I was instructed to learn more about public private partnerships for an assignment and I have found a lot of information online, but I was wondering how these revenue sharing type deals go about being modeled out and analyzed. Does anyone have any experience dealing with PPPs? Any modeling templates out there? Thanks!
PPP Project Finance Model
A PPP model is model for a public infrastructure project which involves a both the government and a private firm. Attached at the bottom of this page is a public private partnership pdf that explains the model and it’s function in depth.
- Input assumptions
- Project costs
- Volume Demand (traffic)
- Revenue Forecast
- IRR
- EBITDA
- Net Cash flow
- CADS
- LLCR
- Interest Coverage Ratio
- Repayment period
- NPV
- Operating cost
-
These models are big, primarily due to the concession period (25+yrs), inflation and the fact that they become inputs in legally binding docs.
Income is based on a monthly charge (unitary charge) which is indexed. It will be subject to deductions and additions as per the project agreement.
example:
a road (not toll) deductions for lack of availability / response times to accidents, additions for health and safety / response times etc.
Debt will be sculpted (amortized at no standard quantum) to maintain min covenants such as LLCR and ADSCR.
Default will also be based on these covenants, also due to persistent breach of the project agreement.
Debt:equity in the region of 90:10. Capex at the beginning of the project is funded through the debt then repaid through fcf.
Some banks use templates for their models that we see but they make what is already a horrible model even worse. every project is different, so each model should be.
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Recommended Reading
| Attachment | Size |
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| ppp_modeling_whitepaper.pdf 343.04 KB | 343.04 KB |
These models are big, primarily due to the concession period (25+yrs), inflation and the fact that they become inputs in legally binding docs.
Income is based on a monthly charge (unitary charge) which is indexed. It will be subject to deductions and additions as per the project agreement. for example for a road (not toll) deductions for lack of availability / response times to accidents, additions for health and safety / response times etc..
Debt will be sculpted (amortized at no standard quantum) to maintain min covenants such as LLCR and ADSCR. default will also be based on these covenants, also due to persistent breach of the project agreement. debt:equity in the region of 90:10. Capex at the beginning of the project is funded through the debt then repaid through fcf.
some banks uses templates for their models that we see but they make what is already a horrible model even worse. every project is different, so each model should be.
not overly sure what you mean by revenue sharing though? PPP / PFIs are done on the bases that the upside stays in the private sector, the public sector after all isn't out to make money, just to provide the service while enabling a competitive capitalist bidding / procurement program to be efficient.
Thanks for that info, very helpful. I'm a newb when it comes to this as I just heard of it recently. This is where I got that revenue sharing bit from.
http://csi-sigegov.org/1/11_375.pdf
okay, yea, i haven't much experience with tolls (our fund got burned once - before my time - on a toll road never to go back) which where their revenue sharing model primarily comes into play. All roads I’ve seen have been availability based or if a tram revenue hasn’t been shared.
sometimes where there is third party income the authority (government) will guarantee that income at a benchmark (normally at a level to cover senior debt service and fixed costs, no equity income). so if TPI is below that benchmark the authority will make up the difference, and when it increase above that level they will take back what they have previously given, with "interest" "profit" whatever you want to call it.
Really appreciate the input. Luckily for me, the analyst said he will be working on this as well so I'm not thrown to the wolves. Thanks for the help again, +2 for ya.
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