Singapore Changi, Odebrecht to Buy Rio Airport for $8.3 Billion

Brazil sold the country’s second-busiest airport for almost four times the minimum bid as part of

President Dilma Rousseff’s program to modernize infrastructure

and shore up investor confidence.

Odebrecht SA and its partner, a Changi Airport Group unit,

offered 19 billion reais ($8.3 billion) to run Galeao airport in

Rio de Janeiro, which will host tourists for the soccer World

Cup next year and the 2016 Olympic Games, for 25 years. That

compares with the minimum required bid of 4.83 billion reais.

The contract is expected to be signed in March, Changi Airports

International said in an e-mailed statement today.

The real surged as the auction showed Rousseff can attract

investors to her 212 billion-reais plan for improving roads,

railways, ports and other infrastructure even as growth in Latin

America’s largest economy slows. The government is under

pressure to complete the projects as the country prepares to

welcome a projected 600,000 international visitors for the World

Cup in June.

“Those pessimistic about Brazil will have a bitter day

today,” Rousseff said yesterday in a speech in the northeastern

city of Fortaleza. The airport auction “didn’t go wrong.”

The real rose as the premium on Galeao airport boosted

speculation more dollars will flow into Brazil, according to

Pablo Spyer, a director at Mirae Asset Management in Sao Paulo.

The currency advanced 1.1 percent to 2.2794 against the dollar

yesterday.

Best Quality

“The Latin American aviation market presents many growth

opportunities,” Lee Seow Hiang, chief executive officer of
Singapore’s Changi Airport Group, said in the statement. “We

must focus immediately on the expansion of the Galeao airport.”

The first phase of the airfield’s expansion will include

building an additional 26 airbridges and parking lots by April

2016, according to the statement. The airport will be able to

handle more than 60 million passengers annually by end of the

concession period, it said.

Singapore’s air transport system is ranked first for

quality in the World Economic Forum’s latest Global

Competitiveness Report, based on a survey of more than 13,000

business leaders. Brazil’s system, by contrast, ranks 123rd on

the list of 148 countries.

Changi is building a fourth terminal to raise its capacity

to 82 million passengers a year by 2017. It was ranked the

world’s best airport by Skytrax earlier this year. The airfield

was the 13th-busiest in the first eight months of 2013,

according to the Airports Council International in Montreal.

Three Airports

Last year, Brazil sold licenses for three airports,

including Brasilia and Sao Paulo’s Guarulhos, for a total of

24.5 billion reais. Afterward, the government was criticized for

setting terms that failed to draw the world’s biggest airport

operators, so the terms were redrawn for the auction.

“I don’t think Odebrecht tore up money with their bid,

that’s not for us to say, considering what we bid on Guarulhos

last year,” said Antonio Carlos Mata Pires, vice president of

OAS Investimentos SA, in an interview at the auction. OAS is an

investor in Invepar, which led the group that won Guarulhos last

year with a 16.2 billion-real bid, almost five times the

minimum.

The auction “is a success of Brazilian-style capitalism, a

partnership of government and the private sector,” Adriano Pires, head of the Brazilian Center for Infrastructure in Rio de

Janeiro, said by phone.

Rousseff’s infrastructure drive has suffered a series of

delays and revisions. The government has not yet auctioned any

railway or port concessions, which it originally pledged to do

this year. It has pushed back its high-speed rail project to

connect Rio and Sao Paulo until after presidential elections

next October.

Road Auctions

Earlier this year, the government had to boost the rate of

return for road projects after an initial offer didn’t generate

interest. Still, one of two roads auctioned in September drew no

bids.

The government in October awarded Libra, the country’s

largest oil discovery and first pre-salt field auctioned, to a

group including state-run Petroleo Brasileiro SA (PETR3), Royal Dutch

Shell Plc (RDSA), and Total SA. (FP) The bid involved a 15 billion-reais

signing fee, and Libra requires spending of about 400 billion

reais over 35 years, according to regulator ANP.

Confins Bid

The Aerobrasil group led by CCR SA (CCRO3), including the operators

of Munich’s and Zurich’s airports, yesterday won the right to

operate the Confins airport in Belo Horizonte for 30 years. The

group offered 1.82 billion reais versus a minimum bid of 1.1

billion reais. CCR shares closed 1.3 percent higher yesterday.

The government will auction three highways before year-end,

Finance Minister Guido Mantega told reporters yesterday in

Brasilia. One of those road projects is “risky” in terms of

attracting bidders, according to Jefferson Finch, an analyst

from political risk consultancy Eurasia Group.

“If they can follow this up with three successful highway

auctions, it could really be very helpful in turning the boat of

sentiment away from negative to more positive,” Finch said by

telephone about the airport auction. “It’s going to be an

incremental process, but this is going in the right direction

for Brazil.”

Brazil’s currency has climbed 1.5 percent over the past

five days, its first weekly rally since Oct. 18 and more than

all major currencies tracked by Bloomberg. That follows a 10

percent weakening this year amid speculation the country may be

downgraded by Standard Poor’s.

Negative Outlook

SP in June placed Brazil’s rating on negative outlook,

citing weak growth. Rousseff will end her first term next year

with the slowest four-year expansion of gross domestic product

since 1990, according to the latest central bank survey of

economists.

Brazil’s economy grew 2.7 percent in 2011 and 0.9 percent

in 2012. Analysts surveyed by the central bank forecast 2.5

percent expansion this year and 2.1 percent next year.

Brazil’s state-run management company Infraero will retain

a 49 percent stake in the airports, and the winning bidders will

contribute 5 percent of annual revenue to support the country’s

other airports.

Five groups submitted bidding documents on Nov. 18. Brazil

required bidders for Galeao to have experience managing airports

that handle 22 million passengers a year, and for Confins 12

million passengers.

Galeao handled more than 17 million passengers in 2012,

according to the civil aviation agency, known as Anac. Confins

is the fifth-busiest Brazilian airport, handling more than 10

million last year.

Investment in Galeao is expected to reach 5.7 billion

reais, including cargo storage installations in time for the

2016 Olympics, according to Anac. Investment for Confins

includes construction of a new terminal and runway, and will

reach about 3.5 billion reais.

“This not only shows the companies’ interest, because the

winners were large airport companies,” Rousseff said, according

to the presidential palace blog. “It shows the immense interest

of international investors in Brazil.”

To contact the reporters on this story:

David Biller in Rio de Janeiro at

dbiller1@bloomberg.net;

Christiana Sciaudone in Sao Paulo at

csciaudone@bloomberg.net;

Taís Fuoco in Sao Paulo at

tfuoco1@bloomberg.net

To contact the editor responsible for this story:

Andre Soliani at

asoliani@bloomberg.net

Enlarge image

Galeao Airport

Dado Galdieri/Bloomberg

TAM Airlines planes sit on the tarmac at the Galeao International Airport in Rio de Janeiro.

TAM Airlines planes sit on the tarmac at the Galeao International Airport in Rio de Janeiro. Photographer: Dado Galdieri/Bloomberg

Enlarge image

Galeao Control Tower

Dado Galdieri/Bloomberg

A Gol Airlines plane taxis past the control tower at the Galeao International Airport in Rio de Janeiro.

A Gol Airlines plane taxis past the control tower at the Galeao International Airport in Rio de Janeiro. Photographer: Dado Galdieri/Bloomberg

Enlarge image

Galeao Airport

Dado Galdieri/Bloomberg

Passengers wait for their suitcases in a terminal under construction at the Galeao International Airport in Rio de Janeiro on Sept. 3, 2013.

Passengers wait for their suitcases in a terminal under construction at the Galeao International Airport in Rio de Janeiro on Sept. 3, 2013. Photographer: Dado Galdieri/Bloomberg

Singapore Changi, Odebrecht to Buy Rio Airport for $8.3 Billion