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, test lender coverage against the covenant, and compare the authority’s payments with a public sector comparator.
Built in: Investment banking, Private equity
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.
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| 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 | AE | |
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| 1 | Assumptions | ||||||||||||||||||||||||||||||
| 2 | $m unless stated, at financial-close prices. Annual periods: C1 and C2, O1 to O25. | ||||||||||||||||||||||||||||||
| 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 | Notes | |
| 5 | Timing | ||||||||||||||||||||||||||||||
| 6 | Years from financial close | years | 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 | Counted at year end: C1 = 1 | |
| 7 | Operating year flag | flag | 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 | 1 in O1 to O25 | |
| 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 | 0 during construction | |
| 10 | Construction and funding | ||||||||||||||||||||||||||||||
| 11 | Design and build contract | $m | 200.0 | Fixed price, nominal; not indexed | |||||||||||||||||||||||||||
| 12 | Construction draw profile | % | 45.0% | 55.0% | Share of the contract drawn in C1 and C2 | ||||||||||||||||||||||||||
| 13 | Development and bid costs | $m | 8.0 | - | Nominal | ||||||||||||||||||||||||||
| 14 | Senior debt gearing | % | 85.0% | Share of construction and development costs funded by debt | |||||||||||||||||||||||||||
| 15 | Arrangement fee | % | 2.0% | % of senior debt drawn; paid by equity | |||||||||||||||||||||||||||
| 16 | Senior debt interest rate, annual | % | 5.0% | Fixed by swap | |||||||||||||||||||||||||||
| 17 | Debt tenor | years | 23 | Operating years, O1 to O23; annuity repayment | |||||||||||||||||||||||||||
| 18 | Lenders’ minimum DSCR | x | 1.2x | Covenant; tested on the Checks sheet | |||||||||||||||||||||||||||
| 20 | Unitary charge and performance regime | ||||||||||||||||||||||||||||||
| 21 | Pricing method | # | 1 | 1 = solve for the target equity IRR; 0 = manual unitary charge | |||||||||||||||||||||||||||
| 22 | Manual unitary charge | $m | 30.0 | Annual, at financial-close prices; used when pricing method = 0 | |||||||||||||||||||||||||||
| 23 | Inflation (CPI), annual | % | 2.5% | Indexes the charge and costs from financial close | |||||||||||||||||||||||||||
| 24 | Indexed share of the unitary charge | % | 60.0% | The rest is fixed in nominal terms | |||||||||||||||||||||||||||
| 25 | Performance case | # | 1 | 1 = base, 2 = poor performance | |||||||||||||||||||||||||||
| 26 | Performance deductions, base case | % | 1.0% | % of the unitary charge payable | |||||||||||||||||||||||||||
| 27 | Performance deductions, poor performance | % | 8.0% | % of the unitary charge payable | |||||||||||||||||||||||||||
| 28 | Contractor recovery share | % | 90.0% | Share of deductions recovered from the facilities management (FM) contractor | |||||||||||||||||||||||||||
| 29 | Contractor recovery cap | % | 20.0% | Annual, % of the indexed FM contract cost | |||||||||||||||||||||||||||
| 31 | Operating costs, at financial-close prices | ||||||||||||||||||||||||||||||
| 32 | FM contract, annual | $m | 6.0 | Indexed to CPI in full | |||||||||||||||||||||||||||
| 33 | Project company costs, annual | $m | 1.5 | Management and insurance; indexed to CPI in full | |||||||||||||||||||||||||||
| 34 | Lifecycle replacement | $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 | Indexed to CPI in full | |||
| 35 | Tax rate | % | 25.0% | ||||||||||||||||||||||||||||
| 37 | Target return and public sector comparator (PSC) | ||||||||||||||||||||||||||||||
| 38 | Target equity IRR | % | 10.0% | Sponsor return the bid charge is solved for | |||||||||||||||||||||||||||
| 39 | Public sector discount rate, annual | % | 6.0% | Nominal | |||||||||||||||||||||||||||
| 40 | PSC: retained construction risk | % | 15.0% | % of construction and development costs | |||||||||||||||||||||||||||
| 41 | PSC: retained operating risk | % | 10.0% | % of operating and lifecycle costs | |||||||||||||||||||||||||||
Select a cell to see its row, its schedule and the type of cell. Font colours: blue for inputs, black for formulas, green for links to other sheets. Scroll sideways to see every period.
Download
PPP availability payment model: the workbook
Excel workbook with working formulas, no macros and no external links. Work with it above first; it is the same model as the preview.
What the base case says
- Bid unitary charge, annual at close prices
- $25.1m
- Calculated equity IRR
- 10.0%
- Project IRR
- 5.6%
- Gearing
- 83.9%
- Minimum DSCR
- 1.2x
- LLCR at completion
- 1.3x
- PPP saving against the PSC
- 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 (PPP) model for a hospital: two years of construction and twenty-five years of operation, paid for by the public authority through an availability-based unitary charge. Senior debt is repaid as an annuity and equity receives the remaining cash.
The model solves the unitary charge that gives the sponsors’ target equity IRR, then tests lender coverage at that charge and compares the authority’s payments with a public sector comparator (PSC).
Uses: learning how a PPP bid is priced, and testing how poor performance, through deductions and contractor recoveries, affects coverage and the equity IRR.
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 performance deductions are recovered from the facilities management (FM) contractor, and what happens to equity when they exceed the recovery 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 recoveries from the FM contractor and their 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: C1 and C2 are construction years; O1 to O25 are operating years. Rates are annual.
- Inputs for the unitary charge and operating costs are at financial-close prices. The calculation sheets show nominal (indexed) amounts: the index in each year is (1 + CPI)^years from financial close, with C1 counted as one year. A share of the unitary charge is indexed and the rest is fixed; facilities management (FM), project company and lifecycle costs are fully indexed. The design and build contract and development costs are nominal.
- 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 O1 to O23. With a partly indexed charge, coverage is tightest in the early years. Lifecycle costs are smoothed through a lifecycle reserve funded at a level indexed amount.
- Performance deductions are withheld by the authority. The project company recovers a share from the FM contractor, up to an annual cap; the rest reduces its revenue.
- 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 unitary charge so the bid can be solved without iteration.
- The bid is priced on the base performance case. The poor performance case uses the same charge and shows the effect on the equity IRR when deductions exceed contractor recoveries.
- The target equity IRR is an input; the calculated equity IRR is on the Returns sheet. The lenders’ DSCR covenant test is separate from the value-for-money comparison, which is a simplified public sector comparator: public build and operating costs plus retained construction and operating risk, discounted at the public sector rate. The result is a comparison under this model’s assumptions, not any government’s method.
Build it yourself
The starter workbook
The Revenue sheet has been cleared: the inflation index, the indexation factor, the unitary charge payable, performance deductions, recoveries from the FM contractor under the cap, and net revenue. Build them so that the Debt sheet shows the DSCR in every year. The Checks sheet shows when the calculated 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: each extra dollar of charge adds a fixed after-tax amount in each year, given the other assumptions. 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 prices a bid. The two models cover the two main revenue structures in infrastructure finance.
What does it cost?
Nothing to preview: the whole workbook is on this page, and a free account works with it online, every formula included. Every starter workbook downloads with a free account. L3VLUP Plus ($4.99/month) keeps one worked model each billing month, yours for good, and L3VLUP Pro ($25/month) keeps every one.
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