welcome! An overview of the regulatory framework for PPPs with specific analysis in Hospital PPPs by Tomurcuk EROGLU

Transcription

1 welcome! An overview of the regulatory framework for PPPs with specific analysis in Hospital PPPs by Tomurcuk EROGLU

2 Why PPPs? Investment structures Healthcare In Numbers Hospital Campus PPP BLT Model Legal Framework Concession Terms and Process Services Structure Terms of Contracts Bankability Risks and How to Mitigate? Status of Hospital Campus PPP Content

3 Why PPPs? Increase in the need for public investments Political motivation to provide public services Increase in the demand for quality and useful projects Deliver on time within budget (Istanbul Ataturk Airport vs. Bolu Tunnel) Use Financial & Operational Capabilities of Private Sector Minimum impact on short term State budget

4 Investment Structures in Infrastructure Tender Methods Investment Model Legal Instruments Tender Methods Closed Bidding / Open Bidding / Negotiation / Bargaining Investment Model Build Operate Transfer (BOT) Build Own Operate (BOO) Build Lease Transfer (BLT) Transfer of Operation Rights (TOR) Legal Instrument Concession Agreement Private Law Agreement

5 Healthcare In Numbers Healthcare Facts of Turkey Healthcare providers: Ministry of Health (MoH), Universities and Private Sector MoH provides 2/3 of hospitals and bed. Turkey is a high growth healthcare market. Healthcare spending increased to $44B in 2008 from $12B in Yearly patient visit has doubled between 2004 to However bed numbers increased annually 2.8% since Germany France Poland Bulgaria Switzerland Greece UK Portugal Spain US Turkey 27

6 Hospital Campus PPPs The 10billion investment in the health campus program in Turkey is currently the largest pipeline of PPP hospitals anywhere on the globe. The MoH, with the support of the World Bank, is implementing this 46,782 bed Health Transformation Program, aiming to: renovate healthcare infrastructure throughout Turkey to meet increasing healthcare demands, bring together smaller hospitals under several integrated health campuses, increase the quality and efficiency of the health care service, and creating a new modern and efficient public health infrastructure.

7 Tender Phase Build Lease Hospital Campus PPPs - BLT Model Projects are awarded through one of the following procedures: Open Bid Procedure (preferred) Open Bid Procedure among bidders selected through a pre-qualification process Negotiated procedure (only allowed in a limited set of circumstances) The project company (SPV) secures the financing required for the completion of the project. If the land on which the facility will be built is treasury-owned, the MoH arranges for the land to be used by the SPV, free of charge, during the concession term. During the investment period, the transactions between the MoH and the SPVare exempt from the stamp tax. Once the facility is built, the MoH will lease the facility for a maximum period of 25 years. The MoH will pay the SPV a yearly lease adjusted annually on the basis of the Turkish Producer Price Index and the Turkish Consumer Price Index. During this period, the SPV also has the right to operate non-medical facilities. Transfer At the end of the concession term, SPV returns the facilities to the MoH in good working condition and without any encumbrances. If the land on which the facility is developed is not treasury-owned, the MoH takes necessary steps to adequately compensate related parties.

8 Hospital Campus PPPs Legal Framework Law on Construction of New Facilities, Renovation of the Existing Ones and Procurement of Services under the Public and Private Partnership Model by the Ministry of Health (PPP Law) In addition to the PPP Law, the Ministry of Health enacted the Implementation Regulation on Construction of New Facilities, Renovation of the Existing Ones and Procurement of Services under the Public and Private Partnership Model by the Ministry of Health (Regulation)

9 Project Term & Overall Process SPV signs Project Agreement with MoH The SPV is required to provide at least 20% Equity Investment Period starts by Site Delivery. Concession Period commences with financial closing. Concession Agreement Term: 28 years 3 years 25 years Investment Period Operation Period SPV is not responsible of consumables & medicine used in medical treatment SPV provides consumables used in support services Market Testing protects SPV to level service prices with market conditions All payments shall be made in 7 days from due date Change of control in SPV is restricted in the Concession Agreement

10 Structure of Healthcare PPP s & Services P1 - MANDATORY SERVICES ESTATE EXTRAORDINARY MAINTENANCE UTILITIES OTHER MEDICAL EQUIPMENT SUPPORT FURNITURE GROUNDS & GARDEN (LANDSCAPING) PEST CONTROL P2 - OPTIONAL SUPPORT SERVICES CARPARKING CLEANING HIMS (IT) SECURITY PATIENT GUIDING / PORTERING / RECEPTION / HELPDESK LINEN (LAUNDRY) CATERING WASTE MANAGEMENT LABORATORIES IMAGING STERILIZATION AND DISINFECTION REHABILITATION volume - support volume - support volume - support volume - medical support volume - medical support volume - medical support volume - medical support

11 STRUCTURE CHART Hospital campus PPPs MoH Direct Agreements Lenders Services and Facilities Availability Loan Agreements Monthly Service Payments & Quarterly Lease Payments SPV Shareholders Agreement Sponsors O&M Fee Payments O&M O&M Agreement EPC Contract Construction Price Payments EPC Service Subcontractor Service Subcontractor EPC Subcontractor EPC Subcontractor

12 Hospital Campus PPPs Terms of Contracts Under the PPP Law and Regulation Implementation contracts will not be concessions but private law contracts Governing law will be Turkish law Dispute forum will be Turkish courts Recourse to arbitration will be possible The duration of the contract shall be a maximum of 30 years (excluding the investment period) Monthly payments for the services Possibility to work with subcontractors for services The fundamental elements of the contract cannot be ammended

13 Hospital campus PPPs Bankability - Risk Allocation and Mitigants Construction& operation risks: Transferred to 3rd parties (EPCs) Market Risk: No/very limited market risk, since models rely on MoH s Availability Payment Payment Risk: Direct agreements with MOH where payments are guaranteed by MoH. Operational Risk: Lenders are granted with step-in rights. Currency & inflation risk: Covered by quarterly adjustments in Availability Payments Termination risk: Covered by MoH termination payment regime

14 Hospital campus PPPs Status Chart Projects Beds Projects Tendered (Contract Signed / Under Construction) 24,307 Projects to be Tendered (Tender Phase) 16,575 Pipeline 5,900 TOTAL 46,782

15 thank you!