Financing Essentials for Public-Private Partnerships United Nations SU/SSC Training Course September 19, 2006

Financing of Private Public Projects Role of Financial Counterparty Funding Resource Professional Expertise Project Oversight and Monitoring Objectives of the Financial Counterparty Policy Goals and Objectives Proper Risk- Reward Relationship Market Rates of Return Financial Social Strictly Private & Confidential

Financing of Private Public Projects Universe of Financial Counterparties Commercial Banks Investment Banks Multilateral Organizations Development Banks Non-Profit Organizations Local, Provincial and National Governments Multinational Development Companies Pension and Investment Funds Infrastructure Equity Funds Sources of Funding Debt Equity Quasi - Equity Strictly Private & Confidential

Financing of Private Public Projects Debt Bank Loans Bond Offerings Domestic or International Public Markets Local or Foreign Currency Denomination Senior/Mezzanine/Subordinated Debt Equity Initial Funding Long Term Investment Change of Control Provisions/Replacement Standards Return Expectations Ongoing Financial Support Strictly Private & Confidential

Financing of Private Public Projects Quasi-Equity Cash Contributions Grants Subsidies Support Agreements Guarantees Certain Forms of Debt Strictly Private & Confidential

Equipment/Rolling Stock Application of Funds Direct Project Costs Development Costs Design Site Acquisition Construction Equipment/Rolling Stock Strictly Private & Confidential

Working Capital Reserve Transaction Costs Structuring Fees Application of Funds Finance Costs Capitalized Interest Reserve Funds Debt Service Reserve Maintenance Reserve Working Capital Reserve Transaction Costs Structuring Fees Commitment Fees Legal Fees Credit Enhancement Fees Financial Advisory Fees Strictly Private & Confidential

Project Risk Assessment Type of Project Greenfield v. Brownfield Sector Service Area Mature or Developing Market Project Evaluation and Economics Project Need Sources and Uses of Funds Market Analysis Project Rationale Competition Pricing Structure Market Competitiveness Strictly Private & Confidential

Project Risk Assessment Project Financial Forecasts and Sensitivity Analyses Development of Key Assumptions Identification of Sensitivities Analysis of Sensitized Cashflows Revenue Shortfalls Construction Costs Interest Rates Inflation Currency Fluctuation Strictly Private & Confidential

Legal and Environmental Requirements Legislation/Regulation/Tax Policy Contract Law Public Private Partnerships Environmental Land Use Other Project Documentation Concession Agreement Construction Contract Operations and Maintenance Contract Supply or Off-take Contracts Strictly Private & Confidential

Legal and Environmental Requirements Concession Agreement Term of the Concession Revenue Tail Allocation of Risk Termination Provisions Payment Mechanism Deduction Regime Lenders’ Rights Insurance Provisions Strictly Private & Confidential

Legal and Environmental Requirements Construction Contract Fixed Price/Date Certain Types of Technology/Track Record Warranties and Guarantees Construction Performance Support Liability Cap Liquidated Damages Lenders’ Rights Role of Technical Advisor/Scope of Services Contingency Levels Strictly Private & Confidential

Legal and Environmental Requirements Operations and Maintenance Contract Scope of Services/Complexity Duration Price/Payment Pass Through of Deductions Benchmarking and Market Testing Provisions Operations Performance Support Strictly Private & Confidential

Legal and Environmental Requirements Supply and Off-take Arrangements Duration Terms Price Price Adjustment Mechanisms Financial Documentation Bond Indenture/Loan Agreement Intercreditor Agreement Lenders’ Direct Agreements Strictly Private & Confidential

Evaluation of Main Project Parties Borrower Shareholders Construction Contractor and Subcontractors Service Operator(s) Multilateral Agencies Local Authorities Other Public Sector Counterparties Suppliers Off-takers Co-Lenders Advisors Strictly Private & Confidential

Liens on or Assignment of Various Assets Guarantees Letters of Credit Project Security Forms of Security Revenue Pledges Mortgages Liens on or Assignment of Various Assets Guarantees Letters of Credit Implicit/Explicit Public Sector Support Strictly Private & Confidential

Project Security Reserve Funds Types of Reserves Maintenance Reserve Operating Reserves Dividend Reserves Others Funding Requirements Amounts/Sizing Timing Replenishment Source of Funding Release Tests/Dates Strictly Private & Confidential

Design and Construction Risk Operating Risk Commercial Risk Risk Evaluation Design and Construction Risk Operating Risk Commercial Risk Sufficient Demand Pricing Levels Affordability Collection Regulatory Risk Strictly Private & Confidential

Macroeconomic and Sovereign Risk Legal Risks Financing Risk Risk Evaluation Macroeconomic and Sovereign Risk Legal Risks Financing Risk Debt Structure Termination/Prepayments Foreign Exchange/Currency Market Risks Interest Rate Inflation Sensitivities Currency Volatility Strictly Private & Confidential

Evaluation of the Risks and Mitigants The Decision Evaluation of the Risks and Mitigants Identification of the Strengths and Weaknesses of the Transaction Risk v. Reward Analysis Decision Processes Governmental Investment Banks Commercial Banks Multinational Organizations Equity Investors Strictly Private & Confidential

Construction Support Package Operator Support Package Business Terms Security Package Construction Support Package Operator Support Package Gearing Requirements Drawdown Schedule Term of the Financing Flow of Funds Representations and Warranties Conditions Precedent Strictly Private & Confidential

Interest Coverage Ratios Business Terms Financial Covenants Interest Coverage Ratios Debt Service Coverage Ratios (historical and projected) Loan Loss Coverage Ratio Dividend Payout Restrictions Events of Default/Remedies Credit Ratings Derivative Products Strictly Private & Confidential

Drawdown Process and Procedures Interest Rate Resets and Rollovers After Financial Close Drawdown Process and Procedures Interest Rate Resets and Rollovers Repayments and Prepayments Portfolio Review and Monitoring Construction Monitor Monthly/Quarterly/Annual Financial Reporting Lifecycle Costs Covenant Compliance Insurance Advisor Waivers/Consents/Amendments Strictly Private & Confidential