to troubled assets;
Robustness of the external sector;
Strong long-term planning;
Government is ready to foster growth:
Fiscal and monetary instruments;
Improved regulatory framework;
Private sector partnerships.
//4
Source: IBGE.
3Q/2013*
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
16%
1998
18%
17,5%
17,5%
17,0%
15,9%
16,5%
15,0%
14,8%
14,0%
14,2%
14,6%
15,5%
16,7%
17,2%
17,9%
18,9%
19,0%
18,0%
19,1%
20%
1997
1996
Expanding investment is a government priority
//5
Gross Fixed Capital Formation (% of GDP)
24%
22%
14%
Increasing public sector investment
//6
Public Sector Investment (% of GDP)
5
4.7
4.2
3.7
4
3
2.6 2.6 2.6
0.2
0.1
0.2
1.2
1.2
0.2
2
0.3
0.1
1.2
3.0 2.9
0.4
0.2
1.4
0.5
1.0
1.0
1.0
4.0
0.4
0.6
0.4
1.4
0.3
1.6
1.4
0.4
States &
Municipalities
1.4
States &
Municipalities
(self financing)
1.9
State Owned
Enterprise
1.1
1.1
1.4
1.8
1.9
1.7
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: IPEA.
Central
Government
0.7
1.4
1
1.1
0.8
0.4
0.4
0.3
0.6
4.4
(Central
Government)
Sound macroeconomic framework:
Declining Net Public Debt/GDP
//7
Consolidated Public Sector Net Debt (% of GDP)
65
60.4
60
55
54.8
50.6
50
48.4 47.3
45.5
45
42.1
38.5
40
35
39.2
36.4
35.2
33.9
30
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*
Source: Brazilian Central Bank.
*position on November 2013
Sound macroeconomic framework:
Inflation is under control
//8
CPI Inflation (IPCA index, % YoY)
Source: Brazilian Central Bank and IBGE.
Sound macroeconomic framework:
Strength of the external sector
//9
International Reserves (US$ billion)
Source: Brazilian Central Bank
Increasing demand for infraestructure
/ / 10
Airline industry, in million passengers
Total cargo holding in ports, in million tons
115
120
904
900
100
850
80
60
950
800
750
48
700
40
650
600
20
550
0
529
500
Thousand vehicles per km on highways
under concession
120
New vehicles (buses, trucks, light commercial
vehicles and cars), in million
105.5
4
4.0
3.5
100
3.0
80
60
40
2.5
56.5
2.0
2
1.5
1.0
20
0
0.5
0.0
Sources: National Agency for Civil Aviation (ANAC), National Agency for Aquatic Transportation (ANTAQ), Brazilian Association of Highway
Concessionaires (ABCR) and Brasilian Association of Automative Vehicle Manufactures (ANFAVEA).
Agenda
/ / 11
Part I: The Economy
Fundamentals of the Brazilian Economy
Investment: current status and perspectives
Part II: BNDES
Part III: Financing of Infrastructure Projects
Infrastructure Division
Logistics Investment Program
Financing Infrastructure
2014-2017: very promising investment
outlook
// 12
Investment Outlook for 4 years ahead Comparable Sectors
U$ billion constant prices
2014-2017
2013-2016
530
509.8
2011-2014
510
487.4
490
2012-2015
470
450
430
410
390
523.9
2008-2011
2009-2012
419.6
417.8
452.2
2010-2013
399.4
2007-2010
372.1
370
350
2006
Source: BNDES
2007
2008
2009
2010
2011
2012
2013
Total Fixed Investment in Brazil may reach US$
1.9 trillion in the coming 4 years (*)
// 13
Investment Outlook for Brazil (2014-17)
(U$ billion - Constant prices)
Δ%
2009-2012
2014-2017
Industry
421.4
523.9
24.3
Infrastructure
194.4
242.7
24.8
Housing
338.6
413.1
22.0
Agriculture & Services
547.6
716.7
30.9
Total
1,502.0
1,896.3
26.3
Sectors
(*) Note: The BNDES research on the investment outlook for 2013-2016 covers 66% of the total industrial investments. and 100% of investments in
infrastructure. totalizing about 58% of the investments in the economy (excluding residential construction). Agriculture and Services investments are
based on queries to Sectorial entities and/or econometric forecast.
13
Source: BNDES
Logistics Investment Program (PIL) will
contribute decisively to raising Brazil’s GFCF
// 14
Provisional estimates for GFCF (% GDP)
22,5%
22,2%
22,0%
21,5%
21,5%
20,7%
21,0%
20,5%
20,1%
20,6%
20,0%
20,2%
19,5%
19,5%
19,0%
19,1%
19,4%
19,8%
19,6%
19,1%
18,5%
2013f
2014f
2015f
Without infrastructure concessions
Source: BNDES
2016f
2017f
2018f
With infrastructure concessions
Agenda
// 15
Part I: The Economy
Fundamentals of the Brazilian Economy
Investment: current status and perspectives
Part II: BNDES
Part III: Financing of Infrastructure Projects
Infrastructure Division
Logistics Investment Program
Financing Infrastructure
BNDES: Among the most efficient development
banks in the world
// 16
 Main source of long term financing in Brazil
 100% Public
2012 (in US$ million)
 Stable Funding (FAT)
BNDES
 2,853 employees
 Instruments




Assets
Outstanding
Direct Operations
Loans
Indirect Operations
Net Profit
MSME (financing and guarantee)
Exports (Pre and Post shipment) ROA (%)
 Project finance
 Equity (Shareholding)
 Non-reimbursable Resources
KFW
CDB
KDB
Germany
China
South Korea
367,825
657,347 1,191,597
147,067
254,019
526,401 1,016,959
85,572
3,009
3,063
9,995
836
0.90
0.47
0.92
0.50
NPL (%)
0.06
0.21
0.30
1.60
Foundation
1952
1948
1994
1954
Employees
2,853
5,190
8,038
na
Source: Banks' balance sheets. We used the appropriate data to the IFRS
(International Financial Reporting Standards).
Source: BNDES
Increasing demand for resources
// 17
Converted to US dollar on the disbursement dates
Source: BNDES
Average growth of 22% in disbursements during the 2008 – 2012 period
Diversified allocation of resources, keeping up
with Brazil’s recent transformation
// 18
Disbursement by Sector 2007-2013 (%)
Disbursement by Region 2007-2013 (%)
Source: BNDES
Support for large-scale firms, main actors in
investment in Brazil...
Disbursement per Company Size – 2007-2013 (%)
Source: BNDES
// 19
...but also financing MSMEs: important for job
generation
// 20
MSMEs 2007-2013
Source: BNDES
Export financing: Focus on capital goods and
engineering services
// 21
Exports: Pre and Post Shipment by destination 2008-2013
Africa
3,0
Áfica
Europe
and Asia
Acumulated in 12 months
Europa e Ásia
North America
In US$ billion
2,5
América do Norte
South and Central America
América do Sul e Central
2,0
1,5
1,0
0,5
.
2008
Source: BNDES
2009
.
2010
.
2011
.
2012
.
2013
Equity portfolio: institutional and strategic
// 22
Equity Portfolio
Estimated market value (US $ b.)
Nº firms with direct support
Nº Investment Funds
sep/13
45.4
203
44
Portfolio Composition – sep/2013
Oil & Gas, 47,4%
Mining, 17,5%
Others, 10,1%
Food &
Beverage, 6,9%
Source: BNDES
Pulp & Paper,
7,6%
Electric power,
10,5%
BNDES’ infrastructure loans are firmly
on the rise
// 23
BNDES disbursements in Electricity and Logistics 2005-2013
U$ billion
Airports
Ports, Terminals and Warehouses
Highways
Railways
Transmission Lines
Distribution
Alternative energy
Hydro Power Plant
Logistics
3.7
12.7
13.4
11.4
8.0
8.8
4.7
Electricity
2007
Source: BNDES
2008
2009
2010
2011
2012
2013
Government’s priority: disbursements to
industry and innovation
// 24
Industrial Policy Disbursements
(Brasil Maior Plan) 2007-2013
US billion
Disbursement to Innovation
2007-2013
US billion
Source: BNDES
BNDES plays a key role in generating jobs
// 25
Estimated job creation or job upkeep associated with BNDES
financing - 2007 to 2012 (in thousands)
7.000
5.871
6.000
4.843
5.000
4.460
5.033
4.356
4.000
3.178
2.841
3.000
2.225
1.978
2.000
2.245
2.376
2.536
1.618
1.156
1.000
0
2007
2008
2009
BNDES Disbursements
Sources: IBGE, MTE, FGV and BNDES. Elaborated by BNDES.
2010
2011
2012
Total Investments
2013
BNDES fosters investment that otherwise
would not exist
// 26
Growth in fixed assets of 3,000 industrial firms:
supported x non-supported firms in 2010
Non Supported
21%
Supported
10%
23%
0%
5%
10%
Investment without BNDES
15%
20%
25%
30%
35%
Induced by BNDES
Source: BNDES, based on SERASA data.
Sixteen published BNDES assessments between 2006 and 2013, of which 11
showed positive impacts, while five showed partial positive or less
meaningful effects. Topics: employment, productivity, balance sheets, firm exports,
effects on local governments and sectors (four of these made by BNDES staff).
BNDES: the same relative size, but Brazil´s credit
market appears to be limited
BNDES and other development banks in 2012
(Outstanding Loans/GDP and Outstanding Loans/Total Credit)
21.0
11.3
15.5
12.7
12.4
8.0
7.4
4.6
KDB
BNDES
Outstanding Loans/GDP
CDB
Outstanding Loans/Total Credit
Source: Annual reports of the respective banks, IIF and Central Banks of the respective countries. Produced by BNDES
KDB: Korea Development Bank; CDB: China Development Bank; KfW: KfW Bankengruppe (Germany).
KfW
// 27
Agenda
// 28
Part I: The Economy
Fundamentals of the Brazilian Economy
Investment: current status and perspectives
Part II: BNDES
Part III: Financing of Infrastructure Projects
Infrastructure Division
Logistics Investment Program
Financing Infrastructure
Infrastructure Division
Portfolio of projects
// 29
Projects status: disbursing and under analysis
Sector
Electric Power
Industry
Transportation
and Logistics
Number of
Projects
BNDES Credit Line
R$ 000
Total Investment
R$ 000
Generation
113
80,481,805
132,711,492
Transmision
57
11,983,113
23,493,635
Distribution
69
14,288,051
27,581,080
Subtotal
239
106,752,969
183,786,207
Roadways
31
14,820,309
27,026,849
Railways
13
10,581,296
31,830,684
Ports
26
9,304,263
18,853,977
Airports
6
6,224,992
9,861,837
Pipeline Transportation
1
4,101,400
8,690,000
Shipping industry
9
1,920,571
2,901,865
13
517,986
736,449
4
36,742
41,619
103
47,507,559
99,943,280
342
154,260,528
283,729,487
Terminals and Warehouses
Others
Subtotal
TOTAL
Infrastructure Division
Annual Disbursement
// 30
Eletric Power Industry Breakdown
20
R$ billion
16
Infrastructure Division Performance
Generation
Transmission
Distribution
13
12
60
Energy Power Industry
50
Transportation and
Logistics
40
Forecast
50
40
30
10
0
44
25
16 15
3
7
28
2012
2014E
2016E
12
8
2
20
18
16
14
12
10
8
6
4
2
0
2006 2007 2008 2009 2010 2011 2012 2013
Transportation and Logistics Breakdown
10
2010
14
0
20
9
2008
4
30
19
6
17
50
0
2006
8
40
33
20
60
19
34% p.a
10
8
6
40% p.a
Railroads
Toll roads
Ports
Airports
Others
7
5
4
2
3
1
1
9
3
1
0
2006 2007 2008 2009 2010 2011 2012 2013
1
9
8
7
6
5
4
3
2
1
0
Infrastructure Division
Approvals between 2003 and 1st semester of 2013
// 31
Transportation and Logistics
Installed Capacity
Number of
Projects
Highways
5,064 km
40
14,792,293
26,635,253
Railways
2,237 km, 15,212 wagons
and 227 locomotives
28
14,096,989
30,211,077
Ports, Terminals and
Warehouses
107,429,148 tons/annum
48
7,547,282
15,101,869
57 MM pax/annum
11
3,630,718
8,060,049
Shipping Industry
223 Ships
31
2,496,449
3,071,277
Pipeline
1,331 km
1
1,902,700
8,690,000
158
44,466,431
91,769,525
Sector
Airports
TOTAL
BNDES Credit Line
R$ 000
Total Investment
R$ 000
Agenda
// 32
Part I: The Economy
Fundamentals of the Brazilian Economy
Investment: current status and perspectives
Part II: BNDES
Part III: Financing of Infrastructure Projects
Infrastructure Division
Logistics Investment Program
Financing Infrastructure
Logistics Investment Program
Highways (1/2)
// 33
A snapshot of the brazilian road network
18,000
Private Roads (Km)
16,000
Concessionaires
60
Private Roads
50
14,000
12,000
40
10,000
30
8,000
6,000
Federal
4,774 km
31%
69%
20
4,000
10
2,000
0,000
0
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
PIL will increase the current network toll road by near 50%
• 9 road stretches
• Totaling 7,000 km
• Estimated investment US$ 23 bn
States
10,680 km
Logistics Investment Program
Highways (2/2)
// 34
Main Regulatory Aspects
• Duplication works should take place within five years.
• The EPL - Logistics and Planning Company (a state-owned company) is responsible
for obtaining environmental for duplication and improvement works.
• Toll charging will be authorized after the completion of 10% of duplication works.
Road Concession Auctioned
Tariff
(2013)
Stretch
Bidders
Km
discount
BR-050 (GO/MG)
42,4%
8
436.6
Next Auctions
CAPEX
(US$ bn)
1.15
BR-060/153/262
(DF/GO/MG)
52,0%
5
1,176.5
3.05
BR-163 (MT)
52,0%
7
850.9
2.35
BR-163 (MS)
52,7%
6
847.2
4.35
BR-040
(MG/GO/DF)
61,1%
8
936.8
3.35
4,248.0
14.25
Total
Stretch
Ongoing feasibility
studies
CAPEX
(US$ bn)
BR-262 (ES/MG)
0.85
BR-101 (BA)
1.80
BR-153 (GO/TO)/TO-080
2.40
BR-116 (MG)
2.50
Total
7.55
Logistics Investment Program
Railroads (1/2)
// 35
Current railroad network
12 Concessionaires (28,314 km)
ALL (4 stretches)
11,738
Vale (4 stretches)
10,283
Transnordestina
4,207
MRS
Others (2 stretches)
1,674
412
Logistics Investment Program
•
•
•
•
•
Cargo Volumes
11,000 km railroad concession
12 railroad stretches
35-year term
Estimated investment: US$ 45.5 bn
Segregation of the system into two
separate private parties:
(1) the infrastructure manager and
(2) the rolling stock operator
291 298
258 271 244 278
221 232
182 203
76%
iron
ore
billion tonne-km
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Logistics Investment Program
Railroads (2/2)
// 36
New Regulatory Model: open access
1
The Concessionaire owns the right to exploit the railway.
2
Valec (state-owned company) purchases the integrality of the operational
capacity of the railway, and pays a tariff to the Concessionaire.
3
Valec sells the railway capacity to rolling stock operators, which can be a cargo
owner, independent train/logistics operators, and rail concessionaires.
Financing
Rail
Infrastructure
Manager
Valec purchases 100% of
the new rail capacity…
Financing
Rail Rolling
Stock Operator
Cargo
Owner
…and sells it to train
operators through public
tenders
► Guarantees the remuneration of the network administration
► Guarantees fair prices for rolling stock operators
Logistics Investment Program
Airports (1/2)
// 37
• Infraero (state-owned company) - responsible for the maintenance, operation and
investment of 67* airports that accounted for 97% of the Brazil total passenger traffic.
Regulatory Model
1st Round (2012)
Passenger
(Million)
Winning bid
(R$ billion)
Premium over
the Minimum
Bid
Expected
investment
(R$ billion)
Concession
Term
(years)
GUARULHOS (SP)
32.8
16.2
374%
5.2
20
VIRACOPOS (SP)
8.9
3.82
160%
8.7
30
15.9
4.51
673%
2.8
25
BRASÍLIA (DF)
* Before the auction of GRU, BSB, VCP, CNF and Galeão
Logistics Investment Program
Airports (2/2)
1
// 38
Concession of the two of the major international airports
2nd Round (2013)
Passenger
(Million)
Winning bid
(R$ billion)
Premium over
the Minimum
Bid
Expected
investment
(R$ billion)
Concession
Term
(years)
GALEÃO (RJ)
17.5
19.0
294%
2.8
25
CONFINS (MG)
10.4
1.82
66%
1.8
30
2
Investment in Regional Airports - US$ 3.6 billion in 270 regional airports.
• Strengthen and restructuring of Brazil's regional aviation network.
• Regional airports will be managed through administrative PPP.
3
Authorization for private airports dedicated exclusively to general aviation.
Logistics Investment Program
Ports (1/2)
// 39
New Port Law (no12,815/13) changed the Regulatory Framework
New law (n.12,815)
Allowance of Authorizations (Private Ports) Private ports are now allowed to handle third-party cargo and thus to
to Handle Third- Party Cargo
freely compete against concessionaires of public port terminals.
Obligation to Hire Workers from the Port Only the concessionaires of public port terminals are obliged to hire
Labor Management Agency (OGMO)
workers from OGMO.
Renewal of Concession Contracts Signed Government plans to re-auction these terminals under the new ports law.
before 1993
There are 94 terminal in this situation, mostly focused on liquid bulk cargo.
Two ways for private exploitation of ports:
(i)
concessions (for terminals located inside public ports): need to be auctioned and must include:
expiration date, renewal clauses, leasing fees and the restriction to hire workers from OGMO (Port
Labor Management Body)
(ii) authorizations (for terminals located outside of public port zones, i.e. private ports): does not
require a public auction, only an authorization. There were two types of authorizations: exclusively
for handling owned cargo and both owned and third party.
Logistics Investment Program
Ports (2/2)
// 40
Investment opportunities: R$ 54 billion
Regulatory Agency (ANTAQ) announced that has already received 123 request for authorization,
of which:
• 63 for port terminals - R$23.5bn investment
• 44 trans-shipment terminals, amounting to R$1.6bn investment
• 11 small-size terminals and
• 5 touristic terminals
For public port concessions, the auctions will be divided into four blocks totaling R$27bn in
investments among 159 bidding processes:
•
Block 1 (R$5,4 bn): 10 terminals in the Ports of Santos (R$ 2,0 bn) and 20 terminals in
the Ports of Pará (R$ 3,4 bn).
• Block 2: 11 terminals in the Port of Paranaguá (R$ 2,8 bn) and 6 terminals in the ports of
Bahia.
• Block 3: Ports of Suape, Itaqui and remaining North and Northeast terminals.
• Block 4: Ports of Vitoria, Rio de Janeiro, Itaguai, Rio Grande and Sao Francisco do Sul;
Agenda
// 41
Part I: The Economy
Fundamentals of the Brazilian Economy
Investment: current status and perspectives
Part II: BNDES
Part III: Financing of Infrastructure Projects
Infrastructure Division
Logistics Investment Program
Financing Infrastructure
Financing Infrastructure
Stimulating bonds issuance
• The size of the loan is calculated taking into account the project’s
capacity of repayment.
• Debt Service Coverage Ratio (DSCR) ≥ 1.2
• Instalments calculated using the Constant Amortization System
• The amortization curve can be based on French Amortization
System (Price Table), in case the SPC issues bonds.
• Collateral sharing.
• Repayment schedule of bonds customized according to the cash
flow generation of the project.
// 42
Financing Infrastructure
Guarantees
// 43
General Structure
Loan Tenure
•
•
•
•
Debt service account (3 instalments)
Pledge of the SPC’ shares
Pledge of receivables and rights (including any indemnity payment)
Step in rights
Pre-Completion
•
•
•
•
Post-Completion
Corporate Guarantee
• Operational and Financial Covenants
Bank Guarantee
Equity Support Agreement
Package of insurance
Financing Infrastructure
Holdings and SPC’s
// 44
Brazilian Infrastructure Bonds and infrastructure investment funds
– benefits for non-resident investors:
(i)zero Income Tax rate
(ii)zero IOF (Financial Operation Tax)
Bond
Holding
Equity
Bond
SPC 1
SPC 2
SPC N
Equity
Government Banks/Funds may co-invest with strategic and financial investors,
either directly in the SPC’s or through the holding company’s equity, taking
minority equity stake
Financing Infrastructure
Loan conditions
// 45
Financial Conditions – Logistics Investment Program
Sector
Grace Period
(up to - years)
Loan Tenure
(years)
BNDES Credit*
5
25
70%
6 months after the
conclusion of the
project
20
70%
up to 20
65%
5
30
70%
Toll Roads
Airports
Ports
Railroads
* Limited to DSCR ≥ 1.2
*
Financial
Cost
Spread (% p.a)
2.0
TJLP
5.0% p.a
0.9 + Risk rate
2.5
1.0
// 46
Thank you!