Santa Catarina Island - Northern Access

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The project consists of an access system from Florianopolis to the beaches on the northern region of the Santa Catarina Island. The contract includes the expansion, rehabilitation and maintenance of the existing highway. The expected internal rate on return on the project is 18%. Financing was achieved with the sponsor own resources and a US$ 17 million loan from the Brazilian federal government development bank (BNDES). In Oct. 1997, the project company had to suspend the charging of tolls because it had not completed the required construction works (of the total project costs, the regulatory agency informed us that it estimates only 10% has been invested; the project company argues that 19% has been invested). As of Mar. 1998, the private sponsor was negotiating the terms of the contract and no tolls were being charged. According to the regulatory agency (DER/PR), Engepasa is a small construction company and it has been facing difficulties to arrange financing for the remaining investments; it is expected that Engepasa will transfer part of the shares it owns on the project company in order to raise funds.