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					Erste Group
Infrastructure Finance & Public Sector

Private Sector participation in Infrastructure
Projects

Romanian Infrastructure Conference

25th January 12
Traditional Financing vs. Project Finance

            Conventional Financing                              Project Finance


                     Banks                                                           Banks

                                                                                        Project
                         Loan                                                           loan
                                                 Company
                                                     /
                                                 Municipality                Project company
           Municipality (Borrower)                                Equity



     Faultless solvency                        Off balance sheet

     Municipality liable for debt service      Non recourse to the sponsors

     On the balance sheet                      Creditworthiness depends on generated cash flows
                                                 by the project

                                                Risk sharing between participants




                                                                                                    2
Instruments for Private Sector Participation


Control versus Cash generation                                 Long term
                                                                                     Privatisation or
                                                                                          Sale




                                                                                                        High
                                        Leasing
        Low




                                                                            Concession

                                              Securitisation
                                                                  Operating or




                                                                                                        Cash generation
                        Hire-purchase
                                                               Management Contract
        Control




                  Public Authority or
                     State Loan
                                             Contracting out
        High




                                        Factoring




                                                                                                        Low
                                                               Short term




                                                                                                                          3
When are PPP‘s appropriate?
PPP‘s are essentially just a procurement alternative: decision should be based on which
alternative (concession, procurement, privatization) offers the best value for money

PPP‟s may be appropriate

        where the public sector wishes to maintain a degree of control over a strategic asset

        where the public sector must make a substantial financial contribution to a project to make it
         “bankable”

        where a publicly owned, commercially oriented entity wishes to participate for commercial
         reasons




                                                                                                          4
Key government issues

 Budgetary considerations

 Time and cost of the tendering phase

 Government fear of loosing administrative power without parallel reduction of responsibilities

 Continuing necessity of governmental support (mixed models)

 Required know-how and experience of governmental agencies

 Political commitment to the PPP model is essential




                                                                                                   5
PPP rewards for Private Sector
 Private partner


    Private partner must have an adequate return on his investments


    Interest in getting a construction contract, EPC contract,
     O&M contract


    Long term contract and revenues


 Banks


    Higher margin and fees


    Long term relationship to public and private partners




                                                                       6
Necessity of risk sharing

                 Risks shall be allocated to the party best able to manage
                                 and influence the specific risk:



    Government                         Private Partners             Supra-national Institutions
    - Land acquisition                 (Concessionaire, general     (EBRD, EIB, IFC etc.)
                                        contractor, operator)
    - Claims                                                        - Reducing political risk
                                       - Completion risk
    - Cultural inheritance                                          - Providing access to local
                                       - Most technical and           currency
    - Licences and permits
                                         operational risks
                                                                    - Accepting longer tenors
    - Change in law
                                       - Performance risk
    - Maybe subsidise cash
                                       - (Some) traffic risk
      flows or tolls thus bear
      (some) traffic risk              - Provide guarantees
    - Provide guarantees for           - Subordinated standby-
      debt facilities                    facilities




                                                                                                  7
Financing issues

 „Bankable“ risk allocation

 Equity contribution depending on the financial feasibility of the Project and investor‟s expectations

 Strong government support (e.g. direct equity / debt guarantees)

 Strong revenue support: key financial risks (e.g. traffic, FX) must be borne by the government,
  shadow toll / availability concepts

 Currency risk: Projects generating mainly local currency income, however, local currency funding is
  not available for the whole amount needed

 Maturities needed according to business plan are not bankable at first sight and need careful
  structuring. Loan tenors can be enhanced through instruments provided by supra-national
  institutions to reach 15-20 years as probably required by the economics of the project.

 Adequate political risk coverage through the involvement of ECAs/MIGA and supra-nationals such
  as EIB and EBRD




                                                                                                          8
Legal issues

 Transparency of the procurement process is a must

 Creating the legal structure, limited potential for standardisation

 Allocation of risks between private and public sector needs to be clearly defined

 Retain certain flexibility to adapt the contracts to a changing environment

 Find ways-out for possible events of early termination acceptable to all parties involved, i.e. public
  entity, investor as well as debt providers

 Compensation in case of early termination

 Change in law risk is often shared for general change in law. Public sector takes risk on
  discriminatory change in law.

 Create a bankable security structure




                                                                                                           9
PPP Project Partners (1)
   Sponsors: equity provider (construction companies, infrastructure funds, individuals)


   Contractors: EPC contracts, long term maintenance, fixed price, date certain construction


   Subcontractors: provide specific services to the general contractor


   Operator/facility manager: has to take performance risk, part of long term maintenance


   Customers: clients who profit most from a well performing solution based on socially
    acceptable levels




                                                                                                10
PPP Project Partners (2)
   State entities: legal framework, early financial contribution, main party to the concession
    contract


   (International) Banks: financial structure, know-how provider, provide funding on a viable
    financial structure (DSCR, LLCR, DSRA)


   Financial/technical advisors: assist the different parties to find an optimal solution


   Market/insurance consultants: market overview, development, provide sufficient necessary
    insurance package for a project


   Lawyers: draft documentation considering the potentially different legal systems involved




                                                                                                  11
Key Players: Investment banks…
 …become Infrastructure Operators
Macquarie Group                                           Deutsche Bank (RREEF Infrastructure)

      Worldwide leading private infrastructure                 Over €6.1bn of assets under management
       investor
                                                                22 acquisitions
      Various infrastructure funds worldwide with
       more than 100 assets                                     2007: acquisition of A5 Ostregion (Austrian
                                                                 toll road)
      €36bn of equity under management
                                                                no other assets in CEE/SEE
      Special fund with CEE investment strategy:
       Macquarie European Infrastructure Fund III         3i

                                                                Focus on Europe, North America and Asia
      Currently bidding for toll road PPP„s in CEE
       (e.g. Slovakian motorways)
                                                                No deals in CEE so far
Goldman Sachs                                             ABN Amro

      Focus on traditional infrastructure sectors              Focus on OECD countries in Europe
       such as toll roads, airports and ports, as well
       as regulated gas, water and electrical utilities         Bidding together with Vinci for R1
                                                                 Expressway (Slovakia)

Morgan Stanley Infrastructure Fund                        Babcock&Brown


                                                                                                               12
Key Players: Construction Companies…
…become Infrastructure operators
Hochtief

     Involved in 31 PPP projects worldwide with an investment volume of +€11bn

            16 in the field of public buildings (operation of 89 schools in Germany, the UK and Ireland)

            15 toll roads with a total length of more than 700km (A4 Highway, Germany; Vienna North
             Highway, Austria;

     Participating in all major toll road tender PPP„s in CEE

     Hochtief Airports:

            stake in Athens, Düsseldorf, Sydney and Hamburg airports

            Operation of Budapest and Tirana airports

            A toal of more than 89million pax in 2007




                                                                                                            13
Key Players: Construction Companies…
…become Infrastructure operators

   Other main international players with activities in CEE:

    Bilfinger Berger                         FCC/Alpine


    Vinci                                    Skanska


    Strabag                                  OHL

    Porr                                     Mota-Engil

    Egis                                     Eiffage

    Bouygues/Colas                           Aktor




                                                              14
Key Players: International Infrastructure Operators…
…move to CEE
                       Some of the players are:




                                                       15
Contacts Bucharest

             Markus Kriegler                            Ioana Gheorghiade
             Erste Group – Banca Comerciala             Erste Group – Banca Comerciala
             Romana                                     Romana
             Head of Project Finance                    Deputy Head of Project Finance
             Bucuresti, Str. Lipscani 18-22, Sector 3

             Tel.:    +40 (372) 26 48 03                Tel.:    +40 (725) 26 75 60
             mobile: +40 (732) 45 06 10                 mobile: +40 (722) 29 18 25
             markus.kriegler@bcr.ro                     ioana.gheorghiade@bcr.ro




            Iuliana Toba
            Erste Group – Banca Comerciala
            Romana
            Senior Client Executive
            Bucuresti, Bd. Regina Elisabeta No. 5

            Tel.:      +40 (21) 31 21 505
            mobile: +40 (723) 71 46 50
            iuliana.toba@bcr.ro




                                                                                         16
Contacts Vienna


        Werner Weihs-Raabl                       Christian Topp
        Erste Group                              Erste Group
        Head of Group Infrastructure Finance &   Head of Energy & Environment Finance
        Group Public Sector                      1020 Vienna, Obere Donaustraße 17 - 19
        1020 Vienna, Obere Donaustraße 17 - 19
                                                 Tel.:      +43 (0) 50100 - 18039
        Tel.:   +43 (0) 50100 - 18010            Fax:       +43 (0) 50100 - 9 18039
        Fax:    +43 (0) 50100 - 9 18010          mobile: +43 (0) 664 818 15 17
        mobile: +43 (0) 664 818 05 27            christian.topp@erstegroup.com
        werner.weihs-raabl@erstegroup.com




        Christoph Lang                            Erich Mascheker
        Erste Group                               Erste Group
        Head of Health & Education Finance        Transportation Finance
        1020 Vienna, Obere Donaustraße 17 - 19    1020 Vienna, Obere Donaustraße 17 - 19

        Tel.:     +43 (0) 50100 - 18041           Tel.:    +43 (0) 50100 - 19911
        Fax:      +43 (0) 50100 - 9 18041         Fax:     +43 (0) 50100 - 9 19911
        mobile: +43 (0) 664 818 04 73             mobile: +43 (0) 664 838 92 13
        christoph.lang@erstegroup.com             erich.mascheker@erstegroup.com




                                                                                           17
Curriculum Vitae
Markus Kriegler, Head Group Project Finance


                     Markus Kriegler heads the Group Project Finance Team of Erste Bank Group as well as the Project Finance
                     Division of Banca Comerciala Romania. He has extensive experience in corporate banking with a strong focus
                     on structured finance. Since more than 10 years Markus Kriegler has been involved in a number of corporate
                     finance transactions almost exclusively in the CEE Region and Austria. Markus holds a master degree from
                     the Vienna University of Economics and Business Administration.


                     Before joining Erste Group in 2008 Markus acted as a Managing Director responsible for Corporate Solutions
                     in the financing team of Unicredit Markets & Investment Banking in Vienna where he was responsible for a
                     number of corporate finance transactions in CEE, Russia and Austria across all sectors.
                     From 2006 to 2007 Markus headed the Structured Finance Team of Unciredit (HVB Bank at this time) in
                     Prague, Czech Republic. Leading a team responsible for project finance, acquisition finance and other
                     structured finance solutions he was overlooking acquisition financings in the heat, power and natural
                     resources sectors as well as in general industries. Moreover he was involved in project financings in various
                     sectors      including     telecom,      power,      biofuel,      general      industries        and     media.
                     Markus also spent three years in Serbia and Montenegro heading the corporate division of the newly founded
                     HVB Bank in the country. Starting as a greenfield he built the corporate business of the bank to a 25 people
                                                                       operation.
                     Before going abroad Markus was a member of the energy, oil& gas and utlities team within the Project
                     Finance Department of Bank Austria Creditanstalt in Vienna which he headed from 2000 to 2001. In this time
                     he was leading project finance transactions for power stations, refineries and water utilities in the CEE region,
                     mainly in Poland, Hungary, Croatia, Czech Republic and Slovakia.




                                                                                                                                         18
Selected Credentials - Infrastructure Finance


 Social Infrastructure Finance    Transport Finance             Transport Finance             Transport Finance              Transport Finance


                                                                 Bina Istra, Croatia              D1, Slovakia                  M6, Hungary
     Sportski Grad, Croatia           AZM, Croatia




                                                                 Phase II Financing            Financial Advisory                 Financing
           Financing             Phase I and II Financing       Transaction volume:              and Financing               Transaction volume:
      Transaction volume:         Transaction volume:               EUR 693Mio.               Transaction volume:                EUR 445 Mio.
          EUR 46Mio.                  EUR 375Mio.             with ERSTE participated:            EUR 2,1Bn.               with ERSTE participated:
                                                                    EUR 30Mio.                                                   EUR 60 Mio.




       Energy Finance                                                  2008
                                  Transport Finance                                      Sports and Leisure Finance
                                                            Sports and Leisure Finance

                                       A5, Austria             Jelačićka Sports Hall           Višnjik Sports Hall
       Enerji SA, Turkey                                             Varaždin                         Zadar


                                                                                         City of Zadar / Sportski Centar
                                                                                                   Višnjik doo
                                        Equity
           Financing              Transaction volume:
      Transaction volume:             EUR 900Mio.              25 yr investment loan:        6 yr investment loan:
           EUR 1Bn.                                                  EUR 29mln.                    EUR 22mln.




                                                                                                                                                      19
Selected Credentials - Infrastructure Finance Advisory


             2008                        2006-2008                     2006-2008                    2006-2007                        2007-2008
    Infrastructure Finance        Infrastructure Finance        Infrastructure Finance       Infrastructure Finance           Infrastructure Finance


       City Town Hall                 Courthouses              Emergency Care Centre      Pardubice County Hospital           Zlin Congress Centre
       Czech Republic                Czech Republic               Czech Republic               Czech Republic                     Czech Republic




                                                                  Financial Advisory     Financial Advisory and Project   Financial Advisory and Project
      Financial Advisory            Financial Advisory                                            Management                       Management
     Transaction volume:                                         Transaction volume:
                                   Transaction volume:                                        Transaction volume:              Transaction volume:
         EUR 40mln.                    EUR 75mln.                    EUR 65mln.                                                     EUR 20mln.
                                                                                                   EUR 80mln.




             2007                           2007                         2006                         2006                           2007-2008
    Infrastructure Finance     Social Infrastructure Finance    Infrastructure Finance       Infrastructure Finance           Infrastructure Finance

     PPP methodology                Catholic Church            Karlovy Vary Hospital       Merger of Two Hospitals           Multifunctional Centre
      Slovak Republic               Czech Republic               Czech Republic               Czech Republic                   Czech Republic




                                                                 Financial Advisory               Advisory                     Financial Advisory
  Advisory on preparation of        Financial advisory
                                                                Transaction volume:          Transaction volume:              Transaction volume:
        methodology                Transaction volume:
                                                                    EUR 30mln.                   EUR 17mln.                       EUR 55mln.
                                       EUR 15mln.




                                                                                                                                                           20

				
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