Recently-privatized Codesa eyes cargo and capacity expansion

Now officially privatized, Codesa plans to expand the capacity of the ports in the Brazilian state of Espírito Santo and bring new types of cargo to the terminals.

The new management of the port authority took over on September 21 and is already concentrating efforts on four different fronts: the adaption of existing contracts, the search for new businesses to occupy vacant areas, contracting new services, and implementing internal changes to the company.

“Our greatest challenge will be to create a new business environment. We see a lot of port idleness and many people wanting to do business. The goal is to bring these investors into the port,” said the company’s new president, Ilson Hulle.

Codesa is Brazil’s first privatized port authority. Its majority shareholder is investment manager Quadra Capital, which was awarded the contract in an auction held in March this year. The privatization process included selling the company and signing a concession agreement, which gives the group the right to explore the ports of Vitória and Barra do Riacho for 35 years.

One of the first few tasks the new management finds itself having is adapting previous contracts with the local terminals, which will move from the public to the private sphere. According to privatization rules, Codesa cannot reduce the scope of any operation, although expansions are welcomed.

“I do not foresee a convoluted adaptation process. The situation will only get better for our lessees. New areas and cargo may be included in the effort to expand the volume throughput at the terminals, which wasn’t possible before. Some groups have already expressed interest in advancing these changes,” said the executive.

The guidelines that will inform the expansion of the Espírito Santo ports will be disclosed in the coming months. In Barra do Riacho, specifically, many empty areas should house new terminals. The plan is currently being designed in collaboration with interested parties. According to Hulle, the objective is to strengthen the flow of cargo already handled at the ports and add new operations.

Among the segments with growth potential, he cites grains, fertilizers, containers (possibly capturing cargo that currently go to other states), steel, oil, and gas, especially in the oil platform decommissioning market.

See below the top five most exported commodities via the Port of Vitória between January and August 2022, according to data from DataLiner.

Top Five Most Exported Goods | Port of Vitória | Jan 2019 – Aug 2022 | WTMT

Source: DataLiner (click here to request a demo)

The executive also anticipates the need for interventions to expand the port’s capacity.

A key example would be expanding rail access to the port. As agreed in the contract, privatized Codesa will have to reform all internal train tracks of the ports. Concomitantly, investing in viable connections with major rail networks will be essential. Today, the ports in Espírito Santos already have an active connection with the Vitória-Minas Railroad, owned by Vale. However, an expansion is needed.

“We shall contact the rail operator [to apply for an expansion]. The railroad is there, but it transports a tiny volume. It would be necessary to gain the capacity to increase volume, especially speaking of grains.”

When contacted, Vale said it “periodically assesses the need and feasibility of making investments in cases where there is a concrete increase in demand.”

As for the case of the waterway access to the ports, it is up to the port authority to increase the capacity of the ports through dredging (which will guarantee a good operating draft) and additional interventions. “There are physical barriers to the entry of vessels, but I see a window to make the entrance of slightly larger ships viable, which can expand the range of cargo possibilities in Vitória.”

This may be possible through dredging interventions but also via simulations of entry and exit of vessels, which can indicate breaches that can be exploited for the passage of larger ships during certain times, with some restrictions. “Let’s work to find the maximization point,” he says.

In total, the contract signed by the new manager of Codesa foresaw BRL 335 million in investments. The central working fronts, which should be completed in the first two years of concession, include renovations to the warehouses, the quay and pier structures, and the internal railroad of the port.

Additionally, Codesa will be tasked with reforming its internal organization. “Before, bids were required to make purchases. The company became private overnight without a supply area and a fundamental flow method for approving acquisitions. These procedures will need to be developed, along with staff training.

Under the terms of privatization, the 235 employees of the former state-owned company will have one year of secured jobs. Codesa is also expected to open a Voluntary Dismissal Plan within six months.

The new president of privatized Codesa is an Espirito Santo native who started his career as an intern at 17 at a terminal in the port of Vitória. Just before taking office, Hulle was the terminal director at Log-in, a company that operates in the port.

This is an unprecedented venture for all involved. Despite the group’s prior involvement in the sector’s credit segment, Quadra Capital, the company that owns Codesa, is operating an infrastructure asset directly for the first time.

All eyes in the port market are set on Codesa, as it is the first example of a private port authority. Other privatization projects that may bear fruits in the coming months include the ports of São Sebestião, Itajaí, and Bahia, in addition to the much-expected privatization of the Port of Santos.

“We are aware of our responsibility. Codesa will serve as a showcase. We were challenged to do a good job. The matter of pioneering lingers since the day we signed the contract. Now, the focus is on making it happen,” says Hulle.

Source: Valor Econômico

To read the full original article, please go to: https://valor.globo.com/empresas/noticia/2022/10/04/privatizada-codesa-busca-ampliacao-e-novas-cargas.ghtml

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