Street lighting PPPs proliferating in Brazil

Authorities in another three Brazil cities tendered PPP contracts for companies to install and maintain street lighting on Friday, as the trend to outsource these services continues to grow rapidly in the country. 

The concessions offered involve supplying street lighting in the cities of Aracaju in Sergipe state, Feira de Santana in Bahia state and Franco da Rocha in São Paulo state. The contracts will cover lighting for a total population of 1.4mn people. 

The auctions took place on the São Paulo stock exchange and generated great competition, with the contracts cities attracting a total of 34 bids from different groups. The total projected investment under these three PPP contracts is 571mn reais (US$105mn).

"In recent months, various mayors contacted us asking for support to structure respective PPP models for their cities. I see a cultural change taking place, with mayors now much more open to investment from the private sector," said Tatiana Thomé de Oliveira, vice president of state-run bank Caixa Econômica Federal. 

The PPP model for street lighting in Brazil was structured by Caixa Econômica Federal and the IFC.

Others similar tenders are expected to take place in the coming months, as cash-strapped authorities look to reduce costs.

"Our portfolio already includes 14 structured concession projects in the street lighting segment that will be offered. In the remainder of this year we will offer concessions for another three cities," said Martha Seiller, head of the government’s PPI concessions and privatization program, during the Friday auction. 

According to Seiller, the PPPs to be offered this year are for Belém, capital of Para state; Campinas in São Paulo state; and Sapucaia do Sul in Rio Grande do Sul state. 

In Aracaju, 58,000 lampposts will be modernized, with an estimated cost of 257mn reais. The infrastructure will serve 657,000 residents of the capital of Sergipe state. A consortium called Consórcio Conecta Aracaju won the contract. 

In Feira de Santana, a city of over 600,000 people, 61,000 street lights will be upgraded with new technology, and 23% of this total will be managed by computerized systems. This will involve investments of 257mn reais. The consortium Conecta Feira was the winner. 

Meanwhile, consortium Luz em Franco da Rocha won the PPP for Franco da Rocha and will replace 10,400 street lights at a total cost of 57.9mn reais, reducing energy expenses by 64.8%.