P3 Failures and I-77: Mar 10, “Will It Happen Here?” Cornelius, NC Widen I-77

Cintra’s Toll Rates Source: C&M Traffic and Revenue Study Approx $18 in Current- Year Dollars

Cintra’s Toll Rates Source: C&M Traffic and Revenue Study Approx $45 in Current- Year Dollars

P3 Projects in the U.S. 4

Recent Examples- Dulles Greenway 5  Dulles Greenway 40 yr term Opened 1995 Chap  Defeasance cost: $1.8B Source: “Rise and Fall and Rise of Toll Road in the U.S.”, Univ of Va, Jun 2015; Fair Market Value Analysis, VDOT, Dec 2015; FHWA $M

Recent Examples- Indiana Toll Road 6  ITR 75 yr term Opened 2006 Chap  Sold for $5.73B  Cintra books $46M gain Source: “IFM Pays $5.7B for Bankrupt Indiana Toll Road Operator”, Law360, Mar 12, 2015; Ferrovial 2015 Annual Report $M

Recent Examples- Chi Skyway 7  Chicago Skyway 99 yr term Opened 2005 $961M debt  $129K payment (2007)  $480M balloon payment 2018  Sold for $2.8B in 2015 Source: “Would you buy a bridge from this man?”, Fortune, Oct 7, 2007

Deep Dive: SH  Oct 2012: Opens for operation Cintra pays TxDOT $100M for 85mph speed limit TxDOT lowers speed limit from 65 to 55 on free road  Mar 2013: TxDOT subsidies truck rates ($11M)  Apr 2013: First Moody Downgrade  Oct 2013: Downgrade to junk bonds  Jun 2014: TxDOT & Cintra agree to delay debt payment Moody declares “technical bankruptcy ”  Mar 2, 2016: Bankruptcy Filing Source: Various An Abrupt Ending for a Road Extension…

SH 130 Scheduled Debt Payments 9 Substantial Debt Repayment Begins in 2017 Source: TIFIA Loan Agreement $000

SH 130 Actual Debt Payments 10 Operating Cash Not Used to Pay Debt Source: 2013, 2014, 2015 Ferrovial Annual Report; Bankruptcy Court Filing $M

Equity Recovery  “To extend its existence, Transurban must buy or build new roads, requiring ongoing equity issues or increased financial leverage, given that the firm currently pays out all free cash flow as distributions to investors.” Source: “Transurban’s high quality core motorways attract, but new project introduce forecasting risk”, Morningstar, Nov 26, 2015

It Won’t Happen Here Because… 12  Toll Lanes are Different than Toll Roads  They’ll Never Walk Away from their Equity Investment  The Contract Protects Taxpayers From Potential Losses

US Toll Lanes- Project Cost 13 $M P3 (Private) Public Source: Various Eight Private Projects…

Toll Lanes Capital Structure 14 Public Contribution Equity Debt Source: TIFIA $M

US Toll Lanes- Opening Dates 15 Source: Various Limited Experience with P3 Toll Lanes

SR  $130M Initial Cost  Bought for $208M in 2005  Operates at a profit  Capital costs paid for  300K+ vpd  $10 one way Source: CalTrans No P3 Road/Lane Under Same Ownership After 15 Years

I-495 Beltway Express 17  80 year term  8-10 lanes  $230 million loss through 2014  Revenues increasing Source: “I-495 Express Lanes Endure Big Losses Early on Way to Potential Profit”, WAMU, Feb 20, 2015; TIFIA

It Won’t Happen Here Because… 18  Toll Lanes are Different Limited operating experience Mixed results  They’ll Never Walk Away from their Equity Investment  The Contract Protects Taxpayers From Potential Losses

Revenues vs Population Source: US Census Bureau, DBRS, Fitch, Various ~$300 Per Year Per LKN Resident

I-77 Capital Structure 20 Source: DBRS Substantial Sum at Risk….

I-77 MP Community Commitment 21 “I-77 Mobility Partners strives to give back by supporting the communities that run along the I-77 corridor from Charlotte to Mooresville.” -I77 Mobility Partners Jan 7, 2015 Source: i77express.com

Half of Equity Already Sold 22 Source: Ferrovial 2015 Annual Report

Equity 23 Investors Won’t Walk Away From $250M…Would They? GCM Laing Aberdeen Cintra Source: Ferrovial 2015 Annual Report; WI77 Analysis $M

Equity Recovery  Accelerated Depreciation  Loan Repayment Deferral

Accelerated Depreciation  Normal depreciation is life of asset (50 years)  Tax code allows accelerated depreciation (15 years) IF: Government grants a tolling concession Assets are “intangible” Developer owns the assets Fifteen Years is an Important Milestone….

Tax Treatment- Part 1  Under the federal tax code, an operating lease cannot be depreciated, but a toll concession can… The CA Accommodates This Source: Executed Comprehensive Agreement

Tax Treatment- Part 2  Intangible assets can take advantage of accelerated depreciation… The CA Accommodates This, Too Source: Executed Comprehensive Agreement

Tax Treatment- Part 3  But only for the owner… The CA Accommodates This, Too Source: Executed Comprehensive Agreement

The Net Result:  $440 Million Construction Costs x 35% Tax Bracket = $154 Million Tax Deduction

Equity Recovery Part 2  Accelerated Depreciation  Debt Repayment Deferral 

Scheduled Debt Payments- PAB Source: PAB Offering Package $000

Mandatory vs Scheduled TIFIA Source: PAB Offering Package $000 ~$19M Total Mandatory Payment Over Fifteen Years…

Mandatory Debt (PAB + TIFIA) Source: PAB Offering Package ~$105M Total Payment in Fifteen Years… $000

Toll Revenues (2012 Dollars) $4.3B Revenues Over 50 Years (2012 Dollars) Source: C&M

Cash Flow Available to Pay Debt Source: C&M $000 Will the Cash Flow Be Used to Pay Debt?

Equity Is Paid Back First… Source: DBRS Credit Rating Agency Confirms “Equity Out First” Strategy

Potential Equity Payments Over 15 Years 55% of Projections 35% of Projections w/Tax Advantage Equity Still Recovered Even If Revenues Miss Projections Percent of Projected Revenues $000

Equity Recovery Part 2  Accelerated Depreciation  Debt Repayment Deferral  

It Won’t Happen Here Because… 39  Toll Lanes are Different Limited operating experience Mixed results  They’ll Never Walk Away from their Equity Investment Accelerated Depreciation Debt Payment Deferral  The Contract Protects Taxpayers From Potential Losses

Termination Compensation Developer Default For Convenience NCDOT Pays greater of Fair Market Value Fair Market Value SR Outstanding Debt NCDOT Default Bankruptcy NCDOT Pays lesser of 80% of SDTA 80% of SDTA - 80% of Cash/Credit Bal - 80% of Compensation Already Pd 80% of ISDTA 80% of Refi Increase 80% of Cash/Credit Bal - 80% of Compensation Already Pd - + NCDOT Pays greater of Demobiliza- tion Out-of-pocket expenses Increase in BC Costs Cash/Credit Balances Renewal Work Compensation Already Paid Excess Compensation Taxes Debt Pmnts Interest between Termination & Valuation Demobiliza- tion Out-of-pocket expenses Increase in BC Costs Fair Market Value Fair Market Value SR Outstanding Debt Demobiliza- tion Out-of-pocket expenses Increase in BC Costs Cash/Credit Balances Renewal Work Compensation Already Paid Excess Compensation Taxes Debt Pmnts Interest between Termination & Valuation Demobiliza- tion Out-of-pocket expenses Increase in BC Costs ZERO NCDOT Pays Source: Executed Comprehensive Agreement Exhibit 15

The Same Law Firm…  Pocahontas Pky  Dulles Greenway  SH 130  SH 121  LBJ  NTE and  I-77      Source: Nossaman

Will It Happen Here?  The first project in NC’s history, and failures have happened in CA, IN, IL, TX and VA, and  The same law firm writing the same type of contracts for the same type of projects for the same company and  The same capital structure and same loan deferral terms and  The same company booked a $46M gain on an earlier default  The contract provides for taxpayer compensation in event of Developer default and  The company has already sold half their interest a month into construction…

Thank You WidenI77 PO Box 792 Cornelius, NC wideni77.org

Appendix

About the $300M Penalty  “Independent” Auditor Used Cintra’s Revenue Projections, and..  Improperly applied or does not understand IRR, and…  Used only one valuation method, and…  Failed to analyze existing managed lane operations as proxies The $300M Figure Is Cintra’s Dream Scenario

About the $300 Penalty  Base Case Equity IRR = 14.39% By definition, Net Present Value when using IRR = 0  Clary used 12.5% Net Present Value = $295M  Small change (1.4%) creates $295M in value??? Using Standard Finance Terms, Answer Does Not Make Sense Source: CA Exhibit 1, p.7; Audit Report, 12/30/15, Clary Consulting

Penalties vs Benefits  Public Contribution:$94M  Bonus Used for toll ramps:$77M  Toll subsidies:$75M  Total saved if cancelled:$246M Cancellation Saves Enough to Pay for GP Lanes

Alternatives  If we cancel the managed lanes, what are our alternatives?

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 I77 General Purpose Lane Project I77 scores higher than 33 funded projects Projects to be funded Projects unfunded I-77 GP project through Lake Norman 73 “Statewide” funded projects 377 Unfunded Projects Highest scoring funded project Lowest scoring funded project A General Purpose Lane Project Would Likely Be Funded Under STI… Source: STI STI 3.0 Total Score 50

Tax Treatment  Not only does the tax payer contribute to this project ($94M)…  …and subsidize toll revenues ($75M)  …and allow Cintra to mine loopholes in the tax code…  But in addition….

Tax Treatment  … if we compensate them for anything, we pay Cintra’s taxes! A Sweetheart Deal… for Cintra

Non-Competitive Fees