Odebrecht Looks to Rebuild Portfolio As Corruption Scandal Lingers
After a tumultuous few years at the center of an international corruption scandal, Brazil-based Odebrecht is looking to move on. The company ended 2018 coming to agreement with Brazilian authorities to settle some of its outstanding fines and charges, paying the government an estimated $700 million related to the Lavo Jato, or “Car Wash,” anticorruption investigation. The agreements will allow the company to once again participate in bids for government projects and to obtain credit in Brazil.
Odebrecht has been one of the Brazilian companies at a center of a bribery and corruption scandal that has rocked governments across Latin America. Ongoing revelations about politicians and bureaucrats taking bribes from Odebrecht and other major Brazilian firms related to infrastructure and energy projects over several decades has led to resignations and government shakeups beyond Brazil, ensnaring officials in Peru, Panama, Bolivia and Colombia, and at times provoking large public protests. A unit of Odebrecht was debarred by the World Bank last month over bribery accusations on a Colombia flood-control project.
The company's revenue in Brazil fell 40% from 2016 to 2017 to a gross revenue of about $3 billion, according to the Brazilian Engineering Ranking, published in 2017 and produced by O Empreiteiro magazine. ENR’s 2018 Top Global Contractors list showed Odebrecht Engenharia E Construcao ranking No. 98, with 2017 worldwide revenue of $3.35 billion.
At the peak of the corruption scandal two years ago, Odebrecht Group sold control of concessionaires that it maintained in its portfolio, such as the Rio de Janeiro International Airport and its sanitation company, with operations in several Brazilian cities. Odebrecht is now trying to negotiate its concessionaire for Brazilian highways and its control of Brazilian petrochemical company Braskem. Odebrecht Group, which once boasted a headcount of almost 150,000, today has only roughly 60,000 employees.
Despite all this, Odebrecht Engenharia & Construção, the group's construction arm and founding business, is seeking to rebuild its reputation and portfolio of projects. The company predicts it will secure $18 billion in new contracts in Brazil and abroad over the next four years.
Work on many Odebrecht infrastructure projects in Brazil has continued despite the cloud of the corruption investigation. Recently completed projects include the 350MW Baixo Iguaçu Hydroelectric Power Plant in southern Brazil, which is now entering production. Still underway is Section IV of the Sertão Alagoano Channel, a 30.4-km extension of a water canal to cities in northeastern Brazil.
New work is also beginning to trickle in. In 2018, Odebrecht Engenharia & Construção won the bid to convert the Santa Cruz Thermoelectric Power Plant in Rio de Janeiro, owned by state-owned Furnas Centrais Eletricas, in a combined cycle natural-gas plant. The contract is budgeted at about $150 million. It also won the bid for the implementation of a bus system in the metro region of Belém city in northern Brazil, with a 10.8-km extension budgeted at about $100 million.
Odebrecht signed a memorandum with Petrocity Portos to perform engineering studies for the construction of the São Mateus Port Center (CPSM), a maritime terminal in the northern state of Espírito Santo. With an estimated investment of $820 million, the new intermodal port will be able to move many types of commodities. The project is being financed by the Abu Dhabi Fund for Development.
In Panama, a consortium of Odebrecht Engenharia & Construção and Spain-based FCC secured a $102.9 million bid to construct a subway link to Tocumén Airport, in Panama City. Odebrecht has a history with Tocumén Airport in its corruption scandal. The airport manager for Tocumén Airport admitted in 2017 to accepting a bribe from an Odebrecht representative in 2008 to pay off debts from a political campaign.
In the United States, Odebrecht won a $34.8 million bid for infrastructure modernization at the Port of Miami. It also saw some of its existing work in the U.S. expand. In August, 2018, the Miami-Dade Aviation Department authorized a $46.3 million expansion to the modernization contract for Terminal E at Miami International Airport. The joint venture of Odebrecht and Parsons will now also implement an improved baggage-handling system as part of its scope of work at the terminal.
"These new contracts are important achievements for the resumption of growth of the company," says the president of Odebrecht Engenharia & Construção, Fabio Januário. "These are projects of great technological complexity and the 75-year history and experience of the company will allow the execution with the level of excellence that the works demand.”