Experience with PPP projects in Europe Vilnius 22 th November 2006 Dr. Christian Kummert, DEPFA BANK plc

2 from a public sector perspective Advantages- Risk transfer to private sector - Date and cost certain - Efficiency and cost advantages - Off budget - Operator Know How - Output- and not input focussed Disadvantages- loss of public sector control - increased financing costs - availability of administrative resources - limited competition over concession period - economic focus of private investors Advantages and disadvantages of PPPs

3 PPPs in Europe Long track record First projects closed Projects in tender or preparation No experience Experience

4 PPPS in Europe Pipeline (as of summer 2006)

5 Project Company Sponsors Banks Insurance Public Authority Construction Consortium Operator Turnkey- Contract O & M - Contract Loan Agreement Concession Agreement Equity Traditional Structure PPP Structures

6 Purchase of Receivables Special Purpose Company Municipality Fixed payments Bank Approval Supervisory Authority Purchase Price: NPV of future payments Concession Purchase of future receivables Germany

7 Hospital Schemes Portugal InfraCoCliniCo Portuguese State Banks Contractor Operator Shareholders Supplier Interface Agreement Medical Equipment Turnkey Construction Contract FM Contract Senior DebtEquity/Subdebt Concession

8 Oeresund-Crossing, Market Entity-Approach Denmark Sweden SPV (= Market Entity) User Contracts Toll income Lenders Garanties 50% ConstructionOperationMaintenance Debt

9 Risk Allocation in School PFI RisksPublic Project Turnkey O&M Banks SectorCoContractor Contractor Planning √ √ Inflation √ Change of Law √ √ Insurance √ √ Construction √ Operations √ Maintenance √ Volume / Demand √ √ Force Majeure √ Termination √ √ Risk Allocation Project Risks

10 Full TollShadow TollAvailability Payment Toll Paymentby Userby Governmentby Government Traffic Risktraffic flow less traffic flow moreno traffic riskpredictable Performanceno additionalpenaltiessophisticated Riskpenaltiespossiblededuction schemes Public Sector- no exposure- financial exposure- financial exposure - low acceptance - optimal use- optimal use - strong control Application- few intersections- many intersections - many intersections - high traffic - low traffic - political motivation Payment Schemes Road PPPs

11 Banding Structure Road PPPs

12 Cash Flow Profile of Shadow Toll Road Road PPPs

13 Availability Payment Structure A13/UK Road PPPs

14 Experience Contractors Buffer in construction schedule (working shifts, winter break, etc.) Completion buffer (Construction Contract versus Concession Agreement) Joint and several liability of turnkey contractors Completion guarantee by contractors/sponsors Liability caps of contractor Liquidated Damages for delays in completion Advance Payment Bond, Retention Bond, Performance Bond Warranty periods Direct Agreement with Turnkey Contractor Mitigation of Construction Risks Lenders‘ Requirements

15 Annual Debt Service Coverage Ratios (ADSCR) Loan Life Coverage Ratios (LLCR) Project Life Coverage Ratios (PLCR) Debt/Equity Ratios Concession Tail Sensitivities (in particular break even scenarios) Repayment Profile (annuity, sculpted, ballon, bullet, cash sweep) Reserve Accounts (Debt Service Reserve Account, Major Maintenance Reserve Account) Cash Flow Lenders‘ Requirements