1. Oct. 2015 Project Fund- An Instrument to Finance Infrastructure Projects Two Case Studies

2. 2 Methods of Financing Infrastructure Projects in Iran Projects Finance Facilities Establishing Project Fund in Tehran Stock Echange Partnership Between Investors and Government Structured Finance Mechanisms

3. 3  Theta Energy was founded in December 2013  Initial shareholder equity was 100 Billion Rials.  Theta Energy’s Shareholders:  Theta Energy’s main goal is to finance, develop and manage energy sector projects via project funds in TSE. Introduction of Theta Energy ShareholdersShare Tejarat Bank20% Iranian Investment company20% Bank Staffs Pension Fund20% Asia Insurance Company20% Kayson Company15% Kayon Oil, Gas & Energy company5%

4. 4  Closed-end structure: Unlike open-ended ones no new shares are issued, and shares are not redeemable.  Possibility to use supporting instruments such as put option to ensure minimum return on investment.  Past experience in Tehran Stock Exchange –Project companies owned and financed via holding companies whose stocks were traded in the public market: Midco –Open ended mutual funds –Fixed income assets like Sukuk and company bonds –Recently Islamic Treasury Bills were offered to investors at a discount (Zero-coupon bill) to pay back government’s debt to contractors. Features of Project Fund In Tehran Stock Exchange

5. 5 Structure of Project Fund Contractor 2Contractor 3Contractor 1 Exchange Traded Project Fund Fund Manager 100% ownership of project company Supervision Technical supervisor Trustee Auditor Stock Exchange Underwriter Market maker Stock Exchange Organization Project company

6. 6  FIPPA Law: Recognizing the rights and interests of foreign investors, immunity against noncommercial risks, facilitating the free flow of investment return, and full and just compensation for expropriation and/or halting foreign investor activities.  Projects’ Partnership Law: –At the time of expiration of exploitation right, in case the expenses of the plan shall not be amortized, transference of exploitation utilities will be extended until full amortization of the plan costs. –Partnership projects in infrastructure are tax-exempt until reimbursement of principal and interest of the amount invested by the private sector partner.  Clause V of Note 5 of the Annual Budget Law of 1394 (2015-16): The possibility to use the resources of the National Development Fund to develop “Transportation Infrastructure” projects including roads, railways, etc. Incentives to Invest in Infrastructure in Iran

7. 1 Case Study 1- A BOT Railway Project

8. 8 Construction of Second Track of Chadormalu- Ardakan Railway

9. 9 Project Datasheet MOU Agreement Between National railway company and Kayson- Theta Energy Consortium Contract TypeBOT, Brownfield Total Investment Costs6000 Billion Rial ($ 180 Million) Project Length200 Km Current Annual Frieght Capacity9 Million Tons Approximate Future Annual Freight Capacity 19 Million Tons Project Financing Structure Project Fund, Loan from National Development Fund of Iran Construction Phase3 years Operation Phase10 years

10. 10  10% Internal Rate of Return in Dollar and 20% Internal Rate of Return in Rial will be guaranteed by Iranian National Railway Company.  Beginning from second year of construction, the revenue of existing track is owned by the investor.  Insuring more than 10% annual exchange rate fluctuations for investing in railway projects.  Access to loans from National Development Fund.  Insuring the principal and interests of the project loans.  Exchange of Rial to the foreign currencies on daily basis of official rates.  Possibility of issuing the required guarantees for Stock Exchange Organization. Investment Incentives

11. 11 Financial Results 6,000 Billion Rial Total Investment Costs 200 Million Tons Total Cargo Transit 30% Project Internal Rate of Return (Rial) 45% Equity Internal Rate of Return (Rial) 584,635 Million Rial Project Net Present Value @ 30% The Financial Model Investment Assumptions 23,000 Million Rial Total Investment Costs per Km 200Project Length (Km) 10Construction Phase (year) 15%Inflation of Construction Costs 25% Share of Local Loan of Total Investments (24% interest rate in Rial) 25% Share of Foreign Loan of Total Investments (6% interest rate) 10%Annual Exchange Rate Inflation 640Freight Fares Per Ton Km (Rial) 0%Annual Income Inflation 9Current Freight Capacity (Million Tons) 19 Future Frieght Capacity (Million Tons) 25%Tax Rate  The freight fares will be determined to achieve the internal rate of return of 30% (in Rial).

12. 12 Cumulative Annual Cash Flow of The Project  Because of early revenue of the project, total required investment will approximately be 4000 billion rials (120 million dollars).

13. 13 Project Contract and Financing Structure Project Company Fixed Income Instruments: 2,500 Billion Rials Loan Repayment Preferred Freight Fares EPC Contract Payment to Contractor Contractor National Railway Company Loan Providers Expected Return of 30% 1,000 Billion Rials 250 Billion Rials 125 Billion Rials Other Institutional Investors Steel and Mining Industry Investors Theta Energy’s Shareholders Underwriting 125 Billion Rials BOT Contract Projec Fund Investment of 1,500 Billion Rials Project Fund

14. 1 Case Study 2- A BOT Road Project

15. 15 Sirjan- BandarAbbas Freeway Legend Sirjan- BandarAbbas

16. 16 Project Datasheet Project Name Sirjan- Bandarabbas Freeway Project Type BOT, Brownfield Total Length of The Road 321 km Number of Lanes Four-lane Total Investment Cost 28,220 Billion Rials Project Scope Completion of The First Part (33 km of total 85 km completed), 10,000 Billion Rials (No Land acquisition funds included) Construction Phase 3 years Operation Phase 20 years Financial Structure  40% Viability Gap Funding by Road Ministry  30% Project Fund  30% Loan from local banks Attractions  North- South corridor  Links The Most Important Port of Iran to Tehran Capacities in 15 th year of operation Trucks: 9100/day, Light vehicles: 10300/day Path Topography Flat: 112km, Hills: 80km, Mountainous: 129km

17. 17  Current average daily traffic of 12,000 vehicles  F level of service in the available highway  Nearly 60% of the traffic of the highway will be absorbed by new freeway. Traffic Estimation Estimated Number of VehiclesYear 9,6742018 12,9462023 17,3252028 21,8722032

18. 18 Financial Results 30%Project Internal Rate of Return (Rial) 32% Equity Internal Rate of Return (Rial) 112,000Toll Rates for Light Vehicles (Rials) The Financial Model  The Toll Rates will be determined to achieve the internal rate of return of 30% (in Rial). Investment Assumptions 10,000Total Investment Cost (Billion Rial) 40%Viability Gap Funding by Government 30% Share of Local Loan of Total Investments (24% interest rate in Rial) FreeTax Rate 12%Annual Toll Increase Rate

19. 19 Cumulative Annual Cash Flow of Total Investment (Government’s Share Excluded)  Because of early revenue of the project, total required investment (other than 40% share of government) will approximately be 4700 billion rials (100 million dollars).

20. 20 Project Contract and Financing Structure Fixed Income Instruments 2,350 Billion Rials Loan Repayments Viability Gap Funding (40% of total Investment) Payments Contractor Road Ministry Loan Providers Tolls Revenue Partnership Contract Projec Fund Investment of 2350 Billion Rials Project Company Project Fund EPC Contract