Public-Private Partnership Stories Brazil: Galeão and Confins Airports Photo © Igor Pereira Santorsula Brazil’s second round of airport concessions will increase operational efficiency, improve the level of service to international standards, and expand the infrastruc- ture capacity of two major Brazilian airports: Galeão and Confins, located in Rio de Janeiro and Belo Horizonte, respectively. The Galeão airport transaction closed on April 2, 2014, followed by the Confins transaction, which closed on April 7, 2014. The consortium Aeroportos do Futuro, composed of Odebrecht and Changi Airport Group, was awarded the Galeão airport. For Confins, the concession was awarded to the Aerobrasil consortium, composed of CCR/SA and Flughafen Zurich AG. This series provides an overview of public-private partnership stories in various infrastructure sectors, The Brazilian Private Sector Partnership Program, a partnership between IFC, the where IFC was the lead advisor. Brazilian Development Bank (BNDES), and the Inter-American Development Bank IFC Advisory Services in Public-Private Partnerships (IDB), together with Estruturadora Brasileira de Projetos (EBP), a company established 2121 Pennsylvania Ave. NW Washington D.C. 20433 by the major banks in Brazil and BNDES, provided support for the advisory work. ifc.org/ppp BACKGROUND as Azul and GOL have already begun to develop secondary hub With the aim of introducing private efficiency in the operation of operations at the airport. its airports, the Federal Government of Brazil launched a tender The Confins project was structured as a 30-year concession, for the São Gonçalo do Amarante airport (ASGA) in 2011. This through which the operation and management of assets is project was part of a pilot which laid the groundwork for future transferred to the concessionaire. The concessionaire has the concessions of major Brazilian airports. responsibility to provide all the necessary investments, including The first round of airport concessions took place in late 2011 civil works, to meet growing demand. The construction of a when the government launched the tender three major airports: second independent runway (to be completed before either Guarulhos (São Paulo), Viracopos (Campinas), and Brasília. reaching 198,000 passenger movements per year or December 31, 2020) is required in the concession agreement. Following this successful concessions, in mid-2012, BNDES approached IFC to assist with the second round of airport Both concessionaires will be remunerated on the basis of a fixed concessions, which would comprise the Galeão and Confins and a variable concession fee. The fixed fee was set as part of airports, in cooperation with Estruturadora Brasileira de Projetos the bid criteria (the highest concession fee), and the variable fee (EBP). corresponds to five percent of the concessionaire’s total annual gross revenue. IFC’S ROLE The National Aviation Secretary (SAC) authorized EBP to develop the BIDDING financial, engineering, and environmental studies necessary for the Both projects were auctioned at the Bovespa Stock Exchange. Five two airport projects. In order to undertake these activities, EBP and consortiums submitted a total of eight proposals. IFC signed a Cooperation Agreement. Galeão airport was awarded to the Aeroportos do Futuro TRANSACTION STRUCTURE consortium, composed of Odebrecht, a leading Brazilian engineering and construction company, and Changi Airport Galeão Group, the operator of the Singapore Changi Airport. They Galeão International Airport is located in the southeast region of are expected to invest $2 billion over the life of the concession. Brazil; the airport supports business and tourism activity in Rio The Confins airport was awarded to the Aerobrasil consortium, de Janeiro and serves as a major air transportation hub for the composed by CCR/SA, a large Brazilian engineering and country and region. The airport is: construction company. and Flughafen Zurich AG, the operator of • strategically located for domestic services and the domestic hub for the Zurich Airport (Switzerland). They are expected to invest over GOL and TAM airlines; $1.2 billion over the life of the concession. • the primary commercial airport in the Rio de Janeiro area, the second The winning bid for Galeão was $7.9 billion and for Confins $750 busiest in Brazil, and the fourth busiest in Latin America; million. This was 252 percent higher than the minimum required bid • an international gateway with a large origin and destination passenger for both airports. base and a strong inbound visitor market. The Galeão project was structured as a 25-year concession, EXPECTD POST-TENDER RESULTS through which the operation and management of assets is • Over $3.2 billion in investments is expected to be transferred to the concessionaire. The concessionaire is responsible for providing all necessary investments, including civil works, mobilized for both airports. to meet growing demand. The construction of an independent • 42 million people are expected to receive improved 10/28 runway system (to be completed before reaching 262,900 access to services. passenger movements per year) is required in the concession • Both winning bidders are qualified and experi- agreement. enced airport operators. • The Galeão airport winning bid, submitted by Confins Tancredo Neves International Airport, also known as Confins Aeroportos do Futuro, was the highest bid to date International Airport, is located in the municipalities of Confins in the airport concessions process. and Lagoa Santa, 41 kilometers from downtown Belo Horizonte. The airport is the main commercial airport in the Belo Horizonte 05/2014 metropolitan region, the capital and largest city in the state of Minas Gerais with a population of approximately six million people. The airport serves as a domestic hub connecting with population areas in the northeast and southwest. Airlines such