Healthcare PPP Projects TURKEY
TABLE OF CONTENTS HEALTHCARE FACTS - TURKEY GENERAL INFORMATION - MoH PPP BANKABILITY ISSUES PAYMENTS RISK ALLOCATIONS TENDER INFO KAYSERI PPP PROJECT MANISA PPP PROJECT KONYA PPP PROJECT
HEALTHCARE FACTS TURKEY PPP
HEALTHCARE FACTS - TURKEY Healthcare in Turkey is provided by the Ministry of Health, Universities and Private Sector. The Ministry of Health provides 2/3 of hospitals and beds in Turkey. By 2010 Turkey had 1,439 hospitals and 199,950 beds. Since 2002 the hospital and bed numbers had increased at 2.8% a year on average, which is almost the double of Turkey s population growth rate. However, there is still a significant investment need in the sector. While beds per 10,000 people were 26.9 in 2009, it was 27.1 at 2010. On the other hand, this figure was 48 for Greece, 66 for Poland and 83 for Germany. Number of Beds per 10,000 people 83 71 66 65 53 48 34 34 32 31 27 Germany France Poland Bulgaria Switzerland Greece UK Portugal Spain US Turkey Source : WHO, Turkish Sta4s4cs Ins4tute, Ministry of Health 4
HEALTHCARE FACTS - TURKEY One of the Fastest Growing Health Care Sector in the World. Around 313 million patients in a year. CAGR(Compound Annual Growth Rate) of 11,9% since 2004. Health care spending since 2008 have reached to 44 billion USD, with a CAGR of 24% since 2002. 12 Health Care spendings 2002 2008 (billion dollars) 44 39 31 26 21 16 % GDP Spending for Health Care ~ 6.1% in 2008, Room for Improvement when compared to neighbour counties: Greece 9.7%, Hungary with 7.3% Turkey developed important legislative changes between 2002-2013 in the health sector. Social Security Institutes have merged. New PPP Law passed from Parliament. 2002 2003 2004 2005 2006 2007 2008 PaQent Numbers Turkey (2004 2010) 2004 2005 2006 2007 2008 2009 2010 CAGR OutpaQent 152.9 187.3 217.5 249.1 273.7 295.3 302.9 12.1% InpaQent 6.4 7.0 7.8 8.7 9.7 9.9 10.5 8.6% Total 159.3 194.3 225.3 257.9 283.4 304.2 313.4 11.9% Source: Ministry of Health of the Republic of Turkey, Turkish Sta4s4cal Ins4tute 5
Ministry of Health PPP Program PPP
GENERAL INFORMATION MoH PPP Administration : PPP Department of Minisrty of Health (MoH) (www.ppp.gov.tr official website) Aim of the Program : Renovation of the insufficient healthcare infrastructure Bringing together small hospitals under one campus Increased service quality and efficiency Ministry of Health allocates land and basic features Concession agreement length : 2-3 years of investment period (subject to project size) 25 years operation 7
LEGAL FRAMEWORK MoH PPP Ø In 2005, the Additional Article 7, which enables PPP projects to be carried out in the health sector, has been added to the Health Services Principal Law (Law No. 3359) published in the Official Gazette dated 15 May 1987 (the "Health Services Principal Law"). Subsequently, the Regulation on the Construction of Healthcare Facilities on a Build-and-Lease Basis and the Restoration of the Services and Areas in These Facilities Other Than Medical Service Areas on a Restore-and-Operate Basis (Council of Ministers Decree No. 2006/10655) (the "Regulation"), based on the Additional Article 7 of the Health Services Principal Law, entered into force on 22 July 2006. Ø Upon the realization of the increasing importance of the PPP projects in the Turkish market, the Administration started to work on a draft law for healthcare PPP projects, setting out the principles regarding the realization of the health facilities within the framework of the PPP model in the health sector. Ø Following the acceptance of this draft PPP law by the Parliament and approval of the President, the draft PPP law has been published in the Official Gazette on 9 March 2013 and became the law numbered 6428 entitled the Law Regarding the Procurement of the Construction, Renovation of the Facilities and Obtainment of Services Under Public Private Cooperation Model by the Ministry of Health and Amendments to be Made on Some Laws and Decrees in Force of Law (the "New PPP Law"). 8
STRUCTURE OF THE PROJECT PPP
STRUCTURE OF THE PROJECT SPV provides the design, construction works, medical devices/equipment and furniture for the health campus. Services other than the Medical Treatment provided by SPV MoH provides health services, takes all responsibility of medical treatment. MoH focuses on Medical Treatment only. 10
STRUCTURE OF THE PROJECT Direct Agreement Services and Facilities Availability Loan Agreement Monthly Service Payments & Quarterly Lease Payments Shareholders Agreement O&M Fee Payments O&M Agreement EPC Contract Construction Price Payments 11
BANKABILITY ISSUES PPP
BANKABILITY ISSUES The SPV is only responsible for the initial investment. Renewals of medical equipment and furniture are undertaken by MoH. The SPV will be only responsible for the delivery of the first set of all medical equipment and furniture as set out in the Project Agreement The renewal of the medical equipment and the furniture will be handled and provided by the Ministry The maintenance under Furniture and Medical Equipment Support Services will be carried out by the SPV 13
BANKABILITY ISSUES ü Lenders have been granted STEP-IN RIGHTS ü Senior Debt Floor payable by MoH on termination by Project Company default ü Lenders sign Direct Agreements with the MoH. ü ICC International Arbitration for dispute resolution ü No Insurance risk (Insurance costs and Non-Insurability risk taken by the Administration) 14
PAYMENT MECHANISM PPP
PAYMENTS AVAILABILITY PAYMENTS NON- VOLUME SERVICES REVENUES SERVICE PAYMENTS VOLUME BASED SERVICES Medical Support Support COMMERCIAL REVENUES 16
PAYMENTS Availability Payments Availability payments account for around 90% of EBITDA Collected indpendent of hospital occupancy rates. Service Payments Non- Volume services independent of volume, occupancy, consumpdon Volume Based Services, minimum amount guaranteed by MoH. Commercial Revenues Less than 2% of total turnover, where 3rd Party risk is taken 17
AVAILABILITY PAYMENTS o Guaranteed by MoH o Payable quarterly in advance by the MoH and denominated in Turkish Lira o Adjusted quarterly by InflaQon and DevaluaQon o ProtecQon against : ü InflaQon ü DevaluaQon (100% coverage) (87.5 % coverage ) 18
SERVICE PAYMENTS 20 support services will be provided by the SPV; 13 services are non- volume and 7 are volume services. Service payments will be paid monthly by the MoH. For the volume based services, the MoH guarantees for certain volumes. For services rendered for an occupancy rate above such threshold the MoH will pay a discounted unit price The service payments will be adjusted with inflaqon annually Market Test: In order to ensure and maintain the compeqqveness of the price, a market test will be conducted for each service every 5 years, except for the Extraordinary Maintenance Service. Capital intensive and specialized services such as imaging, lab, etc. are assumed to be outsourced (sub Service Agreement entered into by the Operator and sub- contractors). The remaining services will be provided directly by the O&M co. 19
SERVICES SERVICES CATEGORY MARKET TESTING ESTATE non- volume every 5 years EXTRAORDINARY MAINTENANCE non- volume N/A UTILITIES non- volume every 5 years FURNITURE non- volume every 5 years GROUNDS & GARDEN (LANDSCAPING) non- volume every 5 years OTHER MEDICAL EQUIPMENT SUPPORT non- volume every 5 years PEST CONTROL non- volume every 5 years CARPARKING non- volume every 5 years MATERIALS MANAGEMENT non- volume every 5 years CLEANING non- volume every 5 years HIMS ( IT ) non- volume every 5 years SECURITY non- volume every 5 years PATIENT GUIDING / PORTERING / RECEPTION / HELPDESK non- volume every 5 years LINEN (LAUNDRY) volume - support every 5 years CATERING volume - support every 5 years WASTE MANAGEMENT volume - support every 5 years LABORATORIES volume - medical support every 5 years IMAGING volume - medical support every 5 years STERILIZATION AND DISINFECTION volume - medical support every 5 years REHABILITION volume - medical support every 5 years MoH takes responsibility for all Medical Treatments 20
RISK ALLOCATION & MITIGANTS PPP
RISK Flow-Down RISK TRANSFER FLOW PROJECT PUBLIC SPV EPC O&M 22
RISK ALLOCATION Construction Period RISK MITIGATION Land Issue All risks arising out of the land will be under the responsibility of the Administra4on. Superficies agreement has been also executed. The third par4es allega4ons related to the land shall be se]led by the Administra4on. Permits/ Planning The Administra4on is responsible for planning and zoning. In case of any failure to obtain the permits without Project Co s default, the Administra4on shall reimburse the financial costs of the Project Co and the construc4on period shall be extended accordingly. The construc4on permit shall be flowed down to the EPC Contractor. Design Design is agreed in sufficient detail prior to the award of the contract. Furthermore financial close and technical due diligence for the banks confirm that the design is appropriate. All design risks shall be also flowed down to the EPC Contractor. 23
RISK ALLOCATION Construction Period RISK MITIGATION CompleQon Risk The comple4on risk of the facili4es will be flowed down to the EPC Contractor. Delay Risk In case of a delay at the comple4on of the Project, the Project Co will have to submit bonds for delay- liquidated damages for each phase. If Project Co will achieve the Final Comple4on, then such bonds will be returned by the Administra4on without any set off. The bond requirement for delay liquidated damages shall be flowed down to the EPC Contractor. Furthermore, a long stop date is s4pulated at the Project Agreement so that the Project Co shall be en4tled to complete the Project within such long stop date. Acceptance & Tests The acceptance of the Project shall be made by the Administra4on. During the construc4on period, the Administra4on will be en4tled to inspect the construc4on works. The Administra4on appointed a JV as its supervisor for the construc4on works. The acceptance risks shall be flowed down to the EPC Contractor. 24
RISK ALLOCATION Construction Period RISK MITIGATION EPC Contractor default risk Environmental VariaQons If the EPC Contractor becomes insolvent and cannot con4nue the Project, then there will be ability to step- in and replace the EPC Contractor without a Project Agreement termina4on. Sa4sfactory levels of performance bonds and payment reten4ons to cover cost of disrup4on. The Project is exempted from the EIA procedure under the Turkish legisla4on provided that the Project Co. prepared an environmental and social impact assessment report in line with the IFC s guidelines. The EPC Contractor and O&M Company shall follow this report during the term of the Project. Before the financial closing, the Administra4on shall issue a single varia4on order up to the 20% of total investment cost. Therefore, during the construc4on period, the Administra4on shall not be en4tled to issue any further varia4on order. 25
RISK ALLOCATION Operation Period RISK MITIGATION OperaQonal performance All services and risks related to the services will be flowed down to the O&M Company. The Administra4on cannot apply both availability or services failure points for a single event. Guaranteed Payments Payments Administra4on guarantees for Availability Payments and Services Payments and the minimum quan4ty for the volume based services. Availability Payments shall be made by the Administra4on at the beginning of each quarter. The availability payments shall be adjusted quarterly inline with infla4on and deprecia4on of Turkish Lira. Service Payments shall be made by the Administra4on in every month. The Availability Payment and Service Payments shall be adjusted annually inline with infla4on. 26
RISK ALLOCATION Operation Period RISK MITIGATION Life Cycle of the Equipment The Administra4on shall be responsible for the life cycle of the medical equipment. Market Tests The market test procedure is well defined at the Project Agreement and savours the Project Company. In case the Project Company will loose a service aher the market tests, then the Administra4on shall pay 5% of the such service payment to the Project Co as its overhead cost. Change in Law Change in law is to be dealt with through contract adjustment and the defini4on of the Administra4ve Prac4ce can be changed in order to secure any cost impact of administra4ve prac4ce. The Project Co shall be en4tled to claim a varia4on in case of change in law. Unavailability of Insurance In case of any unavailability of insurance, the Project Co shall be exempted from its insurance obliga4on un4l such insurance will be available again in the insurance market. Administra4on shall not be en4tled to terminate the Project Agreement due to such unavailability of the Project Company s insurance liability. 27
RISK ALLOCATION Operation Period RISK MITIGATION ExpropriaQon and Project NaQonalizaQon Force Majeure Expropria4on and project na4onaliza4on issues addressed in the Project Agreement will be an Administra4on event of default. In case of a Force Majeure event las4ng for 6 months, the Project Agreement can be terminated by the Par4es. In such termina4on, the Administra4on shall pay the senior debt and equity without any deduc4ons. Suspension In case of suspension, the Project Agreement can be terminated by both Par4es. In such termina4on, the Administra4on shall pay the senior debt and equity without any deduc4ons. O&M Company s Default Ability to step- in and replace service provider without the Project Agreement termina4on is core security for the banks. Sa4sfactory levels of performance bonds and payment reten4ons to cover cost of disrup4on. Project Agreement TerminaQon The termina4on events are limited and there is a remedy period for each defaults of the Project Co. In case the Project Agreement is terminated due to the Project Co s default, the Administra4on shall pay the senior debt and equity without any deduc4on. 28
RISK ALLOCATION Operation Period RISK MITIGATION AdministraQon s Default If the Project Agreement is terminated due to Administra4on s default or the Project Agreement is terminated without any jus4fiable reasons, then the Administra4on shall pay senior debt including all hedging costs, financial costs, breakage costs, penal4es and up to 10% of the loss of profit of the equity investor. ArbitraQon The Project Agreement and Direct Agreement with the banks shall be governed by Turkish law and will be subject to ICC arbitra4on procedures. The arbitra4on shall be held in Istanbul in the English language. Assignment The Project Co shall be en4tled to assign the payments and insurance proceeds to the lenders. Direct Agreement The Administra4on shall sign a direct agreement with the Lenders and the step- in and step- out rights of the Lenders will be regulated under this agreement. Administra4on shall not be en4tled to terminate the direct agreement without the approval of the Lenders. Should the direct agreement is terminated then a compensa4on for such termina4on shall be paid to the lenders. 29
TENDER PRODECURE & INFO PPP
TENDER PROCEDURE Stage I: All Interested Parties Prequalification First Bid Short Listing Stage II: Short Listed Groups Final Bid Dutch Auction Stage III: Awarded Bidder Negotiations Contract 31
PROCEDURE of the AWARDED BIDDER Due Diligence Contract Negotiations Developing Design Obtaining License 90 Days Construction Period (2-3 years) Operation Period (25 years) Awarded Bidder Signing of Contract Design Approval Site Delivery Commencement of Operation Sponsor SPV Financial Close 32
MoH PPP PROJECTS - TURKEY Project Name Beds Construction Area Awarded Bidder Projects Under Construction Kayseri Integrated Health Campus 1583 446.012 YDA Group Inso Contract Signed Ankara Etlik Integrated Health Campus 3566 1.071.885 Astaldi Türkerler Ankara Bilkent Integrated Health Campus 3662 1.129.300 IC İçtaş Dia Holding FZCO İstanbul İkitelli Integrated Health Campus 2682 817.377 Emsaş - PBK Architects Yozgat City Hospital 475 128.119 Sıla - Şentürkler - Rönesans Contract Signing Process Konya Karatay Integrated Health Campus 838 225.125 YDA Group Manisa City Hospital 558 150.692 YDA Group Elazığ Integrated Health Campus 950 207.000 Sıla - Şentürkler - Rönesans Gaziantep Integrated Health Campus 1867 552.054 Samsung C&T - Kayı - Salini Negotiation Process Mersin Integrated Health Campus 1253 328.236 IC İçtaş Adana Integrated Health Campus 1550 436.749 Sıla - Şentürkler - Rönesans Bursa Integrated Health Campus 1355 366.045 Sıla - Şentürkler - Medical Park İzmir Bayraklı Integrated Health Campus 2060 575.030 Türkerler - Gama Holding Isparta City Hospital 728 178.143 Akfen İnş. Tur. Ve Tic. A.Ş Kocaeli Integrated Health Campus 1180 335.648 Türkerler - Gama Holding Bidding Process Eskişehir City Hospital 1060 291.000 N/A TOTAL 25.367 beds 6.611.767 sqm 33
KAYSERI INTEGRATED HEALTH CAMPUS PPP
KAYSERI INTEGRATED HEALTH CAMPUS
KAYSERI PROJECT n Client : Republic of Turkey, Ministry of Health Department of Public Private Partnership n Project Name: Construc4on Works and the Provision of Products and services for Kayseri Integrated Health Campus through Public Private Partnership Model n LocaQon: Kayseri, TURKEY LocaQon of the Project Marmara Region Aegean Region Ankara Mediterranean Region Black Sea Region Central Anatolia Region Malatya Kayseri Niğde On- going hospital construc4on sites of YDA East Anatolia Region Southeast Anatolia Region Muş Loca4on of the project & on- going shopping mall and residen4al construcion site of YDA n ConstrucQon Period : up to 3 years n n n n n OperaQon Period : 25 years The SPV will provide Financing, Design & Build, Medical Devices and other equipment for the health campus. Commercial areas, in the hospital and the campus, will be constructed and operated by the SPV for 25 years. The SPV will also undertake the provision of support services in the facili4es including imaging, laboratory and other medical support services as well as informa4on processing, laundry, housekeeping, security, catering services, and the repair, maintenance and opera4ng works of the buildings. Three hospitals with a total of 1423 beds will be closed down in Kayseri when the Health Campus Project commences opera4on. 36
KAYSERI PROJECT n The Health Campus Project will cover an investment with a bed capacity of 1,583 beds: n 1083 beds General Hospital ; n 200 beds for Physical Therapy and Rehabilita4on ; n 200 beds for Psychiatry ; n 100 beds for High- Security Psychiatry n Construc4on area: 384.295 sqm (ASer the variadon order construcdon area is esdmated to be 446.021 sqm) 37
MANISA EDUCATION & RESEARCH HOSPITAL
MANISA PROJECT n Client : Republic of Turkey, Ministry of Health Department of Public Private Partnership n Project Name: Construc4on Works and the Provision of Products and services for Manisa Educa4on and Research Hospital through Public Private Partnership Model n LocaQon: Manisa, TURKEY LocaQon of the Project Marmara Region MANİSA Aegean Region Ankara Mediterranean Region Black Sea Region Central Anatolia Region Niğde East Anatolia Region Southeast Anatolia Region n ConstrucQon Period : 2 years n n n n OperaQon Period : 25 years The SPV will provide Financing, Design & Build, Medical Devices and other equipment for the health campus. Commercial areas, in the hospital and the campus, will be constructed and operated by the SPV for 25 years. The SPV will also undertake the provision of support services in the facili4es including imaging, laboratory and other medical support services as well as informa4on processing, laundry, housekeeping, security, catering services, and the repair, maintenance and opera4ng works of the buildings. 39
MANISA PROJECT n Bed Capacity : 558 beds: n ConstrucQon area: 152,000 sqm 40
KONYA KARATAY INTEGRATED HEALTH CAMPUS
KONYA KARATAY PROJECT n Client : Republic of Turkey, Ministry of Health Department of Public Private Partnership n Project Name: Construc4on Works and the Provision of Products and services for Konya Integrated Health Campus through Public Private Partnership Model n LocaQon: Konya, TURKEY LocaQon of the Project Marmara Region Aegean Region Ankara Mediterranean Region Black Sea Region Central Anatolia Region KONYA Niğde East Anatolia Region Southeast Anatolia Region n ConstrucQon Period : 3 years n n n n OperaQon Period : 25 years The SPV will provide Financing, Design & Build, Medical Devices and other equipment for the health campus. Commercial areas, in the hospital and the campus, will be constructed and operated by the SPV for 25 years. The SPV will also undertake the provision of support services in the facili4es including imaging, laboratory and other medical support services as well as informa4on processing, laundry, housekeeping, security, catering services, and the repair, maintenance and opera4ng works of the buildings. 42
KONYA KARATAY PROJECT n Bed Capacity : 838 beds: n ConstrucQon area: 225,125 sqm 43
THANKS FOR YOUR KIND ATTENTION 44