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Table of Contents Tab Evolution of Federal Role I

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0 Federal, State & Private Role in Financing P3's
Presentation for: Regarding: Federal, State & Private Role in Financing P3's April 26, 2007

1 Table of Contents Tab Evolution of Federal Role I
Recent Example of State Role: SH II Private Role: An Alternative Source of Capital III

2 I. Evolution of Federal Role

3 Federal aid for transportation projects can take many forms
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

4 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 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.

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

6 II. Recent Example of State Role: SH 121

7 4/6/2017 2:29 PM 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 C:\Temp\DocuCenter2004\STANDARD\Public Private Partnerships\Conference.047\P ppt

8 Project Overview 4/6/2017 2:29 PM
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 C:\Temp\DocuCenter2004\STANDARD\Public Private Partnerships\Conference.047\P ppt

9 Overview of SH 121 Location of SH 121
Map of Local Area Highway Overview 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 to 5.8 million in 2004, CAGR of 2.7%)

10 Overview of SH 121 Transaction 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

11 III. Private Role: An Alternative Source of Capital

12 Established International Infrastructure Investors are Setting Up U.S.
North America is the growth market for global infrastructure investors. Established International Infrastructure Investors are Setting Up U.S. Offices Macquarie Cintra Babcock & Brown Hastings Management Transurban Brisa 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 Goldman Sachs Carlyle Group Blackstone Group Apollo Advisors Morgan Stanley JP Morgan GE/Credit Suisse Deutsche Bank Merrill Lynch $6 bn Fund Raising $1 bn Fund Rumored to be raising Fund Wants to see NYSE listed vehicle to invest $1+ bn Fund U.S. Based Infrastructure Funds are Raising Equity and Seeking Investments

13 Maximum Municipal Bond Leverage Conservative Projections
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 Toll Revenues Net Toll Revenues Conservative Projections Conservative Projections Debt x Coverage Equity Investor Debt Past Today 40 yrs 99 yrs Past Today 40 yrs 99 yrs

14 Examples of Infrastructure Investors/Operators
Substantial pools of capital are focused on investing in infrastructure and this growth wedge. Total Buying Power: $375 Billion Examples of Infrastructure Investors/Operators Macquarie CKI Ontario Teachers Borealis Infrastructure Goldman Sachs Babcock & Brown Hastings Fund Star Capital Carlyle Group Galaxy Fund

15 Potential Target Asset Classes
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 Fund Overview Potential Target Asset Classes 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 Type Asset Types Toll Roads Airports Ports Selected Rail Underground Transport Transportation Regulated Utilities Electricity Gas Water Social Infrastructure Hospitals Schools Prisons Stadiums Communications Broadcast Transmission Networks Mobile Telephony Satellites and Terrestrial or Submarine Cable Networks (a) There can be no assurance that the fund will achieve these objectives.

16 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 Financial Overview(a) Ownership and Financing Structure (in millions) 2004A 2005A 2006E(b) 2007E(b) Ownership Structure Financing Structure Commercial Revenue $49.6 $53.3 NA NA Passenger Revenue NA NA Total Toll Revenue $84.9 $87.7 $90.3 $126.0 % Growth EBITDA (c) % Margin Revenue 1.7% 3.4% 8.2% 10.3% EBITDA 4.2% 9.3% 10.0% 13.0% Bank Debt $3, % Equity Total $4, % 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. 5 Yr Hist. 3 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) Source:Macquarie Website

17 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 Concessionaire’s 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 (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

18 Description of Chicago Skyway
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, $1.20 per truck axle – no change since 1993 Mostly cash-only tolling Lack of Competing Direct Route Small Impact of Toll Increases on Traffic Demand Strong EBITDA Margins and Revenue Growth Rates Limited Future Capital Expenditures Modernization Potential Financial Overview Ownership and Financing Structure (US$ in millions) 2003 (a) (a) 2006 (a) Revenues ($) (b) Operating Expenses ($) (b) EBITDA ($) EBITDA Margin 71.3% 70.4% 74.5% 73.9% Total Vehicles (000) 17,422 17,395 16,260 16,422 Revenues 3.0% 11.6% 8.6% 10.3% EBITDA 1.5% 14.1% 10.1% 12.4% Ownership Structure Initial Financing Structure Debt $1,000 53% Equity Total $1, % $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. 5 Yr Hist. 3 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

19 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 Projected Cash Flow 16.0% 12.5% 9.4% 5.3% 10.7% Year End Debt Service and Cash Flow Comparison ($000s) Projected Cash Flow Debt Service (DS) DS Coverage Ratio 2. 5x 2.4x 2.3x 2.3x 2.2x 2.2x 2.2x 2.6x 2.3x 1.9x

20 General Statement of Distribution Principles
4/6/2017 2:29 PM Disclaimer This material is not a product of the Fixed Income Research Department. It is not a research report and it should not be construed as such. All materials, including proposed terms and conditions, are indicative and for discussion purposes only. Finalized terms and conditions are subject to further discussion and negotiation and will be evidenced by a formal agreement. Opinions expressed are our present opinions only and are subject to change without further notice. The information contained herein is confidential. By accepting this information, the recipient agrees that it will, and it will cause its directors, partners, officers, employees and representatives to use the information only to evaluate its potential interest in the strategies described herein and for no other purpose and will not divulge any such information to any other party. Any reproduction of this information, in whole or in part, is prohibited. 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Transactions involving derivative or other products may involve significant risk and you should not enter into any transaction unless you fully understand all such risks and have independently determined that such transaction is appropriate for you. The Goldman Sachs Group, Inc. is acting in the capacity of an arm's-length contractual counterparty to the user in connection with any transaction the Goldman Sachs Group, Inc. may enter into with the user and not as a financial advisor or a fiduciary. General Statement of Distribution Principles Goldman Sachs is committed to managing securities offerings such that our clients are treated fairly and to conducting our business with integrity and according to proper standards. Our policy is that the pricing of bookbuilt securities offerings and allocations to investors should be transparent to the issuer or seller(s), consistent with our responsibilities to our investing clients. 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Where we underwrite an offering or otherwise guarantee a price in connection with an offering, we will take into account our prudential responsibilities to manage our risk properly when determining allocations and their manner and timing. There is a white background behind the Disclaimer text to cover the client name or logo in the master. C:\Temp\DocuCenter2004\STANDARD\Public Private Partnerships\Conference.047\P ppt

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