Public Law, Project Finance and Regulatory

Rio de Janeiro plans new concession for commuter rail network

Rio de Janeiro state plans to launch a new concession for its commuter rail network after the consortium currently operating the system announced its decision to terminate the contract.

SuperVia, controlled by a consortium led by Japan’s Mitsui, told the government that it is no longer interested in continuing with the concession contract.

“In the midst of a demand from the state government for investments to improve services for the population, the company confirmed that it has given up managing the metropolitan rail system,” said governor Cláudio Castro on his Twitter account.

 “We will make a transparent and smooth transition, guaranteeing the functioning of services until the choice of a new company is made.”

SuperVia is in bankruptcy protection after it saw a severe reduction in passenger numbers with the COVID-19 pandemic and levels have yet to recover.

 The 270km network — comprising five lines, three extensions and 104 stations — connects 12 municipalities in the metropolitan region of Rio de Janeiro city. It serves 350,000 passengers a day.

The company also claimed that operations are hampered due to the constant theft of cables, which causes trains to stop running and leads to constant complaints from passengers.

SuperVia and the government had held talks since last year about maintaining the concession contract.

“The pandemic ended and services remained precarious. We demanded results and they did not come. The population of Rio de Janeiro continued to face delays, discomfort, stoppages and even accidents on the rail network,” said Castro, who stressed that the state government injected 400mn reais (US$80mn) in the concession last year to compensate for the drop in passengers.

 However, the plan to offer a new concession will not be easy to carry out, according to a specialist.

“A complete overhaul of the model is needed. Passenger transport around the world is always a complex financial equation and often requires some government involvement,” Paulo Dantas, a specialist in infrastructure and project finance at law firm Castro Barros Advogados, told BNamericas.

“Quality passenger transport needs very significant investments, but at the same time high fares make it unfeasible for the population. An alternative would be a PPP, in which in addition to the fare charged, there is also a contribution from the state,” he added.

The lawyer also said that given the difficult financial situation of Rio de Janeiro state, a solution involving a capital injection from the federal government and the direct involvement of development bank BNDES and multilateral institutions could also be considered.