Project Management Society of Engineers Ireland

2 October 2006

Delivering and Financing Infrastructure- Its all about achieving balance

Niall QuinnDirector

Public Sector objectives

Deliver Infrastructure

Value for money

Balanced transfer of risk

Private sector investment

Compliance with legislation

Partnership

Funders objectives

Ensure risk mitigated

Security Arrangements

Ensure appropriate contracts

Public Sector Counterparty

Relationship

Partnership

Corporate objectives

Secure pipeline?

Price risks

Achieve appropriate return

Fundable project

Commercial contracts

Partnership

Infrastructure- Achieving the Balance

Investing in Infrastructure

Risk

The Operator

Partnership

EconomicRelationship

Environmental

Contractual

Security

Financing Structur

e

The contractor

Barclays View of the

WorldArrangemen

ts

Benefits

Balanced Approach to Infrastructure Finance

Bank DebtBank Debt

RiskManagem

ent

RiskManagem

ent

Private EquityPrivate Equity

Bond FinanceBond

Finance

BARCLAYS

Sample Infrastructure Experience

Cork School of Music

€75M million Term Loan

Mandated Lead Arranger

Sept 2005

€107 million Secured Bonds

Securitisation of the Scottish – Northern Ireland

Gas Pipeline

Joint Lead managerMarch 2005

Premier Transmission National Toll

Roads

€225 million

UnderwriterMay 2005

£458 millionSenior facilities for Terra

Firma’s acquisition of East Surrey Holdings plc

Joint Mandated Lead Arranger

November 2005

Terra FirmaPhoenix Gas

Barclays arranged over €15 billion of bank, bond & derivative finance to the Infrastructure sector in the last 12 months

€confidentialAcquisition Facilities

supporting the acquisition of Budapest Airport by BAA

Joint Mandated Lead Arranger

January 2006

€1 billionRevolving Credit Facility

ArrangerJuly 2005

Arranger and Joint bookrunner

October 2005

£,1573 million guaranteed bonds

Scotia Gas Networks

BAAAutoroutes du Sud

€3,500 millionAcquisition and Credit

Facilities for Abertis-led acquisition of Sanef

Joint Mandated Lead Arranger

December 2005

Albertis

Current Sources of Finance Senior Debt

Bank debt– Over a dozen project finance banks active in

Infrastructure/PPP, plus over 20 banks as participants– Long established, deep market– Used on around 70% of UK PPP– EIB another source

The Cork School of Music Barclays acted as Mandated Lead Arranger and Underwriter

of a €75M Loan and additional hedging facility to a Hochtief/Barclays Private Equity consortium. The project involves the construction of a specialist music school in Cork

When completed in the summer of 2007 it will provide the Cork School of Music with over 10,000m2 of state-of-the-art facilities - including more than 50 teaching/practice studios, a 500-seater auditorium, a drama theatre and movement room, a professional recording studio, electronic music studio, piano laboratories etc

Key financing issues to be addressed included

Replacement of contractor

Changes in financing market from date of original bid Planning Surplus Land

Cork School of Music

€75M million Term Loan

Mandated Lead Arranger Sept 2005

Current Sources of Finance Senior Debt

Bank debt– Over a dozen project finance banks active in

Infrastructure/PPP, plus over 20 banks as participants– Long established, deep market– Used on 70% of UK PPP– EIB another source

Bonds– Around 6 bond houses active as lead arrangers– Generally credit-enhanced by guarantee from monoline

insurer– 3 large well established monolines (MBIA, Ambac, FSA)– 4 recent entrants (FGIC, XL Capital, CIFG, Assured)– Require investment grade ratings

Scottish/Northern Ireland Gas Pipeline Northern Ireland Energy Holdings was set up as a ‘not for

profit’ concern to finance the sale of the Pipeline to Premier Transmission

Barclays Capital acted as Joint Bookrunner for £107 million guaranteed secured bonds for Premier Transmission Limited

The assets of the pipeline had been shadow rated at A1/A by the rating agencies but a monoline wrap by FGIC gave the deal a AAA rating.

Key financing Issues to be addressed included

This was the first European securitisation of a natural gas pipeline.

Size of deal

Management of order book to return highly competitive pricing

Need to provide additional facilities for liquidity , debt service reserve account and cost reserve account.

€107 millionSecured Bonds

Securitisation of the Scottish – Northern Ireland Gas Pipeline

Joint Lead managerMarch 2005

Premier Transmission

Advantages Disadvantages

Bond Financing

• Competitive cost if wrapped by monoline insurer

• Longer tenors available

• Fixed rate or index linked

• Requirement for rating agency involvement

• Requirement for production of Offering Circular and roadshow

• Less cost effective for deals below €150m

• Credit spread dependent on market conditions

• Covenant package required by monolines

Bank Financing

• More flexible in terms of drawdown and repayment

• Greater certainty over credit margin

• More cost effective for smaller deals

• Floating rate, although can use derivatives to fix

• More limited appetite for tenors over 30 years

• Syndication process required for larger deals

• For syndicated deal, larger number of parties relative to one monoline

Bank Versus Bond

Current Sources of Finance Junior

Subordinated debt– Generally provided by shareholders– Some specialist mezzanine lenders may look at

Infrastructure/PPP (Investec, GE Capital, CIT) Equity

– Number of specialist funds which act as financial investors in Infrastructure/PPP , alongside project sponsors (BPE, Equion, Innisfree, Mill Group)

Key Financing Issues Gearing

Debt Service Reserve Account/Facility

Cover ratios

Term of debt vs. concession length

Repayment profile

Maintenance Reserve Account prefunding and review

Current Financing Terms – It’s a competitive marketFinancial Element

Market Inception

2 years ago

Mature Market

Gearing 80% 90% 92%

Debt Tail (25 year deal)

5 years 18 months 12 months

Average Margin 1.25% 1% < 0.8%

Cash Debt Cover Ratio

1.25x 1.20x 1.15x

Equity Return 18% 15% 13%Decline unlikely

to continue

indefinitelyRange of sectors

increasing

Will Ireland get the balance right?

Challenge Indicators

Deliver pipeline Must meet timetables

In all sectors

Deliver Value for Money

Sensible risk allocation

Celebrate Success

Public Sector Reform Clear approvals process

Planning streamlined

Destination for Investment

Capital Markets Solutions

Significant Bidder Interest

No Reinventing the wheel

Evidence of learning from other markets

Contact Details

Niall Quinn Director

PFI & Structured Project Finance47-48 St Stephens GreenDublin 2

Direct 01 618 2662Mobile 004477 80 60 77 48Fax 01 662 3141e-mail niall.quinn@barclays.com www.barclays.com

Barclays Bank PLC is regulated by the Financial Services Authority

Niall Quinn Director

PFI & Structured Project Finance47-48 St Stephens GreenDublin 2

Direct 01 618 2662Mobile 004477 80 60 77 48Fax 01 662 3141e-mail niall.quinn@barclays.com www.barclays.com

Barclays Bank PLC is regulated by the Financial Services Authority

Our Track Record speaks for itself…

Barclays Bank Ireland PLC is regulated by the Financial Regulator. Registered Office: 47-48 St. Stephens Green, Dublin 2. Registered in Ireland. Registered No: 396330.

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