Major savings for the municipality of Brøndby by repurchasing and inviting tenders for street lighting contract

The Municipality of Brøndby has recently conducted a lengthy process of negotiations in connection with a repurchase and call for tenders for operation as well as maintenance and renovation of the municipality's street lighting installations. Horten has assisted the municipality throughout the process, and the major savings may be obtained from 1 January 2016.

THE PROCESS in the municipality of Brøndby

A number of the municipalities in Denmark, including the Municipality of Brøndby and Hovedstadens Belysningssamarbejde (15 municipalities in the capital), are in the process of repurchasing, negotiating and inviting tenders for the public street lighting installations from the private utilities which today own the municipalities' street lighting installations.

The purpose of repurchasing and inviting tenders is that the municipality will be the owner of the public lighting installations and may invite tenders for operation, maintenance, modernisation, new installations, separation and implementation of new Smart City technologies and thereby obtain the major savings in the area.

Negotiations and repurchase
For the Municipality of Brøndby, the repurchasing process began in 2014. The political motivation for the decision was the expectation of obtaining major operating and renovation savings, but especially the municipality's wish to obtain increased freedom to implement modernisations and energy optimisation of the system.

The negotiations were finalised in 2015 when the municipality terminated the FKKA framework agreement, which is the overall framework agreement for street lighting entered into between Foreningen af Kommuner i Københavns Amt (later discontinued) and Nesa (later DONG Energy A/S) in 2005, with a view to taking over the street lighting installations as of 1 January 2016.

The Municipality of Brøndby has further, as part of Hovedstadens Belysningsnetværk, coordinated the municipalities' cooperation and common strategies for the negotiations. The municipalities in Hovedstadens Belysningsnetværk have all worked on the basis of the same contract, as part of the FKKA framework agreement.

Invitation to tender for operation, maintenance and renovation
Concurrently with the negotiations, the Municipality of Brøndby has prepared an invitation to tender for operation, maintenance and renovation of the street lighting installations with a view to entering into a contract with a new supplier. As part of the preparation, the municipality initiated a technical examination of the state and age of the installations and the possibilities of replacing the existing fittings with new LED technology. The new LED technology is expected to provide a potential for major energy savings and further reduce the yearly operating and maintenance costs as a consequence of a longer service life and service intervals.

The Municipality of Brøndby has entered into a contract and started the new cooperation as of 1 January 2016.

Future savings
The Municipality of Brøndby expects future yearly savings of at least DKK 4 million. The savings will be even greater when the renovation projects are completed and the old bulbs have been replaced by energy-efficient LED bulbs.

Horten has assisted the Municipality of Brøndby and Hovedstadens Belysningsnetværk in the negotiation processes and drafted model tender contracts and final tender documents for the purpose of the future tender procedures.

EXAMPLE OF THE SAVINGS

A municipality pays for 10,000 fittings within the borders of the municipality. The present average price is DKK 450-550 per fitting p.a. With the new prices of approx. DKK 70-150 per fitting p.a., the savings potential is 65-85 %, which is equivalent to savings of DKK 3-4.8 million p.a.

contacts

Andreas Christensen

Partner

Louise Hilton Saggau

Attorney