RIO DE JANEIRO, BRAZIL – Economic-financial rebalancing is a measure provided for in concession contracts to adjust the concessionaire’s revenues to abrupt variations in the pre-established economic conditions.
The impact of the pandemic on economic activity should still weigh on consumers’ pockets with the upward revision in energy and toll tariffs to compensate concessionaires for the drop in demand. The Treasury is feeling the pinch, with the R$1.9 billion (US$350 million) cut in payments for the granting of airport concessions.
The three sectors are currently undergoing a process of economic-financial rebalancing of contracts under discussion with regulatory bodies. Moreover, it is expected that the recovery of the 2020 losses will not be the last stage, since the second wave of the pandemic should lead to new processes concerning 2021.
Airport concessionaires are more advanced: so far, ANAC (National Civil Aviation Agency) has completed the rebalancing of 9 concessions, which were granted discounts in the amount due the government to offset the average 56.4% reduction in passenger flow in 2020.
The only one remaining is Viracopos airport, a more complex process because the concessionaire filed for financial restructuring and the project will be set for a new bidding process. The largest airport in Brazil, Guarulhos received the highest compensation, R$855 million.
In this sector, the greatest impact is for the Treasury, but airport users in Porto Alegre and Florianópolis will also feel the consequences, since ANAC has also authorized an increase in fares.
According to the president of ANEAA (National Association of Airport Management Companies), Dyogo Oliveira, negotiations have solved the problems of 2020, but the discussion will need to be resumed to address the 2021 impacts.
“The movement is still out of pattern,” he says. According to ANAC, in the first quarter, Brazilian airports handled half the number of passengers seen in the same period of 2019.
Economic-financial rebalancing is a measure provided for in concession contracts to adjust the concessionaire’s revenues to abrupt variations in the pre-established economic conditions. In the electricity sector, this issue is addressed by means of extraordinary tariff reviews.
Currently, ANEEL (National Agency of Electric Power) is discussing the methodology to pass on to tariffs the drop in billing in the sector in 2020. In a first moment, distributors were rescued by a loan known as Conta-Covid, launched in June to help companies pay their bills.
This loan is now being paid through the electricity bill. The sector is now debating how to equate the issue in the long term. In addition to the loss in billing, it alleges that it needs to include the increase in defaults and the expense with surplus energy that remained with no one to sell to.
In late 2020, ABRADEE (the association of energy distributors) estimated that the loss would be around R$5 billion. But the association’s president Marcos Madureira says that the calculation must be redone to include the impact of the second wave.
The possibility of an extraordinary review, however, is opposed by IDEC (Brazilian Institute of Consumer Defense), which submitted an opinion to ANEEL challenging the legality of using the mechanism for loss of revenue.
“They argue that the tariff recomposition is based on an expected projected revenue, as if any frustration would necessarily be related to the pandemic,” says USP Law School professor Diogo Coutinho, author of the opinion.
He argues that the electricity sector’s concession model transfers part of the demand risks to concessionaires, which guarantees them greater profit in the event of an explosion in consumption. “When demand increases, they can profit, but if it contracts, to some extent, they must be partly co-responsible.”
Madureira agrees that, “under normal conditions,” the drop in demand should be absorbed by companies. “But these are not normal conditions,” he argues.
The president of ABRADEE says that the sector does not demand the immediate transfer of the revision, to prevent burdening consumers during the crisis. He says the goal is to acknowledge losses in the companies’ assets, so that it can be considered in future tariff reviews.
Not all concessionaires in a sector are entitled to a rebalancing, which is granted only to those that incurred real losses in their revenues.
In the highway sector, for example, concessions with a greater flow of cargo suffered less than those in urban centers, used as commuting routes – such as the two that lost the most traffic in 2020, the Rio-Teresópolis toll road (-16.40%) and Rio-Niterói bridge (-15.61%).
With agribusiness flow, BR-050 (Goiás-Minas Gerais) saw an increase of 5.51% in traffic.
The ANTT (National Agency for Land Transport) proposes that the calculation be based on traffic estimates calculated by an average of the last few years, with a 5% error margin, up or down.
The plan is to pass on to the toll the loss of flow in relation to the lower band, thereby offsetting eventual moments of flow above the projection ceiling.
The agency is trying to dilute the long-term increase in newer contracts to prevent an abrupt impact, but the increase tends to be greater in older contracts. In contracts that are about to expire, such as the Presidente Dutra highway between Rio and São Paulo, compensation for losses will be made in the final account to close the contract.
“The variation in traffic is a concessionaire’s risk, but since the pandemic was so extraordinary, we will transfer part of it to the grantor,” says ANTT’s superintendent of Road Infrastructure André Freire.
The president of ABCR (Brazilian Association of Highway Concessions), Marco Barcellos, says there is still no consensus in the sector about ANTT’s proposal, which is in public hearings until Thursday, May 6th.
However, he says that the recomposition of 2020 losses will not solve the problem, since the sector is also suffering from a drop in traffic in 2021. “We had a recovery scenario at the end of the year, but, with the pandemic resurgence, traffic rates fell again,” he says.
The association estimates the loss to have reached R$1.3 billion between April and June 2020. But it will still take time to determine the real extent of the loss, says Barcellos, which may have permanent consequences, such as a reduction in the flow of passenger vehicles.