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PPP and Irrigation in BrazilPPP and Irrigation in BrazilFebruary, 2009
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Region Area (Km2)
Valley of São Francisco River
640,000
Valley of Parnaíba River
330,000
Northeast Region 1,561,000
Brazil 8,500,000
Codevasf Region 970,000
% Brazil 11.4%
CodevasfCodevasf HighlightsHighlights
140,000 irrigated hectares are in Public Projects
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Why PPP in the
Irrigation Sector in Brazil?
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“The results of public investments in irrigation in Brazil are mixed, while private sector investment in irrigation linked to agro-industrial development has
been very successful…”
o Public Irrigation Projects are still not self-sustainable
o Significant amount of their lands are idled
o O&M service is ineffective and intermittent
o Small farmers frequently face insolvency
StatedStated--Owned Irrigation Projects Owned Irrigation Projects TodayToday
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Brazil has vast experience with PPI - Private Participation in Infrastructure and in the provision of services to the public and to the Government
– Involved sectors such as steel, petrochemicals, power, telecommunications, highways, railroads, gas, and water supply
Stable legal and institutional framework– Constitutional Amendments– National Plan on Privatizations– Standards on concessions contracts and bidding procedures– Sector specific Acts, which creates the respective regulatory agencies, and
establishes standards under which they operate
Variety of contract arrangements– Divestitures/assets sales, BOT, DFBOT, Concessions, joint ventures (with
public and private participation), franchises etc.
Brazilian BackgroundBrazilian Background
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Pilot Project PONTAL
and PPP Irrigation
Projects Pipeline
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11
1. Pontal Project: the Greenfield Projectthe Greenfield Project
Adviser: IFC
Auction (foreseen): June, 2009
Location: City of Petrolina, in the semi-arid region of Brazil’s Northeast region, largest irrigation cluster of Brazil (São Francisco River Valley)
Land: Total area of 33.526 hectares, out of which 7.717 can be irrigated. The remaining land is composed by set-aside area and dry areas
PPP Irrigation Projects PipelinePPP Irrigation Projects Pipeline
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PontalPontal: : InfrastrutureInfrastruture
Already concluded by the Government: US$ 105 MM
To be concluded by the private partner: US$ 40 MM
(*) US$ 1.00 = R$ 2.25
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Pontal: Possibility of phasing implementationPontal: Possibility of phasing implementation
# hecSouth Pontal A
1542 hec
South Pontal B
2046 hec
South PontalNorth Pontal 20
3116 hec
North Pontal 23
1016 hec
North Pontal
Blue Red and Yellow Green
São
Fran
cisc
o R
iver
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PontalPontal: Contractual arrangements: Contractual arrangements
• Private Sector Responsibilities include (i) construction, operation and maintenance of the common irrigation infrastructure, (ii) management of settlement and (iii) development of the agriculture activity
• Government Payment will occur when the concessionaire achieves certain important goals, such as water availability and occupation of the land
• Water tariff: can be charged upon water availability
Brazilian Government
(Integration Department)
Special Purpose Company
(SPC)
PPP Contract
Companies or medium and big
size farmers
Strategic Investor (& other shareholders )
Collateral
FGP-PPP
Small farmers
EPC O&M
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PontalPontal: Concession Contract main features: Concession Contract main features
Concession Term: 25 years
Land: Transferred to the private partner with no cost
Government payment: max. of US$ 84US$ 84 MMMM over the Concession Term – according to Winner Bidder Proposal
Price adjustment index: TariffsTariffs and Government Government Reimbursement PaymentReimbursement Payment will be adjusted in an yearly basis, according to the Brazilian CPI (IPCA)
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PontalPontal: Government payment rationale: Government payment rationale
10%Payment for asset
availability
Unique tranche
40%Payment for settlement
Monthly tranches over 5
years
50%Payment
according to performance
Monthly tranches until the end of the
concession
Payments are done according to the number of hectares which are occupied in each area
(every 100 hectares)
Area MultipleGovernment payment
(R$ million) HectaresGovernment payment per
hectareSouth Pontal A 1.70% 3.213 1542 0.002South Pontal B 15% 28.35 2046 0.014North Pontal 20 43.50% 82.215 3116 0.026North Pontal 23 39.80% 75.222 1016 0.074TOTAL 100% 189 7720
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Final Adjustments
Tender Documents Release
Concession Contract Delivery
LicitationPrePre--QualQual
Analysis of Proposals (financial and technical)Analysis of Proposals (financial and technical)
Auction (Only the Financial Proposal) Auction (Only the Financial Proposal)
PontalPontal: Bidding Process Schedule: Bidding Process Schedule
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The PPP contract will establish as the main objective of the private partner the occupation of the land with irrigated crops
o The choice of the crops are of the private partner
o The private partner will have to submitt an occupation plan during the bidding procedure which should be approved by the Government
o The private partner should use local small farmers to develop a portion (25% in the pilot project) of the land of the project
When the project requires high investments in the infrastructure, the Government is willing to pay to the private partner
Although Government payments are to compensate for the infrastructure implementation, payments are done according to the compliance of land development:
o occupation standards and
o implementation of agriculture activities (which require previous infrastructure investment)
Brazilian Irrigation PPP Guidelines Brazilian Irrigation PPP Guidelines
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222
2. Baixio de Irecê Project:
Adviser: World Bank
Auction (foreseen): December, 2009 till June, 2010
Location: City of Irecê, in the semi-arid region of Brazil’s Northeast region (São Francisco River Valley)
Land: Total area of 107,000 hectares, out of which 59,000 can be irrigated. The remaining land is composed by set-aside area and dry areas
PPP Irrigation Projects PipelinePPP Irrigation Projects Pipeline
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Baixio de Irecê Project Baixio de Irecê Project
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333
3. Salitre Project:
Adviser: BNDES
Auction (foreseen): January till June, 2010
Location: City of Juazeiro, in the semi-arid region of Brazil’s Northeast region, largest irrigation cluster of Brazil (São Francisco River Valley)
Land: Total area of 67,000 hectares, out of which 32,000 can be irrigated. The remaining land is composed by set-aside area and dry areas
PPP Irrigation Projects PipelinePPP Irrigation Projects Pipeline
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SALITRE IRRIGATION PROJECTSALITRE IRRIGATION PROJECT
R io São Francisco
BA-210
BA-2
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JUA
ZEIR
O
CP-5
00
CP-400
Riacho Sacrabetó
RioSalitre
Canal de Aproximação
CP-200
SaquinhoLagoa do
RC-500
EB-4 00
EB-300
EB-200
EB-100
EB-3 90
CS -4
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CANTEIRODE OBRAS
EB-50 0
CP-300
CP -100
CS-390
SHPe 101
SHPe 230
SHPe 102
SHPe 210
SHPe 235
SHPe 301.10
SHPe 310.10
SHPpp 390.10
SHPpp 410.10
SHPe 410.50
SHPe 505
SHPpp 220
SHPpp 301.20
SHPpp 390.30
SHPe 390.40
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444
4. Sertão Pernambucano Channel Project:
Adviser: BNDES
Auction (foreseen): January till June, 2010
Location: Many Cities in Pernambuco State, (São Francisco River Valley)
Land: Total area of 155,500 hectares, out of which 110,000 can be irrigated. The remaining land is composed by set-aside area and dry areas
PPP Irrigation Projects PipelinePPP Irrigation Projects Pipeline
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ReservatReservatóório rio SobradinhoSobradinho
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THANK YOU
Clementino de Souza CoêlhoInfrastructure Director
Codevasf
55 (61) 3312-4628
