WPE: Take note

The Eu136 million Westdeutsche Protonentherapiezentrum Essen (WPE) project bond was both the first major health PPP in Germany featuring real risk transfer to the private sector and the first German PPP financed with notes – and without a monoline wrap.

Awarded by Universitatsklinikum Essen to STRIBA – a joint venture between STRABAG Projektentwicklung and proton therapy technology equipment specialist IBA – in December 2005, the project is a 19-year availability-based design, build, finance and maintain (DBFM) contract, inclusive of a four-year construction period.

The proton therapy centre will be a turnkey facility and repaid by monthly lease payments. The first patients will be treated in 2009 and the facility will be fully operational by 2011.

The initial cost of the project is Eu136 million with construction cost estimated at Eu115 million which includes Eu50 million for the equipment provided by IBA. The total project cost including the non-clinical operation and maintenance of the centre will run to around Eu300 million over the term of the concession.

Lead arranged by Deutsche Bank and Fortis, the initial Eu136 million debt comprises a Eu122 million tranche of 18.5-year fixed rate notes (giving the financing a six month tail) underwritten 50/50 by Deutsche Bank and Fortis Bank; a Eu7 million mezzanine tranche of notes solely underwritten by Deutsche Bank to reduce sponsors' exposure; and Eu7 million of junior notes underwritten by the sponsors. Debt to equity ratio is 90/10 and tenor on both mezzanine and junior notes is 14 years.

The sponsors are also putting Eu50,000 of pinpoint equity into the deal to bankroll both the STRIBA special purpose company and PTC Capital Essen – a Luxembourg-based vehicle from which all the notes are issued and which purchases future receivables from STRIBA.

Consequently the repayment mechanism is effectively a twist on a typical German forfaiting scheme (in effect a forfaiting deal refinanced with notes) that negates the need for a bridging loan during construction (typical of a forfaiting scheme), enables the sponsors to tap a wider investor base but also enables future payments to be structured to reduce trade tax, as in a forfaiting deal.

Although the deal comes with no demand risk it does incorporate performance and technology risk –  the technology has no long-term track record.

WPE is good news for what has been a very conservative and low volume German PPP market to date.

PTC Capital Essen
Status: Closed 28 June 2006
Size: Eu136 million (Initial) Eu300 million (duration)
Description: Proton therapy centre PPP for Essen University Hospital
Sponsors: Strabag, IBA
Lead arrangers: Deutsche Bank, Fortis
Legal counsel to sponsors: Freshfields
Legal counsel to lenders: White & Case
Legal adviser to concession awarder: Luther Rechtsanwaltsgesellschaft
Technical adviser to lenders: Electrowatt Ekono