LONG, WIDE RAILS

Colombia 2016 | TRANSPORT | INTERVIEW

TBY talks to Miguel Centanaro, President of Cenconsas and Ferropetrol, on the new rail project, the state of rail lines in Colombia, and the role of PPPs in developing the country's transportation network.

Miguel Centanaro
BIOGRAPHY
Miguel Centanaro was a business administrator at the University of Cartagena, a recipient of the National Research Award (Analdex), and a candidate for a doctorate of business administration at the University of Liverpool. He has over 30 years of experience in formulating, evaluating, and structuring projects. In addition to Cenconsas and Ferropetrol, he is also the President of Francolex, Kunzell, and Constructora Tibabita. He has been an advisor of more than 30 bills and has outlined four successful railway APPs as well as 12 building APPs, airports, roads, tunnels, and parks throughout Colombia.

What is the background of the company, and what projects have defined your tenure here?

Ferropetrol is a railway project that stretches from Neiva to La Dorada. La Dorada is 385km existing corridor, which means we do not face social and community conflicts in its implementation. This project foresees the mobilization of cargo from Neiva to the center of the country and passenger transport in the medium term after approximately 10 years. Certain areas of this project have narrow-gauge railways. We expect to start construction works in a period of three years and be operational in five years' time. The main opportunity this project represents for investors is the high profitability level; the current cost of the project is $700 million, and we aim to raise equity of between 30% and 40%. This means we expect to attract foreign investors to join us and cover some $250-300 million. The RoI of this project is high, at around 30-40% as of the fourth year of operations, which is when we will start to distribute dividends.

How do you assess the state of development of the railway sector in Colombia?

We currently handle as many as eight railway projects in the country; four of them have already received the green light from the National Infrastructure Agency (ANI) from a feasibility point of view. The remaining four are still in a development stage and these are in already constructed corridors. The cost of rehabilitating these kilometers is $1 million per km, whereas for totally new projects the cost per km is around $3 million to $4 million. Colombia used to have 5,000 active km of railway, whereas now the country has 1,200km. There are 3,500km of inactive railway now in this country; there are many opportunities for foreign companies. In fact, the projects we are involved in represent a total of 2,500km of railway that will be rehabilitated. The problem with inactive railway lines is pretty common across South America; after the 1950s many railway lines were abandoned due to these being property of the state and the difficulties they had to make this sector profitable. Currently, we have seen a regional reactivation of the railway industry under private and public-private partnership schemes. The rehabilitation of inactive railways would be a key economic driver for the country and its logistics sector. Railway would give support to road transportation and reduce transportation costs across the country.

How do you see the logistics sector evolving up to 2020?

Colombia manages around 280 million tons of cargo every year, and cargo logistics will undergo a massive transformation. Final consumers will benefit from this transformation through lower transportation costs, increased agility, multimodal transportation systems, and the capacity to transport large amounts of cargo. Multimodal logistic transport systems will definitely be implemented in Colombia. The Magdalena river represents a key project for this transformation as well. We have seen cooperatives of truck owners and companies investing in Ferropetrol, because they understand the need to do so in order to survive in the future. We have a company of 700 trucks that has already agreed on investing in Ferropetrol, and we just need to formalize everything and make it public. Nevertheless, this is a good indicator of market activity and the opportunities this project has, as well as its importance in the transformation of the Colombian logistics sector.

What role can PPPs play in the transformation of the logistics sector in Colombia?

PPPs certainly have a vital role to play. We have become highly specialized in PPPs and we currently have PPPs totaling as much as $30 billion in logistics, real estate, education, health, and so on. This is a segment that offers many opportunities to foreign investors across the country. Colombia has a high deficit of infrastructure in all the sectors and PPPs are just the perfect tool to close those gaps.