1. ING Project Finance PPI Programme and Investment Projects in Korea
November 2003

2. Worldwide Operations Global Network
ING operates in 60 countries, has 110,000 employees and is a member of over 60 securities exchanges globally
Worldwide Operations
ING Group operates in some 61 countries and has over 82,500 employees worldwide. Our business is not just in developed markets but in most of the world’s emerging markets, a principal focus for the Group’s business.
Europe
Austria
Belgium
Bulgaria
Czech Republic
France
Germany
Greece
Hungary
Italy
Luxembourg
Monaco
Netherlands
Poland
Romania
Russia
Slovakia
Spain
Switzerland
Ukraine
UK & Ireland
Africa/Middle East
Bahrain
Egypt
Lebanon
South Africa
United Arab Emirates
Zimbabwe
Turkey
Asia/Australasia
Australia
China
Hong Kong
India
Indonesia
Japan
Kazakhstan
New Zealand
Malaysia
North Korea
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
North America
Canada
Mexico
United States
South America
Argentina
Brazil
Chile
Colombia
Ecuador
Netherland Antilles and Aruba
Paraguay
Peru
Uruguay
Venezuela
Operations
Banking
Insurance
Asset Management

3. PPI/PPP Transactions
ING is an active adviser, lender and investor in PPP projects globally
Water / Wastewater
Road, Bridge, Tunnel
Rail
Airport
Port
Other PFI

4. PPI/PPP transactions in Korea ING is a market leader in the sector
First European bank to establish operations in Korea
Full service corporate and investment banking operations - >150 staff
Landmark deals include first hard currency securitisation - monoline wrap
Extensive privatisation and M&A experience
In PPI/PPP sector
several deals closed including Incheon Port and Busan Wastewater
WIP includes advising on 5 toll roads, 2 wastewater projects, a port and a rail project
close co-operation with London team has ensured full benefit of local and international practice

5. PPI/PPP Contract between public and private sector
Public sector awards contract to private sector to build/develop and operate an asset - contract typically years
Acronyms (BOO, BOT, DBFO) – variations on same basic theme
Private sector funds build/development cost and is repaid over contract term – payments start once asset is operational
Payments from public sector and/or users (such as road tolls)
Assets include
transport (roads, railways, airports)
buildings (schools, hospitals, prisons, military barracks, etc)
equipment (military, utilities, etc)
Main constraint is size - asset must be big enough (>US$50m) to justify structuring (legal, financial, etc) costs

6. Why are PPP/PPIs being implemented
An innovative approach to service delivery
PPI structures:
spur innovation and efficiency through long term responsibility
promote “whole life costing” decisions (spend now/save later or vice versa).
provide better integration between designer, builder and operator
better for managing construction risk:
no direct contract between contractor and Government
aligns contractors short term profit aims with long term aims of the project
proven examples in motorways - c.25% cost saving through PPP.
PPI acts as a discipline on government - some loss of flexibility
PPI obligations usually do not count towards Government debt

7. PPP/PPI projects - value creation A stable long term investment
Year 1
Year 2 - 4
Year 5
Year
Year

8. Korean PPI Market A growing market with real potential
Market governed by PPI laws - strong Government commitment
Ten year plan- Road, Rail, Ports, Water and others
Market characterised by many large projects (>US$500 million)
Solicited and unsolicited bids allowed
Key is to assess feasibility of project before committing major resource
Construction sector still not wholly comfortable with fixed price contracts (but inflation risk pass through to Govt.)
High levels of revenue risk mitigation provided by Government
Strong termination compensation - usually full compensation for debt

9. Korean PPI Market A relatively mature local debt market
Local banks developing expertise in limited-recourse structures
Significant funding capacity (>US$1 billion equivalent)
Limited need for hard currency solutions - won interest rates competitive
Long term interest rate hedging still problematic/expensive
Terms moving toward international norms - maturities 16/17 years
Active bond market - but amortising bonds still a rarity
Monoline solutions not yet used for projects but are feasible
Advisers can add significant value
in negotiating terms toward international practice
maximising competition - banks and bank/bond

10. Korean PPI Market Local equity/sub debt markets also developing
Traditionally equity has come from contractors/developers
Local banks will consider subordinated debt
Healthy appetite shown by local institutions for PPI investment
Secondary market developing rapidly
Minimum equity requirement in some cases - but this is changing

11. Concession Agreement Comparison UK vs. Korea
Detailed template available with all issues addressed
Revenues usually performance based, limited guaranteed revenue
Compensation clauses generally limited unless for government default
Few restrictions imposed by government on financial structure
Requirement for sharing of refinancing gains
Korea
PIA Act less prescriptive. Concession agreement terms more dependent on individual negotiations
80-90% revenue guarantee depending on whether solicited or unsolicited
Extremely favourable termination compensation clauses - even on concessionaire default
Laws/concession agreements very prescriptive on financial structure

12. Korean PPI Market Conclusion
A long list of projects - feasibility assessment is key
Local banks will consider subordinated debt
Healthy appetite shown by local institutions for PPI investment
Secondary market developing rapidly
Minimum equity requirement in some cases - but this is changing