TRACECA TRANSPORT Zurich Jan. 2011 B.N. Zenouzi

Execution and Build up Plan Back up Business Plan TRACECA , Transportation Company Main Business Plan Execution and Build up Plan Back up Business Plan TRACECA TRANSPORT

Transport Corridor Europe-Caucasus-Asia (TRACECA) Global Trade / Transportation Transport Corridor Europe-Caucasus-Asia (TRACECA) To enhance European export to CIS countries, rules, roads, international role and many infrastructure issues need development so EU initiated TRACECA.

EU Financed TRACECA Armenia Azerbaijan Bulgaria Georgia Kazakhstan Kyrgyzstan Moldova Romania Tajikistan Turkey Ukraine Uzbekistan Turkmenistan Iran

Trade Volume in TRACECA Excluding EU 717 B$ Regional Trade Today, ... T$ tomorrow Needs Quick Development in Transportation

Road Transportation will increase from 15 to 30 Billion Euro till 2030 Market Volume and Growth Road Transportation will increase from 15 to 30 Billion Euro till 2030 Rail Transportation will increase from 30 to 100 Billion Euro till 2030

MAY 2009, IDEA project started Transport dialogue and interoperability between the EU and its neighboring countries and Central Asian countries EU grant for a 3 years project to obtain a sustainable, efficient and integrated multi–modal transport system in the TRACECA region

USA and TRACECA USA has 2000 Billion Ton-Km freight transport and TRACECA (without EU) has almost the same. ------ USA has it’s most big Multi-state transportation company with more than 46,000 Trucks but TRACECA no multi-national. Mode of intercity freight transport Ton-Km (millions) Air 25,170 Truck 2,069,322 Railroad 2,774,043 Domestic water transportation 946,042 Pipeline 1,446,098 TOTAL U.S. Ton-Km of freight 7,260,674 Source: 2005 estimates by the Bureau of Transportation Statistics No. of Truck Grade 46,874 1 45,665 2 25,087 3 8,807 4 5,193 5 3,305 6 2,150 7 2,031 8 1,500 9 1,280 10 1,000 11 965 12 726 13 51 14

Transportation Plan 3 sub-regions was defined as A, B, C. Accordingly, possible routes of transportations are named as follows:

Transportation Plan • According to this routs trucks dedicated to each rout will be as below:

Economical analysis Investment Loan Income Pre operation costs: (invested) 500,000 Euro Fleet start up cost 10,000,000 Euro Truck buying rate 1,000 Per month Buying duration 20 Month Truck and trailer price 74,000 Euro Loan Truck leasing price 87,856 Euro Total number of payments 84 Month Installment payment 1,046 Euro/month Income Transport service price 0.062 Euro per Ton*Km Average annual traveling 85,000 Km Average Cargo chargeable weight 20 Ton Truck full load ratio 70% Truck Gross annual income 6,103 Euro

Economical analysis Expenses Note: Fund Can be supplied by Financer or Fuel consumption 30 liter/100Km Fuel price 0.5 Euro/liter Lubricant consumption 40 liter/15000Km Lubricant price 3 Euro/liter Maintenance(Tires,…) 180 Euro/month Tracking system 8 Euro/truck/month Depreciation 1,225 Euro/truck/month Driver Income 769 Euro/driver/month Rent and Staff 30,000 Euro/month Insurance 153 Euro/truck/month Corporation Tax 25% Note: Fund Can be supplied by Financer or Credit so we can by funds ourselves

Economical analysis IRR= 38% Year Investment cash flow (1,490,500,000) (1,490,500,000) 1 254,740,263 2 677,770,749 3 762,060,611 4 5 6 7 738,266,175 8 697,739,554 9 689,800,962 10 689,926,962 IRR= 38%

Execution and Build up Plan Back up Business Plan TRACECA , Transportation Company Main Business Plan Execution and Build up Plan Back up Business Plan TRACECA TRANSPORT

7 Business Area Management Basic (Top level) Organization Chart Management Board 7 Business Area Management Internal Sales External Sales …… Administration and EU Lobbying Planning Finance Man. Quality Man. HR Man. …….. Transportation Marketing & Sales Project Managers ……. 14 Countries Representatives Local Transport Customs Affair Cross border Transit …..

Risk Matrix Risk Type Mitigation Pre-completion - Cost over-runs - Delays (a) Fixed price turnkey contracts (b) Warranties / penalties / incentives (c) Fixed project specification (d) Strong contractors Post-completion - Revenue forecasts - Revenue build-up - Operating costs - Management failure (a) Committed supply contracts (b) Committed off-take contracts (c) Strong operators (d) Performance guarantees Technical - Performance - Environmental - Safety (a) Warranties (b) Proven technologies (c) Public consultation and approval Financial - Structure: debt/equity ratio, eg. 75/25 - Structure: return on capital - Structure: risk / reward ratio - Foreign exchange - Interest rates - Debt service cover - Taxation (a) Equitable ROE, ( eg. 15-20 %) (b) Acceptable cover ratios ( e.g 1.5 -2.0) (c) Escrow and reserve accounts (d) Dividend constraints (e) Loan syndication (f) Insurance / financial derivatives (g) Standby funding arrangements Legal - Regulatory framework? - Concession law? (a) Experienced lawyers. (b) Clear, simple documents Political - Regime stability - Force majeure aggt. - Political intervention (a) Clear regulatory regime (b) Investment insurance (c) IFI support

Project Structure and risks Political and Macroeconomic Risks FX Risks and Refinancing Risks Shareholders Regulatory Risks Granting Authority Lenders / Bondholders Shareholder’s Agreement Concession Agreement SPV Project Company Operator Services Purchaser Operation & Maintenance Agreement (O&M) Purchase Agreement (e.g., Truck or FMS purchase agreement) Performance Risks Construction Contracts Regulatory and Performance Risks Construction Contractor Raw Material Supplier Supply Agreement (e.g., Fuel supply agreement) Completion Risks

Lead Arranger and Loans Project Map EU + 14 Countries Customers Operators Governmental Major Public Grants, Licenses … . Etc. Drivers Misc… Major Private Management Manufacturers Project Sponsors Sales Trucks Manufacturers Advisors BA Managers Technical Software Contractors Legal Communication Investors Financial Political Maintenance Operators Lead Arranger and Loans Bonds and Insurance Equity and Mezzanine Bank 1 IFI 1 Technical Risk Financial Risks Equity 1 Mezzanine 1 Bank 2 IFI 2 Commercial Risk Environment Equity 2 Mezzanine 2 IFI3 Equity 3 Mezzanine 3 Political Risks Force Major

Model for TRACECA with 7 Business Units TRACECA provides Loads to the Drivers Intermodal Logistics Company TRACECA is insurance broker for trucks insurances and freight insurances Truck suppliers provide trucks and driver services Insurance Company Truck Suppliers TRACECA provides Less expensive fuel and lubricants TRACECA provides Less expensive Tires and spares Monthly Payments TRACECA provides FMS to the Drivers and control the trucks Fleet Management System Lease Company TRACECA checks the drivers and ask for guarantee for monthly lease payments TRACECA sells trucks 30/70 Ownership 15% Cash Deposit Monthly Lease Payments Drivers from TRACECA Region Provides credit or cash to purchase Trucks

Different Agreements Implementation Agreement Concession Agreement Construction Contract Operations Contract Maintenance Contract Raw Materials Supply Contract Sales Purchase Contract Special-Purpose Company Documents Share Subscription Contracts Loan Agreements Inter-creditor Agreement Escrow Account / Trustee Arrangements Insurance Licenses; Permits; Bills & Decrees => Transparent Contract Management

Time Schedule of Building up

National Transit operation First Real Multi National Armenia Azerbaijan Bulgaria Georgia Kazakhstan Kyrgyzstan Moldova Romania Tajikistan Turkey Ukraine Uzbekistan Turkmenistan Iran 14 Nations Transportation Company Will have: Speedy or Non-Stop Load Transportation No Local Restriction but enjoys local support and gain. Access to third country loads. Almost always busy as a chain member in Transport route. Less operational cost for transport because of driving home. Advantage of knowing local roads and rules. Fuel cost saving by Tanks in National Transit Operation. Several Load check points in borders National Transit operation

Execution and Build up Plan Back up Business Plan TRACECA , Transportation Company Main Business Plan Execution and Build up Plan Back up Business Plan TRACECA TRANSPORT

TRACECA 7 BA’s

System Supplier + Operator Local Supplier + Operator BA - Financial BA will carry out: Cross-border leasing in eligible countries. Sustainable growth to Rail, Ocean and Air Transport. Contract signed by authorities, in one country only, it Creates 437 M€ Cash, 649 M€ profit and local root. Insurance CCC Austria = Owner Banks IFI System Supplier + Operator Any Eligible country Local Insurance Local Banks Local Supplier + Operator CCC Country = Owner TRACECA TRANSPORT Leasing Contract Monthly Leasing Payments Advance received € 437,272,727 Operation Margin € 649,355,117 Customs charges -€ 444,000,000 Total Income € 642,627,844

BA – Vehicles BA will carry out: Assembling and Repair in eligible countries. Reduce cost of import and sales at those countries. Will cover all after sales services for own country and neighbors. Will provide trucks for replacements so non-stop load transport. Save 400 Million € customs cost in BA Finance + Totally new business with cash, profit and local strength. TRACECA TRANSPORT

Creates 100 M€ p.a. extra profit and NEW business. BA - Logistics BA will provide: Strong Link with global forwarders as external forwarding. Know-how and recognition as international freight forwarders Develop BA to act as Internal Multi Modal forwarder Serving the market as Multi Modal Forwarder/Carrier Creates 100 M€ p.a. extra profit and NEW business. External Forwarders TRACECA Freight Owner Destination Freight Owner Origin BA Logistics TRACECA Freight Owner Destination Freight Owner Origin Good Communication, High quality service, Low price, On-time delivery

Manage 250 M€ p.a. cost + New Business. BA – Fuel Cards BA will provide: Saving in 255 M€ (10%) Favourable payment conditions Manage 510,000,000 liter of fuel through own supply save 10% more. Establish Fuel distribution channel in eastern countries of TRACECA. Own Mobile fuel distribution network in future. Manage 250 M€ p.a. cost + New Business.

BA – Tires, Spare parts and Maintenance BA will provide: Reduced cost as Whole buyer. Will manage spare parts and 100.000 p.a. tires consumption. Will supervise the maintenance to ensure service continuity. Can produce Tire production plants to create extra added value. Manage 43 M€ p.a. maintenance cost and ensure availability and quality.

BA – Insurance Save margins of 36 M€ p.a. Insurance cost BA will provide following step by step: Broker Function so save broker margin Will collect enough capital to be insurer so save insurer margin. Will develop business to insure sever but covered risk. (Export credit risks … etc.) Will make lobbying with EU to serve TRACECA risks. Will develop together with BA – Finance a Bank in Austria. Save margins of 36 M€ p.a. Insurance cost Develop business to individual insurer and Bank.

10 -15% of benefit + Enhanced Cargo Services BA – Fleet Management System BA will provide: Operational cost saving Smooth up daily operation for fast transport An ERP with Integrated data GPS Navigating and Tracking so better accessibility 10 -15% of benefit + Enhanced Cargo Services

BA – FMS services Improved dispatching Increased route adherence Optimized routes Reduced mobile costs Reduced overall costs Proactive traffic jam action Better managed driver hours Proof of visit and Faster invoicing