Our partner Diogo Nebias spoke to O Globo about how to structure funding for the new generation of railway concessions, a cycle that could total R$ 127.1 billion in investment.
Railways do not pay for themselves commercially at the outset: they are capital-intensive (the cost per kilometer can exceed R$ 20 million) and take a long time to mature. That is why no single source is enough. The article maps a mix: long-term BNDES credit, Viability Gap Funding instruments under the new National Railway Concessions Policy, incentivized debentures in record volume and, on the front Diogo highlights, external financing.
In practice:
- Foreign-currency financing, through bond issues or debt with multilaterals such as the IDB and IFC (the World Bank's arm), is an alternative to the domestic mix.
- This route fits above all operators that transport commodities, whose freight is priced in dollars.
- Dollar-indexed revenue works as a natural hedge for dollar-denominated debt, reducing exposure to exchange-rate fluctuations.
As Diogo Nebias sums up: "Esses organismos multilaterais são alternativas para operadores que transportam commodities, com preços atrelados ao dólar, o que reduz a exposição à variação cambial, ou seja, há receita em reais atrelada ao dólar versus pagamento da dívida em dólar." [These multilateral organizations are alternatives for operators that transport commodities priced in dollars, which reduces exposure to exchange-rate fluctuations; in other words, there is revenue in reais linked to the dollar versus debt payments in dollars.] Matching the currency of revenue with that of debt is no longer a detail and becomes part of the project's bankability analysis.
O Globo article: https://lnkd.in/ejXFhgWj
