Federal, State

1
Federal, State Private Role in Financing P3's
Presentation for
Regarding
April 26, 2007
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Table of Contents
Tab
Evolution of Federal Role I Recent Example of
State Role SH 121 II Private Role An
Alternative Source of Capital III
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• I. Evolution of Federal Role

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Federal aid for transportation projects can take
many forms. Federal lending vehicles have endured
over time.
120 Mn standby Federal line of credit for San
Joaquin Hills Transportation Corridor Agencies
First Federal Section 129 Loan (precursor to
TIFIA) for President George Bush Turnpike
140 Mn TIFIA loan for SR 125 is first-ever
provided for a private toll road development
1993
1995
2002
5
Recent Government Subsidies/Financing Sources

• TIFIA Overview
• The Transportation Infrastructure Financing and
  Innovation Act (TIFIA) provides loans, guarantees
  and standby lines of credit for transportation
  infrastructure projects. It is a taxable US
  Treasury rate.
• In order to become eligible for credit
  assistance, a project must meet certain threshold
  criteria, including
• Large surface transportation projects (project
  costs must exceed 100 million or 50 of State
  federal highway funds for most recent fiscal
  year).
• TIFIA contribution limited to 33 percent
• Investment grade rating requirement (for senior
  debt)
• Dedicated revenues for repayment
• Private Activity Bonds (PABs)
• Qualified PABs are tax-exempt bonds issued by a
  state or local government, the proceeds of which
  are used to build certain qualified facilities
  that will be owned, leased or otherwise used by
  an entity other than the government issuing the
  bonds.
• For a PAB to be tax-exempt, 95 or more of the
  net bond proceeds must be used for one of the
  several qualified purposes, as described in the
  Internal Revenue Code. Section 142 of the Code
  specifically describes what qualifies as an
  Exempt Facility Bond, which is issued to finance
  various types of facilities owned or used by
  private entities.
• As opposed to state-by-state volume cap
  allocations that limit the issuance of certain
  other PABs, SAFETEA-LU establishes a national
  limit of 15 billion to be allocated by 2009 and
  issued by 2015. As a result of this new
  provision, tax exempt financing will be made
  available to surface transportation projects with
  significantly more private participation than has
  been permitted in the past under the Code.

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FTA has designed its Public Private Partnership
Pilot Program to encourage use of alternative
delivery and finance approaches.

• Projects that submitted for the March 31, 2007
  deadline include
• Houston Metro
• BART Oakland Airport Connector
• Denver RTD
• Georgia RTA

• 3 projects will be selected to participate in the
  Pilot Program
• The key benefit of participating will be
  expedited approval for New Starts funding
• Candidates of the new Program must exhibit high
  demonstration value which includes the
  following five criteria
• Number of project elements the private partner is
  responsible for
• Quality of risk allocation with respect to the
  cost of project
• Extent to which equity capital and development
  proceeds contribute to project and terms related
  to contribution
• Whether project is part of a plan that
  incorporate system-wide congestion pricing
• Speed of delivery and quality of performance as
  well as reliability of projections of costs and
  benefits associated with the project
• Applications to the Pilot Program will be
  reviewed quarterly on a rolling basis for as long
  as there is an opening
• Deadlines for submission
• To qualify for first quarterly review,
  applications must have been received by March 31,
  2007
• To qualify for second quarterly review,
  applications must be received on July 1, 2007

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• II. Recent Example of State Role SH 121

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The 3.4 billion SH 121 Project is the largest
competitively bid concession for a greenfield
toll road in the United States to date.

• Goldman Sachs has been serving as a concession
  advisor to the Texas Department of Transportation
  (TxDOT) on its Comprehensive Development
  Agreement (CDA) program since October 2005
• The CDA, which provides a competitive selection
  process for developing regional projects, is the
  program TxDOT uses to enable private investments
  in the Texas transportation system
• On February 28, 2007, TxDOT approved the
  recommendation of the Cintra consortium as the
  preferred best value proposer
• Two other bidding teams led by Macquarie and
  Skanska submitted bids for the project
• The Cintra team will pay an upfront fee of 2.1
  billion, guarantee 49 annual payments of 25
  million per year (PV of 716 million), and spend
  roughly 567 million to extend the main lanes
  into Collin County for the right to design,
  build, finance, operate and maintain the 26 mile
  road for 50 years post final construction
• While part of the SH 121 has already been built
  by TxDOT, this is one of the first Greenfield P3s
  in the US
• TxDOT has imposed a revenue sharing arrangement
  above certain gross revenue targets, TxDOT will
  share an increasing percentage of those gross
  revenues in addition to the upfront payment and
  guaranteed annual payments
• The Regional Transportation Council of the
  Dallas-Worth Area, which will largely decide how
  the upfront funds will be spent, is expected to
  use proceeds to accelerate funding for needed
  transportation projects throughout the region

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Project Overview

• TxDOT pre-applied and pre-qualified for an
  estimated 700 million TIFIA loan and up to 1.8
  billion of Private Activity Bonds (PABs)
  allocation for this project. The developer has
  the option to utilize TIFIA and PABs as part of
  their final funding strategy
• Tolls will be approximately 0.139/ mile in 2008
  and 0.145/mile in 2010 (higher for trucks). Toll
  increases allowed every 2 years, capped by
  increase in CPI or Employment Cost Index. TxDOT
  will allow time of day and congestion pricing
  starting 2012
• Project is expected to be completed in 2012, 20
  years earlier than originally anticipated using
  traditional funding alternatives
• This approach will limit use of public funds
  since the developer will bear the full cost.
  TxDOT funds which otherwise would have been used
  for this project can be redirected to meet other
  transportation priorities
• Developer has committed to higher levels of
  performance standards than TxDOT currently
  provides, which will benefit users
• Award is conditional pending final environmental
  approval (expected April 2007) and successful
  financial close

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Overview of SH 121Location of SH 121
Highway Overview
Map of Local Area

• SH 121 is expected to be a 26-mile tolled
  diagonal state highway, connecting I-35W near
  downtown Fort Worth to US-75 near Bonham, Texas
• 10 miles of new construction to be completed in
  2011, 7 miles already operational as of July
  2006, and 9 miles to be built by the State
• Pass north of the greater Dallas area, running
  through Denton and Collin counties, a densely
  built-up area with one of the fastest growth
  rates in the State and through the most affluent
  counties of the Dallas area
• 6 main lanes with grade separated interchanges at
  all major cross streets
• Expected to provided improved access to DFW
  Airport (the 3rd busiest airport in the US) and
  other critical regional hubs
• The Dallas-Fort Worth Metropolitan Area, which is
  responsible for one-third of Texas GDP, is a
  heavily-developed area with rapid population
  growth (population increase from 4 million in
  1990 to5.8 million in 2004, CAGR of 2.7)

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Overview of SH 121Transaction Timeline

• January 2005 TxDOT received unsolicited proposal
  from Skanska
• March 2005 TxDOT issued request for indicative
  offers
• June 2005 TxDOT received 5 indicative offers
• July 2005 4 consortia short-listed by TxDOT
• August 2006 TxDOT issued request for final
  offers
• January 2007 TxDOT received 3 final offers
• February 2007 Cintra selected as Apparent Best
  Value Proposal
• April 30, 2007 (est.) Obtain environmental
  approvals and financial close

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• III. Private Role An Alternative Source of
  Capital

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North America is the growth market for global
infrastructure investors.
Established International Infrastructure
Investors are Setting Up U.S. Offices

• Over 150 people in U.S.
• Adding to base in Austin/Chicago
• Building U.S. Team in San Francisco
• Moving personnel to New York
• Investment team based in U.S.
• Considering adding U.S. office

• Macquarie
• Cintra
• Babcock Brown
• Hastings Management
• Transurban
• Brisa

• 6 bn Fund
• Raising 1 bn Fund
• Rumored to be raising Fund
• Wants to see NYSE listed vehicle to invest
• 1 bn Fund
• 1 bn Fund
• 1 bn Fund
• 1 bn Fund
• 1 bn Fund

• Goldman Sachs
• Carlyle Group
• Blackstone Group
• Apollo Advisors
• Morgan Stanley
• JP Morgan
• GE/Credit Suisse
• Deutsche Bank
• Merrill Lynch

U.S. Based Infrastructure Funds are Raising
Equity and Seeking Investments
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Public-private partnerships provide an
opportunity to fully capture the growth wedge
in future revenue increases.

• Municipal bond investors rely on historical
  revenues to determine the leverage levels which
  constrains total value for the owner
• Equity investors look for future returns based on
  growth
• Debt Equity Greater Proceeds for Owner of
  Asset

Maximum Municipal Bond Leverage
Concession Sale
Net TollRevenues
Net TollRevenues
Conservative Projections
Conservative Projections
Debt 1.25-2.00x Coverage
Equity Investor
Debt
Today
40 yrs
Past
99 yrs
Today
40 yrs
Past
99 yrs
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Substantial pools of capital are focused on
investing in infrastructure and this growth wedge.
Total Buying Power 375 Billion
Examples of Infrastructure Investors/Operators

• Babcock Brown
• Hastings Fund
• Star Capital
• Carlyle Group
• Galaxy Fund

• Macquarie
• CKI
• Ontario Teachers
• Borealis Infrastructure
• Goldman Sachs

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Goldman Sachs Infrastructure Partners has
recently increased its Infrastructure Fund to
6.5 billion
GSIP Seeks to Invest in Global Infrastructure
Assets with Stable Long Term Yields
Potential Target Asset Classes
Fund Overview
Type
Asset Types

• New, infrastructure-focused, investment fund
  sponsored and managed by Goldman Sachs
• Housed within the Merchant Banking Division
• Leverage from the relationships and capabilities
  of the Goldman Sachs franchise
• Equity commitments in excess of 6.5 billion
• 20.0 billion in buying power with additional
  funds coming through co-investment (includes
  leverage and equity)
• Goldman Sachs to provide a significant portion of
  the equity
• Fund structure similar to traditional private
  equity vehicles
• 12-15 Year Fund Life
• Targets uniquely positioned global infrastructure
  assets with the following characteristics
• Essential social services
• Stable, predictable, low risk cash flows(a)
• Insulated from the business cycle
• Revenue often linked to local inflation
• Able to support high leverage

(a) There can be no assurance that the fund will
achieve these objectives.
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The recent 3.85 billion lease of the Indiana
Toll Road illustrates the PPP market is growing
in the US.
Description of the ITR
The Road Network

• Critical transportation link between major East
  Coast cities, the City of Chicago, and the
  western United States
• 46 year operating history
• Approximately 157 miles in length
• The Toll Road is designated as Interstate 90
  (I-90) from the Illinois State Line (where it
  connects to the Chicago Skyway) to the Ohio State
  Line (where it connects to the Ohio Turnpike)
• FY05 AADT of 46,000 on Barrier System, and 25,000
  on Ticket System
• Unchanged toll rates since 1985 Among lowest
  /mile in US
• State mandated increase to become effective on
  3/1/2006

Ownership and Financing Structure
Financial Overview(a)
(in millions)
2004A
2005A
2006E(b)
2007E(b)
Financing Structure
Ownership Structure
Commercial Revenue 49.6 53.3 NA NA Passenger
Revenue 35.3 34.4 NA NA Total Toll
Revenue 84.9 87.7 90.3 126.0
Growth 3.5 3.3 2.6 39.5 EBITDA (c) 59.7 60.6 63.9
98.0 Margin 65.0 63.3 63.5 71.8 Revenue 1.7 3
.4 8.2 10.3 EBITDA 4.2 9.3 10.0 13.0
Bank Debt 3,278.5 81 Equity 770.1 19 Total
4,048.6 100

• Acquisition bank debt
• Tenor is 9 years
• Step up in margins
• Partial cash sweep
• Hedging
• Fully hedged debt profile for 20 yrs
• Swap rates step up gradually from 2006 to 2026,
  starting at 3 p.a.

3 Yr Hist.
5 Yr Hist.
5 Yr Proj.
10 Yr Proj.
CAGR
Estimated IRR 12.5(d)
(a) Source Wilbur Smith/State of Indiana (b) Pro
Forma 2006 and 2007 estimates based on Goldman
Sachs and Wilbur Smith internal projections(c)
Includes historical concession revenues, which
were included as part of the Concession Agreement
(d) SourceMacquarie Website
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Indiana Toll Road The private operator agreed to
key concession terms, including predefined future
tolling increases and operating standards.

• Term of Concession 75 years
• Estimated Additional Capital Expenditures/Road
  Enhancements 4.4 billion (2006 dollars)
• Toll Increases
• A state-mandated toll increase schedule will be
  implemented on April 1, 2006.
• First toll increase since 1985
• Passenger car tolls to increase to 5.1 / mile,
  and remain unchanged until 2010
• Commercial vehicle tolls step up as shown below
  in April 2006, April 2007, April 2008, and April
  2009
• Concessionaires ability to set tolls begins in
  2010 with a step up in 2010 to reflect the prior
  4 years CPI or nominal GDP per capita growth
• Maximum annual toll increase from 2011-2080 (term
  of concession) will be the greater of 2, CPI and
  nominal GDP per capita growth

• Operating Standards
• 250 pages of operating standards that must be
  maintained
• Restrictions on congestion management with
  mandated expansion upon certain Level of Service
  (LOS)triggers

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The concession lease of the Chicago Skyway was
the first of its kind in the United States.
Description of Chicago Skyway
The Road Network

• 7.8 miles divided elevated toll road and toll
  bridge with 3 lanes in each direction
• Connects to Indiana East-West Toll Road and Dan
  Ryan Expressway
• Current tolls 2 per car, 1.20 per truck axle
  no change since 1993
• Mostly cash-only tolling
• Lack of Competing Direct Route
• Small Impact of Toll Increases on Traffic Demand
• Strong EBITDA Margins and Revenue Growth Rates
• Limited Future Capital Expenditures
• Modernization Potential

Ownership and Financing Structure
Financial Overview
(US in millions) 2003 (a) 2004 2005 (a) 2006
(a) Revenues () (b) 39.8 41.2 49.6 50.1 Operatin
g Expenses () (b) 11.4 12.2 12.6 13.1 EBITDA
() 28.4 29.0 37.0 37.1 EBITDA
Margin 71.3 70.4 74.5 73.9 Total Vehicles
(000) 17,422 17,395 16,260 16,422 Revenues 3.0 1
1.6 8.6 10.3 EBITDA 1.5 14.1 10.1 12.4
Initial Financing Structure
Ownership Structure
Debt 1,000 53 Equity 882 47 Total 1,882 100

• 1.4 bn Debt Refinancing
• Achieved non-recourse financing
• Improved match funding of assets and liabilities
  versus bank financing
• Reduced financing cost through several features
  including an innovative accreting swap provided
  by Goldman Sachs Capital Markets L.P.

3 Yr Hist.
5 Yr Hist.
5 Yr Proj.
10 Yr Proj.
CAGR
Estimated IRR 12.3(c)

• (a) Lane closures due to CIP impacted traffic and
  revenues (completion of CIP in December 2004).
• Source Audited financial statements.
• Source Macquarie Website

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The Skyway 1.4 Billion refinancing gave
proof-of-concept to US capital markets of debt
financing future growth.

• Innovative interest rate derivatives created a
  synthetic floating-rate zero coupon debt
  instrument allowing
• Issue floating-rate securities, enhancing the
  marketability of its senior debt and enabling the
  sponsors to achieve a lower rate than may have
  otherwise been possible
• Significantly defer fixed-rate payments to the
  swap counterparties in the early years to the
  later years after scheduled toll increases take
  effect
• Financial Security Assurance (FSA) wrapped not
  only the senior secured debt, but provided a
  forward commitment to guarantee certain
  refinancing debt
• An aggressive view on growth was necessary to
  achieve such leverage levels

Compounded Annual Growth Rate
2006-2010
2010-2015
2015-2020
2020-2025
2006-2025
Projected Cash Flow 16.0 12.5 9.4 5.3 10.7
Year End Debt Service and Cash Flow Comparison
(000s)
2. 5x
2.4x
2.3x
2.3x
2.2x
2.2x
2.2x
2.3x
2.6x
1.9x
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