A Spanish contractor is picking up the pieces of a failed Brazilian contract to build the São Paulo metro’s sixth line, “Orange,” under the region’s largest public-private partnership. The company inherited the 15.3-kilometer tunnel project, which had been mothballed since 2016, along with Chinese-built tunnel-boring machines from a maker that is now out of business.

Madrid-based Acciona S.A., is mobilizing work along the Orange line’s 9.4-meter-dia. twin-track, single-bore tunnel that will connect 15 new underground stations from Vila Brasilândia in the north, to São Joaquim in the south. With stations as deep as 69 m, depth of construction and the need to fast-track work on multiple fronts are major challenges, says project director Lucio Matteucci.

Acciona must deliver the working system under a five-year design-build contract with a special-purpose company, which it created and controls. The company, Concessionaria Linha Universidade (CLU), took over the project’s P3 agreement from the troubled original consortium last October. Its deal with the São Paulo state government includes procuring rolling stock and maintaining the infrastructure for 19 years.

Acciona is picking up from the original project company, Concessionária Move São Paulo S.A., which halted work in September 2016. It had completed about 10% of the total construction after 19 months’ work, according to a São Paulo state government spokesman.

That firm was controlled by three contractors, with Odebrecht Transport S.A. and Grupo Queiroz Galvão S.A. holding around 20% each and UTC Engenharia S.A. with just over 13%. Financial investors controlled the balance.

As sole bidder for the contract, Concessionária Move São Paulo S.A. signed its 25-year P3 agreement in December 2013, which went into effect the following May. The project was then valued at $1.9 billion, which was to be financed equally by the state and Move.

Within a year of starting excavation in March 2015, the company. had built the tunnel lining precasting facility and made enough segments for 1.5 km of tunnel. Then state governor Geraldo Alckmin announced the planned launch of the first TBM that September, followed by the second machine in early 2017.

But after completing the TBM's 32-m-deep launch shaft by the River Tietê south of Freguesia do Ó station, in September 2016 Concessionária Move São Paulo S.A "reported the complete stoppage of civil works, alleging difficulties in obtaining long-term financing from the National Bank for Economic and Social Development,” says the state spokesman. In a statement, Odebrecht auditor Grant Thornton blamed Concessionária Move São Paulo S.A. financing difficulties partly on government delays in land expropriations.

However, the financing woes have been connected with charges of widescale corruption in public contracts against Odebrecht and others at the time. The official investigation, called “Car Wash” (Operação Lava Jato in Portuguese) resulted in the arrest of the company’s CEO Marcelo Odebrecht in June 2015 and his imprisonment the following March.

In 2018, the process of terminating the concession agreement started, with an August 2019 deadline. But rather than rebidding the deal, the government looked for another company to buy the concession agreement from Move. “This meant that there was no expense…or the need to have other resources to take over the paralyzed enterprise,” explains the state spokesman.

Postponing the termination until February 2020, the state negotiated with various interested groups, including an unsuccessful one led by China Railway Engineering Corp. Ltd.

Meeting all the requirements, Acciona won the right to take over the concession and outlined terms with Concessionária Move São Paulo S.A., to whom the state had paid $131 million for completed civil construction, says the spokesman. The company paid the state a penalty of $9.6 million and, received reportedly around $40 million from Acciona. Until CLU took over, Move was caretaker of the idle sites.

Under CLU’s concession agreement signed last October, São Paulo state will pay for about one-third of the project’s $2.8 billion total cost, including rolling stock, according to Acciona. CLU will finance the balance with equity invested by its shareholders and non-recourse commercial loans.

Acciona was CLU's sole shareholder until this January, when the France-based investment fund STOA S.A. took a 12.3% holding, committing $60 million for construction. STOA also helped shape the contract “to international project finance standards and suited to welcome a non-recourse long-term financing,” noted the fund’s CEO Charles-Henri Malécot.

While CLU looks for co-investors to complete its equity and debt, it is relying on short term loans to finance Acciona as the contractor builds up activity at 10 sites, says Matteucci.

Acciona will excavate 10 stations with sprayed concrete lining method  while five stations in hard rock will also require drill and blast. Shallower areas will be in cut-and-cover. Of the 18 large shafts, the contractor will begin sinking the deepest one, the 62 m x 13 m dia. Mato Grosso, next April. All this “highly synchronized advance” depends on getting the two mothballed TBMs into action, according to Acciona. But not even this task is simple.

Since supplying the 10.55-m-dia earth pressure balance (EPB) machines to Move, France-based NFM Technologies quit the business of TBM manufacture. The company was acquired in 2018 while in court protection after its owner Northern Heavy Industries Group Co., Ltd. hit financial difficulties. NFM’s German buyer itself then fell on hard times, ultimately leaving the company in the hands of the French BMS Group last September.

Now named NFM Engineering, the company offers tunneling advice, site support and machine spares for its few TBMs still in operation, including the São Paulo pair, says design manager Julien Bouilloux.

While NFM will be a source of spares for Acciona’s machines, the contractor has hired the German TBM maker Herrenknecht A.G., to upgrade the São Paulo units and get them working, says Matteucci. He expects the southern TBM to set off late this year, followed by the northern machine early in 2022, five years after originally planned.

For the 9.5-km-long south drive, the closed-faced EPB tunneler will bore through mixtures of sedimentary formations and hard rock. The north drive’s EPB will be able to function also in open mode as it moves through 5 km of mainly rock. The north drive's final 800 m will be excavated with SCL.

While reviving the metro sites, Acciona has assembled a workforce of about 1,000, says Matteucci. And as it winds down work on its tunnel contract on Ecuador’s Quito metro, the company is transferring employees to São Paulo. By this year’s end, Matteucci expects the Orange line’s workforce to reach 4,000, when more than 30 sites will have swung into operation.