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Construction and operation of a multi-disciplinary hospital under RSE “Kazakh National Medical University named after S.D. Asfendiyarov” in Almaty

About the project

Project passport

Contract type

Concession agreement providing creation of a concession object by the concessionaire with the subsequent transfer of the concession object to the state ownership

Project initiator

Ministry of Health of the Republic of Kazakhstan

Sector

Healthcare

Purpose of the project implementation

Establishment and maintenance of material base of RSE on REU “Kazakh National Medical University named after S.D. Asfendiyarov” in order to provide:

  • the quality of clinical training of students, internees, trainees of a university hospital-based residency
  • the quality and availability of medical care based on modern advanced technologies and scientific developments;
  • clinical and laboratory research with the transfer of results to the practical healthcare.

Implementation period

2021-2037

Projected construction cost

KZT 27 984,37 thous.

Performance indicators

Hospital — 300 beds, Polyclinic — 300 visits per day

Expected result

Within the framework of this project, a modern multifunctional university hospital will be constructed, providing a full cycle of clinical training of students and retraining of doctors based on modern achievements in medical science.

KPPF’s involvement in the Project

·       Development of a concession proposal

·       Development of tender documents

·       Development of the draft concession agreement

·       Consulting services in negotiating with tender participants

·       Ensuring the conclusion of a concession agreement

 

The Ministry of Health of the Republic of Kazakhstan (hereinafter referred to as MH RK) intends to implement the Project under the contracted public-private partnership within the Concession agreement. Cooperation between the state represented by MH RK and the private partnership entity on implementation of the Concession project will facilitate the development of healthcare, medical education and medical science. The project will be aimed at financing, establishment and operation of facilities of social infrastructure and support services.

As part of the Project concerned, the Grantor will act as an organizer of the tender for selection of the Concessionaire and will conclude the Concession agreement with the Concessionaire. The Concessionaire will construct the Concession facility and transfer it into the state ownership. KazNMU will be defined as a state-owned legal entity to which the Concession facility subject to be accepted as a state property will be assigned. After that the right to use and own the Concession facility will be transferred to the Concessionaire for further technical operation of a New University Hospital.

The Concession facility will be operated jointly by the Concessionaire who will be responsible for the Technical operation of the Concession facility and Medical services operator/KazNMU who will be responsible for the Operation of the Concession facility.

The Concession agreement (hereinafter referred to as the Agreement) is concluded for 16 years and is effective from the date of expiry of the Agreement unless its effectiveness is terminated earlier or extended for an additional period in accordance with the Agreement’s terms and conditions.

In turn, the term of the Agreement may be prolonged upon the occurrence of circumstances beyond the control of the parties, including special circumstances, in accordance with the terms of the Agreement, and the additional agreement of the Parties, as well as the legislation of the Republic of Kazakhstan.

It is planned to attract own and borrowed funds of private investors in order to finance the construction of New University Hospital.

The costs incurred by the Concessionaire at the investment stage of the Project implementation will be compensated to him at the operation stage. The scheme of availability payments is selected as a payment mechanism (by the Grantor to Concessionaire).

Availability payment provides compensation for operating and investment costs and remuneration for management (including payment of return on equity) to the Concessionaire from the date of commissioning of the Concession facility and shall be paid to the private party regardless of the operating load of the New University Hospital. Thus, with the use of this mechanism, the risk of demand is transferred to the Grantor that increases the attractiveness of the Project for investors.

It is not planned to apply state supporting measures for the Concessionaire’s activities.

The Concessionaire will get availability payment as a remuneration based on the required rate of return. Its return will not depend on amounts of medical services provided by the Operator, but will depend on the quality of provided services of the facility operation and service maintenance of equipment. The application of availability payment corresponds to the international practice and legislation of the Republic of Kazakhstan. A detailed justification of the need to apply availability payments is provided below in this section.

Within the framework of the project, during the period from the transfer of the Concession facility by the Concessionaire to the state ownership till the expiration of the concession agreement, the Grantor will make the following payments to the Concessionaire, in accordance with the Law on concessions:

- Compensation for investment costs;

- Compensation for operating costs;

- Remuneration for management.

Compensation for investment costs is paid to the Concessionaire in order to reimburse the costs incurred for the establishment of Concession facility, regardless of their source.

Compensation for operating costs shall be paid to the Concessionaire in order to reimburse the incurred costs connected with the provision of management services for the Concession facility. In addition, in order to achieve the best possible quality indicators, a concession agreement may provide non-reduction of compensation payments for operating costs before the actual costs as compared to the planned costs upon the commercial closure.

Remuneration for management shall be paid to the Concessionaire for the services of managing the Concession facility, including, without limitation, the following:

- managing the design of the Concession facilities;

- managing the construction of the Concession facilities;

- managing the consumption – is the process of performing the entire complex of operations to provide (render) services connected with the use of the Concession facility by the Medical operator as intended (for instance, security, cleaning, wastes disposal etc.) and additional and related services;

- managing technical maintenance and operation.

The actual remuneration for management may differ from payments provided in the concession agreement by the amount of applied penal deductions. Within this, the amount of penal deductions will be defined in accordance with the terms of the concession agreement taking into account the actual quality of management services provided for the Concession facility.

In addition to payments from the Grantor, the Concessionaire will have an opportunity to obtain additional revenues from other activities:

- catering services for non-hospitalized people;

- rental of certain areas;

- disposal of medical wastes from other health organizations;

- and other activities not prohibited by the legislation of the Republic of Kazakhstan and the concession agreement (for example, reward on current accounts, deposits).

In accordance with the Law on concessions (c. 2 art.7), the availability payment of the concession facility shall be made in the order defined by the authorized body of budget implementation and shall include payments at the expense of budgetary funds provided in sub-clauses 3,4 and 5 of clause 1 of article 7 of the Law on concessions paid as a lump sum by certain shares of the total amount of payments during the entire term of the concession project implementation. According to art. 1 of the Law on concessions, a concession project is a set of measures for the implementation of a concession during the limited period. Also, the Law on concessions provides that a concession means the activities aimed at creating and operating a concession facility. Thus, the Law on concessions provides the possibility of making availability payment throughout the entire term of the concession project implementation (from construction to the end of the concession facility operation).

Also, the Law on concessions refers to the procedure for making availability payment in accordance with the rules determined by the authorized body for budget implementation. Thus, in accordance with the Rules of budget implementation and its cash servicing, approved by the Order of the Minister of Finance of the Republic of Kazakhstan No. 540 dated December 4, 2014 (Paragraph 9. Procedure for making availability payments of a concession facility), the availability payment of the concession facility is a source of cost recovery and revenue generation of the concessionaire which is made at the expense of budgetary funds as lump sums by certain shares of the total amount of payments during the whole period of the concession project implementation.

Thus, the availability payments can be made from the date of commissioning of the Concession facility.