Asset Managers plan funds dedicated to tax-free infrastructure bonds.
Brazil’s largest asset-management firms are brewing a product that promises to soon attract individual investors, be them Brazilian or foreign. Infrastructure bond funds, with returns exempt from income taxes, will emerge as a long-term option. They’ll probably have a similar format to real-estate investment trusts, perhaps even hitching a ride on the success of those portfolios. The asset-management firms of the five largest Brazilian banks – Itaú, Bradesco, Banco do Brasil, Caixa and Santander – are preparing to launch their own funds. Other firms, big and medium-sized such as BNP Paribas, Rio Bravo and BRZ, also plan on launching their own.
Regulation is what still separates those funds from clients. A working group created by the Brazilian Financial and Capital Markets Association (Anbima) has been discussing the structure of the new product since December. The group will present a proposal to the Securities and Exchange Commission of Brazil (CVM). “We would like those funds to become viable in the first half of 2013,” says Ricardo Mizukawa, who coordinates the group and chairs Anbima’s Committee on Credit Receivables Investment Funds (FIDCs).
The working group is reporting to three Anbima committees – of FIDCs, fixed-income funds and Equity Investment Funds (FIPs). The idea is making those infrastructure funds hybrids, with characteristics of the three investment categories, together with some aspects of exchange-traded funds (ETFs) and real-estate funds. “It will be a different type of fund from others on the market today, but we’re trying to seek the best practices for each of those tools,” Mr. Mizukawa says.
Law 12,431, approved in 2011, paved the way for the creation of those funds. The reason is that it exempted Brazilian or foreign individual investors from paying income taxes over bonds to finance infrastructure investments considered priority by the government. The tax cut is valid for direct investors in those bonds, but also for those who invest in funds that buy these securities.
The proposal gathering strength at Anbima is of a closed-end fund, as in one that doesn’t allow withdrawals. The reason is that since those bonds will finance long-term projects, such as hydroelectric plants and highways, they must have limited liquidity. The asset manager could face difficulties to sell them quickly, hurting other shareholders. Besides, the portfolio can’t allow too much available cash. To guarantee the tax exemption, the fund must have at least 67% of its assets invested in the bonds for the first two years, then rising to 85% after that. “We’re seeking a design that, given the asset’s liquidity, takes trading activity into consideration, as in real-estate funds,” Mr. Mizukawa says.
Besides the lack of regulation, some asset managers say there still aren’t enough bonds to complete a fund. “It has to do a bit with who comes first: the egg of the chicken. Until demand is created, there won’t be supply,” Mr. Mizukawa says. He thinks the creation of the funds will foster the launch of those bonds. Brazil needs about R$250 billion a year in infrastructure investments, he says. “Even if funds capture a small share of that, say 5%, it would already be more than R$10 billion.” The government will also create a fund, with initial investment of R$7 billion, to pass on subsidized funds to banks to finance those projects.
Joaquim Levy, superintendent director of Bradesco’s asset-management firm, says that not only the traded securities, but 30 other projects authorized by the government already justify creating such a portfolio. “The fund is ready. Once regulatory issues are clarified, it’s just a matter of pushing the button,” Mr. Levy says. The portfolio model created by the asset-management firm is of a closed-end, exchange-traded fund. The executive says it would be interesting if regulation also allowed the fund to be expanded. That way, even after the fund was closed, new bonds could be included and they could receive additional investors.
BB DTVM’s fund is also in advanced stages, according to Carlos Takahashi, the firm’s president. He says investors would be interested in an exchange-traded fund. “If there were a factor that allowed real-estate funds to go well, that’s exactly it,” he says. The asset manager is currently surveying the interest of foreign investors. Despite Brazil having lost a bit of prestige among international investors lately, Mr. Takahashi says there’s still demand for the fund. “Foreign investors are awaiting the arrival of a differentiated product,” the executive says, noting that those investors are currently orphaned from the fat premiums offered by sovereign bonds and the more obvious stocks in the Brazilian market.
The presence of foreign investors would help to boost the market’s liquidity. Mr. Takahashi considers that individual investors will be the big public of these portfolios. Since pension funds already have the tax benefit, exempting returns doesn’t constitute a differential for them. But there’s the possibility of institutional investors also wishing to invest in these funds as a way of taking advantage of the skill shown by asset managers to pick these bonds.
“Our concern today is not with the investor-demand side, but with the asset side. It’s still a small volume in the face of diversification demand,” says Allan Hadid, general director at BRZ. He says only four bonds issued so far are eligible to join those portfolios. The securities were issued by companies Montes Claros, Rio Canoas, Autoban and Concessionária Raposo Tavares (Cart). The asset manager aims to create an infrastructure fund, but is still seeking projects so it can launch its own bonds.
Rio Bravo also wants to originate its own securities for an infrastructure fund. It already has government approval to a tax-exempt bond for renewable energy. “The securities that have been reaching the market have tighter premiums. Our idea is to try and offer something different,” says Rio Bravo asset manager Bruno Margato.
It could be more a desire than concrete prospects, but the fact is that despite the lack of rules and assets, all managers say they expect to have their fund offerings ready still in the first half.
© 2000 – 2012. All rights reserved to Valor Econômico S. A. . Read our terms and conditions on http://www.valor.com.br/international/about-legals/terms-conditions. This material cannot be published, rewritten, redistributed or broadcasted without authorization from Valor Econômico.
Read more:
http://www.valor.com.br/international/news/3030942/asset-managers-plan-funds-dedicated-tax-free-infrastructure-bonds#ixzz2MgY79x7f
3/04/2013
Infrastructure: Brazilian Infrastructure needs $40bn more in investments per year
Following to my most recent essay about funding the development of Brazilian infrastructure through capital markets mechanisms, please take a look on this article published on Valor Economico, one of the most influents Brazilian economic journals:
Infrastructure needs $40bn more in investments per year
Brazil will have to add $40 billion a year in investments in infrastructure projects, and of those, the government expects private-sector banks to provide up to 40%, Luciano Coutinho, president of the Brazilian Development Bank (BNDES), estimated. He and Chief of Staff Gleisi Hoffmann spoke to Valor after participating of the “Brazil Infrastructure Forum 2013” Friday in London, an event organized by Valor.
“The government alone will not be able to provide all of that,” Ms. Hoffmann said. “We want to attract the private sector” to the concession program, she added. Earlier, both had spoken to an audience of more than 300, in an objective and detailed way, about this program, its challenges and the debate over its financing sources.
Today the country invests about $45 billion a year in infrastructure projects, Mr. Coutinho said. And it will have to raise that amount to somewhere between $85 billion and $90 billion if it wants to grow in a sustainable way, task that needs to be shared by state banks, including Banco do Brasil and Caixa Econômica Federal, and by the private sector. BNDES, the sole lender of long-term projects at the moment, is hitting its limit, Mr. Coutinho admitted.
A capital injection in BNDES being discussed with the Ministry of Finance is not likely to happen soon. The National Treasury is expected to inject up to R$8 billion in the bank this year to increase its core capital, following the Basel rules.
For now, Mr. Coutinho said, private-sector banks may use R$15 billion in reserve-requirement deposits at the Central Bank that are not remunerated for infrastructure financing. As these reserves rise, new allowances may be provided for investments. “Banks tell us they want to participate, but together with BNDES. They want to co-finance.”
Foreign investors with whom Mr. Coutinho talked in the last few weeks were very concerned with the foreign-exchange risk of those operations. They fear a sudden currency devaluation may subtract a good share of the investment return. They will have to handle the currency risks, Mr. Coutinho assured. “In these talks, I have been saying that the longer-term trend of the real is to appreciate. Therefore, if there is some sudden depreciation, I recommend them to be calm, not fall into panic, because there may be a fall, but the exchange rate [of the real] will rise again,” he said.
Other aspects that are being studied and discussed refer to insurance and collateral for these financing and works. Mr. Coutinho said the government plans to combine, at the Brazilian Guarantee Agency, assets of three already-existing guarantee funds: For shipbuilders, the power industry and for public-private partnerships. Public guarantees are used in exceptional cases not covered by insurance, such as regulatory surprises, social insurrection in the country or some natural accident, like earthquakes or similar events. “We sent out people to study this,” Mr. Coutinho said, citing Korea’s export insurance as an example to be verified, as are the ones offered by European countries for the construction of high-speed trains.
The government launched an offensive to seek money for investments and adopted a more modest, more humble speech, businesspeople and bank representatives present at the conference in London said. Mr. Coutinho is talking to big pension funds, sovereign funds and, he said, the growing interest both of foreign and national investors in the Brazilian concession program is remarkable.
Ms. Hoffmann considers that Brazil is “starting 2013 with another prospect. Our industrial production is reacting, investments also started to react, and it’s time for us to present the concessions in an open and consistent way to investors. The government is very determined.”
The conference also had the presence of Maurício Tolmasquim, president of the Energy Planning Company (EPE), and Bernardo Figueiredo, president of the Planning and Logistics Company (EPL).
© 2000 – 2012. All rights reserved to Valor Econômico S. A. . Read our terms and conditions on http://www.valor.com.br/international/about-legals/terms-conditions. This material cannot be published, rewritten, redistributed or broadcasted without authorization from Valor Econômico.
Read more:
http://www.valor.com.br/international/news/3028868/infrastructure-needs-40bn-more-investments-year#ixzz2MaVLN7Lo
Infrastructure needs $40bn more in investments per year
Brazil will have to add $40 billion a year in investments in infrastructure projects, and of those, the government expects private-sector banks to provide up to 40%, Luciano Coutinho, president of the Brazilian Development Bank (BNDES), estimated. He and Chief of Staff Gleisi Hoffmann spoke to Valor after participating of the “Brazil Infrastructure Forum 2013” Friday in London, an event organized by Valor.
“The government alone will not be able to provide all of that,” Ms. Hoffmann said. “We want to attract the private sector” to the concession program, she added. Earlier, both had spoken to an audience of more than 300, in an objective and detailed way, about this program, its challenges and the debate over its financing sources.
Today the country invests about $45 billion a year in infrastructure projects, Mr. Coutinho said. And it will have to raise that amount to somewhere between $85 billion and $90 billion if it wants to grow in a sustainable way, task that needs to be shared by state banks, including Banco do Brasil and Caixa Econômica Federal, and by the private sector. BNDES, the sole lender of long-term projects at the moment, is hitting its limit, Mr. Coutinho admitted.
A capital injection in BNDES being discussed with the Ministry of Finance is not likely to happen soon. The National Treasury is expected to inject up to R$8 billion in the bank this year to increase its core capital, following the Basel rules.
For now, Mr. Coutinho said, private-sector banks may use R$15 billion in reserve-requirement deposits at the Central Bank that are not remunerated for infrastructure financing. As these reserves rise, new allowances may be provided for investments. “Banks tell us they want to participate, but together with BNDES. They want to co-finance.”
Foreign investors with whom Mr. Coutinho talked in the last few weeks were very concerned with the foreign-exchange risk of those operations. They fear a sudden currency devaluation may subtract a good share of the investment return. They will have to handle the currency risks, Mr. Coutinho assured. “In these talks, I have been saying that the longer-term trend of the real is to appreciate. Therefore, if there is some sudden depreciation, I recommend them to be calm, not fall into panic, because there may be a fall, but the exchange rate [of the real] will rise again,” he said.
Other aspects that are being studied and discussed refer to insurance and collateral for these financing and works. Mr. Coutinho said the government plans to combine, at the Brazilian Guarantee Agency, assets of three already-existing guarantee funds: For shipbuilders, the power industry and for public-private partnerships. Public guarantees are used in exceptional cases not covered by insurance, such as regulatory surprises, social insurrection in the country or some natural accident, like earthquakes or similar events. “We sent out people to study this,” Mr. Coutinho said, citing Korea’s export insurance as an example to be verified, as are the ones offered by European countries for the construction of high-speed trains.
The government launched an offensive to seek money for investments and adopted a more modest, more humble speech, businesspeople and bank representatives present at the conference in London said. Mr. Coutinho is talking to big pension funds, sovereign funds and, he said, the growing interest both of foreign and national investors in the Brazilian concession program is remarkable.
Ms. Hoffmann considers that Brazil is “starting 2013 with another prospect. Our industrial production is reacting, investments also started to react, and it’s time for us to present the concessions in an open and consistent way to investors. The government is very determined.”
The conference also had the presence of Maurício Tolmasquim, president of the Energy Planning Company (EPE), and Bernardo Figueiredo, president of the Planning and Logistics Company (EPL).
© 2000 – 2012. All rights reserved to Valor Econômico S. A. . Read our terms and conditions on http://www.valor.com.br/international/about-legals/terms-conditions. This material cannot be published, rewritten, redistributed or broadcasted without authorization from Valor Econômico.
Read more:
http://www.valor.com.br/international/news/3028868/infrastructure-needs-40bn-more-investments-year#ixzz2MaVLN7Lo
Infrastructure: New Article
Please check on my new essay about funding infrastructure projects in Brazil via capital markets at
http://www.scribd.com/doc/127643247/Funding-Infrastructure-Through-Capital-Markets-The-Brazilian-Infrastructure-Mutual-Funds
http://www.scribd.com/doc/127643247/Funding-Infrastructure-Through-Capital-Markets-The-Brazilian-Infrastructure-Mutual-Funds
1/22/2013
Concessions: CCR eyes big investments in passenger rail and airport concessions
CCR eyes big investments in passenger rail and airport concessions
While it's studying federal concessions for airports, highways and railroads, CCR – an infrastructure-focused company – started studies to join billion-dollar projects in the area in the state of São Paulo. Controlled by groups Andrade Gutierrez, Camargo Corrêa and Soares Penido, the company already operates state highways and has an ambitious plan for intercity passenger transport using railroads. Those railroads, which will demand almost R$20 billion, connect different municipalities – such as São Paulo and Campinas – and are being closely followed by government officials and industry companies.
The so-called “regional trains” will travel on 430 kilometers of rails to be built and operated through public-private partnerships (PPP). Of the total investment, R$12.5 billion will come from the private sector and R$6 billion from public coffers. Estação da Luz Participações (EDLP), owned by Guilherme Quintella, and its partner BTG Pactual have already expressed interest in the project. The state hasn't published yet an invitation for manifestations of firm interest – something that is expected to happen this week.
In an interview with Valor PRO, the real-time news service of Valor Econômico, CCR CEO Renato Vale said the company is also interested in operating more lines in São Paulo's subway, or Metrô. Especially on lines 6 and 20 – whose tender notices are soon to be published. The company already controls Line 4-Yellow, which has been suffering from overcrowding during rush hour. “Demand in São Paulo is not a problem now,” he said.
Besides the projects in the São Paulo capital, the company is also looking at city transit opportunities in Salvador and Rio de Janeiro. “There's a lot in infrastructure, which, if it happens, will cause a demand challenge. There will be a lot of demand for energy, concrete, steel, asphalt, people … But we think that's the way to go,” he said.
CCR also has already started to prepare for huge contracts for federal airport concessions. Among them are the Galeão (Rio de Janeiro) and Confins (Minas Gerais) international airports, which had their concessions recently announced by President Dilma Rousseff and demand a total investment of R$11.4 billion. “We're studying both,” the executive said.
The company is seeking an international partner, since Swiss partner Flughafen Zürich, which joined the Brazilian firm in the last round of airport concessions, isn't qualified enough to compete in the next auction – according to new demands announced by the government, it doesn't handle the minimum number of passenger a year that Brasília is requesting. Mr. Vale said the company is not allowed to be the sole operator of the consortium, but it still can be a partner. “We're seeking [other] partners, with advanced talks,” he said.
The company is also dedicating its attention to nine federal auctions slated to take place this year in the highway sector – and demanding a total investment of R$42 billion, with R$23.5 billion in the first five years of the contract. CCR's own studies about the first two roads to be auctioned, BRs (federal highways) 040 and 116, will be finished next week. “We'll look at all. For now, we're alone but open to partnerships,” he said.
Despite all the abundance of opportunities, Mr. Vale said there's enough available capital for all investments. And that acquisitions are not ruled out. “In logistics, we have been trying for three or four years to identify a clear opportunity in that sense. We still haven't identified, but infrastructure is like that, it's a long-term business,” he said.
Considering only the current business, earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to double by 2016 – to a number between R$5.5 billion and R$6.5 billion. Investments are expected to continue above R$1 billion a year, taking into consideration investments for the Transolímpica transportation concession in Rio and the purchase of 15 trains for the São Paulo subway line controlled by the company.
Source: Valor Economico
See more at http://www.valor.com.br/international/news/2978468/ccr-eyes-big-investments-passenger-rail-and-airport-concessions#ixzz2IkP2fC9Y
While it's studying federal concessions for airports, highways and railroads, CCR – an infrastructure-focused company – started studies to join billion-dollar projects in the area in the state of São Paulo. Controlled by groups Andrade Gutierrez, Camargo Corrêa and Soares Penido, the company already operates state highways and has an ambitious plan for intercity passenger transport using railroads. Those railroads, which will demand almost R$20 billion, connect different municipalities – such as São Paulo and Campinas – and are being closely followed by government officials and industry companies.
The so-called “regional trains” will travel on 430 kilometers of rails to be built and operated through public-private partnerships (PPP). Of the total investment, R$12.5 billion will come from the private sector and R$6 billion from public coffers. Estação da Luz Participações (EDLP), owned by Guilherme Quintella, and its partner BTG Pactual have already expressed interest in the project. The state hasn't published yet an invitation for manifestations of firm interest – something that is expected to happen this week.
In an interview with Valor PRO, the real-time news service of Valor Econômico, CCR CEO Renato Vale said the company is also interested in operating more lines in São Paulo's subway, or Metrô. Especially on lines 6 and 20 – whose tender notices are soon to be published. The company already controls Line 4-Yellow, which has been suffering from overcrowding during rush hour. “Demand in São Paulo is not a problem now,” he said.
Besides the projects in the São Paulo capital, the company is also looking at city transit opportunities in Salvador and Rio de Janeiro. “There's a lot in infrastructure, which, if it happens, will cause a demand challenge. There will be a lot of demand for energy, concrete, steel, asphalt, people … But we think that's the way to go,” he said.
CCR also has already started to prepare for huge contracts for federal airport concessions. Among them are the Galeão (Rio de Janeiro) and Confins (Minas Gerais) international airports, which had their concessions recently announced by President Dilma Rousseff and demand a total investment of R$11.4 billion. “We're studying both,” the executive said.
The company is seeking an international partner, since Swiss partner Flughafen Zürich, which joined the Brazilian firm in the last round of airport concessions, isn't qualified enough to compete in the next auction – according to new demands announced by the government, it doesn't handle the minimum number of passenger a year that Brasília is requesting. Mr. Vale said the company is not allowed to be the sole operator of the consortium, but it still can be a partner. “We're seeking [other] partners, with advanced talks,” he said.
The company is also dedicating its attention to nine federal auctions slated to take place this year in the highway sector – and demanding a total investment of R$42 billion, with R$23.5 billion in the first five years of the contract. CCR's own studies about the first two roads to be auctioned, BRs (federal highways) 040 and 116, will be finished next week. “We'll look at all. For now, we're alone but open to partnerships,” he said.
Despite all the abundance of opportunities, Mr. Vale said there's enough available capital for all investments. And that acquisitions are not ruled out. “In logistics, we have been trying for three or four years to identify a clear opportunity in that sense. We still haven't identified, but infrastructure is like that, it's a long-term business,” he said.
Considering only the current business, earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to double by 2016 – to a number between R$5.5 billion and R$6.5 billion. Investments are expected to continue above R$1 billion a year, taking into consideration investments for the Transolímpica transportation concession in Rio and the purchase of 15 trains for the São Paulo subway line controlled by the company.
Source: Valor Economico
See more at http://www.valor.com.br/international/news/2978468/ccr-eyes-big-investments-passenger-rail-and-airport-concessions#ixzz2IkP2fC9Y
10/04/2012
New Article: The Brazilian High Speed Rail Program
Please check out my new article about private investments in transport infrastructure in Brazil, published today in TFI-News.
http://www.tfi-news.com/news/item/?n=16080
This is the second out of four articles I'll be authoring about private investments the Brazilian transport infrastructure to be published in TFI-News. In my first article, I had the opportunity to discuss the newly Brazilian Program for Investments in Logistics (PIL) and road concessions in Brazil.
In this second article, I bring valuable information about the Brazilian High-Speed Rail (HSR) Program for international players of the rail industry in order to assist them in their decision-making process. All information contained in this article was extracted from official documents publicly available. Due to space limitations, this material entails just the most relevant data and information unveiled by Brazilian regulators. A deeper legal study about HSR regulations in Brazil; public procurement and/or auction procedures will be available upon request.
The third and forth articles will address respectively airports and ports concessions in Brazil and the opportunities these concessions bring along to foreign investors. These are expected to be published in November and December, 2012.
I hope you all enjoy reading my materials.
Kind regards,
Mauricio Jayme e Silva
http://www.tfi-news.com/news/item/?n=16080
This is the second out of four articles I'll be authoring about private investments the Brazilian transport infrastructure to be published in TFI-News. In my first article, I had the opportunity to discuss the newly Brazilian Program for Investments in Logistics (PIL) and road concessions in Brazil.
In this second article, I bring valuable information about the Brazilian High-Speed Rail (HSR) Program for international players of the rail industry in order to assist them in their decision-making process. All information contained in this article was extracted from official documents publicly available. Due to space limitations, this material entails just the most relevant data and information unveiled by Brazilian regulators. A deeper legal study about HSR regulations in Brazil; public procurement and/or auction procedures will be available upon request.
The third and forth articles will address respectively airports and ports concessions in Brazil and the opportunities these concessions bring along to foreign investors. These are expected to be published in November and December, 2012.
I hope you all enjoy reading my materials.
Kind regards,
Mauricio Jayme e Silva
9/11/2012
Academics: Link to my dissertation
Please follow the link below to my dissertation presented at Universidade de Sao Paulo Law School to obtain my Master's degree.
http://www.scribd.com/doc/67522307/dissertacao-mestrado
http://www.scribd.com/doc/67522307/dissertacao-mestrado
9/03/2012
New Article: Brazilian Infrastructure: Challenges & Opportunities for International Investors
Check out my new article "Brazilian Infrastructure: Challenges & Opportunities for International Investors" published by TFI-News at
http://www.tfi-news.com/news/item/?n=15892
Here is more information about TFI-News.
TFI-News is owned by UK based MarketMaker Media which is a news and events provider within the project and infrastructure finance sector and was launched in early 2009.
http://www.tfi-news.com/news/item/?n=15892
Here is more information about TFI-News.
TFI-News is owned by UK based MarketMaker Media which is a news and events provider within the project and infrastructure finance sector and was launched in early 2009.
The company was formed by Paul Haley who has over ten years of experience within the project finance industry. After gaining a BA (Hons) in economics from Manchester Metropolitan University Paul's first role within the project finance industry was developing the International Project Finance Association (IPFA) which was launched in 1998 and was managing director up to 2003. At IPFA Paul developed the association into a large member supported organisation which represented the industry on major issues such as Basel II and pushed for contract standardization within the emerging PPP industry.
Paul then co-founded one of the first online infrastructure finance news providers, Infra-News and P3-Americas, which he built up into an international news, events and media company. Paul was joint managing director and oversaw the development of a number of international conferences which became regular annual industry "must attend" events including the European Infrastructure Finance Forum and the US PPP Infrastructure Finance Forum which were attended by over 300 people each year. The news websites became one of the leading providers of accurate and timely news on global PPP and infrastructure acquisitions.After leaving Infra-News, in early 2009 Paul launched TFI-News to profile key P3 transactions and dealmakers within the global privately financed transportation sectors. Taking an innovative approach, TFI-News is the first infrastructure news provider to deliver its content through video and conduct interviews on camera publishing video interviews online - P3TV. As media platforms and modes of delivering content develop and merge, video interviewing is at the forefront of media publishing.
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