Basic$Concept$of$Availability$Payment$ andCaseStudyinJapan · KPPIP$Support$Facility December20 th$,201 6 Basic$Concept$of$Availability$Payment$ andCaseStudyinJapan

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


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


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


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


5 Installment interest •  Interest during maintenance •  Profit and tax


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 -‐


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) ・・・



Commencement and

overhead

Maintenance

Maintenance (Repair)


Commencement and

overhead

Maintenance

Maintenance (Repair)

28

Documents

Basic$Concept$of$Availability$Payment$ andCaseStudyinJapan · KPPIP$Support$Facility December20 th$,201 6 Basic$Concept$of$Availability$Payment$ andCaseStudyinJapan