96896 PUBLIC-PRIVATE PARTNERSHIPS BRIEFS India: Rajasthan Public Street Lighting Photo: Travis Wise/Creative Commons license, creativecommons.org/licenses/bysa/2.0 Overview Jaipur Municipal Corporation (JMC) operates and maintains over 100,000 public street lights within the city. However, the public lights system was facing problems owing to old, energy-intensive technology and a lack of capacity to operate such a large network. This resulted in low lighting levels in several parts of the city and about one in three lamps not functioning at all. This was causing serious problems for city traffic and had become a security issue for residents. In spite of the low quality services, JMC was spending a sig- nificant amount each year on electricity bills for the public lights system. JMC was keen to procure an energy efficient system, but lacked the necessary knowledge and management capabilities. Under the umbrella of a Knowledge Partnership between the Government of Rajasthan and IFC, JMC engaged IFC as the transaction advisor to structure a PPP for financing, upgrading, operating and maintaining the public lights system in Jaipur. As a result, a consortium led by a large Indian energy services company and manufacturer of LED lightswon the bid for a 10-year energy performance contract. The agreement was signed in December 2014. The winning proposal included a commitment to invest ap- proximately US $12 million for retrofitting at least 70,000 street-lamps with energy efficient LED lamps. Once completed, the project is expected to benefit 1.65 million people with improved street lighting and a reduction of GHG emissions by 36,750 metric tons/year. It will also result in $1 million per year in fiscal savings accrued to the Government due to reduced energy consumption. IFC’s advisory work was supported by DevCo. DevCo, a multi-donor program affiliated with the Private Infrastructure Development Group, is funded by the United Kingdom’s Department for International Development, the Dutch Ministry of Foreign Affairs, the Swedish International Development Agency, and the Austrian Development Agency. This series showcases how the World Bank Group supports the development and implementation of public-private partnerships. This support comes in the form of public sector loans, private sector finance, sector and transaction advice, guarantees, and output-based aid. PUBLIC-PRIVATE PARTNERSHIPS - FEBRUARY 2015 Background For these investments and services, JMC agreed to pay a share of the energy savings achieved by the ESCO. The Jaipur, the capital city of Rajasthan (a low income state state government of Rajasthan guaranteed payments to in India), is a popular tourist destination owing to its the ESCO by being party to the EPC. The agreement was vibrant history and culture. The city enjoys a large network structured to balance risks, make the project sustainable of streets, historical buildings, community spaces, and and viable, protect the rights of all parties involved, and markets. Provision and maintenance of civic infrastructure, provide measurable investment and performance objectives. including public lights, is the responsibility of JMC. JMC has high demand for social services and infrastructure, After a transparent and competitive bidding process, a which has frequently taken priority over public lighting. consortium led by SMC Infrastructures Private Ltd., a Due to a limited municipal budget, street lighting large Indian infrastructure company comprising Samudra maintenance has consisted of replacing burned-out lamps Electronic System Private Limited, a leading LED lights using existing technology to avoid introducing the costs manufacturer and Winwalk System Inc., an ESCO, associated with new technologies. However, over the was selected and awarded the project. The winning bid past few years the quality of services began deteriorating committed to achieve over 77% in energy savings of which owing to a lack of staff and technology to maintain a over 30% would be shared with JMC. The tripartite Energy large network of over 100,000 lights. There were growing Performance Contract was signed between the project concerns about safety and security within the city and the SPV (Efficient Illumination Private Limited), the Jaipur public grievance system was also incapable of handling Municipal Corporation, and the state Government of the large number of citizen complaints. JMC tried to Rajasthan in January 2015. contract out maintenance of public lights to over 20 small private sector contractors. However, these were largely World Bank Group Role “material plus labor” contracts and the monitoring of these IFC had entered into a “Knowledge Partnership” with contractors was a challenge. As a result, the desired results the Government of Rajasthan which aimed at increasing were not achieved due to the technological deadlock. private sector investment in the state, including through At the same time, JMC was incurring significant electricity PPPs. IFC’s PPP transaction advisory team was contracted costs from the public lights network. There was evidence to assist JMC in formulating the PPP transaction structure, that electricity consumption could be reduced by about preparing the tender documents, marketing the project, 50% with newer technology, but JMC and the small and conducting the bid for selecting an ESCO through a contractors lacked the technical expertise to overhaul the competitive and transparent process. The winning bidder system. It became imperative for JMC to procure the latest would be responsible for financing, retrofitting, operating technology, properly operate and maintain the network, and maintaining public lights. IFC conducted detailed provide a dedicated public grievance system, and reduce technical, financial, environmental, regulatory and legal energy consumption. JMC decided to launch a large PPP due diligence and provided JMC recommendations on program with the objective of engaging an Energy Services financing mechanisms, risk allocation, and the design of the Company (ESCO) for the provision of services in the entire tender process. city. Outcomes Project Description • Fiscal savings of $1 million per year. IFC proposed a transaction structure based on a 10 year • At least $12 million in private investments. Energy Performance Contract (EPC). The project involves • Improved streetlight services to over 1,650,000 people retrofitting the public street-lamps with energy efficient daily. lamps and their operation and maintenance. It also allowed inclusion of additional lights, if required, going forward. • Reduced Green House Gas emissions by 36,750 metric In addition to the lamps, the ESCO will install a fully tons per year. computerized centralized control and monitoring system • Enhanced safety and security of Jaipur city. as well as create a round the clock public grievance system dedicated to public lights within the JMC office. The • Replication potential throughout the country. procurement was technology neutral to enable a wide range of interested ESCOs to propose the most energy efficient system that they could provide. worldbank.org/ppp @WBG_PPP scribd.com/wbg_ppp