Public-Private Partnership Structuring Project Focused on Public Street Lighting in Sapucaia do Sul, Brazil.

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Amount Raised

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Total Investors

Project Overview

Sapucaia do Sul is a municipality in the metropolitan region of Porto Alegre. The region is famous for its production of steel, metallurgy, beverages and textiles. The project seeks to modernize the city’s public lighting infrastructure by replacing its 12,000 public lighting points with Light Emitting Diode (LED) technology. Adoption of LED will address the twin challenges of high energy consumption and maintenance costs associated with conventional lighting. In addition, 20% of the modernized lighting points will be equipped for remote management, enabling the measurement and dimming of these selected points. Consequently, the city expects a 60% reduction in associated expenses.

The project will follow a phased approach: the first phase aims to setup the operational structure; the second consists of modernizing the public lighting network for LED technology and implementing smart city solutions; and the third entails the operation and maintenance of the public lighting network. Notably, the municipality has in place a public lighting contribution fee, COSIP Tax, which is charged directly to the consumers’ electricity bills. This tax provides a guaranteed financial resource for the payment of public lighting services, with its own legislative regulation.

Sectors

  • Urban Infill & Public Space
US$11,985,249.93
Funding Goal
Brazil
Country
Latin America and the Caribbean
Region

Objectives

The innovation brought by the replacement of the current street lighting infrastructure to LED points generates an average saving of 50% compared to conventional lighting. Because of their longer service life and economy, LEDs provide better luminescence, leading to improvements in public safety as well as benefits in local economic activity.

– Increase in night economic activities (tourism, commerce, services);

– Improving the quality of life of the local population (use of public spaces, reduction of traffic accidents);

– Reduction of crime rates.

Progress Tracker

Phases

  • Phase 1 (Completed)

    Diagnosis: (Finished)
    - Survey of current street lighting infrastructure;
    - Diagnosis of current street lighting infrastructure;
    - Technical survey of luminescence rates, quality and compliance with legislation standards;
    - COSIP tax financial analysis.

  • Phase 2 (Completed)

    Evaluation: (Finished)
    - Schedule and activities detailing;
    - Analysis of regulatory barriers;
    - Economic and financial feasibility study;
    - Stakeholder mapping;
    - Development of Media Plan.

  • Phase 3 (Completed)

    Structuring: (Finished)
    - Market sounding;
    - Evaluation of existing technologies applicable to the project;
    - Details of investments and services;
    - Definition of performance parameters;
    - Potential location mapping for Special Street - Lighting and Project Development;
    - Structuring of the payment system and guarantees;
    - Preparation of the economic and financial feasibility model;
    - Definition of risk allocation for each part;
    - Risk identification and mitigation proposition.

  • Phase 4

    Modeling: (Finished)
    - Results of the economic and financial feasibility model;
    - Structuring of the Payment System and Guarantees;
    - Value for Money Analysis;
    Preparation of Public Consultations draft

  • Phase 5

    External Validation: (At this stage)
    - Project presentation at the Public Consultations;
    - Reply to requests for clarification;
    Preparation of project promotion proposals;
    - Road Show;
    - Mapping of key stakeholders in the project and evaluation of any Deal Breakers to the bidding process participation.

  • Phase 6

    Deployment:
    - Implementation of the necessary procedures for the Final Publication of the Bidding Process Notice;
    - Incorporation of positive reviews, beneficial to the project, in the Drafts for Public Consultation;
    - Attendance to any clarifications that may be required by those interested in the bidding process;
    - Contract Signing with the winner of the bidding process;
    - Transition from the company currently responsible for street lighting maintenance to the new Contractor;
    - Start of operations for the modernization of the public street lighting infrastructure in Sapucaia do Sul, Brazil.

Current Stage

Advanced Design: Clear funding requirements, operational feasibility. Financial model exists.

Timeline

The next project stage is the Tender process which will then be followed by contract signing once the consortium/team has been awarded the tender.

Once the contract has been signed the project-Modernization of the public lighting network- will be carried out in the first 2 years and the operation will be carried out for 11 years until the conclusion of the contract.
• Beginning of the process of modernization and technological adaptation in June 2020- June 2022
• Operation and maintenance- June 2022 to 2033
The scope considered for this concession covers the services listed below, which shall be detailed in the following sub-items:
i. Preparation of the base registry and permanent updating of the registry;
ii. Preparation of the Operation and Maintenance Plan (POM), the Modernization Plan (PM) and the Operational Demobilization Plan (PDO);
iii. Modernization and Streamlining Energy of the Public Lighting Points contained in the base registry;
iv. Implementation of the Telemanagement System;
v. Implementation and maintenance of Special Lighting in the goods defined;
vi. Implementation and Operationalization of the Operational Control Center (CCO);
vii. Execution of maintenance services for the Municipal Public Lighting Network;
viii. Operational and Organizational Structure;
ix. Execution of complementary services;
x. Periodic training of the Concession Authority team, through courses and workshops on themes related to the concession;
xi. Disclosure of the main information and documents related to the concession.

Project Milestones

Important milestones after the contract has been signed:
Within up to 360 days counted from the Contract Signing, the Concessionaire shall be responsible for proving, for compliance with Concession Milestone I:
i. Modernization Percentage of at least thirty-three percent (33%);
ii. Streamlining Energy Percentage of at least thirty-three percent (33%) of the Energy Efficiency Target;
iii. Implementation of Special Lighting in at least thirty-three percent (33%) of the locations in the Municipality;
Implementation of the Telemanagement System in all Public Lighting Points already modernized and streamlined energy, located on roads with telemanagement

Within up to 540 days counted from the Contract Signing, the Concessionaire shall be responsible for proving, for compliance with Concession Milestone II:
i. Modernization Percentage of at least sixty-six percent (66%);
ii. Streamlining Energy Percentage of at least sixty-six percent (66%) of the Energy Efficiency Target;
iii. Implementation of Special Lighting in at least sixty-six percent (66%) of the locations in the Municipality;
Implementation of the Telemanagement System in all Public Lighting Points already modernized and streamlined energy, located on roads with telemanagement;
Within up to 720 days counted from the Contract Signing, the Concessionaire shall be responsible for proving, for compliance with Concession Milestone III:
i. Modernization Percentage of at least one hundred percent (100%);
ii. Streamlining Energy Percentage of at least ninety-five percent (95%) of the Energy Efficiency Target;
iii. Implementation of Special Lighting in at least 100% of the locations in the Municipality;
Implementation of the Telemanagement System in all Public Lighting Points already modernized and streamlined energy, located on roads with telemanagement.

The scope considered for this concession covers the services listed below, which shall be detailed in the following sub-items:
xii. Preparation of the base registry and permanent updating of the registry;
xiii. Preparation of the Operation and Maintenance Plan (POM), the Modernization Plan (PM) and the Operational Demobilization Plan (PDO);
xiv. Modernization and Streamlining Energy of the Public Lighting Points contained in the base registry;
xv. Implementation of the Telemanagement System;
xvi. Implementation and maintenance of Special Lighting in the goods defined;
xvii. Implementation and Operationalization of the Operational Control Center (CCO);
xviii. Execution of maintenance services for the Municipal Public Lighting Network;
xix. Operational and Organizational Structure;
xx. Execution of complementary services;
xxi. Periodic training of the Concession Authority team, through courses and workshops on themes related to the concession;
xxii. Disclosure of the main information and documents related to the concession.

ESG Impact

Sapucaia do Sul is a municipality in the metropolitan region of Porto Alegre, with focus on industrial development and the natural beauty of its countryside. It is located just 19 km from the capital, 22 km from Salgado Filho Airport and 25 km from Porto Alegre Bus Station, giving it a privileged location in the Region. The city has a good industrial structure and working culture, factors that benefit the installation of industries and services. The production of steel, metallurgy, beverages and textile yarns are featured in the region. The city is responsible for the public lighting assets of the municipality as well as its operation and management and has approximately 12,000 light points and a monthly consumption of 734,852 kwh. City Hall is interested in modernizing its park by adopting LED (Light Emitting Diode) lighting technology, which has shown an average savings of 50% when replacing conventional lighting. Offering significantly longer service life and economy, LEDs provide better illumination for improved public safety as well as benefits in local economic activity. The project also impacts on climate change mitigation and sustainable development initiatives, as well as improving the service level of the public lighting service. In addition to the modernization of the park, 20% of the modernized points will be equipped for remote management, enabling the measurement and dimming of these selected points. As a result of the modernization of the Public Lighting Park it is also expected:

  • Increase of nocturnal economic activities (tourism, commerce, services).
  • Improving the quality of life of the local population (use of public spaces, reduction of traffic accidents)..
  • Reduction of crime rates.

Beneficiaries

All 140,000 inhabitants of the municipality.

SDG Goals

SDG 1: No PovertySDG 2: Zero HungerSDG 3: Good Health and Well-beingSDG 4: Quality EducationSDG 5: Gender EqualitySDG 6: Clean Water and SanitationSDG 7: Affordable and Clean EnergySDG 8: Decent Work and Economic GrowthSDG 9: Industry, Innovation and InfrastructureSDG 10: Reduced InequalitySDG 11: Sustainable Cities and CommunitiesSDG 12: Responsible Consumption and ProductionSDG 13: Climate ActionSDG 14: Life Below WaterSDG 15: Life on LandSDG 16: Peace and Justice Strong InstitutionsSDG 17: Partnerships to achieve the Goals

Rationale

SDG 3 – Good Health and Well-being

Some of this objective’s goals will be impacted directly or indirectly, with the change in the quality of public street lighting there is a change in some health indicators, such as the reduction of road accidents, goal 3.6, of ODS 3, which aims to reduce by 2020 halving deaths and global injuries from road accidents. Our municipality has 3 major traffic roads (ERS 118, BR 116 and BR 448) that have high vehicle flow and a significant number of accidents, especially at night, with the adequacy of luminescence through the qualification of public street lighting infrastructure, we will certainly have significant reduction in road accident indicators;

SDG 7 – Affordable and Clean Energy

The relationship between a Street Lighting PPP and this objective is direct, with the project structuring and the 100% adequacy of public street lighting in the municipality, eliminating sodium-vapor lamps, which harm the environment, as well as other aspects of the old existing structure the need for economy and preservation of the environment will be met. In addition, with the structuring of street lighting more than 65% of the population of the municipality will pay for a better quality service at a lower price, because with the new municipal COSIP tax law, the amount charged to each citizen were adjusted. The proposal meets several goals of SDG 7, highlighting goals 7.1, 7.3 and 7.5 the municipality will do its part by adapting 100% of its street lighting, making it more efficient and sustainable;

SDG  8 – Decent Work and Economic Growth

With the new public street lighting infrastructure, services that previously were not performed on the night shift due to poor lighting can be carried out, providing an increase in economic development of night activities in the city. This way, new job vacancies and opportunities will be opened, promoting local work, generating income for citizens. In addition, with better quality street lighting, workers can move more safely, as scientific studies have shown, that adequate street lighting changes the reality and quality of work of all citizens who travel around the city, as well as a better quality of life. Thus this proposal directly includes the objective 8 as follows: goals 8.3, 8.5, 8.8 and 8.9;

SDG 9 – Industry, Innovation and Infrastructure

Investments in infrastructure guarantee the economic growth and development of cities. In this perspective, the project encompasses technological innovation actions, seeking energy efficiency, social inclusion and technological progress, with a new public street lighting infrastructure not only will the lighting be adequate, but free access to the Internet will be made available through points in different locations, providing universal access to the media and information technologies within a sustainable development. With the modernization of the public street lighting infrastructure, the following goals of objective 9 will be met: 9.1, 9.4, 9.6, 9.7 and 9.8;

SDG 10 – Reduced Inequality

Social inequalities were verified at the feasibility diagnosis stage, which consisted of unfair billing ranges previously employed on the COSIP tax, from this moment a new bill was elaborated, through fiscal adjustment and adequacy of we values, we achieved service rates of over 65% of the population of the municipality. The main goals met in this objective are 10.2, 10.3 and 10.4;

SDG 11 – Sustainable Cities and Communities

With the adequacy of public street lighting in the municipality, citizens will have better quality in public spaces and surrounding areas, increasing security rates, providing inclusive and accessible public spaces, meeting the goals 11.6, 11.7, 11.8 1 11.9;

SDG 13 – Climate Action

Currently the existing lamps in the public street lighting of the municipality produce significant aggression to the environment, assisting in the impacts on climate change, meeting the requirements of this objective, as well as goals 13.2 and 13.5;

SDG 17 – Partnerships to achieve the Goals

Through the public street lighting PPP, the municipality will have a new way of thinking about the management processes of this asset, starting to have a relationship between the public and private entities, qualifying the work processes and providing higher quality services, meeting the goals 17.14, 17.15, 17.16, 17.18 and 17.19.

Risks and Limitations

What are the key risks, constraints and dependencies related to the project?

  • Poor acceptance of the project in the public consultation / hearing for various reasons, including the low participation of other public audit authorities in the project team, or failure to address all stakeholder claims throughout the project modeling;
  • Economic and Financial Feasibility Study proposed project scope indicate higher cost than currently practiced in the municipality, even exploring the possible advisory trade revenues;
  • Project stoppage / suspension due to dissatisfaction of stakeholders and / or control bodies, as well as the election period.
  • Legislative changes necessary to implement the project;
  • Interest of investors in the project;
  • Economic stagnation due to the Covid-19 pandemic.

Risk mitigation and continuity

Considering the project will be executed under a long-term contract, its continuity is guaranteed by the Concessionaire´s performance during the 13 years. If a new government wants to discontinue the project, it must approve the law to terminate the contract and indemnify the Concessionaire.

Financing

Type of Investment

Equity and debt

Financing Structure

Public Private Partnership

Secured Investment

So far the only monetary investment we had was with the PPP Advisory Contract, signed with the Bank CAIXA EECÔNOMICA FEDERAL after we participated in a selection process in which the municipality of Sapucaia do Sul competed with all interested municipalities in Brazil, being classified in and thus participating in the partnership process. The Ministry of Regional Development (MDR) paid for 90%, around R$ 2.221.020 (US$ 530,161.25), while our municipality paid the remaining 10%, around R$ 246.780,00 (US$ 58.881,21), that corresponds to the counterpart of the contract.

Committed Government Funding

Yes. $11,985,249.93

National and Subnational Investors

US$11,985,249.93 (Originated from the COSIP tax); Committed after the COSIP tax financial analysis in Phase 1 – Diagnosis; The municipality will pay for 100% of the project over a 13-year period; Subnational level.

Committed Private Funding

No.

Support

Technical Support Required

All actors listed in the item act to promote technical support for project implementation. In addition to these, the World Bank Group’s International Finance Corporation – IFC also participates in structuring the project to bring the best international experiences to the success of this project. To take this project forward towards implementation we would also like to count on Un-Habitat’s support to publicize our project and aid us in raising funds to implement this initiative. In addition, considering that this is a pilot project proposal, we hope that through the World Urban Forum we can advance in expanding this project to other municipalities in Brazil.

Stakeholders

Governmental Buy-in

The Government will be able to support the Concessionaire in its relationship with the electricity distribution company, with other municipal bodies and with the citizens.

Other Forms of Governmental Support

The government will provide technical consultancy.

National Ministries Involved

Minister of Regional Development: Mr. Gustavo Canuto;
Secretary of the Investment Partnership Program (SPPI): Mr. José Carlos Medaglia;
General Coordinator of Concessions and Partnerships Modeling - MDR: Mr. Rodrigo Ramiro;
Special Secretariat of Investment Partnership Program Advisor (SPPI): Mr. André Arantes Luciano;
President of Caixa Econômica Federal(CEF): Mr. Pedro Duarte Guimarães

SubNational Ministries Involved

Coordination of Public-Private Partnerships Projects in the Municipality of Sapucaia do Sul / RS
Larissa Junckes

Other Entities Involved

N/A

Licenses and Permits

Yes

Updates

  • 10th February 2020

    Cities Investment Platform in progress - updates pending

  • 10th February 2020

    Project featured on the Cities Investment Platform, which was launched at the Tenth Session of the World Urban Forum (WUF10)

Supporting Documents

No supporting documents included.

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