Clean Energy: Brazilian Development Bank approves credit of US$200 mi for five wind farms in Brazil's Northeast

The board of directors of the Brazilian Development Bank (BNDES) approved US$200 million in financing for the construction of five wind farms in Brazil's Northeast. The funds will also finance the respective associated transmission systems. The farms will have an installed capacity of 138 MW. 

The projects, both winners of the Alternative Sources Auction in 2010, are part of the Growth Acceleration Program (PAC). The Bank will participate with 67.8% of total investments, US$ 300 million, an amount expected to create 1,800 direct and indirect jobs during construction.

The investments in Brazil’s wind energy sector reached US$ 3 billion last year, of which US$ 2 billion was financed by BNDES. The projects represent an increase of 1,160 MW in Brazil’s energy grid, with 38 wind farms.

The project supported by the BNDES will contribute to reducing greenhouse gas emissions, as well as diversifying Brazil’s energy grid with renewable sources. It will also complement the hydroelectric generation, avoiding the reliance on power plants during periods when water levels are lower, besides the bonus of geographically diversifying farms, spread over six municipalities in two states with different wind regimes. 

INFRASTRUCTURE - Brazilian Infrastructure in Numbers

Brazilian Infrastructure in Numbers

1. Growth in Mapped Investments in Infrastructure 2011-2014

Sectors	US$ Billion			Growth
	06-09	11-14		%	% p.y.
Electric Energy	56	75		34%	6%
Telecommunications	33.5	39		15%	2.8%
Sanitation	14	22		57%	9.4%
Railway	11	32.5		202%	24.7%
Highway Transportation	16	27.5		71%	11.4%
Ports	3	10		225%	26.6%
Infrastructure	133.5	206		54%	9%

Source: BNDES. Perspectiva de Investimentos em Infraestrutura. Visão do Desenvolvimento nº 92. 

http://www.bndes.gov.br/SiteBNDES/export/sites/default/bndes_pt/Galerias/Arquivos/conhecimento/visao/Visao_92.pdf

2. Composition of Brazilian Investment in Infrastructure

Investor	2001	2002	2003	2004	2005	2006	2007	∑ 01-07	∑ 08-11
Public Direct Investment	0.36	0.25	0.08	0.15	0.22	0.29	0.34
Govt. Held Entities	0.73	0.76	0.65	0.61	0.70	0.83	0.72
Private Companies	2.23	1.19	0.88	1.08	1.14	0.99	0.97
Investment/GDP (%)	3.32	2.20	1.61	1.84	2.06	2.11	2.03	2.11	2.18

Source: Brazilian Institute for Applied Economic Research. www.ipea.gov.br

3. Comparing Infrastructure Investments among Developing Countries

                                            CHINA                           INDIA                                BRAZIL

Source: World Bank: Transformation Through Infrastructure. www.worldbank.org

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

INFRASTRUCTURE - An overview about Brazilian regulations about Public Private Partnership (P3)

Public-Private Partnership (P3) in Brazil

Public-Private Partnerships (P3) are a type of public investment in which the Government engages a private party for the rendering of public services

 or the rendering of a service to the State itself, demanding, in any case, a high investment and a horizon of long-term investment amortization. Whereas the Brazilian Constitution sets forth that public services shall be rendered by the State directly or by means of concession to be granted to private entities by means of a public bidding procedure, a P3 contract shall be preceded by a bid to select the concessionaire.

P3s as defined by Federal Law N. 11,079 (P3 Law) were created with the purpose of attracting a post-1996 wave of private investments for projects of high social interest, especially in the infrastructure sector which, under regular conditions, would not be economically feasible or would be assigned to the State action, depending upon very scarce budgetary availabilities. In order to enhance P3‘s economical attractiveness P3 Law allows the consideration by the public partner in addition to fees/tariffs collected from end users, the remuneration to the private partner varying in accordance to the achieved results, the sharing of gains from refinancing with the Government, the transfer of control of the SPE to its lenders for the continuity service, and the pledges from the public partner directly to the SPE’s lenders.

P3’s Modalities

P3 Law provides two modalities of P3 as follows:

• Sponsored Concession - the P3’s purpose is the rendering of a public service by a private partner directly to end users, in which a portion of concessionaire’s remuneration results from fee and/or tariff revenues charged from its users and another portion results from payment subsidiaries paid directly by the Government; and
• Administrative Concession - the P3’s purpose is the rendering of services by the private partner to the Public Administration, as direct or indirect user, to the society in general, or to a community that cannot be individualized or subject to fee and/or tariff collection (e.g., prisons). Accordingly, remuneration is derived solely from governmental payments to the concessionaire.

Guarantees for P3’s Concessionaires

Acknowledging the financial risks assumed by private parties, P3 Law created special guarantees to extend the favorable conditions for developing infrastructure projects in Brazil. In this light, P3 Law establishes that RFP’s must specify guarantees of the consideration by the Government to the private partner among the following: earmarking of revenues, special funds, performance bond, guarantees by international financial or non-Government-held institutions, guarantee fund or State-owned company created for this purpose, or other guarantees provided by law, i.e., the P3 Guarantee Fund  (FGP) created by the Brazilian federal government. All these guarantees mount up to those regularly available in other public contracts and reflect a willingness to overcome traditional impediments to the full satisfaction of the concessionaire credits.

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 

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

INFRASTRUCTURE - Tax benefits for Private Investment in Brazilian Infrastructure Projects

Private Financing of Infrastructure Projects

Aiming private funds to finance new infrastructure projects in key areas such as logistics and mass public transportation, urban mobility, energy, telecommunications, sewage, and irrigation, the Brazilian Government issued new regulations regarding Infrastructure Investment Funds (IIF). In this light, the Brazilian Government offered tax benefits and exemptions  for national and foreign IIF investors and extended these tax incentives to reach debentures issued by Special Purpose Entities (SPE) that are created to carry out infrastructure projects.

The main features of these stimuli package are the following:

• IIF–Debentures
• At least 85% of IIF–Debentures’ net equity must be invested in SPE’s debentures issued by 12.31.2015.
• Exemption of Income Tax for:
• Individuals.
• Foreign corporations, except from tax havens.
• 15% Income Tax for:
• Brazilian corporations.

• IIF–Securities
• At least 90% of IIF–Securities’ net equity must be invested in SPE’s shares, subscription bonds, debentures, convertible debentures, options and other derivative products.
• Exemption of Income Tax:
• Individuals. 
• Foreign corporations.
• 15% Income Tax for:
• Brazilian corporations.

• Debentures
• Issued by SPEs created to carry out infrastructure projects
• Exemption of Income Tax:
• Individuals.
• Foreign corporations, if debentures were subject of public offer.
• 15% Income Tax:
• National corporations.

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. 

AIRPORTS CONCESSION: ANAC discloses authorized companies to submit projects for the concession of top-3 Brazilian airports

AIRPORTS CONCESSION: ANAC discloses authorized companies to submit projects for the concession of top-3 Brazilian airports

ANAC has just disclosed its Rule 1,537/SRE/2011 regarding the authorization for interested companies to submit projects for the concession of top-3 Brazilian airports, accordingly to the RFP.

Find below the link to ANAC Rule 1,537/SRE/2011, containing the authorized companies.

http://www2.anac.gov.br/biblioteca/portarias/2011/PA2011-1537.pdf

For more information, contact me at jaymesilva3@gmail.com

TELECOM - Brazilian Senate passes bill to open cable TV market to phone companies

TELECOM - Brazilian Senate passes bill to open cable TV market to phone companies

On August, 16th, the Brazilian Senate passed a bill (PLC 116/2010) to open the cable TV market to phone companies. It is now waiting for the signature of Brazilian President Dilma Rousseff, who endorses the measure. 

Basically, PLC 116/2010 establishes an entirely new legal framework for Brazil's telecommunication systems, since it modifies and unifies all regulations related to Pay TV (cable TV, MMDS, DTH and TVA). Amongst its top innovations, it is worth mentioning the partial revoke of the Brazilian Cable TV Act, the allowance for telephone companies to operate cable TV, and the establishment of national and regional content quotes to be broadcasted by cable TV carriers.

According to the Brazilian Telecommunication Agency (ANATEL), over 90 million people in Brazil (51,9% of the Brazilian population) distributed to over 465 Municipalities (8,4% of the total Brazilian Municipalities) have access to any sort of Pay TV. Full information available in Portuguese at http://www.anatel.gov.br/Portal/verificaDocumentos/documentoVersionado.asp?numeroPublicacao=251424&documentoPath=251424.pdf&Pub=&URL=/Portal/verificaDocumentos/documento.asp.

For any questions regarding this issue or for legal analysis of the PLC 116/2010 impact on the telecom market in Brazil, please contact me at jaymesilva3@gmail.com