1. D E C E M B E R 1 2, 2 0 0 6D E C E M B E R 1 2, 2 0 0 6 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S FHWA: Northern Border Finance Workshop Detroit, Michigan S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A LS T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L

2. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Overview Private Sector Capital: A financing tool A new Detroit River International Crossing Federal Sector Capital: Co-investment 1 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

3. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Private Capital Can Add Value Aggressive use of capital to maximize asset value given a projected stream of tolls Private capital structure using both debt and equity Equity demands a higher rate of return, but may be more flexible during ramp up Optimal use of debt Upfront payment to sponsoring government, even in a new construction project Extract value from existing assets Infrastructure private purchasing power > $200 billion 2 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

4. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Infrastructure Financing Alternatives Conventional Innovative Initial Public Offering  Separate assets into operating company  Offer shares to public and maintain significant ownership  Sell additional ownership percentages over time  Likely to give more autonomy to management and attract local retail investors  Possibly lower initial proceeds than sale or concession Leverage Asset with Debt  Debt Service coverage levels to Baa/BBB rating category  Debt proceeds fund Project  No asset sale or transfer  Comply with existing bond covenants, if applicable Transfer Asset to Public Authority  Create a new Public Authority in which the sponsor has significant participation  Authority borrows funds for purchase  Authority purchases transportation assets or concession  Apply purchase price to pay existing debt and to finance new projects Public Private Concession Agreement  Accept bids for long term lease from private operators and investors  Retain asset ownership  Critical controls negotiated in concession agreement  Potential for upfront cash and revenue sharing Direct Asset Sale  Direct sale of either a portion of or entire asset  Complete divestiture of transportation assets  Parent company likely to assume control over day-to-day operations  Likely to produce maximum proceeds Brownfield or Greenfield Brownfield 3 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

5. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Infrastructure Assets are Attractive to Investors Long term, stable cashflows, inflation adjusted Low correlation to other asset classes Increase in share price due to revaluation and growth Income stream with tax deferred components Predictable Cashflow Diver sification Capita l Appr eciat ion Tax Benefits Uni que Inve stme nt Class Previously unavailable for investment Broad Appeal Traditional institutions Pension plans Hedge funds Retail investors Rapid Shift to Funded Pension Systems Shift to funded pension systems Duration match of liabilities to assets Incentive for Private Sector Participation Investment encouraged by government Long-Term Investment Returns Valued Using Discounted Cash Flow Investors seek high-yield, low risk, bond-like returns with potential for capital growth 4 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

6. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Striking the “Right” Public-Private Partnership Balance Deliver project Promote economic development Maximize financial resources Build project if it produces good financial return Generate stable long-term equity returns Maximize return on investment Public Agency Objectives: Private Sector Objectives: Long-term mindset Tailored agreements Maximize Equity Returns Maximize Traffic Flow and Economic Development Public Sector Private Sector 5 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

7. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M 1 Includes concession ($67mm for 100% implied) and construction $621mm Recent North American Road Privatizations 6 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

8. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M U.S. Transportation PPP Projects In-Progress 7 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

9. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Projects Completed Between US and Canada Blue Water Bridge Managed by: Michigan Dept. of Transportation (MDOT) & Blue Water Bridge Authority (BWBA) Description: Connects Port Huron, MI and Sarnia, ON Financing: MDOT 2005 Refunding of $54.5MM 1996 Bonds; C$100MM BWBA bonds outstanding Security: State Trunk Line Fund (MDOT); Toll revenues (BWBA) Traffic 1 : Two way traffic Notes: AA- rating from S&P (MDOT & BWBA) Bridge is tolled in both directions 20012002200320042005 5,687,5595,596,9115,441,2075,568,8455,513,809 International Bridge Managed by: Federal Bridge Corporation Limited Description: Connects Sault Ste. Marie, MI and Sault St Marie, ON Financing: No bonds outstanding - $16MM issued in 1960 have been retired Security: Toll revenues Traffic 1 : One way traffic Notes: Nov. 06, JIBA proposed a toll increase to meet long term needs and decreasing revenue Bridge is tolled in both directions 1 Respective websites 2003200420052006 est. 1,898,5801,849,3821,926,6601,941,353 8 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

10. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Detroit River International Border Crossings Canada and the US have the largest bilateral trading partnership in the world Over $1 billion (USD) in daily trade 1 28% of surface trade between Canada and the US passes through the Detroit River Area 2 Currently, crossing occurs via: Ambassador Bridge —Privately owned by the Detroit International Bridge Company and the Canadian Transit Company Detroit-Windsor Tunnel —$53.5MM Macquarie concession for US side – January 2001 Detroit Windsor Rail Tunnel —Controlled by Canadian Pacific Railway, owned by CPR and Borealis Infrastructure Fund 1 Detroit River International Crossing Study - Evaluation of Illustrative Alternative on US Side of Border – Volume 2 2 Detroit River International Crossing Study - Travel Demand Forecasts 9 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

11. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Forecasted Need for a New Detroit River International Crossing By 2035, base forecast traffic is expected to increase 1 : Passenger traffic – 57% Truck traffic - 128% Capacity of the connections and plaza operations will be exceeded sooner than roads Since 1999 traffic in the Detroit River area has declined by 25% 1 Detroit River International Crossing Study – Travel Demand Forecasts (Sept. 2005) Source: DRIC Study - Travel Demand Forecast Bridge and Tunnel Operators Associations Annual Passenger Cars Annual Commercial Vehicles 2001 – US Attacked on 9/11 2003 – SARS outbreak in Canada Historical Events 1989 – FTA Agreement 1999 – Casinos open in Detroit Average annual growth rates: 10 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

12. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Forecasted Need for a New Detroit River International Crossing Crossing speed and capacity Source: Detroit River International Crossing Study – Travel Demand Forecasts 1 Based on PCE factor of 3 for commercial vehicles Base forecast physical crossing capacity exceeded: Ambassador Bridge – 2020 Detroit Windsor Tunnel - 2035 11 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

13. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Detroit River International Crossing Project Proposed Bridge Canadian Inspection Plaza US Inspection Plaza Canadian Highway Connection US Highway Connection A new border crossing will have five components Access roads leading to the border crossing Toll collection facilities Physical crossing Border inspection system —Primary and secondary Egress roads leading from border crossing Source: Detroit River International Crossing Study – Travel Demand Forecasts Summary of future Detroit River crossings capacity needs 12 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

14. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Recent Border Processing Improvements Ambassador Bridge Four new truck customs booths – Jan. 8, 2004 New Fast and Secure Trade (FAST) program improvements – Nov. 1, 2004 Improved technology and staffing levels have improved mobility patterns Mean Commercial Travel Times Source: Detroit River International Crossing Study – Travel Demand Forecast 1 Detroit River International Crossing Study – Travel Demand Forecasts Crossing Times – Canada to US Delay times on the critical US-bound Ambassador Bridge crossing reduced by 80% 1 13 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

15. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Political Risk Market Position Existing competition —Bridges —Rail —Ferries Alternate proposals —Detroit River Tunnel Partnership - Jobs Tunnel (~$400 million to construct) —Mich-Can - Rouge River Bridge Project (~$400-$500 million to construct) Traffic and Revenue Forecasting Competing truck toll ($USD) Investor Considerations: Detroit River Crossing Greenfield Project Socioeconomic Event Risk Source: DRIC Study – Travel Demand Forecast 14 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

16. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Funding Sources for a New Crossing 1 2006 State of Michigan – State Trunk Line Funds Official Statement, 2 New and Publications – Michigan Infrastructure & Transportation Association Public Private Partnerships ??? Canada  Would concession be allowed across border?  Would the restrictions from both countries deter investors from taking on the project?  A number of other crossings are privately owned – agreements? Michigan Department of Transportation In FY 2005 surface transportation revenues - $1.97 billion 1 Each year, Michigan falls more than $700 million short in meeting basic maintenance needs 2 State of Michigan Senate approved 2007 capital outlay budget contains language prohibiting any state expenditures for renewed crossing over Detroit River Federal Funding Transportation Infrastructure Finance and Innovation Act (TIFIA) —Can TIFIA be applied to the US portion? Private Activity Bonds (PABs) —Potential for use with TIFIA if allowed —Would allow for less expensive financing Province of Ontario May 2005 - Ontario releases infrastructure investment plan with transportation investments of $11.4 billion by 2010 Federal Funding Transport Canada manages the Highways and Border Infrastructure Fund, with a commitment of $2.4 billion in 2006 budget Strategic Highway Infrastructure Program —5-year program to renew and enhance Canada’s highway infrastructure —$600 million dedicated to overall program, with $65 million set aside for border crossings Cost of the crossing is estimated at $1 billion United States Canada 15 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

17. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Federal-Aid Highway Program (FAHP) funded by contract authority Major criteria: National or regional significance Federal requirements (Civil Rights, NEPA, Titles 23/49 of U.S.C.) Eligible project costs must be at least: —At least $50 million or 33% or more of the State’s Federal-aid highway apportionments —Assistance cannot exceed 33% of total eligible costs Sponsor must pledge a revenue source to repay the TIFIA obligation State and local transportation approvals must be obtained Dedicated Revenue Sources Tolls, user fees, special assessments, tax increment financings and any portion of a tax or fee that produces revenue pledged for debt retirement General obligation pledges or Corporate Priority pledges No pledge of US federal funds Transportation Infrastructure Finance and Innovation Act (TIFIA): Background 16 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

18. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Loan Guarantee Direct Loan Will Generate Proceeds for Construction ProgramApplicationDirect Benefit Original Proceeds Generated? Direct Loan Line of Credit Finance/refinance eligible project costs Sponsor receives a loan with more flexibility than third party loans Yes Enhances participation by third party lenders No Guarantees loan for eligible project costs Available only after Substantial Completion No Pay debt service on obligations to finance eligible costs, O&M costs, etc. 17 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

19. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Title 23 / Title 49 Project Definition $15 billion limitation – No expiration date No annual limitation PAB Authorization PABs Can Allow Private Partners Access to Less Expensive Funding Private Ownership Can be loaned to a private entity to construct Private entity may own Private entity can keep all tolls and other revenue Private Management Can be owned by a governmental entity and leased to, or managed by, another private entity Management agreement need not comply with the limitations imposed by IRS Revenue Procedure 97-13 “Qualified Highway and Surface Freight Transfer Facilities” (“Qualified Transportation Facilities”) include Any surface transportation project which receives Federal assistance under title 23, United States Code Any project for an international bridge or tunnel for which an international entity authorized under Federal or State law is responsible and which receives Federal assistance under title 23, United States Code Any facility for the transfer of freight from truck to rail or rail to truck which receives Federal assistance under either title 23 or title 49, United States Code Project must comply with Title 23 (United States Code) (Highway) and/or Section 5333(a) of Title 49 U.S.C.(Rail) TIFIA funding qualifies as Title 23 funds and will establish eligibility for PAB approval Subject to the Alternative Minimum Tax (“AMT”) AMT premium of 15-30 basis points on long-term fixed rate bonds and the premium on floating-rate securities is 5 basis points Primary buyers are institutional investors AMT Depreciation & Interest Expense Private party can deduct depreciation if treated for tax purposes as the owner Generally, the private party is treated as the tax owner if: Legal owner Lease or otherwise has the right to use for their full economic lives, or Lease with a bargain payment option Private entity can deduct interest payments Significant interest rate advantage relative to taxable rates 18 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

20. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Conclusion A new crossing for the Detroit River –- or any similar project –- can only be done based on good underlying fundamentals Federal sector co-investment: TIFIA can fund project costs, and can drive down capital costs directly and indirectly Effective tool when used properly Not a magic bullet Not a pot of gold Private sector capital 19 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S

21. N O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A MN O R T H E R N B O R D E R T R A N S P O R T A T I O N P R O G R A M Questions and Answers Bob Walsh, JPMorgan Securities Phone: (312) 732 – 2010 E-Mail: robert.e.walsh@jpmorgan.com 20 I N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E SI N F R A S T R U C T U R E F I N A N C I N G S T R A T E G I E S