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• PFI contract commenced May 2003 and expires May 2028. Contract initially with
ABB Ltd but acquired by E.on Energy Solutions Ltd in August 2008.
• Continuous asset renewal programme throughout the life of the contract split into five yearly blocks (IARP / AARP Blocks 1 to 4) with each period having an end of block penalty mechanism.
• Contract delivery and performance exceeding service expectations.
• In Nov 2009 E.on raised a ‘concern’ regarding their ability to achieve the asset renewal performance target for the 2 nd Block. SCC referred to their contractual obligations.
• In July 2010 E.on formally raised their concerns and submitted a detailed reasoning inclusive of the financial impact upon their business. SCC validated and confirmed the following causes:

• End of Block 2 timeframe out of sink with annual unitary charge payment;
• £6 million over exposure against contract delivery:
• Impact of 50% intervention requirement;
• End of block asset age criteria;
• Growth from asset renewal;
• Asset renewal strategy during IARP.

• Agreed a partnership approach from the outset.
• Reviewed contract delivery expectations and defined potential areas for modernisation based upon:
• HM Treasury Guidance;
• PFI Service Specification;
• Street Lighting Innovations;
• Energy Conservation.
• Created workgroups to evaluate specific Service Standards.
• Each Party to produce a preferred savings strategy to form the basis from which negotiations could commence.
• SLT and Members informed as required at this stage.

• Contract negotiations commenced in July 2011.
• Each party established a team of representatives and aligned technical experts to assist with the process.
• Do not underestimate the demands of this stage and the need to keep SLT and legal informed throughout the process.
• SCC negotiation team remained constant throughout the process; however, E.on would call upon PFI project board directors as and when required.
• Have a clearly defined negotiation strategy and stick to it. Include options that you are willing to relinquish for the sake of effective bargaining.
• Undertake a risk assessment for each option put forward and bank offers once they are confirmed as acceptable.

st
Item
1.0
1.1
Applying HM Treasury Guidance
Implement new service standards for:
• Night time patrols
• Illuminated bollard cleaning
• Column maintenance frequencies
• Lamp change frequencies
• Photometric performance (PS No.3)
Proposal
1.2
2.0
2.1
3.0
3.1
Insurance – annual release of insurance gain share benefits
Asset Replacement Programme
Removal of end of block penalty mechanism and re-profiling of asset replacement programme to an agreed new design methodology.
Energy Saving Measures
LfS to share inherent AARP energy savings with SCC as a consequence of the new design methodology.
3.2
3.3
LfS to introduce dimming facilities for proposed asset renewals, circa 26,000 units (Invest to save strategy).
LfS retrofit dimming facilities for units previously renewed during IARP/AARP, circa 15,000 units (invest to save initiative).
Total Benefit Over Contract Term
Est Benefit
(£000)
SCC
3,780
LfS
573
1,032
5,200
395
2,244
8,024 5,200

• SLT and Member engagement for sign off to operational changes and introduction of dimming policy:
• Stakeholders;
• Community Safety;
• Road Safety;
• Public Health;
• Public Consultation;
• Delegated Approval Process (Highways Portfolio Cabinet Member)
• E.on Approval Process:
• Financial Investors;
• LfS (Lighting for Staffordshire) SPV Board Approval.
• Project sign off 16 th May 2012.

• Final agreement included for SCC legal costs and independent legal advisors appointed in June 2012.
• Ensure legal experts are focused upon primary objectives.
• Opportunity to tidy up contract anomalies.
• Legal work can be significant in order to produce final legal pack e.g.:
• Deed of Variation - PA;
• Deed of Variation - SPA;
• Deed of Novation - SPA;
• LfS Consent - ProjectCo;
• LfS Consent - HoldCo”;
• SPA Consent Notice;
• LfS Charged Documents, etc. etc. etc.
• Contract changes finally engrossed 19 th December 2012.

E.on Approval Process
Consultation
Financial
Investors
LfS
LfS Approval Granted
LfS / E.on
Appoint Legal Advisors
PFI Contract Modernisation
SCC / E.on
Benefits Realisation
Define Delivery Objectives
Business Case Development
SCC / E.on
Technical / Financial
Workshops
Final Business Case
SCC Approval Process
Consultation
SLT &
Member
Engagement
Stakeholders
Communities
Road Safety
Public Health
SCC Approval Granted
SCC / E.on
Development of Formal
Contractual Amendments
LfS / SCC
Formalise Contract
Changes
(Deed of Variation)
SCC
Appoint Legal Advisors

• Project commencement date of 1 st September 2012 previously agreed irrespective of contract legal engrossment date.
• Financial recovery process encompassed within unitary charge.
• Backdated savings released to SCC within January 2013 monthly unitary charge.
• E.on has taken the independent decision to roll out LED lanterns for all planned
AARP residential schemes. Increased savings for both parties.
• Joint annual review of street lighting specification to ensure a continuous alignment with industry developments.
• Annual report to select committee to keep members informed of progress.
• Creation of a more collaborative working environment between SCC/E.on.
• Worth the effort – ABSOLUTELEY!