Construction and operation of Regional Multi-profile Hospital for 300 beds in city

PPP DEVELOPMENT CENTER Main information and description of the Project Construction and operation of Regional Multi-profile Hospital Project description and objectives

Information Description Industry: The project envisages the construction and operation of a multi-profile clinical Healthcare hospital providing a full cycle of medical care, as well as providing retraining of doctors on the basis of modern achievements of medical science. Project objectives: • Creation of multi-profile The new multi-profile hospital will consist of a hospital with 300 beds. The hospital: construction of this project is justified by the current demand for inpatient – quality and availability of medical services and high morbidity in the . medical care on the basis The following activities will be carried out in the hospital: of modern advanced Medical service, including: technologies. • State guaranteed benefits package • Creation of a base for • Medical services within the Mandatory Social Health Insurance improving the availability • Paid medical services. of medical care, including Non-medical service, including: highly specialized • Lease of premises • Catering services medical care for residents • Services for other organisations of The contract period is 20 years, including 3 years of construction.

PPP DEVELOPMENT CENTER Construction and operation of Regional Multi-profile Hospital

STRUCTURE OF MULTIPROFILE Kyzylorda city HOSPITAL FOR 300 Regional hospital BEDS WITH oncological center POLYCLINIC FOR 100 VISITS PER SHIFT

71 Neironal 40 rehabilitation Chemotherapy Neurology 30 30 30

Theraphy Radiation therapy 30 30 28 25 20 Surgery 16 Surgery Traumatology

Regional cancer center 130 Palliative care City hospital Gynecology beds 220 beds

© 2017 PPPТОО «Делойт DEVELOPMENT ТСФ» CENTER Бизнес-план 4 Construction and operation of Regional Multi-profile Hospital Project description and objectives

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PPP DEVELOPMENT CENTER Construction and operation of Regional Multi-profile Hospital Reasons for the construction of the hospital

High demand of medical service Low survival rate of people with cancer diagnosis

High demand of hospital beds Both on City hospital and Regional cancer center bed capacity 2.8 m2 per bed, instead of 9.5 m2, less than 3 Infrastructure need times by the required standards Deterioration of existing facilities above 90%.

Development of preventative medicine High level of mordibity In accordance with the Law of the Over the past 5 years, the Republic of Kazakhstan "On social incidence of cancer has increased protection of citizens affected by the ecological disaster in the by 15. region" Kyzylorda region recognized as the zone of ecological disaster. PPP DEVELOPMENT CENTER Construction and operation of Regional Multi-profile Hospital Investment plan

Capital expenditures for construction hospital, thousand USD

Name Total Capital expenditures Facility 45,134 Medical equipment 40,114 Non-medical equipment 5,000 Total investment costs 90 248

Structure of capital expenditures

50% 47% 3% 3960 млн тенге

Construction Medical equipment Non-medical equipment

PPP DEVELOPMENT CENTER Construction and operation of Regional Multi-profile Hospital Investment plan Timeline of project implementation 2023 2045 2020 2020 …

• Compensation of capital expenditures (CAPEX)will be returned within 10 years 90,248 thousand after completion of construction works • Management fee will be paid during the USD Whole period of contract Capital expenditures

Fulfilment of theinitial of Fulfilment conditions Design and Operation period • construction period

Signing PPPcontract Signing 17 years.

• 11 26 months The term of the Contract can be Contractcan the of termThe extended

months •

Total length of contract – 20 years PPP DEVELOPMENT CENTER Construction and operation of Regional Multi-profile Hospital Main participants of Project

I. Investment period II. Operation period

Private partner Public partner (Health Private partner • The conclusion of the PPP agreement Department of • Design and construction of the Kyzylorda • Transfer of the PPP Facility to the state Facility; region) property; • Compliance with construction • Acceptance of the Object • Acceptance of the right to use and own the PPP requirements and standards; into state ownership; • The introduction of advanced • Transfer to a Private partner Object; methods of construction; the right to use and own the • Technical operation (equipment of medical • project financing. object of concession for equipment and infrastructure); • Ensuring the execution of the Project financing Private partner has the right to technical operation; involve the General contractor • Verification of financial and conditions; and financial organization economic activities of a • Ensuring the safety of the PPP Object; Private partner without • The provision of medical services under the PPP contract interference in its activities; SGBP and MSHI; • Monitoring compliance with • Provision of paid medical services; the terms of the Contract by • Ensuring the return of the PPP Object at the the Private partner; end of the Contract. Public partner (Health • claim for compensation from Department of Kyzylorda region) a Private partner for deterioration of the property transferred to operation; •The conclusion of the PPP • Reimbursement of the agreement; Private partner. •Provision of land for free use for • Provision of medical construction; personnel. •Monitoring of Project implementation.

PPP DEVELOPMENT CENTER Construction and operation of Regional Multi-profile Hospital The payment mechanism of the Project

Payments for medical services are made by patients in favor of a Private partner

State support measures Private partner incomes Remuneration for the provision of CAPEX quality characteristics Additional income Hospital construction, supply and Taxes: maintenance services: • Wealth tax Medical service: • Construction of the hospital • Tax and deductions on the wage fund • SGBP • Equipment • Profit tax • MSHI • Improvement of the surrounding area • VAT • Paid services Remuneration: Acquisition of income: Other commercial • For senior debt accrued during the • Return on equity activities not prohibited investment period • Maintenance costs of assets and other by the legislation of the • On a joint-stock loan accrued during the costs Republic of Kazakhstan. investment period • Maintenance • Bank guarantee during construction • Building system upgrades • Insurance during construction Maintenance • The costs of the Private partner • building Maintenance • Wage fund during construction Insurance during operation

PPP DEVELOPMENT CENTER Investment climate in Kazakhstan State support of investments

Cost recovery to the Private partner The sources of cost recovery of public-private partnership and income generation by the subjects of public- private partnership are: 1) realization of goods, works and services in the process of operation of the public-private partnership object; 2) subsidies from the state in cases established by the legislation of the Republic of Kazakhstan; 3) compensation of investment costs for the public-private partnership project; 4) remuneration for the management of the public-private partnership object that is in state ownership, as well as rent for the use of the public-private partnership object.

State support of Private partner activity Participation of state bodies in the form of state support measures in accordance with the legislation of the Republic of Kazakhstan is carried out including through: 1) guarantees of the state on infrastructure bonds; 2) state guarantees on loans attracted for financing of public-private partnership projects; 3) transfer of exclusive rights to intellectual property owned by the state; 4) guarantees of the state's consumption of a certain amount of goods, works and services produced during the implementation of the public-private partnership project.

PPP DEVELOPMENT CENTER Industry overview Health network Main indicators in the health sector comparatively with the average level in Kazakhstan

1,3 times 1,6 times 1,0 year Total mortality Birth rate The average life expectancy (the (Region-5,54; RK-7,15) (Region-24,39; RK-21,65) lowest in the RK) (within 5 years: -6,6%) (within 5 years: -9,7%) (Region-72,6; RK-72,95) (within 5 years: +1,2 years)

1,4 times 1,2 times 1,4 times Mortality from diseases of the Mortality from diseases of the Cancer mortality circulatory system respiratory system (Region-61,68; RK-83,90) (Region-79,55; RK-92,2) (Region-123,5; RK-174,83) (within 5 years: -27,8%) (within 5 years: -4,8%) (within 5 years: +3,3%)

1,9 times 1,4 times 1,1 times Deaths from injuries and Incidence of cancer Mortality from tuberculosis poisoning (Region-142,8; RK-197,9) (Region-3,2; RK-3,0) (Region-35,73; RK-69,38) (within 5 year: +2,8 times) (within 5 years: -43,8%) (within 5 years: -50,3%)

PPP DEVELOPMENT CENTER Demographic indicators Number and structure of population

Number and gender structure of the population

Kyzylorda city 234 736 118368 116368

Kyzylorda region 390 857 389 378 839 300

Republic of Kazakhstan 9 306 600 18 034 366 8 727 766

Age structure of the population

10% 7% 15% 23% 23% 28%

65% 21 67% 63% Republic of Kazakhstan Kyzylorda region Kyzylorda city

Source: Statistics committee of the RK 0-14 15-64 65+ PPP DEVELOPMENT CENTER Health indicators of the population of Kazakhstan Number of diseases Morbidity of the population for the first time established diagnosis per 100 people (all types of diseases)

80 74 76 71 71 70 70 69 70 66 63 63 60 59 59 60 60 60 56 57 56 54 55 54 53 53 54 50 51 48 50 47 47 48 47 47 46 45 45 44 45 44 44 44 42 42 42 42 41 40 31 28 29 30 per million per million people

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0 г. г. Астана г. г. Алматы Атырауская Жамбылская Алматинская Акмолинская Актюбинская Костанайская Павлодарская Мангистауская Карагандинская Кызылординская Akmola region region Aktobe West Kazakhstan Zhambyl region Karagandy region region Kyzylorda region South Kazakhstan region Pavodar North Kazakhstan East Kazakhstan Astana Южно-Казахстанская Северо-Казахстанская Западно-Казахстанская 2014 2015 2016 Восточно-Казахстанская • In the context of the the highest incidence is • In comparison with the indicators of other regions, Kyzylorda region observed in the ecologically problematic regions of the country: has an average level of morbidity. Moreover, the number of new cases industrial region (75.7 diseases per 100 people), the decreased in 2014-2016. southern capital (71.5) and (70.6). In General, in the period under review, the level of morbidity has steadily increased in all regions of the country. Source: Statistics committee of the RK

PPP DEVELOPMENT CENTER Health network The consumption of inpatient services Indicators of the bed Fund, 2017

Republic of Kazakhstan

10 10 311 266 31 26

12 11 312 310 26 11 28 11 299 243 26 22 12 10 308 10 316 26 268 30 12 27 307 26

10 319 11 31 9 309 290 27 10 32 324 33

9 320 36 Astana Almaty Average number of days a patient stays in bed 10 10 340 Average number of bed days per year 358 38 35 Bed turnover

• Hospitals of most regions of Kazakhstan are working with a high level of workload. The highest level of hospital load in the country was observed in the southern regions of the country and in Astana. At the end of 2017, the average annual employment of hospital beds in Astana was 358 days, and in the Kyzylorda region 309 days. The lowest level of congestion was recorded in the .

Source: Statistical Yearbook of MOH

PPP DEVELOPMENT CENTER Financial section Construction and operation of a multi-profile hospital Financial performance

Cost structure, 2024 Administrative expenses, 2024

Wage fund Tax on Wage fund 3% Insurance 19% during Contributions to MSHI 1% operation Land tax 1% 20%

Municipal services 6%

Other expenses 6% Repair and maintenance Bank 44% guarantee 4% Property taxes 96%

• The main share of the cost will be the cost of repairs • The main share of administrative expenses will be taxes. and maintenance. Among them, property tax accounts for 96%. • Costs for utility services include the cost of electricity, heating, water, waste management, as well as maintenance of the Laundry service and Parking. • Other costs include other operating costs and additional waste disposal costs.

PPP DEVELOPMENT CENTER Construction and operation of a multi-profile hospital Financial performance

Equity financing 25%

75% Debt financing

• Within the framework of this project, it is assumed that the Project will be financed by the Private partner. This financing is carried out at the expense of own and borrowed funds in the ratio of 25%:75%. At the same time, the structure of the share capital will consist of a share loan and an infusion into the authorized capital in the ratio of 60%:40%. Debt financing Terms of project financing for senior debt : - Currency – USD - The amount of 67 686 thousand USD - Interest rate– 14,4% - Loan period – 20 years • Terms of refinancing the project on senior debt: - Currency – USD - The amount of 33 843USD - Interest rate– 12,4% - Loan term-10 years • The payment of interest on the senior debt begins at the construction stage, and the payment of the principal – from the moment of commissioning of The public-private partnership facility. Payment of the senior debt will be made in equal installments. Equity financing Financing conditions provided by a Private partner - Currency – USD - Equity investments – 22 562 thousand USD

PPP DEVELOPMENT CENTER Advantages and risk factors Construction and operation of a multi-profile hospital

SWOT analysis of the project

Strength Weakness •The project is strategic for the Republic of Kazakhstan, the •Patients ' distrust of public health services in General; Ministry of health and the city; •Lack of qualified personnel with the desired training, experience •The uniqueness and key value of the project will strengthen the and mentality, especially clinicians (doctors, nurses, laboratory); image of the planned medical organization, which will attract and •Natural (expected) difficulties at opening and starting – retain strong medical personnel; coordination and adaptation of new employees •The recommended types of medical services are the most popular on the market according to the current data of marketing analysis; •The Trinity of clinical, educational and scientific activities contribute to the involvement of the most experienced and strong practitioners – doctors to work in the clinic. •The absence of competitors in the market of medical servicesS in W Kyzylorda

Opportunities O T Threats •Population growth contributes to demand for services •To adjust the profile of beds and number of beds in the offices based on market conditions •Insufficient or delayed funding, delayed licensing processes – •To win the trust of patients, to create the image of a prestigious backlog from the planned terms, the partial security of materials, organization and high quality services equipment •To strive for competitive quality of services in the local and •New players in the market of medical services-the outflow of international market through JCI standards and accreditation potential patients to clinics, including foreign ones, with the best •To introduce advanced educational methods and technologies from conditions for the price, quality of service and technical the Anglo-Saxon model of medical education equipment. •To develop on the basis of the clinic scientific activities at a new level according to the standards of GCP

PPP DEVELOPMENT CENTER THANK YOU FOR YOUR ATTENTION!

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