GAVIN MUNRO, MANAGING DIRECTOR Public-Private Partnerships & the Project Finance Market November 11, 2014 | 10:00 AM EST Shyamala Shukla Senior Consultant, WBG with GAVIN MUNRO, MANAGING DIRECTOR SOCIETE GENERALE Public-Private Partnerships

Global Infrastructure Project Finance Source: Infrastructure Journal, Global Project Finance Infrastructure Review 2013 Public-Private Partnerships

Global PPP Infrastructure Investment Source: Infrastructure Journal, Global PPP Market Review 2013 Public-Private Partnerships

PPI in Key Countries Developing markets…. Brazil, India, Russia Decline in closed projects Decline in total investment Turkey, Mexico, China Substantial increases in total investment Developed markets….. Australia: High profile deals United States: Increasing interest in PPP United Kingdom: Largest PPP market with large investments in transport and social sectors Public-Private Partnerships

Project Structuring Risk allocation may be changing Less demand risk? Availability payments PPAs Other forms of demand guarantees Less construction risk? Government debt support instruments Senior debt Subordinate debt Innovative structuring Mini perms Multiple financing instruments Guarantees by government Letters of comfort Debt guarantees PRGs Public-Private Partnerships

Sharing of demand risk with availability payments United Kingdom Major changes through PF2 UK Guarantee Scheme for senior debt Support for availability payments in case of revenue shortfall Example: Mersey Gateway Bridge Government Guarantee for 50% of Senior Debt Availability payments DfT support for availability payments to authority DfT grant to HBC for land assembly and other associated costs Creates CL for government Sharing of demand risk with availability payments Source: PWC, Funding Infrastructure, Time for a New Approach, June 2011 Public-Private Partnerships

United States TIFIA PROGRAM Use of subordinate debt with longer terms With mini perm like commercial loans Extensive use of availability payments Port of Miami Tunnel Fixed payments during construction Construction completion payment TIFIA subordinate loan Annual availability payments Source: FDOT Public-Private Partnerships

India Africa Economic downturn Most transactions in the energy sector Financing issues Sector exposure limits Single and group borrower limits constraints in external borrowing currency depreciation Lack of affordable hedging instruments statutory requirements for banks Governance issues: Elections Inefficient procurement Land acquisition delays Rethink in standard risk structure Power sector tariff issues Coal block allocation issues Most transactions in the energy sector Less traction in other sectors Heavily wrapped transactions in many countries Demand/ Offtake guarantees Tariffs indexed to USD Letters of comfort PRGs Public-Private Partnerships

Questions of focus Do you see a difference in the project finance market prior to and after the financial crisis? Do you think that the resurgence of PPPs in the UK does have something to do with the government coming up with programs like the UK guarantee scheme and other protections we have discussed? Can you talk a little bit about the Indian PPP market and why there is no real project finance? What would it take for say Gavin Munro MD of SG to feel comfortable in financing projects in India? How do you see the PPP project finance market in some of the African countries emerging over the next 5-6 years? Do you think the current project finance model with substantial indexing, PPAs and letters of comfort can be sustainable? Which are the markets of most promise among the developing countries? Public-Private Partnerships