Centro Hospitalar de Cascais PPP, Portugal


Portugal's first hospital project - Centro Hospitalar de Cascais - has reached financial close, a welcome development for the PPP industry that is fast gaining momentum on the Iberian Peninsula.

This financial close marks an important milestone in the development of infrastructure PPP in the country which until now has been dominated by transport PPP [and a pretty patchy history in that to boot].

Centro Hospitalar de Cascais serves as a pathfinder for other projects to follow and is impressive in combining both construction work and clinical services.

The close of the clinical services-inclusive hospital PPP was some time in the waiting, but comes as an encouraging pointer for the future of Portuguese PPP.


The Project

The Centro Hospitalar de Cascais PPP project includes the development of a 250-bed general hospital in the suburban Cascais region of Portugal.

When fully operational, the new hospital will serve a population of 170,000 people in the Cascais area - located 30km west of the capital, Lisbon.

The new hospital will integrate:

  • Condes de Castro Guimarães hospital
  • Dr António José de Almeida orthopedic hospital

The Portuguese ministry of health originally launched the Cascais project in October 2004 and first proposals were received in February 2005.

At the start of 2006, the Hospitais Privados de Portugal (HPP) consortium - led by Caixa Geral de Depósitos Group and Teixeira Duarte - came top in a shortlist of four released by the evaluation commission that studied bids for the project.

In order of preference, the other shortlisted consortia were ranked as follows:

  • Jose de Mello Saúde (JMS) and Somague consortium
  • Espirito Santo Health (ESS) and Mota-Engil consortium
  • Banco Português de Negócios' (BPN) Grupo Português de Saúde and Ferrovial consortium

Two consortia submitted best and final offers (BAFO) in November 2006 and the project moved forward with the HPP consortium to financial close by late-February 2008.

The selection of a preferred bidder was mainly based on the lowest offer, but also took into consideration technical issues.

The Portuguese state provided a Public Comparable Cost (CPC) of €409 million (US$627m) - where the grantor compared the value of the different bids to its cost assumption.

In November 2007 the ministry of health published a tender notice on OJEU for the provision of legal advisory services for hospital PPP projects across Portugal, including the Cascais Hospital; and a month before that, a tender notice  was issued for technical consultancy services.

The structure of the project includes two separate entities - one for the construction and maintenance of the hospital infrastructure, and another entity for the provision of clinical services.

The sponsor for the Infraco is Portuguese infrastructure firm Teixeira Duarte with a 100 per cent share, while the sponsor for the Clinico is HPP (owned by Fidelidade Mundial - a Portuguese insurance group) - also with a 100 per cent share of its separate entity.

For Infraco the operator is TDHOSP - Gestão de Edifício Hospitalar - and will be the entity responsible for the building's management; while HPP Saúde - Parcerias Cascais is the operator for Clinico and will be responsible for the management of the hospital services.


Financing

Caixa - Banco de Investimento (part of Caixa Geral de Depósitos) - acted as mandated lead arranger (MLA) for the project, that in total cost €99.2 million (US$152m) - of which Caixa provided 100 per cent of the €74.5 million (US$114m) senior debt.

The project was split into two distinct entities - with the hospital infrastructure (Infraco) value at €67 million (US$102.7m) and clinical services (Clinco) €32.2 million (US$49.3m).

The infrastructure entity is remunerated by availability payments, with penalties for failing to keep the wards open, while clinical services are remunerated by annual contracts for particular services.

Each year the hospital will contract a number of surgeries and treatments, within certain clinical specialities.

The long term debt facility for Infraco is €57 million (US$87.3m), which includes a guarantee facility of €1.025 million (US$1.57m); while for the Clinico entity, the long term facility is €17.5 million (US$26.8m) including a guarantee facility of €2.05 million (US$3.14m).

The total equity for the Infraco is €10 million (US$15.3m), with a share capital of €1.68 million (US$2.57m) and shareholder loans totalling €8.38 million (US$12.84m).

For the Clinico, total equity stands at €14.7 million (US$22.5m) including a share capital of €1.61 million (US$2.47m) and shareholder loans of €13 million (US$19.9m).

The debt to equity ratio is 85:15 for the Infraco, while for the Clinico is 55:45.

The project duration for the Infraco is 30 years, with a construction period of 24 months, while the project duration for the Clinico is 10 years - which can be extended up to a maximum of 30 years.

For the Infraco entity, during the construction phase, the senior debt is priced at Euribor +100bp, while during operation is at the Euribor +90bp mark.

For the Clinico element, senior debt pricing is set at Euribor +75bp.

The project reached financial close on 22 February 2008.

Linklaters acted as legal adviser for Caixa.

Caixa Banco de Investimento provided financial advice to the sponsor, while Carlos Aguiar Ferreira de Lima & Associados - Sociedade de Advogados acted as legal adviser.

Barrocas Sarmento Neves provided legal advice to the government and Banco BPI acted as financial adviser.


Portuguese Hospital PPP Update

The Portuguese government and its preferred bidder - Jose de Mello Saude and Somague consortium - are working towards financial close on the €1.18 billion (US$1.8bn) Braga Hospital PPP in Portugal.

The selected group beat off another shortlisted contender for the 780-bed scheme [Projects Database] last year - the Espírito Santo Saúde and Mota Engil consortium.

The Braga Hospital will serve a population of 274,000 people.

KPMG is acting as financial adviser to the Jose de Mello Saude and Somague consortium and the project is due to close towards the end of the year.

The Portuguese authorities are due to announce the two final bidders for the BAFO stage of the Vila Franca  Hospital PPP. This new 280-bed hospital will serve a population of 225,000 people.

The tender for the 30-year Loures Hospital PPP [Projects Database]  was launched this year and two proposals have been delivered. It will be a 565-bed hospital for a population of 340,000 people. Loures is the closest to Lisbon and the process is expected to now progress to the BAFO stage.

Todos-os-Santos  Hospital PPP is an construction and operation PPP scheme, and proposals for the tender will be delivered later this year.

Conclusion

Earlier this week International Financial Services London (IFSL) published a report that revealed a promising outlook for the European PPP market, while the UK is showing signs of slowing down - from PFI project value of £9.6 billion (US$19bn) in 2006 down to £7.3 billion (US$14.5bn) in 2007.

In Europe as a whole, the total value of PPP projects being procured reached €67 billion (US$103bn) in 2007 - up from €55 billion (US$84bn) in 2006 - indicating buoyancy in PPP activity for years to come.

Up until 2007 Portugal had a number of PPP projects in procurement totalling €1.5 billion (US$2.3bn), while neighbouring Spain had a total of €2.9 billion (US$4.4bn).

While Portugal is some way behind the development of PPP compared to the Spanish PPP market, by 2007 six PPP projects had closed.

The latest addition is the country's eighth PPP and the first hospital project, after the financial close in January of the US$1.2 billion Douro Litoral road PPP [Projects Database].

Between 2001 and 2007 Spain signed 38 PPP projects - some distance to catch up with 501 PPP projects closed in the UK.

Portugal has a healthy outlook for PPP, in transport, but now also in social infrastructure, following the successful close of Cascais hospital.

The project at a glance

Project name Centro Hospitalar de Cascais PPP
Location Cascais, Portugal - 30km west of Lisbon
Description

The new DBFM hospital will integrate Condes de Castro Guimarães hospital with the Dr António José de Almeida orthopedic hospital

Sponsors Teixeira Duarte and Fidelidade Mundial
Operator TDHOSP - Gestão de Edifício Hospitalar and HPP Saúde - Parcerias Cascais
Authority Portuguese government through the Ministry of Health
Project duration 30 years
Construction stage 24 months
Total project value €99.2 million (US$152m)
Total equity €24.7 million (US$37.9m)
Total senior debt €74.5 million (US$114m)
Senior debt breakdown 100 per cent provided by Caixa
Debt:equity ratio 75:25
Mandated lead arrangers Caixa Geral de Depósitos
Legal adviser to sponsor Carlos Aguiar Ferreira de Lima & Associados - Sociedade de Advogados
Financial adviser to sponsor Caixa Banco de Investimento
Legal adviser to banks Linklaters
Legal adviser to government Barrocas Sarmento Neves
Financial adviser to gov't Banco BPI

Date of financial close

22 February 2008
Infraco

Sponsors Teixeira Duarte
Operator TDHOSP - Gestão de Edifício Hospitalar
Project duration 30 years
Construction duration 24 months
Total Infraco project value €67 million (US$102.7m)
Total equity €10 million (US$15.3m)
Equity breakdown Share capital - €1.68 million (US$2.57m)
Shareholder loans - €8.38 million (US$12.84m)
Total senior debt €57 million (US$87.3m)
Senior debt breakdown 100 per cent provided by Caixa, includes a guarantee facility of €1.025 million (US$1.57m)
Senior debt pricing Construction - Euribor+100bp
Operation - Euribor+90bp
Debt:equity ratio 85:15
Clinico
Sponsors HPP SGPS
Operator HPP Saúde - Parcerias Cascais
Project duration 10 years - renewable by equal periods - with a maximum of 30 years
Total Clinco project value €32.2 million (US$49.3m)
Total equity €14.7 million (US$22.5m)
Equity breakdown

Share capital - €1.61 million (US$2.47m)
Shareholder loans - €13 million (US$19.9m)

Total senior debt €17.5 million (US$26.8m)
Senior debt breakdown 100 per cent provided by Caixa, includes a guarantee facility of €2.05 million (US$3.14m)
Senior debt pricing Euribor+75bp
Debt:equity ratio 55:45

Snapshots

Transaction Snapshot

Cascais Hospital I


Financial Close:
22/02/2008
Value:
$99.80m USD
Equity:
$15.20m
Debt:
$84.60m
Debt/Equity Ratio:
85:15
Concession Period:
30.00 years
PPP:
Yes
Full Details
Transaction Snapshot

Cascais Hospital II


Financial Close:
22/02/2008
Value:
$53.35m USD
Equity:
$24.33m
Debt:
$29.03m
Debt/Equity Ratio:
54:46
PPP:
Yes
Full Details