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New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
Bruno Mejean, Managing Director NORD/LB New York Branch
Day 2Session 10.1
PPPsPPPs in Infrastructure in Infrastructure
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Day 2Risks & Responsibilities
Output Based Aid
Session 6Service Standards,Tariffs & Subsidy
Session 7
Responsibilities& Risks
Subnational Projects
Session 8
Contingent LiabilityManagementSession 9
Combining EUFunding with Private
Finance
Day2
Mobilizing CapitalMarkets
Carbon Finance
Session 10
Alternative Financing
Session 10.1
Project FinanceLender’s Perspective
Session 10
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New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
Agenda
– Introduction: Who is Nord/LB? PPP references
– Case Example: Tlalnepantla Waste Water Treatment Concession in
Mexico
– Case Example: Castrop-Rauxel Secondary School & Sport Halls under
the German Public Forfaiting Model
– Conclusions and Outlook
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New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
Who is NORD/LB?
– 8th Largest German Bank (in terms of Equity) with a balance sheet of $267 Bn
– Landesbank of Lower Saxony, Saxony-Anhalt, Mecklenburg – Western
Pomerania and Bremen
– Focused on the Baltic Rim (with a 49% ownership in Bank DnB Nord A/S)
– 2007 Net Income of Euro 305MM (IFRS) with no subprime exposure
– Stable ratings of A (S&P) Aa2 (Moody’s) and A (Fitch)
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New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
NORD/LB PPP References – Euro 1.6 Bn Portfolio in roads, mass transit, schools, hospitals, other facilities
– MLA and Co-Bookrunner in largest Road Privatization in the Americas to date:
MXP 37.1 Bn Red de Carreteral de Occidente in Mexico
– MLA and Co-Syndication Agent in first and largest Light Rail PPP Project in
the Americas: C$600 MM Canada Line in Vancouver
– Sole Arranger for Water Treatment Concessions in Mexico involving local
currency loans via interest rate, currency and inflation-indexed swaps
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Example: Tlalnepantla Waste Water Treatment Project in
Mexico Sponsors: OPDM WATER UTILITY of the
MUNICIPALITY of TLALNEPANTLA
Project: Construction and Operation of aWaste Water Treatment Facility (200liters/sec) to Recycle Water for IndustrialReuse. Project also Funds Survey andRehabilitation of Water Distribution Network toReduce Physical and Commercial WaterLosses
Total Amount = US$ 11 Million
New Models for Financing PPP’s Infrastructure:A Commercial Project Lender’s Perspective
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OPDMWATER UTILITY ofthe MUNICIPALITYof TLALNEPANTLA
• MEXICAN FINANCING
INSTITUTIONS
• MEXICAN INSTITUTIONAL
INVESTORS
WATER AND SANITATIONSERVICES
TRUST
issued BONDS
(Certificados Bursátiles)TARIFF
USERS
CREDIT ENHANCEMENT
(DEXIA Letter of Credit)
MUNICIPALITY of
TLALNEPANTLA
IFC Counter-guarantee
New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
Tlalnepantla Contractual Structure
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Municipality of Tlalnepantla
OPDM Water Utility
Mexican Trust as legal Issuer: BancoSantander Mexicano
Credit Enhancement: Dexia
Participant with Dexia: IFC
Arranger: Protego
Placement Agent: Deutsche Bank & Santander
Mexican Institutional Investors
Project Participants
New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
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Structure / Size -- First Transaction of its kind….
Municipal Risk
New Funding Source – Domestic Capital Markets
But on the Positive Front……
Solid Credit Rating of Municipality
IFC’s Involvement
Deepening Institutional Investor Pool
Challenges
New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
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Municipal Water Utility’s Bond (rated AAA.mx):
10-year MX$95,900,000 ( ~29 Million UDIS)
5.5% per annum in UDIS (UDI – Inflation adjusted Unit)
Repayment Source: Municipal Water Tariffs (Δ annually)
Back Stop provided by the Municipality (rated AA.mx)
No Sovereign Guarantees nor Federal Tax Transfers Provided
Bond’s Partial Credit Guarantee: 90% at closing
- Letter of Credit provided by DEXIA (NY Branch)
Credit Enhancement Risks shared by:
- DEXIA (US$5.3 million) and IFC (US$3 million)
Project Finance features: escrow accounts, debt service reserve, cash sweep
Financing Structure
New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
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Inflation-Index Example
Loan Disbursement: May 15, 2003
First Repayment: Nov. 15, 2003
Value of UDIS on May 15, 2003 = MX$3.269486
Value of UDIS on Nov. 15, 2003 = MX$3.318374
Loan Amount = MX$95’900,000 = 29’331,827 UDIS (on May 15, 03)
Amortization (1st. Repayment):
Semi-Annual Payment = 1’466,591 UDIS
Interests: 5.5% p.a. = 806,625 UDIS
TOTAL Payment = 2’273,216 UDIS x $ 3.318374 UDIS (on 11/15/03)
= MX$7’543,380.00
New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
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Avoids FX related Risks (“Original Sin”)
First Mover Advantage
Low Risk Given Underlying Credit Profile,as well as IFC’s Involvement
Market Niche with significant potential
Project’s Positive Attributes
New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
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New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
Transaction is attractive from an international bank’sperspective due to the unfunded credit enhancement
Municipal credit standing and Dexia/IFC support arethe key elements
The pricing is attractive only so long as the creditenhancements remain undrawn
Transaction size should be larger due to complexityand documentation
Observations
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New Models for Financing Infrastructure PPP’s: A Commercial Project Lender’s Perspective
Case Example: Design, financing and construction of a secondary school and three sport halls in Castrop-Rauxel, Germany
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Castrop-Rauxel: Project Details
– Awarding authority: City of Castrop-Rauxel
– Construction company: MBN Bau AG
– Planning/Architects: pbs Planungsbür Rohling AG
– Financing: Sparkasse Osnabrück / NORD/LB Girozentrale
– Total Cost: ca € 12 Mio
– Concession period: 30 years (plus 15 months construction)
– Financing structure: Public Forfaiting
New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
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Castrop-Rauxel: Project Structure
Assignment of Compensation
Payments(Forfaiting)
Receivables (Present Value)
Waiver of future claims („Einredeverzicht“ )
RepaymentTurnkeyconstructioncontract
Sparkasse Osnabrück
1
2
3
Compensation(Unitary Charge)
New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
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Castrop-Rauxel: Public Forfaiting
• Public Forfaiting = Sales agreement for future receivables
– Purchase price: Compensation payments + Interest + VAT
– Seller: MBN Bau AG
– Obligor: city of Castrop-Rauxel
– Buyer: NORD/LB and Savings Bank Osnabrück
• Monitoring of performance conducted by the public sector
• Attractive / achievable solution for mid cap companies:
– streamlined transaction process, due diligence without external advisory
– easy equity requirements
New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
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Projects CompletedPublic Private Partnership
Task Force
14,30%Sep 0674Justice buildingState Sachsen (Chemnitz-K.)
Sports halls
District Office
City hall
Swimming pool
Schools
Schools
Vocationalschools
Kreishaus
Schools
Schools
Learning centre
Schools
Schools
Schools
Schools
Schools
Schools
Project
15,00%Jun 046,5City of Münster
20,00%Aug 0511,5Bodensee district
13,50%Sep 0416City of Gladbeck
20,00%Apr 0510,8City of Leimen
21,00%Feb 067Barleben borough
18,40%Aug 058,4City of Achim
15,00%Jun 0526City of Leverkusen
8,00%Sep 0420Unna district
10,00%Mrz 0511City of Bedburg
5,00%Jun 0410Gütersloh district
25,00%Jul 0342City of Frankfurt am Main
9,30%Aug 0413City of Witten
18,10%Nov 04100Kreis Offenbach (Los Ost)
19,30%Mrz 04100Offenbach County (Los West)
10,30%Feb 0415Rhein-Erft-Kreis
15,00%Jan 0424City of Monheim
10,00%Apr 0534City of Köln
EfifciencyFinancial
CloseCapex €mAwarding authority
New Models for Financing Infrastructure PPP’s: A Commercial ProjectLender’s Perspective
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New Models for Financing Infrastructure PPP’s:A Commercial Project Lender’s Perspective
Conclusions & Outlook– Local currency funding mechanisms
need to be promoted morevigorously in Emerging Markets
– Bilateral & Multilateral DevelopmentFinance Agencies should focus onproviding long-term currency andinflation hedging tools
– Ditto with sub-sovereign creditenhancements
– Very long-term financing in EM couldideally rely on the World Bank PartialGuarantee Program
– The private sector is best suited tobring efficiency and capital
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THANK YOU!
PPPs in Infrastructure
Bruno Mejean, Managing DirectorNORD/LB New York Branch
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Contacts
For comments or further details contact:
Penny Williams [email protected] Mejean [email protected]
Cledan Mandri-Perrott [email protected] Escobedo [email protected] Stiggers [email protected] Name [email protected]/org
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Infrastructure Project Finance References
Warnow-crossing
EUR 215.8 Mio.
Lead Arranger
First privately financedtraffic project in Germany
Niedersachsen-stadion Hannover
EUR 63.84 Mio.
Adviser / Arranger
Modification and operationof a soccer stadium
Realschule inCastrop-Rauxel
Construction and operationof a secondary school
EUR 12.5 Mio.
Adviser / Arranger Arranger
Construction of a communitycentrein Hannover
Factoringfor home advancement and
land acquisition
Lower Saxony‘scommunities
factoring
ArrangerEUR 51 Mio.
Financing of a soccer stadium
Arranger
Volkswagen ArenaWolfsburg
Construction and operation of a prison Construction and operation of
a ring-roadArranger
EUR 70 Mio.
CommunityHarsewinkel
EUR 12.35 Mio.
Arranger
Burg Madel
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Refurbishment of a nurseryin Lübz
Arranger
Construction and operation ofthe „Heinrich-Böll-Foundation“
in BerlinEUR 12 Mio.
Adviser und Arranger
Construction and operation ofan educational institution EUR 92 Mio.
Financing of a tunnel
Arranger
Construction of agrammar school
Arranger
Construction and operationof various schools
Schools inFrankfurt/Main
EUR 108.5 Mio.Arranger
Refurbishment,construction and operation
of 4 schools
Comprehensive schoolin Köln Rodenkirchen
EUR 47.5 Mio.Arranger
Construction andoperation of a school
Welfenakademie inBraunschweig
Arranger
Arge Tunnel Burgholz
EUR 42 Mio.MLA
School package I inMagdeburg
School inBleckede
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InfraspeedPrivately financed
construction and operationof a high speed link in the
Netherlands
EUR 1,178 Mio.
Lead Manager
LusoscutPrivately financedshadow toll road
in Portugal
EUR 723.5 Mio.
Arranger
Norscut
Privately financedshadow toll road
in Portugal
EUR 1,007 Mio.
ArrangerEUR 215,8 Mio.
Lead ArrangerEUR 195 Mio.
Senior Lead Manager
Europpass
Electrical tolling systemfor trucks on motorways
in Austria
Privately financedtoll road project
in Poland
A2-sectionBerlin - Warsaw Scutvias
Glasgow Schools
Privately financedroad construction project
in Portugal
Refurbishment andmaintenance of all
secondary schools inGlasgow
EUR 847.6 Mio.
Co-Arranger
GBP 339 Mio.
Club ParticipantEUR 882 Mio.
Co-Arranger
Airport Prague
CZK 10 bn.
Arranger
Construction ofNorth terminal 2
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Airport Warsaw
Extension of terminal 2
USD 215 Mio.
Co-Arranger
E39 LyngdalFlekkefjord
NOK 1.31 bn.Senior Lead Manager
Privately financedroad construction project
in Norway
Phyrn-CorridorZagreb-Macelj
Lead Arranger / Underwriter
Privately financed toll motorway in Croatia
Privately financedroad construction project
in Great BritainGBP 750 Mio.
Arranger
Premier
Prisons
Design, construction andmanagement of 5
juvenile detention centres in Great Britain
GBP 217 Mio.
Lead Manager
MadridRadial 3 & Radial 5
Privately financedtoll roads in Spain
EUR 668.5 Mio.Co-Arranger
EUR 940,5 Mio.
Lead Arranger
Privately financedtoll motorway in France
Construction andoperation of two primaryand secondary schools
EUR 141 Mio.
Arranger
Schools North-Ayrshire
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Construction and operationof a waste disposal plant for4 urban districts in the East
of London
EUR 195 Mio.Arranger
Construction andoperation of 6 schools
EUR 178 Mio.Arranger
Construction andoperation of ahospital in Hull
EUR 34 Mio.Arranger
Hull MaternityHospital
Construction and operationof 6 secondary schools
EUR 159 Mio.Arranger
Kent EducationPartnership
Construction andoperation of a waste-fuelled power station
EUR 251 Mio.Arranger
Refurbishment and partoperation of the London
Underground Infrastructure(3 projects)EUR 20.8 bn.
Arranger
Kent EnviropowerConstruction and operation oftwo primary and secondary
schools
EUR 139 Mio.Arranger
Construction and operation of8 primary schools
in Scotland
EUR 54 Mio.Arranger
Leeds City Council
Schools East-Ayrshire Metronet Tubelines
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Construction and operationof a waste disposal
in Dumfries & Galloway
EUR 53 Mio.MLA
Construction and operation of51 primary and secondary
schoolsEUR 351 Mio.
Arranger
Construction and operation ofa satellite communicationsystem for the MoD/UK
EUR 1.94 bn.Arranger
Paradigm SecureCommunications
Construction and operation of3 schools in Wiltshire
EUR 62 Mio.Arranger
Construction and operation ofthe traffic information system
in EnglandEUR 103 Mio.
White Horse EducationPartnership
Construction andoperation of a primaryand a grammar school
Vildbjerg / DK
EUR 18 Mio.Investor, adviser and
arranger
Arranger
SchoolsNorthamptonshire
Traffic InformationSystems
Refurbishment andoperation of military
barracks
Munich / Germany
EUR 60 Mio.Arranger
Construction and operation ofhousing in 30 locations for
LeedsEUR tbc Mio.
Arranger
Leeds IndependentLiving Accommodation
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Financing of aport portfolio
USA and Latin America
USD 2,400 Mio.Arranger
Construction and operationof the Sea to Sky Highway
Vancouver
CAD 498 Mio.Lender
Financing of aport portfolio
USA
USD 625 Mio.Lender
Financing of aport portfolio
Montréal
CAD 372 Mio.Lender
Financing of aport portfolio
USA
USD 955 Mio.Sub-Underwriter
Financing of aport portfolio
USA and Canada
USD 1,880 Mio.Lender
Construction and operationof a light rail connection
British ColumbiaCAD 600 Mio.
Co-Lead-Arranger &Swap Provider
Construction and operationof Autoroute 25
Montréal
CAD 270 Mio.Lender
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Financing of a motorwaySydney
AUD 1,8 bn.Lead Manager
Construction of a Petro-terminal
Singapore
SGD 20 Mio.Arranger
Financing of a motorway
Brisbane
AUD 580 Mio.Lead Manager
Financing of a motorway
Brisbane
AUD 580 Mio.Lead Manager
William R. BennettBridge
Construction of OkanaganLake Bridge Project
British Columbia
CAD 145 Mio.Co-Financial Advisor
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THANK YOU!
PPPs in Infrastructure
Bruno Mejean, Managing DirectorNORD/LB New York Branch