INFRASTRUCTURE - Public Financing in Brazil - An overview about BNDES

Public Financing of Infrastructure Projects - The Brazilian Development Bank - BNDES
The Brazilian Development Bank (BNDES) is the main financial support vehicle in Brazil for investments in all economic sectors. In terms of investment in infrastructure the role played by BNDES is even more significant since all long-term financial structures for infrastructure-related projects are backed up by BNDES.
The two most import BNDES financial mechanisms for infrastructure projects are Financing and Securities’ Subscription.
  • Financing
    • BNDES may finance investment projects, isolated acquisition of new machinery and equipment, export of machinery, Brazilian equipment and services, and acquisitions of goods and production inputs. Financing modalities are divided into products, according to the aim of the undertaking. The infrastructure-related products are the following:
      • BNDES Finem: Minimum of R$10 million (≈ US$6 million) financing for carry-out, expansion or modernization of infrastructure projects related to: electric energy, alternative-source energy, oil & natural gas, logistics, and telecommunications.
      • BNDES Project Finance: earmarked for financial structuring of investment projects and contractually supported by the cash flow of the projects.
        • General Requirements:
          • Borrower must be a Special Purpose Entity (SPE) created specifically to carry out the project.
          • Expected cash flow must cover the loans.
          • Revenues must be earmarked or conceded to the lenders.
          • Yearly-Projected DSCR
          •  of the project’s operational stage must be at least 1.3. It may be 1.2 if IRR
          •  = 8% per year minimum.
          • Shareholder’s own capital = 20% of the total investment.
          • Operational agreement must forbid loans among SPE and shareholders, and regulate financial operations among SPE and shareholders.
  • Securities’ Subscription:
    • BNDES may participate as a subscriber of securities – i.e., shares, debentures, convertible debentures, subscription bonds, options and other derivatives products, in addition to participation in asset-backed (receivables) investment funds (FIDC) – in publicly-listed companies, in public or private issuances, or in companies that may join the capitals market in the short or medium term, through a private issuance.
Mauricio Jayme e Silva. Pontíficia Universidade Católica de São Paulo (PUC-SP) Law School (J.D., 2000). Universidade de São Paulo Law School (LL.M., 2011). Visiting Scholar at Columbia Law School (2011-2012). E: mjayme@law.columbia.edu.  P. 201-563-0516. T. @MauricioJayme. B. www.direitoeinfraestrutura.blogspot.com

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