PPP will build and operate the Line 6 of Metro SP

The Line 6-Orange of São Paulo metro, which will connect the western and central areas of the city, will be built and operated by the private sector through a Public Private Partnership (PPP). The investment model will be used for the first time in a São Paulo metro piece of work. Line 4-Yellow is operated by the private sector, but is being built by the State. The investment for the construction of the Orange Line reaches US$3.92 billion.

According to the lieutenant governor of the State and chairman of the Management Council of PPP, Guilherme Afif Domingos, the PPP of the Orange Line envisages that the winning company invests 20% of its own capital, receives up to 30% of financing and has 50% of consideration from the State, through the issuance of debentures.

The State will also be responsible for the decrees of public utility for property to be expropriated for the construction of the line and stations. It is expected for the project a rate of return of 7% to 8% for the investor.

Afif says that he waits for the provisional measure from the federal government, which will determine the PPP tax relief from PIS and Cofins. This is important for the feasibility of the project. We already guarantee the exemption from state taxes. Thus, the purchase of equipment, which is taxed at 18%, will be exempted.

Galvão-Somague Engenharia, Odebrecht and Queiroz Galvão has already submitted projects for work. Camargo Corrêa, Mitsui, Constran and Andrade Gutierrez has also showed interest in the project and still can participate in the competition. In August, there will be a public hearing on the project. The release of the notice to bid is scheduled for January 2013.

Line 6 – Orange will connect the district of Brasilândia, in the west area, to São Joaquim station in the central area, where it will have a connection with Line 1-Blue, which connects the north and south areas of the city. It will have 16 kilometers long and 15 stations. The anticipated demand for the line is 640 thousand passengers per day.

Initially, the metro expected that work would begin in the second half of this year and be completed in 2018, but there was a delay in preparing the project, so the start date now is 2013. The PPP envisages six years to complete the line (2019) and operation for more 19 years, totaling a 25-year contract.