1. Financing Infrastructure - a Siemens Financial Services Perspective
Johannes Schmidt
CEO Project and Structured Finance Infrastructure & Cities and Industry,
Siemens Financial Services GmbH

2. Contents 1
Cities and investment needs 2
Trends in infrastructure financing 3
Financial solutions of Siemens 4
Criteria for successful projects

3. Contents 1
Cities and investment needs 2
Trends in infrastructure financing 3
Financial solutions of Siemens 4
Criteria for successful projects

4. The dawn of the "urban millennium" has started
50% of world GDP
is produced in cities
with a population
over 750K.
75% of energy
consumed in cities;
80% of CO2 emissions
are produced in cities.
Regional power-houses
“urban millenium"
In 2007 ~50% of the world's population
was living in cities. An increase from
3.5B to 4.7B is expected until 2030.
Population
Major energy and climate factor 4

5. The basic needs of a city drive the market for intelligent infrastructure solutions
Sustainable
Intermodal mobility / efficient and effective mobility
Sustainable and decentralized energy supply
Efficient water supply and waste management
Security
Rigorous reduced carbon footprint of the entire city (e.g. smart buildings, transportation)
Financing
Competitive
Livable
Requirements are drastically changing from closed island solutions /
single products to interlinked intelligent infrastructure solutions 5

6. Increasing importance of financing in city-context
Europe
Asia-Pacific
North and South America
Africa, Middle East, CIS
Budget constraints at cities with concurrently essential needs
for action lead to high importance of private sector finance
Source: SFS Paper, Sustainable Cities, 2011

7. Example rail transportation Market growth worldwide divided by regions
1.7%
3.8%
2.7%
11.5
10.2
4.9%
7.2
4.7
5.7
5.5
1.6
2.3
NAFTA
Western Europe
Eastern Europe
CIS B€ B€ B€
2.1%
2.5% B€
23.0
20.0
5.6%
53.5
3.1%
44.9
1.3
1.6
1.5
2.2
Rest of America
Africa / Middle East
Asia / Pacific
World x%
Market size 2007/08/09
Market size 2015/16
CAGR 2007/08/ /16
Source: UNIFE World Rail Market Study – Status Quo and Outlook 2020

8. Contents 1
Cities and investment needs 2
Trends in infrastructure financing 3
Financial solutions of Siemens 4
Criteria for successful projects

9. Challenging financial environment
Debt level of selected European states in percent of the GDP
Greece
Italy
Portugal
Ireland
Spain
Germany
Euro area
Even if infrastructure improvements usually pay for themselves over a number of years, initially all have to be financed to start with.
Source: EU Commission, Autumn Prognosis 2010, effective November 2010

10. Significant investment gap as a consequence
$20-25 trillion
Public funding1)
$15-20 trillion
Global infrastructure investment needs until 2030
$35-40 trillion
Including $7-8 trillion for transport infrastructure
Funds that governments can allocate in the development of infrastructures
Funds potentially required from the private sector, including equity and dept
Source: BCG analysis
Page 10 10

11. Opportunity for private sector as intermediary
Positive demand outlook for Project Finance 1
Investors seeking investment opportunities 3
Opportunity for private sector as intermediary
Expected to increase in particular for power/ energy and infra-structure
Private equity seeking stable, inflation-linked investment opportunities
Opportunity to match private equity with rising financing demand
Role of government/ development banks 2
Budget constraint leading to higher need for private finance while policy objectives like climate leading to targeted support mechanisms

12. Financing structure for Russian State Railways (RZD)
Challenge
RZD wanted to modernize the existing fleet by state-of-the art vehicles to connect St. Petersburg - Moskau - Nizhny Novgorod with a project value of €318 million
Russian State Railway (RZD)
Passenger and freight service for national and international routes (100% state-owned)
km of track, 1.2 million employees, 1.3 billion passengers a year, 1.3 billion tons of freight per year
Solution
Siemens offered an attractive and innovative technical solution comprising the project planning, the delivery and 30 year maintenance of eight High Speed Trains thus enabling RZD to reduce substantially the overall life cycle costs of its fleet
Long term financing for the project planning and the delivery contract by means of Euler Hermes covered and uncovered loans achieving very attractive terms and conditions for RZD
Benefits
Trade Finance Magazine award „Deal of the Year“ for the financing of the trains

13. Evaluation of European PPPs
Evolution of European PPPs per annum
Value of projects (in €millons) Total 253,744.9
Number of projects Total 1340
Source: European Investement Bank, Economic and Financial Report 2010/04, private Public Partnerships in Europe – Before and During the recent Financial Crisis, Kappeler/Nemoz, 2010.

14. Challenge: Project finance in most regions have become more difficult after the financial crisis
Source: Dealogic Project Finance Review, first nine month 2011 final results, October 2011 14

15. Changes in the financial environment
Stringent Debt/Equity ratio (from 90/10 to 70/30); margins only decreased slightly
Clear focus on customer relationship / regions (bank/exporter and bank/importer)
Tenors shorter / Export Credit Agency (ECA) coverage helps to achieve longer tenors (power plants 12 years repayment, renewables up to 18 years)
Arranging / underwriting stopped, trend to club deals, smaller ticket sizes
Substantial coordination effort on Siemens’ side to pick and align the most suitable partners
Specifics of regional markets (Europe vs. US), margin differential / development more obvious
Significant reduction in on-balance sheet financing of renewable energies expected

16. Contents 1
Cities and investment needs 2
Trends in infrastructure financing 3
Financial solutions of Siemens 4
Criteria for successful projects

17. Financial Services – the essence of what we do and who we are
SFS is a reliable financing and risk management partner for Siemens businesses and their customers in times when financing of investments becomes increasingly important. 1
Being part of the Siemens Group, SFS differentiates itself through superior market know-how and asset expertise in Siemens' domains. 2
Offering technological product and service know-how as well as financial expertise provides an easier, more comprehensive customer interface. 3
SFS supports the Siemens growth initiatives by focusing on the same Sectors and key regions as the operating units – thereby building and enhancing customer relationships. 4

18. Financial Services (SFS)
Under the roof of Financial Services we provide an extensive portfolio of financial solutions
Financial Services (SFS)
Activities
Financial Solutions
Entities
Commercial Finance
Asset Finance & Leasing
Vendor Finance
Supply Chain Finance
Structured Finance (Debt & Equity)
Project & Equity Participations
Leveraged & Working Capital Finance
Financial Advisory
Asset-Based Lending
Venture Capital Equity Investments
Industrial Insurance Solutions
Private Finance Solutions
Asset Management
Credit Warehouse
Pension Management
Treasury Tasks for Siemens
Guarantees & Letters of Credit
Trade Finance
e.g. Siemens Financial Services GmbH
Project and Structured Finance
e.g. Siemens Financial Services Inc.
Venture Capital
e.g. Siemens Bank GmbH
Enlarge sales financing options
Investment loans
Project finance loans
Insurance
Investment Management …
Treasury

19. Project and Structured Finance Infrastructure & Cities and Industry
PSF IC&I
Americas
EMEA
Asia, Australia (AA)
Relationship Mgmt. & Structuring (R&S)
Debt
Equity
Risk Mgmt. (incl. Portfolio Mgmt.)
Primarily serving as Sector liaison
Advisory services: advise on finance topics and offer trainings
If applicable, structuring of deals incl. analysis of asset to be financed and deal team mgmt. in case of SFS financing
Separate role: Market screening for placement for identification of up-to-date standards and pricing
Primarily originating 3rd party deals in close coordination with R&S and equity team
Support of R&S in initial structuring of deals
Contribution of debt related expertise incl. structuring skills, e.g. covenants, collateral, payment schedules, default probability, amendments, debt service capabilities, market standards
If applicable, structuring of deals incl. analysis of asset to be financed and deal team mgmt. in case of SFS financing
Primarily originating 3rd party deals in close co-ordination with R&S and debt team
Support of R&S in initial structuring of deals
Contribution of equity related expertise, e.g. participation, control requirements, leverage assessment, details on vehicle, dividend streams
If applicable, structuring of deals incl. analysis of asset to be financed and deal team mgmt. in case of SFS financing
Credit decisions along entire structuring process, incl. final approval
Monitoring of existing exposures
Continuous assessment of portfolio
Execution of underwriting process
Proactive identification of portfolio de-risking measures

20. Financing for Thameslink Rolling Stock Project
The Department for Transport (DfT) in UK established a major bid process to procure new rolling stock including the construction and operation of maintenance depots for 20 years. On 16th June 2011 the Minister of State for Transport announced that the preferred bidder for the supply and maintenance of the new Thameslink fleet will be Siemens Plc
Thameslink Rolling Stock Project
Equity & Debt Financing
Total project volume:
more than ₤3 billion
The total project will be worth more than ₤3 billion to Industry Mobility. SFS’ strong commitment to the project is reflected in their decision to invest equity, subordinated debt and provide a finance solution for the depot facilities
Thameslink is an excellent example to demonstrate how SFS support could provide a unique advantage to the wider group to ensure it secures a significant contract. It shows how a financial partnership with our Sector can lead to overall success for Siemens

21. Contents 1
Cities and investment needs 2
Trends in infrastructure financing 3
Financial solutions of Siemens 4
Criteria for successful projects

22. The goal: create win-win situations that produce stable earnings for public and private partners
From an unstable equilibrium…
Uncertainty-filled projects, e.g., because of:
Untenable access to risk sharing
High bidding costs
Excessively long contract terms
Lack of competition
…to stable earnings for the public and private sectors
Project quality criteria (example: UK):
Determination of service to be outsourced
Risk sharing
Earnings expectations
Key conditions and preconditions
Bankability
Binding schedule
Self-commitment of sponsors
Statutory process
Error intolerance
Win-win
situation
+5-10%

23. Example 1: Criteria for successful equity investments
Infrastructure projects
Example 1: Criteria for successful equity investments
Emphasis on financing the development, construction and operation of infrastructure projects
Capital requirements of the projects range from around €100 million to more than €1 billion
Mostly minority holdings of 10 to 40 percent
Specialization in energy, transportation, healthcare, airports
Company influence necessary (e.g. through representation in company bodies)
Exit prospects within five years
Insurance for country risks where possible and economically viable use of export insurance to improve risk-return profile
Strict adherence to market conditions when Siemens serves as a supplier 23

24. Example 2: key success factors for successful Public Private Partnerships
Identifiability
The interfaces to the economic environment must be clearly identifiable and definable
Example: power plant vs. railroad network
Stable demand
Due to the long service life, efficient risk sharing requires a reliable basis for long-term planning
Example: energy and water supplies, mobility
Low risk of substitution
Similarly, the risk related to the introduction of competing solutions and technology must be limited throughout the project
Example: bridges / tunnels in road construction
Flexible
contract design
Sustainable solutions must be project focused, not based on standardized stipulations
Transportation sector example: Arlanda airport rail connection Stockholm
Low risk of
“politicization”
It must not be possible to use the project for political purposes Example: administrative prices as an election campaign tool (local public transport, energy, water, disposal)

25. Outlook: How to finance infrastructure projects in today’s environment
Sound project economics
Robust contractual and legal framework – permits and government approvals
Low construction risk – including proven technology, cost and schedule control and contractor experience
Low political risks, especially in emerging markets
Extensive due diligence – technical, environmental, economic and legal factors
Credible partners and credit-worthy counterparties – including suppliers

26. Questions & Answers

27. Thank you for your attention.

28. Published by Siemens Financial Services GmbH
Project and Structured Finance Infrastructure and Cities & Industry Johannes Schmidt
Werner-von-Siemens-Str. 50
Erlangen, Germany
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