Local funding has set the pace for infrastructure financing in Brazil – and Itaú BBA made its presence felt in the market over the past year by acting as a driving force in some of the most emblematic deals to have closed in the period.
Marcelo Girão, managing director and head of project finance at the bank, says its performance is partly a function of investor appetite for infrastructure assets in Brazil, despite the economic and political ups and downs of the country and macro headwinds from abroad.
He notes that the Brazilian market started to pick up steam in the second half of 2023 and kept the momentum going early this year. In that period, Itaú BBA, which wins the award for Infrastructure Bank of the Year in Brazil, acted as the financial adviser to Aegea to close a R$25.5 billion financial package to fund two water and sewage concessions in Rio de Janeiro.
“It is an emblematic deal with an innovative structure that includes several different sources of financing,” Girão says.
The bank was also present on other important deals in the same sector, including the R$4.65 billion in green bonds and BNDES loans arranged for Rio+, another Rio de Janeiro concession, and the R$2 billion raised by Conasa for the financing of a water and sanitation concession in the Alagoas state.
In the airport sector, Itaú BBA helped CCR to tap capital and banking markets for R$7.23 billion in limited recourse financing for two concessions in the South and Central regions of Brazil. The bank also helped several renewable energy projects to reach financial close in the period of the award.
Girão is optimistic that Itaú BBA will have plenty of opportunities to keep posting good performances in infrastructure financing in forthcoming years. A growing number of projects have been able to raise money by issuing bonds in capital markets, and development bank BNDES is acting as a galvaniser of market sources, rather than a cheaper alternative to them, he says. As a result, banks like Itaú BBA have been involved in large projects even when BNDES is the main source of funding.
“Good projects that want to tap capital markets meet strong demand, and BNDES has shown a lot of appetite,” he says. “From the point of financing, perspectives are positive.”
Sectors including data centers and water and sanitation, for example, should continue to attract investments. Road concessions are set to recover, and PPPs may create new sources of business in areas such as park management, social infrastructure and others. Girão also believes that Brazil’s first big green hydrogen project should hit the market soon.
He adds that if the pace of renewable energy deals has slowed, the looming end of subsidies for the sector could accelerate some projects, and the broader energy sector still has a significant need for investments.
“In the transmission sector alone, tenders have been completed that will require over R$50 billion in CAPEX,” Girão says. “Those projects will soon start raising funding.”