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Applicability of Spanish PPP experience to Russian

market

Fernando Gutiérrez de VeraChairman of SEOPAN Concessions Commission

21 October 2008

What is SEOPAN ?

• The Association of Major Spanish ContractorsFounded in 1956

• 32 member companies

• Turnover of member companies equivalent to 5% of GDP (Gross Domestic Product) (56.000 M€), 73% in national market, 27% in foreign markets

• SEOPAN represents 95% of Spanish Construction exports (15.000 M€)

• SEOPAN Contractors export activity in 2006 represents 1,5% of GDP including diversification activities

• Diversification activities reach 46% of major companies turnover

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With an aggregated international turnover in 2006 of almost 112 billion €, European international contractors are the most important players in the international construction business

About EIC About EIC -- StatisticsStatistics

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1967 Toll highways 2.089 km

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2007 Toll highways 3.455 km

TOP TRANSPORTATION DEVELOPERS 2007 TOP TRANSPORTATION DEVELOPERS 2007 No. of Concession/P3 Projects

CompanyConst./Operating* Active Proposals

ACS/Irídium (Spain)Ferrovial/Cintra (Spain)Macquarie group (Australia)Sacyr/Itinere (Spain)Gobal Vía (FCC-Caja Madrid) (Spain)NWS Holdings (China)Road King (China)OHL (Spain)Hochtief (Germany)Cheung Kong Infrastructure (China)Acciona (Spain)Vinci/Cofiroute (France)EGIS Projects (France)Alstom (France)John Laing (UK)Bouygues (France)Andrade Gutierrez (Brazil)Bilfinger Berger (Germany)AMEC (UK)Balfour Beatty (UK)Transurban (Australia)

5940403933252220181716141413131211111098

44351744111045149362113116181210267

* road, bridge, tunnel, rail, port, airport concessions + public-private partnerships over $50m put under const./oper. since 1985. Source PWF database

TRANSPORT DEVELOPERS Ranked by Invested Capital 2007TRANSPORT DEVELOPERS Ranked by Invested Capital 2007Concession/P3 Projects

Company Total Invested*$ millions Const./Operating*

Macquarie group (Australia)Ferrovial/Cintra (Spain)ACS/Irídium (Spain)Vinci/Cofiroute (France)Hochtief (Germany)Alstom (France)Siemens (Germany)Sacyr/Itinere (Spain)Gobal Vía (FCC-Caja Madrid) (Spain)Bouygues (France)

Total

$44,283$37,900$33,000$24,140$22,322$21,900$20,750$18,320$11,030$9,200

$242,845

4040591418137393312

275* <Aggregate value (in nominal currencies converted to dollars) of all of a firm’s transportation project concessions and asset leases signed since 1985. The number does not represent a firm’s equity commitment, but rather the total of all funds invested in the projects it has been involved in, i.e. the public infrastructure improvements it has helped to create or enhance. Source PWF database

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Published in April 2003

Based on the broad experience of EIC member companies as concessionaires in preparing forPPP projects in the transport sector

Advise to Governments, Contr. Acting Authorities and International (Financial) Organisations in structuring PPP projects

Comprises 21 recommendations for the technical and financial implementation of PPP projects

www.eicontractors.de

EIC White Book on BOT/PPPEIC White Book on BOT/PPPBasic FeaturesBasic Features

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1 GENERAL PRECONDITIONS– Ensure true Government Support

– Create a PPP Task Force

– Enhance Country Legal Framework(Accounting, Taxes, Procurement)

2 PROJECT PREPARATION– Put in place sound procurement

strategy

– Present comprehensive, reliable project documentation

– Provide for a steady and secure payment mechanism

– Agree on affordable level of tariffs

3 TENDER PROCESS– Use Pre-qualification of bidders

– Ensure Transparency & Confidentiality throughout process

– Present clear award criteria

– Reimburse Bidding Costs

– Unsolicited Bids ??? (outside EU )

4 RISK MITIGATION

– Provide for optimal risk identification & allocation

– Invite financial risk mitigation through IFIs, ECAs, etc

EIC White Book on BOT/PPPEIC White Book on BOT/PPP21 Recommendations21 Recommendations

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The financial structure of a typical Greenfield concession

(800)

(600)

(400)

(200)

0

200

400

600

800

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30year of concessionU

S$m

nom

inal

Opex CapexSenior debt interest & fees Senior debt repaymentDividends TaxEquity subscribed Debt drawdownTotal Revenues

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Currency risk

Long term loans

• Government Guarantee of exchange rate(In first Spanish Highways)

Provide for optimal risk identification & allocation. Mitigation of major risks -1

• Involve Multilateral Banks in first projects

• Cooperation of Russian Banks with Multilaterals(in Spain, Government last resource guarantee)

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Political risk

Land occupation

• Partnership with Russian Partners and Banks

• Step-in rights in favor of financial institutions

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Provide for optimal risk identification & allocation. Mitigation of major risks -2

• Guaranteed by Concedent

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Traffic and operations risks, including “Force Majeur”

• In Spain Concession Law provides for reestablishment of economic balance under certain circumstances

• In case of debt default without misbehavior of the Concessionaire, Concedent rescues the concession and compensate lenders

3 Provide for optimal risk identification & allocation. Mitigation of major risks -3

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THE PUBLIC/PRIVATE PARTNERSHIP FOR LONG TERM PROJECTS IN THE INFRASTRUCTURE AND

PUBLIC SERVICES SECTORS:A REALITY CONSOLIDATED IN THE LAST DECADE

SINCE 1985 UNTIL 2007, A TOTAL OF US$ 1,197,279 MILLION HAVE BEEN PROPOSED FOR INVESTMENT FOLLOWING THIS DISTRIBUTION:

ROADS……………………………………………….. 573,205 MILLIONRAILWAYS…………………………………………… 383,754 MILLIONWATER SEWAGE AND TREATMENT…………… 135,635 MILLIONADMINISTRATIVE BUILDINGS, HOSPITALS,OFFICES AND OTHER 104,685 MILLION

But only 579,460M $ have reached a financing

Source: PWF 2007

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CONCLUSION

• The success of PPP is to obtain finance for the projects

• Lenders like to believe that they will be paid back

• The assurances that Spain provided for the first projects cost less than the income received by taxes generated for those projects

• A wise structure of the initial tenders is basic for the success of the future projects

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Thank you for your attention