Our partner Diogo Nebias was interviewed by the Painel S.A. column of Folha de S.Paulo in its coverage of the administrative forfeiture proceeding opened by Aneel against Enel's concession in the city of São Paulo and its metropolitan region.
In the published analysis, Diogo highlighted two factors likely to define the pace and outcome of the proceeding: "O processo de caducidade é complexo. Devem ser feitos vários cálculos para indenizar a concessionária dos investimentos feitos e que não serão amortizados. Há grande risco de judicialização, e fazer modelagem de nova licitação também leva tempo." [The forfeiture process is complex. Several calculations must be made to compensate the concessionaire for investments made that will not be amortized. There is a high risk of litigation, and modeling a new tender also takes time.]
The forfeiture rules for public service concession contracts (art. 38 of Law No. 8,987/1995) pose two highly material technical challenges: (i) calculating the indemnity owed to the concessionaire for the unamortized portions of reversible investments, under a contract that expires in 2028; and (ii) structuring a new tender capable of ensuring continuity and quality of service, in an environment marked by foreseeable litigation.
For the market, the practical point is that opening the proceeding immediately prevents early renewal of the concession, but does not bring forward an immediate replacement of the operator.
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