PPP availability payment model
Unitary charge, deductions, annuity debt, bid and value for money. Build an availability-based unitary charge with indexation and deductions, repay the debt as an annuity, smooth lifecycle costs through a reserve, solve the charge that delivers the target equity IRR, and say whether the lenders’ cover and the authority’s value-for-money test pass.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: ppp availability payment model.Updated 2 October 2026
Who builds it, and for whatThe model a bidding consortium builds to price a public-private partnership: the hospital, school, road or prison an authority wants designed, built, financed and maintained for twenty-five years and paid for by availability rather than use. The consortium’s financial adviser runs it to find the unitary charge that gives the sponsors their return; the lenders run it for cover; the authority’s advisers run their own version against the public sector comparator to decide whether the deal is value for money at all.
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z | AA | AB | AC | AD | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Assumptions | |||||||||||||||||||||||||||||
| 2 | Blue cells only. $ millions; annual periods, C1 and C2 construction and O1 to O25 operations. Prices are at financial close and indexed from it. The project is invented. | |||||||||||||||||||||||||||||
| 4 | Year | Unit | C1 | C2 | O1 | O2 | O3 | O4 | O5 | O6 | O7 | O8 | O9 | O10 | O11 | O12 | O13 | O14 | O15 | O16 | O17 | O18 | O19 | O20 | O21 | O22 | O23 | O24 | O25 | |
| 5 | Timing | |||||||||||||||||||||||||||||
| 6 | Years from financial close | # | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | |
| 7 | Operating (1) | # | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |
| 8 | Operating year | # | 0 | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | |
| 10 | Construction and funding | |||||||||||||||||||||||||||||
| 11 | Design and build contract, fixed price | $m | 200.0 | |||||||||||||||||||||||||||
| 12 | Construction draw profile | % | 45.0% | 55.0% | ||||||||||||||||||||||||||
| 13 | Development and bid costs | $m | 8.0 | - | ||||||||||||||||||||||||||
| 14 | Senior debt: share of construction and development costs | % | 85.0% | |||||||||||||||||||||||||||
| 15 | Arrangement fee, % of senior debt drawn (paid by equity) | % | 2.0% | |||||||||||||||||||||||||||
| 16 | Senior debt interest rate (fixed by swap) | % | 5.0% | |||||||||||||||||||||||||||
| 17 | Debt tenor, operating years (annuity repayment) | # | 23 | |||||||||||||||||||||||||||
| 18 | Lenders’ minimum DSCR | x | 1.2x | |||||||||||||||||||||||||||
| 20 | The unitary charge | |||||||||||||||||||||||||||||
| 21 | Unitary charge: 1 = solve for the target equity IRR, 0 = use the typed charge | # | 1 | |||||||||||||||||||||||||||
| 22 | Typed unitary charge, a year at financial close prices | $m | 30.0 | |||||||||||||||||||||||||||
| 23 | Inflation (CPI) a year | % | 2.5% | |||||||||||||||||||||||||||
| 24 | Share of the unitary charge indexed to CPI | % | 60.0% | |||||||||||||||||||||||||||
| 25 | Performance case: 1 = base, 2 = poor performance | # | 1 | |||||||||||||||||||||||||||
| 26 | Deductions, base case, % of the unitary charge | % | 1.0% | |||||||||||||||||||||||||||
| 27 | Deductions, poor performance case, % of the unitary charge | % | 8.0% | |||||||||||||||||||||||||||
| 28 | Share of deductions passed down to the FM contractor | % | 90.0% | |||||||||||||||||||||||||||
| 29 | Pass-down cap a year, % of the FM contract price | % | 20.0% | |||||||||||||||||||||||||||
| 31 | Operating costs, at financial close prices | |||||||||||||||||||||||||||||
| 32 | Facilities management contract a year (indexed) | $m | 6.0 | |||||||||||||||||||||||||||
| 33 | Project company costs: management, insurance a year (indexed) | $m | 1.5 | |||||||||||||||||||||||||||
| 34 | Lifecycle replacement (indexed) | $m | 0.8 | 0.8 | 0.8 | 0.8 | 0.8 | 0.8 | 0.8 | 5.0 | 0.8 | 0.8 | 0.8 | 0.8 | 0.8 | 0.8 | 8.0 | 0.8 | 0.8 | 0.8 | 0.8 | 5.0 | 0.8 | 0.8 | 0.8 | 0.8 | 0.8 | |||
| 35 | Tax rate | % | 25.0% | |||||||||||||||||||||||||||
| 37 | Returns and the public sector comparator | |||||||||||||||||||||||||||||
| 38 | Target equity IRR (the bid) | % | 10.0% | |||||||||||||||||||||||||||
| 39 | Public sector discount rate (nominal) | % | 6.0% | |||||||||||||||||||||||||||
| 40 | Comparator: construction risk retained by the public sector, % of capex | % | 15.0% | |||||||||||||||||||||||||||
| 41 | Comparator: operating risk retained, % of operating and lifecycle costs | % | 10.0% |
Click any cell. The inspector names the line, the schedule it belongs to and what kind of cell it is; blue on cream is an input, black a calculation, green a value from another sheet. Scroll sideways to see every year.
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PPP availability payment model: the workbook
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What the base case says
- Bid unitary charge, a year at close prices
- $25.1m
- Equity IRR
- 10.0%
- Project IRR
- 5.6%
- Gearing
- 83.9%
- Minimum DSCR
- 1.2x
- LLCR at completion
- 1.3x
- Value for money against the comparator
- 7.0%
- Lenders’ cover test
- Passes
Read from the workbook as served, every input at its default. Periods: C1, C2, O1, O2, O3, O4, O5, O6, O7, O8, O9, O10, O11, O12, O13, O14, O15, O16, O17, O18, O19, O20, O21, O22, O23, O24, O25. The figures are invented and move with whatever you type in.
What this model is
A public-private partnership for a hospital: two years of construction and twenty-five of operation, paid by the public authority a unitary charge for keeping the building available. Deductions for poor performance, most of them passed down to the facilities management contractor; senior debt repaid as an annuity; equity paid what is left.
The model prices the bid. Equity cash flow is linear in the unitary charge, so the charge that delivers the sponsors’ target equity IRR is solved in closed form, and the checks hold the IRR at that charge to the target. The lenders’ cover and the authority’s value-for-money test are read at the same charge.
Switch the performance case to poor performance and watch the pass-down cap bind, the deductions reach the project company and the equity IRR fall below the bid, with the debt service unchanged.
Seats: Investment banking, Private equity.
Careers that do this work: infrastructure & real assets, debt capital markets, private credit.
How the schedules connect
Every row in the workbook is tagged with the schedule it belongs to; the inspector above shows the tag when you click a row. These are the schedules this model is made of and where each one lives.
Construction funding
Draws, interest during construction, fees, equity
Assumptions, rows 6–8 · Assumptions, rows 11–15 · Construction, rows 6–10 · Construction, rows 13–18
Unitary charge and deductions
The availability payment, its indexation and the deductions
Assumptions, rows 22–29 · Revenue, rows 6–8 · Revenue, rows 11–15
CFADS
Cash flow available for debt service
Assumptions, rows 32–35 · Operations, rows 6–10 · Operations, rows 23–26
Reserve accounts
Debt service reserve and maintenance reserve
Operations, rows 13–20
Annuity repayment
Level debt service: interest falls, principal rises
Assumptions, rows 16–17 · Debt, rows 6–14
Coverage ratios
DSCR, LLCR and PLCR
Assumptions, row 18 · Debt, rows 17–22
Project and equity returns
Gearing, project IRR, equity IRR and multiple
Returns, rows 6–9 · Returns, rows 12–13
Pricing a PPP bid
The unitary charge that gives the target equity IRR
Assumptions, row 21 · Assumptions, row 38 · Bid, rows 6–11
Value for money
PPP payments against the public sector comparator
Assumptions, rows 39–41 · Bid, rows 14–18
What you should be able to explain
- How an availability payment differs from revenue with volume risk: the project company is paid for keeping the asset available and loses only what the performance regime deducts.
- Why most deductions are passed down to the facilities management contractor, and what happens to equity when they exceed the pass-down cap.
- Why availability deals often repay debt as an annuity rather than sculpting it, and what partial indexation does to cover over the life.
- How a bid is priced: the unitary charge that makes the equity NPV zero at the target IRR, solved directly because equity cash flow is linear in the charge.
- What the value-for-money test compares, and why it depends as much on the risks the public sector would keep as on the cost of private finance.
What a reviewer looks for
- Indexing the whole unitary charge when only part of it is indexed, which overstates late-life cover.
- Letting deductions fall on the project company in full, ignoring the pass-down to the contractor and its cap.
- Charging lifecycle costs straight to CFADS so the lumpy years break the cover test, when a lifecycle reserve would smooth them.
- Goal-seeking the bid on a model whose equity cash flow is not linear, then quoting an IRR that is not quite the target.
- A value-for-money test that compares the PPP payments with the public sector’s raw costs and leaves out the risks it would keep.
Conventions this workbook uses
Stated on the cover sheet too. A model is only as trustworthy as the decisions it tells you it made.
- Annual periods. Prices are at financial close: the unitary charge is part indexed to inflation and part fixed; every cost is fully indexed.
- Interest during construction accrues on the opening balance and is capitalised onto the loan. The arrangement fee is paid by equity. Interest in operations is on the opening balance, so the model has no circular reference.
- The debt is repaid as an annuity: level debt service over the tenor. With a partly indexed charge, cover is tightest in the early years and in the years lifecycle replacement falls. Lenders may require a lifecycle reserve to smooth those years; this model leaves the dips visible.
- Tax is charged on profit after interest and straight-line tax depreciation of the capitalised cost. A loss is relieved in the year it arises, as group relief allows, which keeps equity cash flow linear in the charge so the bid can be solved exactly.
- The bid is priced on the base performance case. The poor performance case runs at the same charge and shows what the equity bears when deductions exceed what the contractor can be made to pay.
- The public sector comparator is the cost of building and running the hospital publicly plus the construction and operating risks the authority would keep, discounted at the public sector rate. It is a teaching simplification of a comparator, not any government’s method.
Build it yourself
The starter workbook
The Revenue sheet has been cleared: the inflation index, the charge factor, the unitary charge payable, the deductions, the pass-down to the contractor under its cap, and net revenue. Build it so that the Debt sheet shows the DSCR in every year and the Checks sheet confirms the equity IRR at the bid equals the target.
Blanks: Unitary charge and deductions. Free with any account. Compare with the worked model when you are done: download above.
The path around this model
Understand it, drill it, read the build, then apply it to a real company.
Build · Lab · ~12 min
DSCR Sculpting
Sculpt debt service to CFADS at a target DSCR, size the loan as its present value, split a payment into interest and principal, and explain why a level repayment profile fails a project lender.
Read · Guide · 12 min
Project Finance Modelling: Cash Flow Waterfalls, DSCR Sizing and the Debt Sculpt
Read · Guide · 10 min
Scenario and Sensitivity Architecture: Building a Model That Can Be Stress-Tested
Read · Guide · 11 min
Financial Modelling Best Practices: The Conventions That Make a Model Auditable
Apply · Skill
Model Audit
Find the errors in a financial model before someone senior does.
Vocabulary: Public-Private Partnership (PPP), Unitary Charge, Availability Payment, Performance Deductions, Value for Money (VfM), Public Sector Comparator (PSC), Lifecycle Costs, DSCR (Debt Service Coverage Ratio), CFADS (Cash Flow Available for Debt Service), LLCR (Loan Life Coverage Ratio), Interest During Construction (IDC).
Questions about this model
What is an availability payment?
A payment the public authority makes for an asset being available and meeting its performance standards, regardless of how much it is used. It is usually called the unitary charge. Part of it rises with inflation and part is fixed, and deductions are made when an area is unavailable or service falls short.
How is the bid unitary charge solved?
Equity cash flow is linear in the charge: every dollar of charge adds the same after-tax amount in every year, whatever else happens. So the model splits equity cash flow into a part per dollar of charge and a part with no charge, values both at the target IRR, and divides one by the other. The equity IRR at the solved charge is exactly the target, and the checks hold it there. In the base case the bid is about $25.1 million a year at financial close prices for a 10% equity IRR.
Why repay the debt as an annuity?
Because the charge is contracted, the lenders do not need repayments to follow volatile cash, and level debt service like a mortgage is simple to document and to bid on. With 60% of the charge indexed and costs fully indexed, cover rises slowly over the life, so the first years are the tightest: minimum DSCR is 1.23 in O1 against a 1.20 covenant.
How is this different from the wind farm project finance model?
The wind farm sells power and carries volume risk, so its debt is sculpted to cash flow, it holds a debt service reserve and a lock-up, and its returns come from the base case the lenders sized on. The PPP is paid for availability, so its risks are construction and performance; its debt is an annuity; and the model’s job is to price a bid. Together they cover the two halves of infrastructure finance.
What does it cost?
Nothing to inspect: the whole workbook is on this page. A free account chooses one worked model to keep, and downloads every starter workbook. L3VLUP Pro ($25/month) downloads the whole library and opens every model’s formulas in the inspector.
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