1. Asset-Based Financing for Transport Projects Chris Cook Partnerships Consulting LLP

2. What is Asset-Based Finance? Ownership of assets and their revenue streams Legal “wrapper” around assets and revenues –Limited Liability Company –Trust –“Open Corporate” Limited Liability Partnership

3. What is Deficit-based Finance? Interest-bearing (from Credit Institutions) –“Asset-backed”/ Secured by a claim on assets (mortgage or “charge”) –unsecured Non interest-bearing (from suppliers or staff)

4. Asset-Based Finance – Companies –Types Limited by Guarantee Limited by Shares –Private –Public –GM eg IPS, CIC –Issues Conflicts – ”shareholder value” and CSR Management – the Principal/Agency problem

5. Asset-Based Finance – Trusts –Examples Canadian Income/ Royalty Trusts Macquarie Bank business model –Common Law – judge made –Issues Risk Aversion Management Taxation Legal complexity and cost

6. Asset-Based Finance - LLPs Q. When is a partnership not a partnership? A. When it’s a UK Limited Liability Partnership (“LLP”) Q. What is it if it’s not a partnership? A. A corporate body: with limited liability: and………er, that’s it!

7. Why an “Open” Corporate? Open to any “stakeholder” to be a Member, as long as they subscribe to the “Member Agreement”. A legal “wrapper” – like a “trust”, but without the drawbacks - for any assets or revenues anywhere in the world. Tax transparent.

8. Introducing the “Capital Partnership” “Capital User” Member “Capital Provider” Investor Member Jointly acquire a productive asset “Capital Rental” - user pays Investor a revenue share in Money (or “Money’s Worth”) for as long as Capital is used Rental paid before due date is Investment Outcome “Co-ownership”

9. Hilton Deal 2002 Capital Partnership LLP 10 UK Hotels Revenues 27yr term Hilton Group “Capital User” Consortium LLP “Capital Provider” £350m Bank Property Developer Hotel Specialist % of Revenues %%

10. Community Transport Partnership LLP Investors Users Capital Rental Operators % Trustee Ownership

11. Community Transport Partnership “Trustee” Member “Investor” Member “Developer/Operator” Member “Occupier” Member

12. Example 1 – Eurotunnel Divide £8 bn Capital (debt and equity) into billionths/ ”shares” at £8.00 each Allocate (say) 25% of Eurotunnel revenues to “ Capital Rental” Initial Capital Rental £150m = 1.875% Each billionth then carries one quarter billionth of Eurotunnel revenues, initially 1.875%

13. Example 2 – Merseytram Current Plan – increase Mersey Tunnel deficit-based finance by £40m Alternative Plan – refinance Mersey Tunnel with £120m asset-based finance 10 million “ shares” at £12.00 initial Capital Rental of 3% = £3.6m or approx 10% of revenues each share carries one 100 millionth of tunnel revenues Financing costs reduced overall despite increase in Capital

14. Investment Proposition Reasonable long-term return Secure –based upon “ Co-ownership” of asset Potential for growth with limited downside Islamically sound

15. Outcomes “Co-ownership” between financier and financed New long term savings/pension asset class Local investment in local infrastructure? Lower cost of capital than deficit-based finance