THE FIFTH ANNUAL MEETING OF SENIOR PPP OFFICIALS

Adalberto Santos de Vasconcelos

Secretary for Oversight of Privatization and Regulation

1. Present the Brazilian Court of Audit (TCU):

- Jurisdiction and main activities.

2. Provision of infrastructure:

- Models of private and public sectors participation.

3. Oversight of infrastructure investment:

- TCU strategy;

- Benefits of concomitant control;

- TCU current structure;

- Concessions of Federal Highways.

Agenda

The Brazilian Court of Audit (TCU)

1. Competence:

▪ The Court of Audit (TCU) assists the National Congress in

the control of external administrative matters;

▪ It analyzes aspects related to accounting, financial,

budgetary, performance and of property nature.

2. Composition:

▪ The Court has three collegiate bodies: a plenary and two

chambers;

▪ It is composed by nine ministers and four deputy

ministers;

▪ TCU’s technical secretariats.

The Brazilian Court of Audit (TCU)

1. Jurisdiction:

▪ Any person, agency or entity that manages public money

or money for which the Union is responsible;

▪ Any person that causes loss, misappropriation or other

irregularity that results in damages to the public treasury.

2. Main activities:

▪ Compliance audits;

▪ Performance audits;

▪ Public works audits;

▪ Environmental audits.

Provision of infrastructure

Models of public and private sectors participation

Concession

self-sustainable

Private Investment

essentially

Tariffs

PPP

(non self-sustainable)

Public and private

Investment

Public resources

and tariffs

Budget

Public

Investment

Public

resources

Provision of infrastructure

TCU oversight strategy

Concession

Private

PPP

Public + Private

Budget

Public

Accounts

Accounts

oversight

secretariat

Public

Works

Public

Works

oversight

secretariat

Grant

Regulation and

contract execution

Privatization and regulation oversight

secretariat

Support: Public works oversight

secretariat and environmental

oversight secretariat

Fiscal

impact

Government

evaluation

secretariat

Oversight of infrastructure investments

TCU strategy

Concessions and PPP

Regulation

Grant

Feasibility

Hiring

Contract execution

Performance

TCU Internal Rules (IN): they establish the documents and deadlines for

forwarding them to be analyzed by oversight staff.

- IN 27/1998: General Privatization and Grants.

- IN 43/2002: Periodic Tariff Review of electricity;

- IN 46/2004: Highways concessions;

- IN 52/2007: PPPs.

Oversight of infrastructure investments

TCU strategy

2nd: public notice (5 days after the event)

1st: technical/economic-financial and environment feasibility (60 days before the Public Notice)

3rd: qualification and declaration of bidder stating they have knowledge of all information on the object of the PPP (5 days after each event)

5th: Contract (5 days after the event)

4th: Judgment of bid (5 days after the event)

PPP analysis: main documents and deadlines.

Oversight of infrastructure investments

Benefits of the concurrent control

Concurrent

control:

results in lower costs for the regulatory

process due to timely

performance;

contributes to regulatory stability;

provides tariffs and the amount

of the grant adequacy.

Oversight of infrastructure investments

TCU current structure: oversight of privatization and regulation

Sefid-1

Land Transport

Water Transport

Air Transport

and health

Sefid-2

Electric energy

Oil, Natural Gas and Biofuel

Telecom

2nd Stage of the Program of Concessions of Federal Highways

FEDERAL HIGHWAY CONCESSIONS

FEDERAL HIGHWAY CONCESSIONS

Highways Road section Segment (KM)

BR-153/SP MG/SP Border – SP/PR Border 321.60

BR-116/PR/SC Curitiba – SC/RS Border 412.70

BR-393/RJ MG/RJ Border – BR116 Intersection (Via Dutra)

200.35

BR-101/RJ RJ/ES Border – Presidente Costa e Silva Bridge

320.10

BR-381/MG/SP Belo Horizonte – São Paulo (Highway Fernão Dias)

562.10

BR-116/SP/PR São Paulo – Curitiba (Highway Regis Bitencourt)

401.60

BR-116/376/PR E 101/SC

Curitiba – Florianópolis 382.33

TOTAL 2,600.78

• Tariff moderateness – concern with the maximum reference price in the bidding contest;

• Technical basis and consistency of the studies: investments, operational costs, profitability, environmental issues;

• Execution of future contracts by the National Agency of Land Transportation (ANTT);

• Effective competition in the bid, in order to reduce the possibility of penalizing the user with overpriced tariffs.

Focus of the analysis of feasibility studies

What TCU has found

• incorrect calculations regarding the Internal Rate of

Return (IRR);

• overestimation of investments;

• budgets that do not consider the differences of the

private sector, being drawn up as if the project were from

the public sector (full prices of Sicro/Dnit);

• budgets with a high profit margin and with the occasional

inclusion of 5 to 10%;

• unjustified operational costs;

• poorly estimated costs;

• lack of environmental liability register;

• several errors in the spreadsheet.

EVOLUTION OF THE IRR

• Initially, the feasibility studies carried out by the Ministry of Transportation indicated an IRR between 17 and 18% per year, without the due technical basis;

• The first study of the National Agency of Land Transportation (ANTT) resulted in an IRR of 15.04% per year;

• Adopting the determinations of the Sentence of TCU, the Agency reviewed the premises of the calculation and reached 12.88% per year;

• Finally, the Ministry of Finance imposed the adoption of the recommendations of TCU and presented a new analysis with an IRR of 8.95% per year.

RESULTS OF THE AUCTION

Highways Original Toll (R$) (A)

Tol l Bid (R$) (B)

Winning toll (R$) (C)

Discount (%) (C/B)

BR-153/SP 2.95 2.35 1.42 39.99

BR-116/PR/SC 3.00 2.42 1.47 39.35

BR-393/RJ 2.43 2.33 1.70 27.17

BR-101/RJ 2.66 2.20 1.30 40.95

BR-381/MG/SP 2.83 1.66 0.57 65.42

BR-116/SP/PR 2.66 1.55 0.79 49.19

BR-116/376/PR E 101/SC 2.66 1.59 0.60 62.67

Thank you.

www.tcu.gov.br/controleregulacao