UPDATE 1-CCR wins auction for stretch of key Brazilian soy road

Tue Dec 17, 2013 12:26pm EST

By Roberta Vilas Boas

SAO PAULO Dec 17 (Reuters) - Brazilian toll road operator CCR SA on Tuesday won the rights to operate a stretch of highway in the South American country's soy belt, as the government seeks private companies to help improve infrastructure and ease commodities exports.

Six groups bid for rights to the 847-kilometer (526-mile) road, known as BR-163, in Mato Grosso do Sul state. The rights to operate BR-163 are for 30 years and should attract investments of up to 5.69 billion reais ($2.45 billion).

The auction is a sign President Dilma Rousseff's government is finally convincing reluctant private companies to invest in roads, ports and airports, after failing to lure them since taking office in January 2011.

Her government is speeding up environmental licensing, extending more loans and raising estimated rates of return on the projects to lure investments.

The result of this and past auctions "supports our view that, if returns are compelling, they will attract more competitors, and the livelier competition will automatically drive returns down," said Renata Faber, an analyst with Itaú BBA.

BR-163 is the main road link through Brazil's fast-growing farm state of Mato Grosso to ports, which gives it considerable revenue potential. Brazil relies almost entirely on trucks to get some 20 million tonnes of corn and 25 million tonnes of soy to market each year. Heavy trucks make up 60 percent of total traffic on the stretch that was auctioned on Tuesday.

"The road has a very large growth potential," Leonardo Vianna, CCR's director of new business, told reporters. CCR had studied traffic on the highway for three years, he added.

CCR offered a 52.7 percent discount to the maximum toll proposed by the government, handing the São Paulo-based company its first win in four road auctions this year.

CCR's offer was a toll of 0.04381 reais per kilometer, about 15 percent lower than second-ranked Ecorodovias Infraestrutura e Logística SA's bid.

Shares of CCR, which also operates the busiest highway linking Brazil's two most populous cities, São Paulo and Rio de Janeiro, rose 1.7 percent to 17.23 reais on Tuesday afternoon.

ODEBRECHT

According to Itaú BBA's Faber, CCR took advantage of this auction to stretch out the duration of the toll road concessions it operates. Currently, 51 percent of CCR's toll-related revenue comes from contracts that expire before 2022.

The fact that CCR bid aggressively to win the auction also might help mitigate risks of negotiating contract amendments with regulatory agencies in coming years, analysts added.

CCR was part of a group that won the concession for Confins airport outside of Belo Horizonte last month, when Brazil awarded $9 billion worth of contracts to overhaul crowded terminals ahead of the 2014 World Cup and 2016 Olympics.

Vianna said CCR is considering bidding in a Dec. 27 auction for rights to the BR-040 highway in mid-western Brazil.

Another Brazilian company, Grupo Odebrecht SA, beat six competitors with a proposal to exact tolls on a 850-kilometer stretch of the BR-163 in Mato Grosso state on Nov. 27, though it lost out to CCR on Tuesday.

The highway stretches north to Amazon River ports in Para state and could open a long-sought northern export route for the country's farm sector. But even with auctions in Mato Grosso and Mato Grosso do Sul, large stretches of the road leading to the Tapajos and Amazon rivers are unlikely to be paved and remain impassable much of the year.

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