Brazil's CCR looks to acquire more airport concessions in Latin America
Private management of airports in Latin America is dominated by the giant Corporación América, but at a slightly lower level there are several other companies. Those companies are led by Brazil's CCR, which is mainly a road and rail operator specialising in toll roads but which has built up a hefty airport portfolio, mainly in Brazil, in the last few years.
With the Brazilian airport concessions reaching the end of the runway, CCR has declared that it wants to spread its wings throughout the continent where it already has a handful of airport assets, and it has been in talks with potential collaborators that might either co-invest in its existing assets or help it acquire new ones; or both.
With a lot of the low-hanging fruit already consumed in the region, the question is how ambitious CCR and these collaborators are.
Summary
- Brazil's CCR seeking more airport concessions in Latin America; talking to potential collaborators.
- Best known for co-managing Belo Horizonte Tancredo Neves Airport since 2012, CCR has expanded in the past couple of years to take on another one there, as well as a raft of provincial airports.
- Along with other concessionaires in Brazil's airports, it may not be enamoured with the early deal it was offered,
- The Brazilian concessions have now almost reached the end of the road, especially since the recent change of government.
- There will be opportunities elsewhere in its region - there are right now - and there may be some on the African continent.
- The question is: how ambitious are CCR and its potential new collaborators?
Brazil's CCR talking to investors and funds about co-investments and acquiring more airport concessions
CCR (formerly Companhia de Concessões Rodoviárias, but now operating in the airports business as Companhia de Participação em Concessões, as a subsidiary of CCR) operates 19 airports in Brazil and is interested in acquiring more airport concessions in Latin America.,
Two US infrastructure funds, a Middle Eastern fund and a French investor, are reported to have approached CCR about either co-investing or acquiring some of its airport concessions.
One of the world's largest private infrastructure groups
CCR is a São Paulo-based toll road operator, the largest highways operator in Latin America, and one of the largest private infrastructure groups in the world.
CCR is owned by Camargo Corrêa (17.00%), Andrade Gutierrez (17.00%) and Soares Penido (17.22%), in addition to which there is a free float (48.78%).
It has interests in private interstate highway concessions and the metro system in Brazil and other countries, apart from airport operations. It operates approximately 3,000 kilometres of toll roads.
The company controls nine subsidiary concession holders, through which it works a public-private business model for the operation of toll roads, aiming to centralise the management of a portfolio of toll concessions and service companies.
CCR has operated Belo Horizonte's main airport since 2012
The company operates the Belo Horizonte International Airport (a.k.a. Tancredo Neves) in the 'BH Airport' consortium with: Flughafen Zürich, Quito Mariscal Sucre International Airport as part of Corporación Quiport S.A, the San José International Airport in Costa Rica, and Curaçao International Airport.
BH Airport paid handsomely to get the Belo Horizonte concession - an earnings multiple of 35.7 times, although that was quite a small one compared with the Changi International Airports/Odebrecht deal for Rio de Janeiro Galeão airport (178.7 times earnings, which was way in excess of the global norms of around 20 times, even allowing for the peculiarities of the Brazilian accounting system).
Then, on 07-Apr-2021 CCR won the concession to operate for 30 years the following airports in Brazil: Curitiba-Afonso Pena International Airport, Curitiba-Bacacheri Airport, Foz do Iguaçu International Airport, Londrina Airport, Navegantes Airport, Joinville-Lauro Carneiro de Loyola Airport, Pelotas International Airport, Ruben Berta International Airport (Uruguaiana), Bagé-Comte. Gustavo Kraemer International Airport, Goiânia-Santa Genoveva Airport, Palmas Airport, Teresina Airport, Petrolina Airport, São Luís-Mal. Cunha Machado International Airport, and Imperatriz Airport.
The airports are in two blocks.
The Southern Block was sold for BRL2.1 billion (USD413.7 million sale price) and the Central Block for BRL754 million (USD148.6 million sale price).
CCR's winning bid comprised an initial investment of BRL754 million (USD133.2 million), with plans to invest an estimated BRL1.8 billion (USD318 million) over the 30-year concession term.
That deal made it one of the largest airport operators in Latin America, exceeded only by Corporación América, with its 53 airports including 35 in Argentina, although AENA Internacional is catching up (16 airports) by way of a deal it has just signed.
Both organisations are rated as 'Major Global Investors' in the CAPA Global Airport Investors Database, two of six investors in Latin America.
Active airports for CCR SA
Then, on 05-Oct-2021 CCR S.A. won a 30-year concession to operate the Belo Horizonte/Pampulha-Carlos Drummond de Andrade Airport, making it the sole or joint operator of the two airports in Brazil's fifth biggest city.
Brazil's Minas Gerais government awarded Companhia de Participação em Concessões (CCR) a BRL34 million (USD6.2 million) contract for the concession of Belo Horizonte Pampulha Airport.
CCR plans to invest BRL151 million (USD27.6 million) over the 30-year term - BRL65 million (USD11.9 million) will be invested in the first three years, towards initiatives that will include construction of a terminal and taxiway and runway renovation. Federal, state and municipal taxes over the concession period are projected at BRL99 million (USD18.1 million).
Pampulha Airport is a minnow compared to Tancredo Neves.
In 2019 it handled only 180,000 passengers versus 11.1 million at Tancredo Neves, and had been in permanent decline for a decade. That means it was barely affected by the COVID-19 pandemic.
Belo Horizonte Pampulha Airport: annual traffic, passenger numbers/growth, 2010-2019
CCR's bid for Pampulha and the regional blocks shows how Brazilian concessions have now reached their natural conclusion
There had been some concern expressed about the Brazilian government's decision to make the Pampulha airport available for concession in addition to the earlier Tancredo Neves (a.k.a. 'Confins') airport by the concessionaire, but ultimately that decision ended up being the same one.
The very fact that CCR made a bid for the Southern and Central blocks and the Pampulha airport is indicative of how the Brazilian concessions have now reached their natural conclusion, with only the Rio de Janeiro Santos Dumont airports remaining that are of any consequence (São Paulo Congonhas was concessioned to AENA at the end of Mar-2023). Along with the reconcessioning of Rio's Galeão airport and their concessions, which have been suspended by the incoming 'Lula' government anyway.
So what direction is CCR likely to take?
CCR perhaps not happy with the earlier deal it did - and it isn't alone
The suggestion that the investors that have approached CCR have partly done so with regard to co-investing in some airports suggests perhaps that CCR is not happy with some of the deals it has struck in Brazil and would be prepared to share the burden with another investor.
It wouldn't be the only company to express dissatisfaction, mainly on the price extracted by the government versus the lack of traffic growth that was promised, although the government has made some reparations.
CCR's external deals date back over many years to before the Brazilian ones, which began in 2012 at Belo Horizonte.
The landscape has changed considerably since then. As of 2019, when Airports Council International undertook a survey, two thirds exactly of air passengers in Latin America and the Caribbean travelled through airports that were wholly or partly privatised - the second highest ratio in the world after Europe.
Far less to aim for now in Brazil - the low hanging fruit has been taken
In other words, there is far less virgin territory to aim for, with more in the way of on-sales or reconcessions, which are commonplace on the continent if CCR opts to expand its portfolio.
The Brazilian government would probably want to extract maximum value from the two remaining consequential concessions and the reconcession in Rio de Janeiro, if they go ahead at all, and CCR may be dissuaded from pitching unless it sees very good reasons to do so in the traffic and financial statistics from its existing airports there, the vast majority of which were, of course, acquired during the pandemic.
Portugues, por favor
Presumably CCR would want to continue to operate by using the Portuguese language as much as possible (there is always room for misunderstandings when multiple languages are used in an agreement), but it is restricted by the fact that Brazil is the only country in South America where Portuguese is the official language, even if the language is spoken by minorities in several other countries.
In contrast, there are 20 Latin American countries where Spanish is the official language.
But Portugal itself is a no-no
Portugal itself is out of bounds, even if CCR's ambition stretched that far - all the commercial airports on the mainland and islands being concessioned to VINCI and operated by ANA Airports of Portugal.
Interestingly, in Apr-2012 CCR had entered an MoU with Portugal's Brisa to establish a joint undertaking to assess and explore the opportunity of acquiring and managing ANA, within the scope of the privatisation process that had been announced by the Portuguese government. Brisa and CCR identified the privatisation of ANA and the airport management industry as business opportunities that fitted into their field of expertise, resulting in joint cooperation.
Several possibilities in Africa
African countries with Portuguese colonial heritage are another possible target, but few of them offer any good prospects.
The jewel is Cape Verde (on account of tourism) - but that has already gone to VINCI, which has concessioned its airports.
Angola might be a possibility. Back in Jan-2023 the Angolan government offered a 51% stake in its national airports company, as discussed in this report: Angola to offer a 51% stake in national airports company; China at least will be interested
The New Luanda International Airport is scheduled to open later in 2023.
It is interesting to note that Corporación América is targeting Africa countries and is preferred bidder for the concessions at Abuja and Kano airports in Nigeria.
Nigeria would take up a lot of Corporación América's time, because operating there could be a minefield. But even then it is unlikely to take its eye off its Latin American assets, which have been built up over years - with the exception of the Natal Airport in Brazil, where it has surrendered the concession.
CCR has been a preferred bidder for a Barbados concession for several years
Whatever the attractions elsewhere in the world, CCR is likely to feel more comfortable remaining on its own 'patch' in Latin America and the Caribbean (as it has stated), and where there are still a few deals to be resolved.
In Barbados, for example. Where a 30-year concession deal for the Grantley Adams International Airport was suspended in Feb-2021 on account of the 'new realities' of the air transport business, then resurrected in 2022 for potential completion in 1H2023.
The list of prequalified parties has not changed since the procedure was suspended: there are 13 of them, all formidable players globally, and CCR is one of them, by way of Companhia de Participações em Concessões.
CCR will have quite a challenge on its hands, and this bid in particular will set down a marker for how hard it is prepared to fight to extend its network in the region.
There will always be new opportunities in Latin America and the Caribbean; the question is how hard CCR will pursue them
Meanwhile, in Colombia the National Infrastructure Agency (NIA) expects to put out a request for proposals for a design-build-finance-operate-maintain (DBFOM) P3 concession to make major improvements to El Dorado International, the country's largest airport, in Bogotá, the capital city.
In Jan-2023 the NIA also launched a tender for the concession of Cartagena Rafael Núñez International Airport. The deadline for bids is May-2023, with a contract to be awarded in mid 2023, for a concession period of 8.5 years. Estimated investment for the works is COP490 billion (USD103.44 million).
While it might not be CCR's preferred path, the Bahamian government has issued a tender for a company (or companies) to upgrade 14 'out-island' airports. Winning bidders will design, build, finance, operate, and maintain improved airports on those islands. P3 concessions will be for 30 years, and short-listed companies are to receive formal requests for proposals in May-2023.
That little snapshot demonstrates how there will always be opportunities to expand an airport portfolio in the Latin American and Caribbean regions.
What is yet to be revealed is how keen CCR and any potential co-investors are to pursue these opportunities, or whether CCR opts to put discretion ahead of valour.