US$4.6 billion metro concession in São Paulo cancelled

US$4.6 billion metro concession in São Paulo cancelled

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Move São Paulo S.A., a special purpose vehicle of a consortium comprising Odebrecht Transport, Construtora Queiroz Galvão, UTC Participações and Eco Realty Investment Fund, has requested the termination of its concession contract for Line 6 of the metro system of the state of São Paulo, south-east Brazil.

Move São Paulo was contracted to construct, operate and maintain a new metro line connecting São Joaquim, in the centre of São Paulo city, to Brasilândia to the north. The line would run for 15.9 km through 15 stations, and connect to four other lines in the state's metro system. 

According to the concessionaire, the contracting authority was not fulfilling its obligations regarding payment of indemnities due to the expropriation of areas fundamental to the implementation of the PPP; the availability of public areas; and resettlement of the vulnerable population.

Due to these circumstances, the execution schedule of the civil works was not feasible, either due to the significant increase in direct and indirect costs due to delays caused by the state government, or because financing from the National Bank for Economic and Social Development (BNDES) has changed in recent years.

However, the State of São Paulo has already initiated several administrative sanctioning proceedings against the concessionaire, as well as the administrative process to order the concession to lapse.

The concession was awarded to the consortium in December 2013. The term of the contract is 25 years and its estimated value is BRL15 billion (US$4.6 billion).

As reported on this platform, development of the project stalled in August 2015 due to a delay in the release of government funding. At that time about 30% of the funding had not been released, meaning that less than 40% of the expropriations have been made. The expropriations were scheduled to be completed in May 2015.

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