Page 48 - U4SSC Compendium of practices on innovative financing for smart sustainable cities projects

SDG 17: Partnership between local government and private railway companies.

People-first elements

• Access and equity: The tram system integrates the north side of Longhua district into the
city’s metro network and significantly eases commuting difficulties to promote equity for local
inhabitants in terms of metro service. This project provides the citizens with convenient, safe,
economic and environmentally friendly railway transit services.

• Use of smart technology: The train operation is controlled by an intelligent (cloud platform)
control system, which allows the dispatching centre to control the two signals (traffic and tram
signals) across the junction, thus ensuring safety for passengers. The system supervises the
operation of the track area and stations in real time, ensuring traffic priority to the tram at
crossings.

• Environmental sustainability: The tram is powered by a supercapacitor, which can be recycled
after eight to 10 years of service. It saves approximately 30–40 per cent electricity consumption
in comparison with a conventional electricity-driven train. The line track is covered by green
grass, and trees are planted alongside to build an ecology landscape, effectively reducing
carbon emissions and urban noise.

Financial information

The project construction used a concession model, managed and franchised for 20 years and open
to public tender, with a settlement price of RMB 2.54 billion (approximately USD 390 million) for
the winning contract document. The project total investment included RMB 1.31 billion (USD 200
million) for construction, RMB 860 million (USD 130 million) for device procurement and renewal,
and RMB 390 million (USD 60 million) as subsidy for the passengers/revenue gap. The government
approved an initial fare of RMB 2 (0.30 USD) for the line trip, while advertising and commercial
operations along the line have accounted for 4 per cent of total operational income.

The public tender for the project investment covers the construction cost and the cost of the
20 year-concession operations (including taxes), which will be shared by the successful bidder
according to the winning contract price and contract terms. The investment is split by the partners
according to their shareholdings. The project has outstanding socially beneficial properties; the
financial internal rate of return is limited to 2-2.5 per cent of the winning contract price for the
concessionaire.

Payback terms: The project is paid for through ticketing and operating revenues (advertising etc.).
The concessionaire is responsible for marketing and promotion to attract passengers. Any increase
or decrease in passenger flow, which may bring about change of the fare cost during the operating
period, will be in accordance with the winning contract document and the operating supervision
agreement document.

36 Compendium of practices on innovative financing for SSC projects | January 2023