brazil, bndes and financing infrastructure
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Brazil, BNDES and Financing Infrastructure. Wagner Bittencourt de Oliveira Vice-President. Agenda. Part I: The Economy Fundamentals of the Brazilian Economy Investment: current status and perspectives Part II: BNDES Part III: Financing of Infrastructure Projects - PowerPoint PPT PresentationTRANSCRIPT
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Brazil, BNDES and Financing Infrastructure
Wagner Bittencourt de OliveiraVice-President
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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
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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
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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.
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Gross Fixed Capital Formation (% of GDP)
Expanding investment is a government priority
Source: IBGE.
14%
16%
18%
20%
22%
24%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
3Q/2
013*
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%
/ / 6
Increasing public sector investment
Public Sector Investment (% of GDP)
Source: IPEA.
/ / 7
Sound macroeconomic framework: Declining Net Public Debt/GDP
Consolidated Public Sector Net Debt (% of GDP)
Source: Brazilian Central Bank. *position on November 2013
/ / 8
CPI Inflation (IPCA index, % YoY)
Sound macroeconomic framework: Inflation is under control
Source: Brazilian Central Bank and IBGE.
/ / 9
International Reserves (US$ billion)
Sound macroeconomic framework: Strength of the external sector
Source: Brazilian Central Bank
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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).
Increasing demand for infraestructure
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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
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2014-2017: very promising investment outlook
Source: BNDESSource: BNDES
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Total Fixed Investment in Brazil may reach US$ 1.9 trillion in the coming 4 years (*)
(*) 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.
Investment Outlook for Brazil (2014-17) (U$ billion - Constant prices)
13
Sectors
2009-2012 2014-2017
Δ%
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
Source: BNDESSource: BNDES
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Provisional estimates for GFCF (% GDP)
19,1%19,4%
19,6%19,8%
20,2%
20,6%
19,1%
19,5%
20,1%
20,7%
21,5%
22,2%
18,5%
19,0%
19,5%
20,0%
20,5%
21,0%
21,5%
22,0%
22,5%
2013f 2014f 2015f 2016f 2017f 2018f
Without infrastructure concessions With infrastructure concessions
Logistics Investment Program (PIL) will contribute decisively to raising Brazil’s GFCF
Source: BNDESSource: BNDES
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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
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100% Public
Stable Funding (FAT)
2,853 employees
Instruments Direct Operations Indirect Operations MSME (financing and guarantee) Exports (Pre and Post shipment) Project finance Equity (Shareholding) Non-reimbursable Resources
BNDES: Among the most efficient development banks in the world
BNDES KFWGermany
CDBChina
KDBSouth Korea
Assets 367,825 657,347 1,191,597 147,067
Outstanding Loans 254,019 526,401 1,016,959 85,572
Net Profit 3,009 3,063 9,995 836
ROA (%) 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
2012 (in US$ million)
Source: BNDESSource: BNDES
Source: Banks' balance sheets. We used the appropriate data to the IFRS (International Financial Reporting Standards).
Main source of long term financing in Brazil
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Increasing demand for resources
Converted to US dollar on the disbursement dates
Average growth of 22% in disbursements during the 2008 – 2012 periodSource: BNDESSource: BNDES
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Diversified allocation of resources, keeping up with Brazil’s recent transformation
Disbursement by Sector 2007-2013 (%)
Disbursement by Region 2007-2013 (%)
Source: BNDESSource: BNDES
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Support for large-scale firms, main actors in investment in Brazil...
Disbursement per Company Size – 2007-2013 (%)
Source: BNDESSource: BNDES
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MSMEs 2007-2013
...but also financing MSMEs: important for job generation
Source: BNDESSource: BNDES
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-
0,5
1,0
1,5
2,0
2,5
3,0
. . . . .
2008 2009 2010 2011 2012 2013
Áfica
Europa e Ásia
América do Norte
América do Sul e Central
Export financing: Focus on capital goods and engineering services
Exports: Pre and Post Shipment by destination 2008-2013
Source: BNDESSource: BNDES
Africa
Europe and Asia
North America
South and Central America
In U
S$ b
illio
n
Acumulated in 12 months
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sep/13 Estimated market value (US $ b.) 45.4Nº firms with direct support 203Nº Investment Funds 44
Equity portfolio: institutional and strategic
Portfolio Composition – sep/2013
Equity Portfolio
Source: BNDESSource: BNDES
Oil & Gas, 47,4%
Mining, 17,5%
Electric power, 10,5%Pulp & Paper,
7,6%
Food & Beverage, 6,9%
Others, 10,1%
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BNDES’ infrastructure loans are firmly on the rise
BNDES disbursements in Electricity and Logistics 2005-2013
U$ billion
Source: BNDESSource: BNDES
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Industrial Policy Disbursements (Brasil Maior Plan) 2007-2013
US billion
Industrial Policy Disbursements (Brasil Maior Plan) 2007-2013
US billion
Government’s priority: disbursements to industry and innovation
Disbursement to Innovation 2007-2013
US billion
Source: BNDESSource: BNDES
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BNDES plays a key role in generating jobs
Estimated job creation or job upkeep associated with BNDES financing - 2007 to 2012 (in thousands)
1.156
1.618
2.225 2.245 2.376
3.178
1.978
2.841
4.460 4.356
4.843
5.871
2.536
5.033
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
2007 2008 2009 2010 2011 2012 2013
BNDES Disbursements Total InvestmentsSources: IBGE, MTE, FGV and BNDES. Elaborated by BNDES.
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BNDES fosters investment that otherwise would not exist
Growth in fixed assets of 3,000 industrial firms: supported x non-supported firms in 2010
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).
23%
21%
10%
0% 5% 10% 15% 20% 25% 30% 35%
Supported
Non Supported
Investment without BNDES Induced by BNDES
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BNDES and other development banks in 2012 (Outstanding Loans/GDP and Outstanding Loans/Total Credit)
Source: Annual reports of the respective banks, IIF and Central Banks of the respective countries. Produced by BNDESKDB: Korea Development Bank; CDB: China Development Bank; KfW: KfW Bankengruppe (Germany).
BNDES: the same relative size, but Brazil´s credit market appears to be limited
7.4
11.3 12.415.5
4.6
21.0
8.0
12.7
KDB BNDES CDB KfW
Outstanding Loans/GDP Outstanding Loans/Total Credit
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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
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Infrastructure Division Portfolio of projects
Projects status: disbursing and under analysisSector
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
Terminals and Warehouses 13 517,986 736,449
Others 4 36,742 41,619
Subtotal 103 47,507,559 99,943,280
TOTAL 342 154,260,528 283,729,487
Electric Power Industry
Transportation and Logistics
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Infrastructure Division Annual Disbursement
37 9
16 1519
2528
3340
4450
0
10
20
30
40
50
60
0
10
20
30
40
50
60
2006 2008 2010 2012 2014E 2016E
Energy Power Industry
Transportation andLogistics 2
68
1312
14
1719
02468101214161820
0
4
8
12
16
20
2006 2007 2008 2009 2010 2011 2012 2013
GenerationTransmissionDistribution
1 1 1
3 3
5
7
9
012345678910
0
2
4
6
8
10
2006 2007 2008 2009 2010 2011 2012 2013
RailroadsToll roadsPortsAirportsOthers
Transportation and Logistics Breakdown
Eletric Power Industry Breakdown
Forecast
Infrastructure Division Performance
34% p.a
40% p.a
R$ billion
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Infrastructure Division Approvals between 2003 and 1st semester of 2013
Sector Installed CapacityNumber of Projects
BNDES Credit Line R$ 000
Total Investment R$ 000
Highways 5,064 km 40 14,792,293 26,635,253
Railways2,237 km, 15,212 wagons
and 227 locomotives28 14,096,989 30,211,077
Ports, Terminals and Warehouses
107,429,148 tons/annum 48 7,547,282 15,101,869
Airports 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
TOTAL 158 44,466,431 91,769,525
Transportation and Logistics
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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
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Logistics Investment Program Highways (1/2)
A snapshot of the brazilian road network
31%
69%
FederalStates10,680 km
4,774 km
Private Roads
0
10
20
30
40
50
60
0,000
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Private Roads (Km)
Concessionaires
PIL will increase the current network toll road by near 50%
• 9 road stretches
• Totaling 7,000 km
• Estimated investment US$ 23 bn
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Logistics Investment Program Highways (2/2)
• 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.
Main Regulatory Aspects
Road Concession Auctioned (2013)
Next AuctionsStretch Tariff
discount Bidders Km CAPEX(US$ bn)
BR-050 (GO/MG) 42,4% 8 436.6 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
Total 4,248.0 14.25
Stretch 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
Ongoing feasibility studies
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Logistics Investment Program Railroads (1/2)
Current railroad network
182 203 221 232 258 271 244278 291 298
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
billion tonne-km
11,738
10,283
4,207
1,674
412
ALL (4 stretches)
Vale (4 stretches)
Transnordestina
MRS
Others (2 stretches)
• 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:
12 Concessionaires (28,314 km) Cargo Volumes
76% iron ore
Logistics Investment Program
(1) the infrastructure manager and
(2) the rolling stock operator
(1) the infrastructure manager and
(2) the rolling stock operator
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Logistics Investment Program Railroads (2/2)
New Regulatory Model: open access
Financing
Valec purchases 100% of the new rail capacity…
Financing
…and sells it to train operators through public tenders
Rail Infrastructure
Manager CargoOwner
►Guarantees the remuneration of the network administration
►Guarantees fair prices for rolling stock operators
Rail RollingStock Operator
The Concessionaire owns the right to exploit the railway.1
2Valec (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.
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Logistics Investment Program Airports (1/2)
• 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
* Before the auction of GRU, BSB, VCP, CNF and Galeão
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
BRASÍLIA (DF) 15.9 4.51 673% 2.8 25
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Logistics Investment Program Airports (2/2)
Concession of the two of the major international airports 1
Investment in Regional Airports - US$ 3.6 billion in 270 regional airports. 2
• Strengthen and restructuring of Brazil's regional aviation network.• Regional airports will be managed through administrative PPP.
Authorization for private airports dedicated exclusively to general aviation. 3
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
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Logistics Investment Program Ports (1/2)
New Port Law (no12,815/13) changed the Regulatory Framework
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.
New law (n.12,815)
Allowance of Authorizations (Private Ports) to Handle Third- Party Cargo
Private ports are now allowed to handle third-party cargo and thus to freely compete against concessionaires of public port terminals.
Obligation to Hire Workers from the Port Labor Management Agency (OGMO)
Only the concessionaires of public port terminals are obliged to hire workers from OGMO.
Renewal of Concession Contracts Signed before 1993
Government plans to re-auction these terminals under the new ports law. There are 94 terminal in this situation, mostly focused on liquid bulk cargo.
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Logistics Investment Program Ports (2/2)
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;
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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
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Financing InfrastructureStimulating bonds issuance
• The size of the loan is calculated taking into account the project’s
capacity of repayment.
• Instalments calculated using the Constant Amortization System
• Debt Service Coverage Ratio (DSCR) ≥ 1.2
• 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.
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Financing InfrastructureGuarantees
Loan Tenure
Pre-Completion
• Debt service account (3 instalments)• Pledge of the SPC’ shares• Pledge of receivables and rights (including any indemnity payment)• Step in rights
• Corporate Guarantee• Bank Guarantee• Equity Support Agreement• Package of insurance
Post-Completion
General Structure
• Operational and Financial Covenants
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Financing Infrastructure Holdings and SPC’s
HoldingHolding
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
SPC 1SPC 1 SPC 2SPC 2 SPC NSPC NBond
Equity
Bond
Equity
Brazilian Infrastructure Bonds and infrastructure investment funds – benefits for non-resident investors: (i)zero Income Tax rate(ii)zero IOF (Financial Operation Tax)
Brazilian Infrastructure Bonds and infrastructure investment funds – benefits for non-resident investors: (i)zero Income Tax rate(ii)zero IOF (Financial Operation Tax)
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Financing InfrastructureLoan conditions
* Limited to DSCR ≥ 1.2
Financial Conditions – Logistics Investment Program
*Sector
Grace Period (up to - years)
Loan Tenure (years)
BNDES Credit*Financial
CostSpread (% p.a)
Toll Roads 5 25 70% 2.0
Airports 20 70% 0.9 + Risk rate
Ports up to 20 65% 2.5
Railroads 5 30 70% 1.0
TJLP 5.0% p.a
6 months after the conclusion of the
project
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Thank you!