With the issuance of GM Ordinance No. 517/2018, the Ministry of Transport, Ports, and Civil Aviation provided guidance, at the beginning of October, on the procedures and requirements for the approval of investment projects as a priority in the area of ​​infrastructure, in the logistics and transport sector, and for the issuance of incentive debentures. The text of the rule puts into effect the provisions of article 2 of Law No. 12,431/2011, which regulates the conditions for the offer of incentive debentures with the objective of financing priority investment projects.

The regulation is in line with similar changes made by other infrastructure sectors, which have recently updated the rules for defining their priority projects. As an example, in December of 2017, the Ministry of Mines and Energy issued Ordinance No. 493/2017; the basic sanitation sector, in turn, had its rules for the definition of priority projects updated through the promulgation of Ordinance No. 315/2018 of the Ministry of Cities, in May of 2018.

Ordinance 517/2018, on the other hand, regulates all modalities of the logistics and transportation sector, in such a way that the standards for the qualification of road, railroad, port, and airport infrastructure projects have become the same. The previous ordinances applicable to the different transport segments were revoked.[1] Thus, the ministry met the interest already shown by the transport and logistics market by standardizing procedures and eliminating inconsistencies found in the framework for investment projects in the different modes of transportation. The ministry also sought to benefit from the experience accumulated in the different sectors, especially the highway sector, which has been using in a more frequent and successful manner the issuance of debentures under the terms of Law No. 12,431/2011, and to apply it uniformly to the segment as a whole, thereby allowing for a more agile and efficient review of the requirements presented.

The new ordinance establishes as priority those projects that are the subject of a concession, permit, authorization, or lease or public-private partnership process included in the Investment Partnerships Program (PPI), under the terms of Law No. 13,334/2016, or any projects previously approved by the Ministry of Transport.

Thus, Ordinance 517/2018 gives relevance to projects considered priority by the PPI, therein formalizing the correctness of the prioritization of the infrastructure projects in the area of ​​transportation and logistics with the Federal Government’s agenda. The measure indirectly meets the Federal Government's objectives of resuming private investments in these projects with more speed and legal certainty.

One of the innovations of the ordinance that should be featured is the possibility of using incentivized debentures to raise funds for the payment of concession expenses (not only implementation, expansion, maintenance, recovery, adaptation, or modernization of projects), in line with changes already made, for example, by the Ministry of Mines and Energy.

The project owner's request must be supported by technical documentation, with a description of the project and project implementation and investment schedule, as well as a technical declaration by the respective regulatory agency attesting to the validity of the contract and stating that the project is contemplated in the concession instrument or related to the public service provided. This requirement was a novelty introduced by Ordinance 517/2018 and aims to prioritize companies in a situation of good standing before regulatory bodies.

Once the application has been received, the Department for Development and Partnerships of the Ministry of Transport will review the application and, if necessary, request the submission of additional documents and information. It is important to note that the Department for Development and Partnerships may consult other departments of the Ministry of Transport (namely, the National Department of Civil Aviation, the National Department Ports, and the National Department of Land and Water Transport), depending on the sector of the project under review.

Once the project is approved, by means of a ministerial ordinance, the issuance of debentures should occur within up to 2 years. In the case of non-issuance, the legal entity owning the project must provide a justification.

The ordinance provides for monitoring of the implementation of the project by the Department for Development and Partnerships. Accordingly, the project owner must inform the department of the issuance of the debentures within 30 days. It must also send information and documents annually regarding the investment in the project of the proceeds received from the issuance (a copy of the management report sent to the debenture holders, project uses and sources, and information on the issuance of debentures and a detailed report on the investment of the funds).

The tax treatment favored by certain investors makes it possible, in many cases, to obtain more attractive rates for companies issuing debentures under Law No. 12,431/2011. The local capital market has been taking advantage of this condition and making significant use of incentivized debenture issuances, per the terms of Law No. 12,431/2011, with 181 public offers carried out since the law was enacted until October 17 of this year.[2] The changes introduced by the Ministry of Transport through Ordinance 517/2018 aim to eliminate gaps and standardize procedures, thus giving greater legal certainty and encouraging investments in the transport and logistics sector.

[1] SEP/PR Ordinance No. 404, of October 2, 2015; SAC/PR Ordinance No. 18, of January 23, 2012; and MT Ordinance No. 9, of January 27, 2012.

[2] http://sistemas.cvm.gov.br/asp/cvmwww/registro/ofertasreg/OfertasProjPri.asp