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TCU rejects Rumo’s early concession renewal proposal

Jul, 12, 2019 Posted by datamarnews

Week 201929

The Public Prosecutor of the Federal Audit Court (TCU) has requested the rejection of the early renewal of the Malha Paulista rail concession, operated by Rumo, a logistics company controlled by the Cosan group.

According to Valor, prosecutor Júlio Marcelo de Oliveira, who analyzed the case since the end of March, requested the rejection of the extension of the contract for not seeing its advantages to the Brazilian society. He said he would prefer a new railroad bid following the end of the contract, scheduled for December 2029.

The 30-year renewal of the concession, in exchange for investments of about R$7bn, had already been approved by the National Land Transport Agency (ANTT) and the technical area of ​​the TCU, which approved the project in view of some changes in the additive term of the contract.

Now, with the opinion of the prosecutor, the reporter of the case, Minister Augusto Nardes, will prepare his final report – which will not necessarily comply with the opinion of the Public Prosecutor – and forward it to the court.

Despite the setback, the expectation of the federal government, the company, and the market is that the ministers will agree to the renewal, although with some changes in terms, according to sources. Following the release of the negative opinion, Rumo’s shares ended yesterday’s trading session at B3, up 1.24%.

The extension of the Malha Paulista contract is considered strategic by the industry and the government because it is the first request of early renewal of a railway to be analyzed by the TCU. There are four other projects of the kind already qualified by the Council of the Investment Partnership Program (PPI), which would anticipate about R$30bn of investments in the sector, according to the government.

One of the criticisms made by the prosecutor is that ANTT did not consider, in its analysis, the possibility that the investments anticipated in the early renewal would be made even without the extension. He suggests that this be accomplished by means of another concession from Rumo, the Malha Norte – which, together with the Malha Paulista, forms a corridor between Rondonópolis (MT) and the port of Santos (SP).

Rumo affirmed in a statement that they “have met all the legal requirements for renewal” and that investments will bring a 150% increase in road transport capacity, which “will increase the efficiency of the Brazilian agribusiness outflow and the handling of industrial cargo destined, mainly, to the domestic market “.

Source: Valor

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