Road Infrastructure Success Stories the German Market

Road Infrastructure Success Stories

The German Market

MY OUR MOTOR WAY

Road Infrastructure Success Stories - The German Market 1 General overview of global PPP market 2014

2014 . 260 deals closed with a value of USD 83.56bn in total . Total amount of project financing was USD 57bn comprising USD 47bn in bank financing and USD 10bn in bond debt . Transport sector again forms the biggest part in value (101 deals) followed by Social Infrastructure (121 deals) . Transport sector again gained more importance . Substantial parts of the worldwide dealflow within EMEA

Source: InfraDeals Full Year 2014 Trend Report Road Infrastructure Success Stories - The German Market 2 Overview project finance market 2005 – 2013 (non PPP + PPP)

. The majority of projects is funded with long-term bank debt . The total project finance funding volume reached some 366bn USD in 2013, of which half represented infrastructure . In the last decade the share of project bonds consistently stayed well below 20% . The project finance market has so far been dominated by long-term bank debt, while project bonds only played a minor role

Road Infrastructure Success Stories - The German Market 3 Selected major highlights in the European motorways and infrastructure sector 2014

Country Project Value Status UK Aberdeen Western Peripheral Route GBP 745m FC DE A7 Bordesholm – Hamburg PPP EUR 735m FC UK Mersey Gateway PPP GBP 600m FC B Viapass road tolling PPP EUR 300-400m FC NL A9 Gaasperdammerweg road PPP EUR 700m CC B Liege tram PPP EUR 366m PB FIN E18 Hamina – Vaalimaa PPP EUR 340m PB IRL N25 New Ross bypass EUR 217m PB B Brabo 2 tram PPP EUR 230m BAFO DE A94 Pastetten – Heldenstein, Bavaria EUR 500m Tender Phase NL Ijmuiden sea lock PPP EUR 800m Dialogue Phase NL Beatrix Lock PPP EUR 250m Dialogue Phase DE A7 Salzgitter – Göttingen PPP EUR 450m PQ NL N18 Enschede – Varsseveld EUR 300m Transaction launch

Road Infrastructure Success Stories - The German Market 4 German Concession Models - Facts

. Federal Republic of Germany set Pilot projects up two different PPP seasons: A8 (Augsburg-West – Bavaria Operation . Wave I: starting from 2005 München-Allach) A4 (Lgr. Hessen/Thüringen - AS Thuringia Operation . Wave II: starting from 2009 Gotha) . Wave III: expected for H1 2015 Lower Saxony A1 (AD Buchholz – AK Bremen) Operation Baden- A5 (Malsch – Offenburg) Operation . Private contractor is in charge of Württemberg A8 (AK Ulm-Elchingen – AD design, construction, financing Bavaria Construction Augsburg-West) and operation + maintaining of A9 (AS Lederhose – a defined motorway section Thuringia Landesgrenze Construction Thüringen/Bayern) . Project site stays property of Schleswig- A7 (AD Bordeholm – AD HH- Construction Contracting Authority Holstein Nordwest) . Remuneration: Bavaria A94 (Forstinning – Marktl) Procurement Lower Saxony A7 (Salzgitter – Drammetal) Procurement . Formerly: shadow toll regime Baden- A6 ( Wiesloch-Rauenberg – Procurement . Today: availability based Württemberg Weinsberg) Project launch expected payments only A-Model scheme, Source VIFG Berlin / A10/A24 Neuruppin - AD . In addition, the contracting Brandenburg Pankow authority may provide start North Rhine- A1/A30 (Lotte – Münster/Rheine Westphalia – Lotte) up funding Bavaria A3 Biebelried - Erlangen

Road Infrastructure Success Stories - The German Market 5 Availability Model A7, Germany Key Facts Contract: Availability Model. Planning, financing and upgrading (Six-/Eight-Lane extension under traffic) of some 65 kilometers of the A 7 federal highway between the Hamburg- Northwest and Bordesholm intersections.

Operation and maintenance of a 59 km © DEGES/V

section between Hamburg and Neumünster

- KON.media

Construction volume: approx. EUR 580m

Contract volume: approx. EUR 735m

Concession period: 30 years

Term: 2014 - 2044

Client: Federal Republic of Germany © © DEGES/V

Project parties: HOCHTIEF PPP Solutions GmbH (49%), - Dutch Infra Fund (41%), KEMNA BAU KON.media

Andreae GmbH & Co. KG (10%)

Project company: Via Solutions Nord GmbH & Co. KG Road Infrastructure Success Stories - The German Market 6 Availability Model A7, Germany Organisation - Overview

Partner: Client Federal Republic of Germany represented by Hamburg/Schleswig Holstein represented by . independent dedicated DEGES fund management company focused on infrastructure and Shareholder SPV Financing Parties renewable energy . equity portfolio of roughly Senior Bond HOCHTIEF PPPS 49% EUR 1 billion Milestone Bridge Facility DIF 41% Project Bond Credit KEMNA 10% Enhancement (PBCE)

. specializes in raw materials CJV Operation Company production, road construction and civil HOCHTIEF Solutions 70% engineering HOCHTIEF PPPS 83% . 1.500 employees KEMNA 20% KEMNA 17% . annual turnover of app. TESCH 10% EUR 300 m

Road Infrastructure Success Stories - The German Market 7 Availability Model A7, Germany Schedule

2012 2013 2014

22.08.2012 Pre-qualification 6 months

12.11.2013 Tender 9 months

Negotiations 1.5 months 16 months 23.06.2014 BAFO 2 months

26.08.2014 Financial close 3.5 months

. Long process (almost two years) . Volatile and fast changing financing market environment which required working on several funding solutions in parallel until late in the process

Road Infrastructure Success Stories - The German Market 8 Availability Model A7, Germany Key features of financing . While investigating the two alternative financing options, bond financing solution generated notable savings compared to bank financing. . Final solution was a multi-sourced financing with 90:10 gearing: . Bond placement - EUR 430m of senior secured notes were placed with seven investors using private placement (limited number of investors, commitments similar to banks, validity periods for several months, investors carry out due diligence like a bank, external rating not necessarily required) . Project Bond Credit Enhancement (PBCE) - Benefiting from a 1.5 notch uplift due to the EUR 86 M EIB PBCE, the notes were rated A3 by Moody’s. PBCE provided additional liquidity in the form of an irrevocable Letter of Credit to either fund cost overruns where the longstop date can still be met or to compensate senior debt in a termination scenario . Milestone Bridge Facility - Construction milestone payments from the Authority to be bridged with a EUR 82m revolving Milestone Bridge Facility provided by commercial banks . Challenges and results: . Complex funding mix resulting in complex intercreditor issues . Diverse investor group with EIB involvement as PBCE provider and bond investor . At BAFO stage, the EUR 430m offering was approx. 2x covered by the investors who provided exclusive support in the tender phase . Improvement of offered price by 5% by reason of using bond financing Road Infrastructure Success Stories - The German Market 9 Comparison bank loan vs. project bonds (I)

Disadvantages of project bonds for sponsors continue to disappear Feature Bank Loan Project Bond Comment (private placement) Draw-down • monthly • Same as bank No negative carry thanks to deferred draw-down Repayment • Sculpted profile or annuity Decision making & Generally limited Trend towards In the past, decision making was voting number of banks replicating more sometimes difficult in public and more or less bank-style placements with numerous investors functioning intercreditor where a fair share did not have Procedures stipulations sufficient resources for active loan management; private placements can help improve this Interest Rate Fixed through Fixed No need for hedging with project interest bonds rate swap

Road Infrastructure Success Stories - The German Market 10 Comparison bank loan vs. project bonds (II)

As a result projects bonds can currently often beat the costs of bank financing

Feature Bank Loan Project Bond Comment (private placement) Headroom Bank loans allow Bond volume Lack of flexibility can to some extent certain up and irrevocably be mitigated if bonds are coupled downward flexibility fixed at the time of with some form of standby funding financial and/or short term bank debt or close credit enhancements (CE’s) Validity of up to 6 months up to 6 months Investors now accept validity periods commitments similar to banks Security package Liability cap around Liability cap The requirements of the security (contractor) 25%; Performance around 40%; package to reach investment grade Bond around 10% Performance are considerably higher than those of Bond starting a bank financing; Sponsors need to at 15% assess if the additional costs are (dependent on outweighed by the savings of complexity) financing costs (margin)

Road Infrastructure Success Stories - The German Market 11 Conclusion & Outlook

Project financing market: classical bank loan vs. bonds . Former disadvantages of project bonds for sponsors have nearly disappeared . Despite a much more comprehensive security package and higher bidding costs, project bonds can generate significant savings compared to bank financing . However, recent deals show that banks are currently under high pressure regarding financing and offer very competitive pricing and covenants. In addition banks can also act as bond investors and/or offer fixed rate products Project financing market: current situation . Currently European financing markets show high degree of liquidity but very few investment opportunities . Share of bond financing is still below 20% of total project finance market . 2014 showed vast financing interest for well structured projects in well rated countries like Benelux, Germany, France, UK, Scandinavia . No major PPP transport projects in CEE in 2014 . CEE outlook (2015/2016): . Great interest of investors on CZ, SK and PL . Attractive to finance markets: sovereign rating of AA- (CZ), A (SK) and A- (PL) . Projects (e.g. D4 SK) still in preparatory phase

Road Infrastructure Success Stories - The German Market 12

The HOCHTIEF Group

Rea . Founded in 1873 -

. Represented in all the world’s major markets OscarDurand © . 80,000 employees worldwide FlatironAlvarez © . Integrated portfolio: Develop, build, operate . Focus on core competency of construction, notably in infrastructure projects . Transportation infrastructure . Energy infrastructure . Social and urban infrastructure . Contract mining

Road Infrastructure Success Stories - The German Market 13 HOCHTIEF Group

Corporate structure Three divisions with major subsidiaries

HOCHTIEF Corporate Headquarters (management holding company)

© Flatiron © Leighton Contractors © Oscar Durand .HOCHTIEF Americas .HOCHTIEF Asia Pacific .HOCHTIEF Europe . Turner . Leighton Holdings . HOCHTIEF Solutions . Clark Builders . Thiess . HOCHTIEF Building . Flatiron . Leighton Contractors . HOCHTIEF Infrastructure . E.E. Cruz . John Holland . HOCHTIEF Engineering . Leighton Properties . HOCHTIEF PPP Solutions . Leighton Asia, India and . Subsidiaries Offshore . Habtoor Leighton Group

Road Infrastructure Success Stories - The German Market 14 HOCHTIEF Group

Our worldwide presence

Road Infrastructure Success Stories - The German Market 15 HT PPPS Transport Infrastructure Europe

HOCHTIEF offers all key competences for PPP-projects: Design, Finance, Construction and Operation

Idea Assessment of Asset Opportunities Management Conceptualisation Maintenance procure Design Operation design financing Obtaining Permits & Guaranteed Approvals Completion

Construction Risk Allocation guarantee negotiate Constructioncompletion contractsCommercial Management Structuring Finance

Road Infrastructure Success Stories - The German Market 16 HT PPPS Transport Infrastructure Europe

Our Business

. Acquisition Development of DBFM- and Concession-projects in the sector of transport infrastructure in Europe.

. Operation/Execution Ensuring a systematic and contract compliant operation incl. increase in value of the investment.

. Divestment Realization of value and resourcing through sale of assets in order to provide equity for new transport infrastructure projects.

Road Infrastructure Success Stories - The German Market 17 HT PPPS Transport Infrastructure Europe

Our Portfolio

Total HOCHTIEF Length No. Project investment Operation share [%] [km] [EURm]

1 Herren Tunnel Lübeck (D) 78,5 50,0 2005 - 2035 2,0

2 San Cristóbal Express (Chile) 107,9 50,0 2008 - 2037 4,0

3a North Highway A5 (Ypsilon) (A) 830,8 4,4 2010 - 2039 51,0

North Highway A5 (Ypsilon) (A) 3b 30,6 50,0 2011 - 2039 - Service Area Business

4 Maliakos-Kleidi (GR) 1.113,2 35,0 2008 - 2038 260,0

5 Elefsina-Patras-Tsakona (GR) 2.214,2 17,0 2008 - 2038 365,0

6 A8 Highway (D) 430,0 50,0 2011 - 2041 58,0 Northeast Anthony Henday Drive 7 472,0 25,0 2012 - 2046 27,0 (CAN) 8 Presidio Parkway (USA) 68,0 50,0 2012 - 2045 2,4

9 SAAone (NL) 538,1 20,0 2017 - 2041 22,0

10 A7 Highway (D) 734,9 49% 2014 - 2034 59,0

Road Infrastructure Success Stories - The German Market 18 Contacts

Piotr Soltyski Team Leader CEE / Nordics HOCHTIEF PPP Solutions Transport Infrastructure Europe

Tel.: +49 201 824-4108 E-Mail: [email protected]

Tomáš Koranda Member of the Board HOCHTIEF CZ a.s.

Tel.: +420 257 406 000 E-Mail: [email protected]

Road Infrastructure Success Stories - The German Market 19