November 23, 2017 / 8:38 PM / a year ago

Brazil's Rumo says new rail extension hinges on license renewal

SAO PAULO, Nov 23 (Reuters) - Brazilian rail operator Rumo Logística SA’s decision to go ahead with a network expansion in top grains state Mato Grosso will depend on a license renewal for a crucial connecting railway line, Chief Executive Júlio Fontana said on Thursday.

Fontana said in a telephone interview that uncertainty over the renewal of Rumo’s license for the Malha Paulista system in Sao Paulo state was delaying investment decisions by Latin America’s largest independent rail operator.

The Malha Paulista license expires in 2028 and without a renewal Rumo risks not recouping investment in the connecting Malha Norte system, Fontana said. Rumo, controlled by Cosan Logística SA, is seeking a 30-year extension of the Malha Paulista contract.

“Extending the railway (in Mato Grosso) is umbilically linked to the license renewal process,” Fontana said.

“We’ve submitted all of the documents, now it is up to the authorities to decide on the (Malha Paulista) renewal,” Fontana said. Rumo started the process two years ago, he added, and is now waiting for a decision by transport regulator ANTT, which must then be confirmed by a federal audit court (TCU).

Rumo’s Malha Norte and Malha Paulista systems already provide a 1,700-km (1,056 miles) connection between Rondonópolis and Santos, Latin America’s largest port, where some 16.4 million tonnes of Brazilian soybeans were exported in the first 10 months of 2017, according to cereal exporters association Anec.

The new 650-km stretch of the rail line would link the cities of Rondonópolis and Sorriso, extending rail access to southern ports deeper into Mato Grosso, and would lower grain prices from the world’s biggest soy exporter.

Fontana said Rumo is maintaining plans to invest 9 billion reais ($2.8 billion) through 2020 to grow operations, adding the company may participate in the 1,100-km Ferrogrão rail project that would connect Center-West grain producing regions to the northern Port of Miritituba, in Pará state.

The Ferrogrão system could curtail the need for trucks, which have to navigate a tricky road with long unpaved sections that make passage nearly impossible during heavy rains.

$1 = 3.22 reais Reporting by Ana Mano; Editing by Susan Thomas

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