Infrastructure Finance

Week 11
19th December
23. By what means do equity investors in a Project receive returns on their investment?

24. What are the different ways in which the public sector can extract an economic benefit from
investment by the private sector in an infrastructure asset or undertaking?

25. What are the different instruments or ways in which the state can support or subsidise
investment in infrastructure?

26. What are the sources of revenue and profit for a commercial bank from lending to an
infrastructure project?

27. In what circumstances would a PPP be preferred over a public sector solution for an investment
in infrastructure?

28. And when might a PPP not be the preferred solution?

 .
Quiz contd

29. What is an appropriate number of consortia that we might expect to be pre-qualified for the
award of a concession in a competition initiated by a Grantor?
30. How many bidders should be invited?
31. What are the features of a bid that are material for winning a competition?
32. What are the benefits and disadvantages of a “Competitive Dialogue” procedure?
33. When preparing the timetable for the selection of PPP Concessionaire what are the important
milestones that the Grantor needs to take into account?
34. From the point of view of a Consortium bidding in a PPP competition, how does the approach
for sourcing finance from IFIs, export credit agencies or commercial banks differ?
35. What purpose does an Intercreditor Agreement serve?
36. When and why should projects be refinanced? What are the benefits?
37. What might inhibit or prevent a refinancing?
38. How shall the term ”off-balance sheet financing” be understood?
---For an SPV
--- For a corporate investor or sponsor
--- For a Government

39. What are the most important attributes of an accomplished infrastructure financier?
eater Istanbul: Motorways and Bridges
Avraysa/ Eurasia Tunnel, Turkey, 2012

Project Eurasia Tunnel, Istanbul, Turkey: 30 yr PPP concession

Name: [also “Istanbul Strait Road Crossing”]

Value: US $1.45bn

Project 5.4 km two x two lane tunnel, plus 5.4km and 3.8km connection
History: roads. Capacity = 11,000 vehicles per day.

Key ATAS Consortium = Yapi Merkazi & SKE&C (50/50)

Participants: (Turk. & S. Korea contractors)

1. Equity = $278mn
Funding 2. Snr debt = $960mn, 18yr term, incl. 4.5 yr constr.
- $150mn EIB direct loan
- $200mn, EIB, gteed by Garanti, Isbank & Yapi Kredi
- $210mn KExim (100% cover): SMBC, Mizuho, St. Ch.
- $250mn KExim direct loan
- $150mn EBRD
1. Lump sum, fixed price EPC: Yapi Merkazi & SK E&C
Issues: 2. Toll tunnel, with min. revenue gtee from Govt.
3. min. rev. gtee gives 100% debt-service cover
4. Step-in rights for lenders
5. Debt assumption agreement with Govt. on concessionaire
default.
7
Yavuz Sultan Selim Bridge: The Third Bosphorus Bridge
• First Bosphorus Bridge opened 1973, Second in 1988
• Located at the Black Sea end of the Bosphorus
• Overall Length 2164 m, single span, 1408 m. 60m. wide (8 road vehicle and two rail lanes)
• Environmental and ecological Issues: Built on wetlands
• Grantor: Turkish Directorate of Highways
• Concession awarded May 2012 to IC Ictas-Astaldi Consortium
• 30 month construction period, starting 2013 (originally scheduled for 36 months)
• Concession to be transferred back to State in 2022
• Total investment cost: EUR 3.5 billion
• 2018 Toll set at EUR 9.90, payable in TL and EUR
• Financing Agreements: English Law
• Concession and Transaction Documents: Turkish Law
Yavuz Sultan Selim Bridge: The Third Bosphorus Bridge
• Debt Assumption Agreement by Grantor in case of default
• Guaranteed Minimum Traffic Volume (135,000 vehicles/day)
• 2017, Actual: 100,000
• Debt: Equity 80:20
• Debt placed with Turkish banks but provided in US Dollars with :
• Fixed Rate 7.6 % maturing 2022
• Floating Rate, LIBOR + 550 bp, maturing 2024

2018 REFINANCING:
Astaldi seeking to exit
ICBC (Industrial and Commercial Bank of China) refinancing all outstanding debt
Çanakkle Bridge
• Suspension Bridge: Main Span 2,023m.; headroom clearance 70 m.
• Part of Ring Road around Marmara Sea Earthquake and wind zone
• Height of towers: 318 m.
• Project includes 88km 3 lane motorway, 48 km. connecting roads, and 35 km. access roads,
service areas and tolling stations and facilities
• Competition to select Concessionaire 2017
• Grant of 16 year Concession by Turkish Directorate of Highways March 2018
• Award to Daelim and S.K. (Korea) and Limak and Yapi Merkezi, Turkey, each with 25 % of the
equity
• Losing consortia: (1)IHI-Itochu (Japan), (2)Cengiz, Kolin and CRBC (China) (3) I.C. Içtas & Astaldi
• Estimated Investment Cost: EUR 3.0 billion
• Toll rates payable in TL but pegged to Euro (EUR 15 plus VAT in 2019)
• Minimum Traffic Guarantee: 45,000 vehicles/day-------- estimated to require EUR
250million/annum from TDH=EUR2.5 billion over ten years
• Debt:Equity 76:24
• Minimum traffic guarantee and debt assumption for 85% of loan value in case of termination of
Concession Contract
Çanakkle Bridge
• Export Credit Cover from K-Exim and K-Sure (EUR 1.0 billion in total: funded by commercial banks
and direct loan from K-Exim of EUR 300 million)
• Export Credit Cover from Islamic Corporation for the Insurance of Investment and Export Credit
(ICIEC),(subsidiary of Islamic Development Bank, and EKF (Denmark)
• Kuwait Finance House EUR 200 million
• Commercial Banks with export credit cover: Standard Chartered, ING, Natxis, Deutsche, DZ,
Intesa, Siemens Bank and Korean Banks: Hana, Shinhan, Korea Development Bank
• Turkish Bank Tranche (without export credit cover) EUR 683 million: Akbank, Finansbankm
Garanti Bank, Isbank, Vakif Bank, Yapi Kredi, at TL 3-Month Interbank Rate (currently 13%) plus
500 b.p.
Mersey Gateway Bridge
Mersey Gateway Bridge Location
Mersey Gateway Bridge
• Six lane Cable-stayed road bridge, overall length: 2200 m, longest span: 300m; 60 m wide linking
Runcorn and Widnes
• Estimated 20 million vehicle crossings p.a.
• £700 million (bridge ) £1.85 billion with road upgrades
• Replacing Silver Jubilee Bridge arch bridge designed for 8000 AADT with 80,000 AADT actual
• Silver Jubilee Bridge to be renovated and tolled (reduced to one lane in each direction)
• Department of Transport approved Halton Borough Councils plans in 2006
2011 PQ
2012 Competitive Dialogue
2013 Preferred Bidder for 26.5 year DBFO Concession:Merseylink: Kier Infrastructure,
Samsung C+T Corp. (Korea), FCC Construcción, Spain)
Mersey Gateway contd.

• Bridge opened September 2017

• Tolls: Local residents: £10/annum all trips
Cars £2.00, HGVs £8.00
On-line Toll collection: £60 penalty charge
Within 15 months of opening over a million penalty charges issued
• Tolls go to Borough Council
• Consortium Receives Unitary Charge from Halton Borough Council (KPI regime)
• Emovis (toll collection and enforcement) receives flat payment (KPI regime and revenue share
above specified breakeven vehicle numbers)
• UK Treasury revenue shortfall guarantees to support Halton Borough Council if toll revenues fall
short of amounts due under unitary charge formula
SWRO Shuqaiq IWP
• Sea-Water Reverse Osmosis: ) 0.45 potable from 1.0 cu. m. of seawater
• Second Independent Water Project in Saudi Arabia
• Bids solicited in March 2018 by Saudi Water & Electricity Company (“WEC”) (now renamed Saudi
Water Partnership Co.) for a 450,000 cu.m./day SWRO
• Bid criterion lowest levelized whole concession life cost per cu. m.
• 25 year Water Purchase Agreement (“WPA”) with WEC
• Bids received in September 2018 SR1.95/cu.m (USD 0.52/cu.m.)
• Financial Close May 2019: USD 600 million total investment cost
Shuqaiq contd.
• Concessionaire: Marubeni Corporation (45%); Acciona Agua (10%); Abdul Latif Jameel
Commercial Development Company (30%), Rawafid Alhadarah Holding (15%)
• Levelized cost per cu.m comprises:
1. fixed capacity payment to cover capital costs and overheads and fixed O&M costs (40%)
2. Output Payment for variable O&M costs (excluding electricity) (20%)
3. Electricity Costs (40%)
• Electricity Costs treated as a “pass-through” subject to meeting Concession Agreement threshold
of electricity consumption below 3.5 kWh/ cu.m.
• WEC’s payment obligations guaranteed by Saudi Ministry of Finance
• Acciona: Sole EPC contractor and provides completion undertaking
• O&M contract with Acciona
• Debt financing: MUFG,Credit Agricole, Norinchukin Bank, SMBC, National Commercial Bank,
Samba Capital
Acciona Aqua
• See www.acciona-agua.com

• 80 SWROs, 120 DWTPs (Drinking Water Treatment Plants, 300 WWPs (Waste Water Treatment
Plants)
• Largest SWRO in Europe: Torrevieja, near Alicante 240,000 cu.m./day to irrigate 800,000 ha.
agricultural land and provide 400,000 population with water requirements
• Beckton 150,000 cu. m./day SWRO on Thames Estuary
• Construction commenced 2008, operational 2010. Cost £250 million
• Client: Thames Water
• Construction: Consortium: Interserve, Atkins Water, Acciona
• Runs mainly in bio-diesel including fat from restaurants
UK Water Industry
• 10 water companies privatized in 1989—excluding water companies in Northern
Ireland and Scotland which are still public sector
• All were quoted on public exchange: now only three: Severn Trent, South West
and United Utilities. The remainder owned by PE, except Wessex owned by YPL
(Malaysia) and Dwr Cymru (“Not for Profit Company”)
• Tightly regulated tariff levels set by OFWAT every 5 years using “Regulatory Asset
Base (“RAB”)” as the denominator. Numerator is the projected operating profit
which an efficiently operated regulated water business is deemed to be able to
achieve. Permitted tariff increases are set so as to achieve a projected revenue
base using WACC assumptions (OFWAT assumes 2.94% for 2019 Review)
UK Water Industry contd.
• RAB increased by an inflation index and cost of agreed new capital investment, less depreciation
of existing assets
• Highly leveraged balance sheets:
• Since privatization: £51 billion in aggregate borrowings
• £56 billion in aggregate dividends
• Tariffs vs. investment levels
 NEOEN Renewable Energy

Revenue EBITDA EUR MW in Operation or under

EUR Million construction
Million
2016 81 55 858
2017 139 102
2018 228 174
2019 (est.) 260 212 1775
2021 (Target) 400 5000
NEOEN
• Carve out from subsidiary Direct Energie: Third largest Electric utility in France
• Australia 50 per cent of corporate assets and revenues
• Operational Capacity: 70 % Solar, 26 % wind 4% Biomass
• 59 % owned by Jacques Veyrat, ex CEO Louis Dreyfus Commodities, supported with Credit Agricole PE
• All Project phases: Identification and Conception, DBFO and Investment. Green field and Brownfield
• Solar, Wind, and Battery
• 300 MW solar farm in France at Cestas, EUR 360 million investment in 2017
86% Debt:Equity,
20 year PPAs at EUR 82.00/MWh
18.5 year debt maturity underwritten by SocGen
• Solar as entry strategy in new markets
• 2019: 53 MW of wind farms with 25 year power purchase contracts in place with objective of
repowering
• 150 MW Battery Storage Capacity at Hornsdale (Australia) 315 MW Wind Farm to be built by
Tesla
NEOEN contd.
• Jordan 200 MW PV Farm USD 81/MWh (2015)
• El Salvador 100 MW PV farm with 20 year PPA at USD 102/MWh(2016). Investment Cost USD 159
million
• Jamaica: 51 MW at at USD 80/MWh (2017)
• Zambia 25 year PPA with State Electricity Company of Zambia (auctioned by IFC as Adviser)
450,00 modules over 129 acres:
USD 60/MWh (2017)
CDPQ and Montreal Metro
• Caisse de dépôt et placement du Québec, a “Crown Corporation”
with C$ 327 billion AUM (US$245 billion) (C$23 billion infrastructure)

• CDPQ 45 % Shareholder in DP World Ports

13% Heathrow Airport
20% Fluxys Gas Transportation and Storage
24.9% stake in Sydney Metro Train and Systems O&M
PPP, together with Marubeni, MTR Corp., CIMIC, Plenary group
REM contd .

Reseau Express Métropolitain (“REM”) C$6.5 billion, 67 km of track, above and below ground,
26 stations, to be integrated into Montreal existing metro and bus systems, coming into service
2021, and fully operational 2023
• 4th longest automated train transportation system (after Singapore MRT, Vancouver Sky Train, and Dubai Metro
• Construction underway
• Capacity and Time Savings: Montreal Trudeau Airport 20 minutes from City centre and reduce
commute time between Université de Montréal and McGill University from 30 minutes to 3
• CDPQ SPV in 99 year concession
• SPV receives C$ 0.72 per passenger km. over the lifetime, indexed for inflation
REM Funding Plan
C$ Billion Terms
Equity CDPQ: 2.95 Target ERR: 8 %
Govt. of Quebec 1.95 3.7% coupon
Subordinated Debt”
Debt Canadian Infra Bank 1.28 15 years, 1% escalating to 3%
Hydro Quebec 0.30
6.48
REM Significant Features
• Surtax by City of Montreal on land and properties within 1 km radius
of the 26 stations
• CDPQ large existing financial exposure on shopping malls and
residential in the catchment areas
• CDPQ is the largest shareholder in SNC Lavallin