Bahia Outfall PPP

active

In December 2006, a consortium led by Odebrecht SA [Brazil, 100%] signed an 18 year BOT contract by Embassa, the Bahia state water company, to construct and operate a 5.1km discharge pipeline, which was to extend 1.5km underground and 3.6km into the sea in the beach suburb of Jaguaribe in Bahia state. The sewerage collection and treatment was to serve a population of approximately 1.1 million. The project was awarded in December 2006 through a competitive tender by offering the lowest amount of fixed payments. Odebrecht Investments made an initial bid of 4.29mn reais (US$1.97mn) for the monthly fees, and then lowered that proposal to 4.15mn reais - the lowest bid Embassa received. A rival consortium formed by Carioca Chistiani-Nielsen and Andrade Gutierrez presented a 5.3mn-real bid. In January 2007, the project was renegotiated by a new government in the state of Bahia citing concerns over Odebrecht’s rate of return and environmental hazards of the outfall. At the end of negotiations, Odebrecht conceded a 20% reduction in monthly payments. The total cost of the project was estimated at 240 million reais (US $131 million). The project reached financial closure in October 2008, when a PPP contract was signed between the federal government and Odebrecht SA which included a credit covering 70% of the project cost (172 million reais) with recourse to the Fundo de Garantia por Tempo de Serviço or federal workers unemployment insurance fund (FGTS). The remaining 30% was to be financed by Odebrecht SA. Monthly payments to Odebrecht were guaranteed by Embassa, which earmarked a portion of its revenues for the consortium. Operations commenced in May 2011. Figures converted based on the market rate, period average for 2008 published by the IMF.