1. 6 June 2012
Project Bonds
Adam Nicolopoulos, President & CEO

2. The Debt Markets
Commercial The Public
Banks Market - Bonds
Benchmark + Margin
Multi-Billion Multi-Trillion
1

3. Different Debt Markets of Execution
Distinct differences between the bond and bank debt markets
Bank financing Bond financing
Proven track record ( + ) New market ? ( - )
Flexible execution Inflexible execution (one-shot)
Private market / no rating Public market / with rating
Comfortable with construction risk Uneasy about construction risk
Commercial covenants are key Indifferent about commercial covenants
Long term Very long term
Credit risk-driven Price-driven
Long execution horizon Short execution horizon
Potentially much larger provider
Somewhat limited provider of capital
of capital
Certainty of volume of financing
Uncertainty of volume of financing
Flexibility for refinancing
Inflexible about refinancing
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4. Selected projects bonds internationally (in
2002)
OECD countries
♦ Australia Melbourne Citylink US$647m A-/AAA 3 to 7yr 2002
♦ Canada 407ETR US$425m BBB 2/3yr 2001
♦ Czech Rep. D47 – – – –
♦ France A28 €460m AAA 15/25/30yr 2002
♦ Portugal Algarve €126m AAA 26yr 2001
♦ South Korea Daejeon Riverside US$107m A 10yr 2001
♦ UK A1 £113m AAA 32yr 2003
Connect M77 £152m AAA 31yr 2003
♦ USA SR-91 US$135m AAA 27yr 2001
Non-
Non-OECD countries
♦ Chile Various US$16 to AA- to AAA 13 to 23yr 2001/2/3/4
432m
♦ China Various US$100 to NR to BBB- 7/8/10yr 1997/8
600m
♦ Jamaica Highway 2000 US$130m Private Private 2003
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5. The Mandate & Challenge
Were mandated to raise the most money at the lowest cost and within
the shortest possible timescale
Team was to develop a finance plan for Bina Istra,
the Istrian Motorways’ Concessionaire, and raise
bonds to finance the construction of Phase 1B and
refinance Phase 1A bank debt
The challenge—to satisfy the commercial and
financial objectives of four different groups of
parties
– issuer/private sector (Bouygues)
– government/grantor
– investors/bond holders
– bank lenders
4

6. Bina Istra’s shareholders (in 2002)
♦ Bina Istra has two main shareholders
— Bouygues Travaux Public with 50.2%
— Hrvatske Autoceste with 44%
♦ Collectively, the state-owned shareholders: (HAC and INA) hold 47%
♦ Istarska Autocesta is a small motorway construction company owned by a number of
regional municipalities and banks
Ownership structure
Ina Industrija
Bouygues T.P. Hrvatske Autoceste
Nafte d.d.
51% 44%
5%
BINA Fincom Bouygues T.P. Hrvatske Autoceste Istarska Autocesta
d.d. 67% 16% 14.8% 2.2%
Bina Istra d.d
100%
5

7. BINA-Istra: building Phase 1A
Attention to quality and budget management
Photo is courtesy of Bouygues Construction
6

8. BINA-Istra: operation of the motorway
Discipline on costs and attention to safety
Photo is courtesy of Bouygues Construction
7

9. The Rating Process (require a min of two
ratings)
Rating I Rating II
rating:
BB+ Ba1
8

10. Some time the cashflow is not adequate
800
600
Millions of Euros nominal
400
200
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 26 27 28 29 30
year of concession
(200)
Opex Capex
(400)
Senior debt interest & fees Senior debt repayment
Dividends Tax
(600)
Equity subscribed Debt drawdown
Total Revenues
(800)
♦ In structuring a project financing, sponsors will seek to optimize their capital structure
and:
– Minimise shareholder funding commitment and maximise project gearing over the life of the
concession
– back-end equity and sub-debt injections
– maximise shareholder sub-debt versus equity
– receive distributions as soon as possible!
♦ Funders simply want to ensure repayment of their debt
9

11. Concession - a practical payment mechanism
that works
Costs = Revenues Liquidity
Forecasted tolling
Opex
revenue
+ +
Bina Istra
Debt service 12 month debt
Financial service reserve
+ contribution1
1A-firm
Return on equity
+ + Any intra-year
DSRA cash flow shortfall is
DSRA amount Replenishment covered by the
DSRA
Note:
1 State budget items
10

12. Financing structure for Bina Istra
Debt package Revenue stream
Bouygues
€210m bond Escrow (construction
issue account contractor) Tolling
revenues
€42m bank Bina Istra dd.
loan (Concessionaire)
Concession
agreement Government
Debt
€30m financial
Service Croatian
committed contribution
Reserve Government
bank standby
Account (Grantor)
11

13. Major challenges that had to be addressed
◆ Untested markets
◆ Lack of precedents
◆ Absence of long-term maturity in the bank market
◆ Absence of bank capacity for Croatian un-covered risk
◆ Non-investment grade project
◆ Phased construction schedule
◆ Protection against construction cost overrun risk
◆ Very tight timetable (imposed be Government)
◆ Emerging markets volatility
12

14. Elements of Debt – Highlights
♦ One-shot approach & unforgiving market
♦ Who and where are the investors?
♦ Negative Carry
♦ “60 secs to explain the deal”
♦ “De-personalized” financing
♦ Deal must be fully completed
♦ Rating-driven – around investment grade (cut off)
♦ Like certainly and do not like certain risks (e.g. construction)
♦ Fast track process
♦ More relaxed covenants
♦ More advantageous terms
♦ Not easy to refinance
13

15. Summary of (current) financing trends (…back
in 2003)
♦ Banking universe is consolidating limiting the availability of
bank debt
♦ Monoline insurers are coming in closing the gap
♦ Increasing role of the international credit rating agencies
♦ Emergence of sector-specific sophisticated equity investors—
global players
♦ Creation of new debt capital markets products—securitisation
schemes (market risk)
♦ Complex contractual arrangements allow government to raise
project funds without those scoring on their balance sheets
♦ Mobilisation of local pension fund to fund long-term transport
assets
14

16. The Investment Banker as Advisor or …
“Architect”
♦ Financial Advisor – deal manager and coordinator?
♦ Client team
♦ Technical Consultant
♦ Legal Counsel / Project Finance Lawyer
♦ Revenue Consultant
♦ Insurance Consultant
♦ Accountants
♦ Model Auditors
15

17. Revenues and expenses breakdown
100,000
90,000
80,000
70,000
60,000
(€000's)
50,000
40,000
30,000
20,000
10,000
0
2006 2009 2012 2015 2018 2021 2024 2027
Financial cont ribut ion Ucka t unnel revenues
M irna bridge revenues Ot her income
FC revenue adjust ment O&M , LCC and t ax
Debt service + O&M , LCC and t ax
16

18. Significantly improved financial structure
Final deal (Feb 2003)
Phase 1A (Jun 1998) Phases 1A and 1B Im provem ent s
Amount (t ot al) €174m €428m
Debt t ype Tr.1 €87m (COFACE) Tr.1 €210m (Bonds)
Tr.2 €18m (int ernat ional) Tr.2 €72m (Bank debt )
Tr.3 €15m (local)
Tr.4 €8m (st andby)
Annual senior €18m €29m
debt service
Debt amount €128m €282m
Risk Full t raf f ic Very limit ed t raf f ic
Equit y €20.5m €34m
Term 11.5 years (1.5+10) 19 years (5+14)
Spread Tr.1 CIR + 2.00% / 1.25% (COFACE) Tr.1 8.00%
Tr.2 LIBOR + 5.00% / 6.00% / 7.00% Tr.2 LIBOR + margin
Tr.3 9.00% / 10.00% / 11.00%
17

19. Attractive cost of funding …
… and pan-European distribution
Croatia and Bina Istra bond performance,
2003-2004 Geographic distribution
400.00 Greece Asia Scandinavia
Aust ria 3% 3% 1%
300.00 6%
Benelux UK
200.00 6% 39%
100.00 France
8%
0.00
Croat ia
2/3/2003 9/3/2004 11% Germany
Bina Ist ra 2022 Croat ia 2011 23%
Issue pricing Distribution by investor type
Insurance Privat e Bank
Issue amount €210,000,000 1% 1%
Benchmark DBR 6% June 2016 Banks
Issue price (%) 100 21%
Benchmark spread at launch (bp) DBR +365
Coupon (%) 8.00 Fund
77%
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20. Expeditious transaction timetable
May Jun Jul Aug Sep Oct Nov Dec Jan Feb
Memorandum of understanding
Appointment of Financial Advisor
Legal counsel
Financial model
Amendment of concession agreement
Financial plan
Procurement of bank debt
Discussion with rating agencies
Offering circular
Finance documents
Day closing
Financial close 25 February
19

21. BINA-Istra lessons
Some reasons for the success of the project
♦ Croatia before 1995: a pioneering role of the sponsor
♦ Political issues with real toll: a partnership attitude with the Government
♦ Flexibility: from real toll to shadow toll, then to a financial support mechanism
♦ Strong and experienced financial partners
♦ Design management and optimization
♦ Knowhow on the permitting and land acquisition process
♦ Financial innovation: non wrapped bonds (search for long maturities)
20

22. Selected projects bonds internationally
OECD countries
♦ Australia Melbourne Citylink US$647m A-/AAA 3 to 7yr 2002
♦ Canada 407ETR US$425m BBB 2/3yr 2001
♦ Czech Rep. D47 – – – –
♦ France A28 €460m AAA 15/25/30yr 2002
♦ Portugal Algarve €126m AAA 26yr 2001
♦ South Korea Daejeon Riverside US$107m A 10yr 2001
♦ UK A1 £113m AAA 32yr 2003
Connect M77 £152m AAA 31yr 2003
♦ USA SR-91 US$135m AAA 27yr 2001
Non-
Non-OECD countries
♦ Chile Various US$16 to AA- to AAA 13 to 23yr 2001/2/3/4
432m
♦ China Various US$100 to NR to BBB- 7/8/10yr 1997/8
600m
♦ Croatia Bina Istra €210m BB+/Ba2 19yr 2003
21

23. BINA-Istra: building Phase 1B
Design excellence
Photo is courtesy of Bouygues Construction
22

24. Construction of Project Financial Model
Economic assumptions Project assumptions Capital assumptions
♦ Growth rates ♦ Energy tariffs / user fees ♦ Debt size
♦ Inflation ♦ Construction costs ♦ Debt maturity
INPUT ♦ Exchange rates ♦ Maintenance costs ♦
♦
Amortisation profile
♦ Tax ♦ Operating costs DSCRs
♦ Commodity indices ♦ Timing profile ♦ Cost of finance
♦ Equity assumptions
Project Operating
Data
Base case
financial model
OUTPUT
Sources & Construction
Funding Revenue Driving Balance IRRs
Uses of Funds forecasts Cashflow P&L
Schedule Assumptions Sheet
DSCR
Tax & Debt
Sizing / Equity Sensitivities
Depreciation Funding Risk
Analysis
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25. ADN Capital Ventures, Inc.
ADN Capital Ventures, Inc. (“ADN”) delivers financial advisory services to clients who are developing,
financing and implementing transportation, energy and other related infrastructure projects in the
private and public domains. ADN is led by seasoned investment bankers and finance professionals
in the global capital markets with a successful track record in project execution and wealth of
corporate relationships.
As an independent advisor, ADN focuses on its clients’ interests and provides advice to assist clients
in optimizing and achieving their financial and commercial objectives. Our practice includes strategic
advisory and project development services with an office in San Francisco and presence in Europe.
Our team has hands-on experience in a variety of projects such as public-private partnerships (“PPP”),
long-term concessions, public projects and privately developed projects, including independent power
projects, in the United States and internationally. We deliver expertise and provide advisory services on
all aspects of infrastructure finance and project development to a broad range of clients. At the same
time our team offers M&A and capital raising consultancy services as necessary.
Having operated in over 20 countries, the ADN team brings experience in what makes projects
succeed. Over the last two years our advisory practice has grown, and we currently provide
advisory services on a transaction portfolio exceeding $2.5 billion of aggregate investments.
Adam Nicolopoulos
President and Founder,
Phone: +1 415-785-4613
Cell: +1 415-246-1765 Suite 7
Fax: +1 415-532-2873 810 College Avenue, Kentfield
E-mail: anicolopoulos@adncv.com California, 94904
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26. Adam D. Nicolopoulos
♦ Involved in over 60 project finance /private finance /concession type transactions in the US and
internationally;
♦ Total transactional experience exceeds $45 billion of total investment value;
♦ Visiting Scholar at Stanford University’s Collaboratory for Research on Global Projects since
November 2007;
♦ Two international “deal of the year” awards for novel infrastructure deals: 2003 and 1997;
Adam has spent well over 18 years with UBS Investment Banking Division (London, Zurich, New
York and San Francisco) focusing on funding transportation infrastructure and energy/power
generation assets. His clients included private sector developers, contractors, government
authorities, and public bodies. In addition to UBS, Adam worked for NatWest Markets (presently
known as RBS) from 1994 until 1997 in London in its project advisory group and with Mission
Energy (1994).
On the private side, he has advised investors, international contractors and developers in structuring
optimal financing solutions (bonds, bank debt and/or equity financing) and successfully
implementing financings. In the US, he advised on over 10 PPP/PFI and concession deals,
including advising bidders on tenders for the Indiana Toll Road and Northwest Parkway and the
development of two greenfield container port terminals in the Gulf of Mexico. His services included
advising public authorities and government enterprises, (NJ DOT), on the application of suitable
public-private partnership models for their infrastructure sector.
Mr. Nicolopoulos holds an MBA from Stern School of Business at NYU (honors / full academic
scholarship), an MSc in Mechanical Engineering from the University of California, Berkeley (honors)
and a BSc in the same field from Columbia University. Certifications include Series 7 and 63. He
has spoken at over 30 national and international conferences on topics relating to PPPs and
financial innovation.
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27. Our deals
♦ Expert witness on an international arbitration case involving a major multi-billion euro road infrastructure project in
Europe.
♦ Advised a major electronics conglomerate on a M&A buy-side mandate in the US solar renewable sector.
♦ Advised a solar PV project developer on structuring and raising funding (equity and debt) toward the development of
utility scale projects (around 25 MWs each).
♦ Advising on finance strategy and capital raising for start-up technology companies active in the clean & green tech
renewable sectors.
♦ Advising Sea Point LLC (www.sea-point.net) a private company on the development, structuring and procurement of
both equity and debt financing for a private 900,000 TEUs (twenty-foot equivalent unit) container trans-shipment port
facility in Venice, Louisiana.
♦ Advised CalTrans (California DOT) on efficient development of solar power projects on sites and land controlled by
the agency;
♦ Advised Solyndra on project transactions;
♦ Was involved from the outset in the formation and launching of a $2 billion private equity infrastructure fund targeting
the public pension funds in the US and Canada.
♦ Member of an advisory team working with TxDOT on the application of PPPs and road concession contracts in
Texas.
♦ Advising a Caribbean government (confidential) on its national debt restructuring and application of public private
partnerships (PPPs) on key transportation infrastructure assets (including an airport, a port, a ferry passenger
terminal, and others).
♦ Developer (confidential) on strategy, capital (debt and equity) and financing of 94 MW wind farm portfolio (four wind
farms) in Europe.
♦ Advised a major international concession/development company on positioning for major infrastructure and PPP
projects in Europe.
♦ Advised Halivourgiki, one of the largest industrial groups in Greece, on the development, strategy and financing of an
880 MW gas fired power station in Greece and their negotiations with partners as co-sponsors.
♦ Advised an international road operator (confidential) on their tender for the Alligator Alley Road, Florida.
♦ Advised Dragados SPL on its tender for the acquisition of a container port terminal in the Mediterranean Sea.
♦ Advised on the successful sale of an ownership interest in a 17.85 MW wind farm under development (fully permitted)
in Greece. Assignment included the selection of and negotiations with strategic international investors.
Driving • Integrity • Excellence
• Character • Independence
Values • Commitment • Social responsibility
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