March 13, 2017 / 10:16 PM / a year ago

UPDATE 1-Four groups submit bids in Brazil airport auction

(Adds number of groups bidding, comments from executive and official, background)

By Gabriela Mello and Tatiana Bautzer

SAO PAULO, March 13 (Reuters) - Four investor groups submitted bids on Monday in a Brazilian government auction for licenses to run four airports, one of the first in a new wave of privatizations in Latin America’s largest economy.

French group Vinci SA put in bids for at least two of the airports, a source with knowledge of the matter said on Monday, without detailing which airports. The company did not respond to a request for comment.

The bids will be unsealed on Thursday at the Sao Paulo Stock Exchange, when the rights to operate airports in Porto Alegre, Florianopolis, Fortaleza and Salvador are up for grabs in a process that could go to a final round of live bidding.

The results will be an important gauge of President Michel Temer’s efforts to spur infrastructure spending with private capital, helping to lift Brazil’s economy from a deep recession and bolstering the federal budget with concession fees.

On Friday, two government sources said that at least nine airport operators had shown interest in this week’s auction.

One of the companies they named, Brazilian toll road operator CCR SA, which won the operating rights to the international airport near Belo Horizonte in 2013, ultimately turned down participating in the auction this week.

CCR’s head of new business, Leonardo Vianna, told Reuters that the company found the government was underestimating the cost of renovations and overestimating demand in coming years when they outlined the required investments and concession fees.

“The main issue is with demand. When we simulate the projected demand, there is a huge gap compared to the government’s studies,” Vianna said.

Adalberto Vasconcelos, an official overseeing the government’s privatization program, said on Monday he was not counting on the auction yielding significant premiums over the minimum allowable bids as previous airport privatizations have.

“We expect bids for all four airports, but we probably won’t have the same premiums as before,” he told journalists.

In 2013, when Brazil auctioned its biggest airports amid healthier economic forecasts, a consortium led by construction giant Odebrecht SA paid 19 billion reais ($6 billion), or four times the minimum, to run Rio’s Galeao International Airport.

A corruption scandal has since snared Odebrecht and several of its biggest rivals in Brazil’s construction industry, resulting in the jailing of many of their executives, restricting their access to credit and keeping them at bay during the current round of privatizations. ($1 = 3.15 reais) (Reporting by Gabriela Mello and Tatiana Bautzer; Additional reporting by Rodrigo Viga Gaier in Rio de Janeiro, Alberto Alerigi Jr. in Sao Paulo and Dominique Vidalon in Paris; Writing by Brad Haynes; Editing by Daniel Flynn and Jonathan Oatis)

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