KPPIP Support Facility
December 20th , 2016
Basic Concept of Availability Payment and Case Study in Japan
Table of Contents
1. Basic Concept of Availability Payment
2. Case Study in Japan
2
Two Types of PPP Project
3
Project Company User Pay (Typical BOT)
Availability Payment
Users/Beneficiaries
Project Company
Users/Beneficiaries
Service Tariff/Fee
GCA
Service
AP
Tariff/Fee
PPP TYPE SERVICE and REVENUE DEMAND RISK
Typically, demand risks rest with PRIVATE SECTOR
Typically, demand risks rest with PUBLIC SECTOR
CharacterisTcs of Availability by Sector?
4
Sector CharacterisIcs of Availability Payment Criteria
1. Electricity Power plant is ready to generate electricity
Based on generaTon capacity
2. Toll Road Road lanes are available for road users
Based on number of available lanes
3. Water Supply Water treatment plant is ready to treat water
Based on treatment capacity
4. Public Hospital Public hospital facility spaces are available with supporTng services
Based on available space area with supporTng services
5. Public Housing Public housing facility spaces are available with supporTng services
Based on available space area with supporTng services
CharacterisTcs of Availability Payment Scheme
5
ConvenIonal Scheme AP Scheme Number of Contracts Several (Design, ConstrucTon, OperaTon,
Maintenance) Only One
(PPP/AP Contract)
Typical Contract Year ConstrucTon (1-‐3 years) Maintenance (Every year)
10-‐30 Years
Typical Risk AllocaTon Public Risks (ConstrucTon, O&M, Demand, etc) are transferred to Private
Financial Source for ConstrucTon
Public Private
Service SpecificaTon and Monitoring
Input SpecificaTon and Public Sector Monitoring
Output SpecificaTon and Performance Monitoring with Self Monitoring based on
pre-‐agreed Parameters
Fiscal Burden/ Payment Schedule
Top Heavy
Flat and Pay as Service Delivery
Amount ($)
Time
Amount ($)
Time
ConstrucTon OperaTon ConstrucTon OperaTon
ConvenIonal Scheme
AP Scheme
• Top heavy financial burden • ConstrucTon overrun risk and Tme overrun risk born by public sector
• O&M cost over run risk and service delivery risk born by public sector
• Flat financial burden • ConstrucTon overrun risk, Tme overrun risk, O&M cost over run risk and service delivery risk transferred to private sector
• O&M cost managed by life cycle cost basis
Payment Profile of ConvenTonal Scheme and Availability Payment
6
SelecTon Criteria is Value for Money
7
Investment Cost
O&M Cost
Interest
Tax
Dividend etc.
AP Scheme
Necessary Expenditure for Private
(Project Life Cycle Cost)*
This total amount shall be bidding price for investors
ConvenTonal Scheme
VFM
*The cost include risks which private would take.
Public Expenditure of ConvenIonal Scheme
Public Expenditure of APS
1 2 3 4 5 6 7 8 9 10 11 12
10
ConstrucTon Payment
O&M Payment Risk/ConTngency owned by public
100 100 5 5 5 5 5 5 5 5 5 5
Total Expenditure
260
$
Year
1 2 3 4 5 6 7 8 9 10 11 12
25 25 25 25 25 25 25 25 25 25
Total Expenditure
250
$
Year
No construcTon payment Risks are transferred and managed by private. Availability Payment
8
AP shall be reduced if service level become lower than contracted level which will be monitored daily basis.
Comparison of Value for Money
Source of VFM
9
CompeIIon among Bidders
OpImal Risk AllocaIon
IncenIves and PenalIes
A risk shall be allocated to the entity who can best able to manage it.
A sound competition help realizing least pricing and innovations for delivering quality services.
A project company shall be well motivated through out all project phases.
This is all up to project management by GCA Capacity development of GCA staff is essential.
* Too much risk transfer to the private undermines achieving the highest VFM.
* Single source selection and direct appointment undermine achieving the highest VFM.
* Moral hazard of Project Company undermines achieving the highest VFM.
Advantage of Availability Payment (AP) Scheme
10
(AP vs. User Pay) • AP scheme makes the project “Bankable” even demand is unstable
– Even demand is unstable, private would receive stable income (AP)=> Akract more investors => Higher compeTTon => Lower project cost
– Private will receive stable income (AP) => Lower demand risk premium * => lower project cost
• AP is applicable for the projects with economically feasible and strategically desirable but not commercially viable (User pay => X ) – Social infrastructure such as public housing, public hospital, etc.
(AP vs. ConvenIonal) • AP can reduce iniTal financial burden for public through flat and
scheduled payment – Achieve more infrastructure services with same budget size
• Best “value for money” can be achieved by AP – AP can reduce life cycle public expenditure and increase quality of public
service by uTlizing private sector know-‐how and performance based payment
* Private would borne “Availability Risk” but controllable for private.
• Feasibility study for applicaTon of APS • Land acquisiTon • Bid preparaTon, including development of output
specificaTon and drap PPP/AP Agreement • ApplicaTon of subsidy and guarantee (as necessary) • Carrying out bid and closure of PPP/APS contract • Project performance monitoring • Securing yearly budget and payment to Project Company
Role of GCA (Local Government)
11
Key to Success
12
• Strong commitment and iniTaTve of the head of GCA as “Project Champion”
• Capacity development of GCA staff is essenTal
Table of Contents
1. Basic Concept of Availability Payment
2. Case Study in Japan
13
Case Study 1: Fukuoka City New Children Hospital -‐ Outline -‐
14
Fukuoka City New Children Hospital
GCA Fukuoka city
Facility Hospital bldg. 26,000 m2(floor area) / 260 beds Nursery house 300m3 Family house 2,000m2(bldg. area)
SOW Facility development and maintenance for new hospital
Contract period
Oct. 2011 – Nov. 2029 (approx. 15 years)
Contract Amount
approx. 15.5 billion JPY (≒IDR 1.8 trillion IDR *)
Features AP system includes bonus point
* 1 JPY = 118 IDR
Schedule: PublicaTon Oct. 2009 SelecTon of project as PFI Dec.2009 RFP Issue Feb. 2010 SelecTon of winning bidder Aug.2011 Contract agreement Oct.2011 OperaTon Nov.2014-‐Nov.2029 (15 years)
Heliport
Family House Lobby Family House Kitchen
Hospital Hall way
Hospital Exterior
AutomaTc RegistraTon
15
Case Study 1: Fukuoka City New Children Hospital -‐ Background -‐
• Current Fukuoka City Children Hospital building is already 30 years old and the size became to small to deal with the increased number of paTents
• Fiscal condiTon of Fukuoka city did not allow huge construcTon expenditure for new hospital
=> New Children Hospital building is required to construct with the most cost effecTve method
Fukuoka City
SPC
Private Business
Maintenance Co. ConstrucTon Co.
AP
Maintenance fee
CAPEX
Insurance Co.
Bank Investor Dividend
Invest
Repayment
Loan
PFI Contract
Shareholder
Property Trust CorporaTon Building maintenance
Toda CorporaTon ConstrucTon
Kyudenko Facility design and construcTon
16
Case Study 1: Fukuoka City New Children Hospital -‐ Project Scheme -‐
CorporaIon Company
Yamashita Sekkei Architecture design
Matumoto-‐Gumi CorporaTon ConstrucTon
Setsubi Hoshu Center Facility maintenance
Asou Hospital management
Koyo Medical, welfare service
Hospita
l Co
nstrucTo
n Ho
spita
l Ope
raTo
n
Medical Service
Hospital Opera2on Service Medical Support Service
DiagnosTc, ExaminaTon and Treatment by Doctor Nursing
Hospital Management
Medical Equipment Building Facility
Land
Imaging
SterilizaTon / DisinfecTon
Catering
PaTent Transfer
Laboratory
Physiological Test
Linen
Cleaning
Medical Gas Maintenance
Equipment Management
Pharmacy
AdministraTon
Material Procurement and Management
RecepTon
Medical AccounTng Medical Fee Claiming
Facility Maintenance Security Scope of
Private Co.
17
Case Study 1: Fukuoka City New Children Hospital -‐ Scope of Work for Private Company -‐
18
Case Study 1: Fukuoka City New Children Hospital -‐ Points of ConsideraTon -‐
1. Work split between public and private If more services (e.g. medical support) are included into the scope of
work for private, there are more room for service improvement. However, the operaTonal coordinaTon between public and private
will be more complicated.
2. Co-‐work arrangement between public and private Since public and private work together within the same hospital, it is
very important to have good co-‐work framework and rules.
3. Private business opportunity If the hospital locates in the middle of big city, there is a possibility
for integraTon of private profitmaking faciliTes (e.g. hotel for paTent’s family, residence for paTents who required regular dialysis treatment), which may decrease cost for public.
• Toshima Ward PopulaTon: 284 thousand
• Project: Complex of Ward Office and private housing (apartment)
• Total floor area 95 Thousand square meters: Ward Office 25 Thousand square meters
• Project Scheme: Urban RenovaTon Project(NOT using ordinary public procurement)
• Project cost: Approximately JPY 22 Billion (2.8 Trillion IDR) for Ward Office but Toshima Ward using no cash for this project
• Project ConsorTum: Toshima Ward and Real estate company
Case 2. New Toshima Ward Office (Non AP, Advanced Scheme) -‐ Overview -‐
19
Public
Old Toshima Office City Hall
Public
Elementary School
Children’s House
Private
Individual Houses
Site for Old Office
Site for New Office
Before Aper
Lease land for 77 years to Private
Office Theater Shops
Co-‐share of land
New Toshima Office
Residence
Public
Private
Public
Demolish
Demolished
Ownership of land change to ownership of building
Case 2. New Toshima Ward Office (Non AP, Advanced Scheme) -‐ Simultaneous development of Old and New Sites -‐
ExisTng Building
New Building
Demolish
20
Case 2. New Toshima Ward Office -‐Flow of Cash for Gov’t Office ConstrucTon -‐
=> Toshima ward gov’t was able to construct new office building without actual spending.
1F-‐9F
11F-‐49F
Old Gov’t Office
Payment for land co-‐ownership from residence
Payment for land lease from private company
New Gov’t Office
Residence
NaTonal Gov’t subsidy for redevelopment
21
22
APPENDIX
23
Outline of PPP AP Capacity Development Module
Module Title Major Contents
I
Basic Principles and Mechanism of AP
1. Purpose and Features of PPP/AP 2. Project Structure of AP 3. Basic Mechanism of Availability Payment 4. Understanding VFM (Value For Money) 5. Role of GCA and Key to Success 6. Securing Bankability
II
Case Studies for Various Sectors ApplicaTon
1. Hospital (Fukuoka) 2. Water Supply (Yokohama) 3. Public Housing (Kyoto) 4. Airport Apron (Haneda) 5. Railway/ LRT (Bangkok)
III
Gevng Started: PreparaTon and ImplementaTon of AP in Local Governments
1. Overview of Availability Payment Regulatory Framework in Indonesia
2. Required RegulaTons in Local Government 3. Project PreparaTon
IV
Advanced: InnovaTve Methods/ Financing for AddiTonal Value CreaTon
1. Air Rights Selling to Private 2. Power and Heat Supply(Waste to Energy) 3. Transit Oriented Development 4. Land Readjustment 5. Hybrid Financing
Facility Map
Parking
Hospital
Entrance Entrance
Heliport
Island
city
cen
tral park
Fukuoka City New Children Hospital
24
Scope and Criteria of Output SpecificaIon
Facility Development Maintenance management Commercial facility operaIon 【Required facility and specificaTon】 1. Low level with roof garden 2. Surgery faculty, Perinatal
Medical Center, PICU (Pediatric Intensive Care Unit) and HCU (High Care Unit) are on same floor
3. OutpaTent service on ground floor
4. ExaminaTon room: 3m x 4 m
5. Sleeping room next to central treatment room
6. Interview room near the entrance
7. Heliport 8. Cleanliness level: level I-‐IV
【Required work】 1. Manual preparaTon 2. Rehearsal 3. Regular repair and replace 4. Planned Repair 5. Energy management and
supervision: CalculaTon and analysis for energy consumpTon
6. ReporTng: Management of ledger and takeover manual
【Basic policy】 1. Contribute to all user’s
convenience visiTng the hospital
2. Financially independent 3. No bad influence to the
hospital 【Component】 1. Shops 2. Café , restaurant 3. Vending machine 4. Coin laundry 5. Locker 6. Post 7. ATM 8. Telephone room
Fukuoka City New Children Hospital
25
Monitoring and Payment
Performance Parameter (PP) for the evaluaTon is categorized in four zones, S, A, B and C. Bonus point is given for the zone A, and penalty points is given for the zone B and C. The amount of AP except for the lump sum porTon, will be calculated based on the summaTon of bonus points and penalty points
Zone Gold Blue Yellow Red
EvaluaTon S Well SaTsfied A SaTsfied Enough B Need to Improve C UnsaTsfied
Level Bonus Point Penalty Point
1 1 Point (=0.5% for the original AP) 2 Point
2 2 Point 3 Point
3 3 Point 5 Point
AP Original AP 1
200
Bonus Point
Penalty Point
*In case (Bonus Point – Penalty Point) is plus, the points will be carried forward to the next quarter and be valid in one year
EvaluaIon Zone
Bonus Point and Penalty Point
CalculaIon
Fukuoka City New Children Hospital
26
AP ComposiIon
AP Contents Time
1 Facility development cost (Lump Sum porTon) • Facility development cost (except for
commercial facility)
Lump sum at transfer
2 Facility development cost (Installment porTon)
Every quarter aper transfer
3 Equipment procurement cost • Equipment procurement cost Lump sum at transfer
4 Commencement and overhead cost during facility development
• Commencement cost • Fixture cost • Overhead during facility development
Every quarter aper transfer
5 Installment interest • Interest during maintenance • Profit and tax
Every quarter aper transfer
6 Maintenance cost • Facility management cost Every quarter aper transfer
7 Maintenance cost (Repair) • Planned repairing cost Every year aper transfer
8 Other cost • Other management costs of SPC -‐
Fukuoka City New Children Hospital
27
AP Schedule
Payment
Facility development (Lump Sum porIon)
2012 2013 2014 2015 2030 Year
AP Schedule
Contract Amount: approx 15.5 billion JPY (≒1.8 trillion IDR)
Equipment procurement
Facility development (Installment porIon)
Facility development
・・・
・・・
・・・
Commencement and
overhead
Maintenance
2016
・・・
Maintenance (Repair) ・・・
Fukuoka City New Children Hospital
Facility development (Installment porIon)
Commencement and
overhead
Maintenance
Maintenance (Repair)
Facility development (Installment porIon)
Commencement and
overhead
Maintenance
Maintenance (Repair)
28
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