Bloomberg News

Singapore Operator Pays $8.3 Bln for Rio de Janeiro Airport (1)

November 22, 2013

Galeao Airport

TAM Airlines planes sit on the tarmac at the Galeao International Airport in Rio de Janeiro. Photographer: Dado Galdieri/Bloomberg

Brazil’s government today sold the country’s second-busiest airport for nearly four times the minimum bid as part of President Dilma Rousseff’s program to modernize infrastructure.

The Aeroportos do Futuro group led by Odebrecht SA, and including Singapore airport operator Changi Airport Group, offered 19 billion reais ($8.3 billion) and won the right to operate Galeao airport in Rio de Janeiro, which will host tourists for the soccer World Cup next year and the 2016 Olympic Games, for 25 years. The offer compares with the minimum required bid of 4.83 billion reais.

Today’s auction forms part of a program Rousseff announced last year to attract 212 billion reais in investment for roads, railways, ports and airports. The drive aims to ease bottlenecks and boost expansion in Latin America’s largest economy, which will grow less in the first three years of Rousseff’s administration than in any similar period since 2001-2003, according to economists surveyed by Bloomberg.

“The government is going to say this was a tremendous success, because it attained its objectives,” Adriano Pires, head of the Brazilian Center for Infrastructure in Rio de Janeiro, said by phone. “This is a success of Brazilian-style capitalism, a partnership of government and the private sector.”

The Aerobrasil group led by CCR SA (CCRO3), including the operators of Munich’s and Zurich’s airports, offered 1.82 billion reais for the right to operate Confins airport in Belo Horizonte for 30 years, compared with a minimum bid of 1.1 billion reais.

Infraero Stake

Brazil’s state-run management company Infraero will retain a 49 percent stake in the airports, and the winning bidders will contribute 5 percent of annual revenue to support the country’s other airports.

Brazil’s economy grew 2.7 percent in 2011 and 0.9 percent in 2012. Analysts surveyed by Bloomberg forecast 2.5 percent expansion this year, for a three-year average of 2 percent, compared with 8.1 percent in China and 3.2 percent in Russia, two of its counterparts in the so-called BRIC group of nations.

Five groups submitted bidding documents on Nov. 18. Brazil required bidders for Galeao to have experience managing airports that handle 22 million passengers a year, and for Confins 12 million passengers.

Galeao handled more than 17 million passengers in 2012, according to the civil aviation agency, known as Anac. Confins is the fifth-busiest Brazilian airport, handling more than 10 million last year.

2016 Olympics

Investment in Galeao is expected to reach 5.7 billion reais, including cargo storage installations in time for the 2016 Olympics, according to Anac. Investment for Confins includes construction of a new terminal and runway, and will reach about 3.5 billion reais.

The quality of Brazil’s air transport infrastructure ranked 123rd in the World Economic Forum’s latest Global Competitiveness Report, based on a survey of more than 13,000 business leaders. Singapore ranks first on the list of 148 countries. Its Changi airport was the 13th-busiest in the first eight months of 2013, according to the Airports Council International in Montreal.

Last year, Brazil sold licenses for three airports, including Brasilia and Sao Paulo’s Guarulhos, for a total of 24.5 billion reais. The winner of the Guarulhos concession offered nearly five times the minimum bid. Afterward, the government was criticized for setting terms that failed to draw the world’s biggest airport operators, so the terms were redrawn for today’s auction.

Delays, Revisions

Rousseff’s infrastructure drive has suffered a series of delays and revisions. The government has not yet auctioned any railway or port concessions, which it originally pledged to do this year. It has pushed back its high-speed rail project to connect Rio and Sao Paulo until after presidential elections next October.

Earlier this year, the government had to boost the rate of return for road projects after an initial offer did not generate interest. Still, one of two roads auctioned in September drew no bids.

To contact the reporters on this story: David Biller in Rio de Janeiro at dbiller1@bloomberg.net; Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net; Taís Fuoco in Sao Paulo at tfuoco1@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net


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