Chile is one of the most mature Latin American PPP markets which instated its concessions law over a decade ago.

Even though a lot of hospital projects haven't reached financial close in the country yet, the healthcare space has been one of the priority sectors for the Chilean government and it is making every effort to procure its said pipeline of hospital PPPs.

Since the earthquake that hit Chile in 2010, the country has been in need of reconstructing at least 15 hospitals that were destroyed or damaged and the Government is said to be in need of around US$3.6 billion in investment for rehabilitating these.

Therefore the Maipú and La Florida Hospitals PPP project, which reached financial close during early 2011, makes a good case for future healthcare projects in the country.

Spanish sponsor Grupo San Jose (GSJ) worked on the project beating its own internal financial difficulties and closed the project successfully combining finances from a pool of eight banks that lent debt to the scheme.

The project is valued through the Chilean inflation-linked security instrument - the unidades de fomento (UF) which has an adjustable exchange rate set on a daily basis by the Central Bank of Chile.

The Project - Background & Procurement

The project was brought to the market in early 2009 and awarded to a consortium led by Grupo San Jose in the same year.  It involves design, build, financing and management of two new hospitals in Santiago, the capital city of Chile.

Under the 15-year concession two large hospitals - Maipú (375 beds) and La Florida (391 beds) will be built over the next two years [Transactions Database].

Hospital de Maipú will be constructed across an area of 70,000m² and will serve the needs of the areas of Maipú and Cerrillos, which extend 159km² and have a combined population of 698,518.

Meanwhile, Hospital de La Florida will be built across an area of 72,000m² and will have a capacity of 391 beds once complete. La Florida area has a population of around 394,821 inhabitants, equivalent to six per cent of the total population in the region .

The sponsor consortium is made up of:

• Constructora San José - 70 per cent
• Tecnocontrol - 30 per cent

Once the construction is finished, the Ministry of Healthcare (through the Ministry of Public Works) in Chile will pay back the investment with eight yearly fix construction subsidies of UF 1.11 million each. In addition, the concessionaire will receive 30 semi-annual fix operation subsidies of UF 0.24 million each, plus variable subsidies that will compensate, when applicable, for any excess occupancy above its design capacity of any of hospitals.

The project is understood to be Grupo San Jose's first concession award in Chile and is also unique in-terms of having two hospital projects wrapped into a single contract.

At the time when sponsor GSJ was awarded the scheme it was faced with tough financial conditions owing to the global financial crisis, but sources say that the company was quick to adapt to the wider market conditions.

"GSJ fixed their finances to the current market conditions, by restructuring their debt in 2009 with a large 19-bank syndicate, which provided them with financial flexibility and stability for the next 6 years," the source said.

GSJ also eventually shifted their strategy towards new international markets, less hit by the real estate crisis.

Financing

Spanish banking group, Banco Bilbao Vizcaya Argentaria (BBVA) was lead arranger for debt for the US$283 million project.

BBVA was joined by seven other banks that helped raise a total debt pile of US$230 million for the project which included a US$16 million VAT facility. As mentioned before the project is valued through the Chilean inflation-linked security instrument the unidades de fomento (UF).

The entire bank group comprised:

• BBVA
• Banco BICE
• Corpbanca
  
• Itau-Unibanco
  
• Banco Estado
  
• Scotia Capital
  
• Banco Security
  
• Banco Consorcio

The sponsors contributed equity of around US$55 million for the project.

The project is one of the first successfully financed hospital PPP concessions in the country and is expected to motivate other banks to enter the market to fund future projects.

A hospital scheme in Antofagasta in northern Chile is expected to be seeking financing this year for redevlopment of an exisiting hospital in the region.

Advisory Roles

For the authority, Currie & Brown and R&O Ingenieros provided technical advice. For the lenders, Chadwich & Aldunate and Uría Menéndez provided legal counsel.

For the sponsors, legal advice was priovided by Molina Ríos Abogados and Ashurst. Insurance advice was given by Marsh while Jeria, Martínez y Asociados did the financial modelling.

Cruz y Dávila Ingenieros provided technical advice on the transaction.