Colombian Road Concession Program Luis Fernando Andrade Moreno 2013 - 2014 Projects and Financing Issues Luis Fernando Andrade Moreno President Agencia Nacional de Infraestructura June, 2013

Agenda The target and ground preparation The plan in motion: 4th generation of roadway concessions The project financing challenge The timetable

The difficulty: Infrastructure deficiency Source: World Economic Forum. The Global Competitiveness Report 2012-2013.

The difficulty: Infrastructure deficiency Historical low investment in transportation infrastructure Source: Own calculations using DNP investment data

The actions carried out by the current Government Creation of a PPP Law (Ley 1508 de 2012) Improved legal framework Creation of the National Infrastructure Agency (ANI) Governance Capability Building intitutional capacity Design of a comprehensive infrastructure investment program based on PPP scheme Robust structuring Improved and standardized contracts Effective project management with better controls and monitoring systems Speeding up execution Removing bottlenecks Moving forward our infrastructure

Other Government actions Additional actions to set up a supportive regulatory and legal framework for private investment Infrastructure Law project in Congress Improving regulation to mitigate risks associated to land acquisition, social and environmental management, and utility network displacements Additional contractual provisions to facilitate resolution of Force Majeure events Expedited conflict resolution mechanism in standard contract

Agenda The target and ground preparation The plan in motion: 4th generation of roadway concessions The project financing challenge The timetable

Estimated investment profile for the Program How will the Government deliver on its promise of closing the infrastructure gap? The 4G Program US$26 billion investment program Around 40 toll road PPP projects Construction in over 8,100 km of national roadways in the next 8 years. Estimated investment profile for the Program (US$ Billion of 2012)

National roadway network under Concession: Existing and Upcoming VILLAVICENCIO CALI Buga PEREIRA Sogamoso Palo de Letras Caucasia MONTERÍA SINCELEJO Bolívar Carmen de VALLEDUPAR BARRANQUILLA CARTAGENA SANTA MARTA RIOHACHA Paraguachon San Roque Necoclí PASTO Zipaquirá Pamplona Simití Achí San Marcos San Pelayo CÚCUTA Girardot NEIVA Puerto Gaitán POPAYÁN B/MANGA Chachagüí Espinal ARMENIA Ibagué Pto. Salgar Cáqueza Calera La Paila Buenaventura De Quilichao Santander YOPAL Tame ARAUCA Sopó El Secreto MOCOA Cartago Planeta Rica La Yé Toluviejo Cruz del Viso Carreto Ponedera La Paz San Juan Buenavista Cuestecitas Barbosa Aguaclara MANIZALES Villeta MEDELLÍN BOGOTA Barrancabermeja Remedios Pto. Arimena El Tigre Pto. Berrío Santa Fé de Ant. Bolombolo La Manuela Camilo C TUNJA Aguachica Granada More than 11,000 Km 25 existing projects + 40 new projects PTO CARRENO PTO CARRENO Sisga Existing projects 4G projects

4G Concession Contract: Basics Design Rehabilitation, construction and/or improvement Operation and maintenance Financing Scope Variable, 25 – 30 years Term Infrastructure units with functional independence Size: Capex + Opex over ~US$ 50 million per Unit Functional Units By Functional Unit based on availability Sources: Tolls and Government Contributions Discounts related to availability, quality and service, capped at ~10%. Evaluation by an experimented external auditor, Payment

4G Concession Contract: Risk Allocation Concessionaire’s Risks ANI’s Risks Force Majeure events Non insurable events (e.g. natural disasters) Land acquisition* Social consultation* Environmental licensing* Traffic (Aggregated Income) Utility networks (non identified networks) * Assuming concessionaire’s proper management Concessionaire’s Risks Construction (except tunnels) Operation and maintenance Financing Change in construction and operation & maintenance input prices Land acquisition management (with control and supervision of ANI) Insurable Force Majeure events Traffic (liquidity risk) Macroeconomic risks Changes in law Shared Risks Construction (tunnels) Land acquisition (cost overruns) Environmental and social management (cost overruns in environmental compensations) Utility networks (cost overruns)

Agenda The target and ground preparation The plan in motion: 4th generation of roadway concessions The project financing challenge The timetable

4G program financing needs Investment & financing Needs: Funding US$26 billons to be invested during the next 8 years and repaid with long term flows starting after construction phases Investment & financing Equity Debt Note: Preliminary and estimated values, subject to modifications, adjustments and corrections.

4G program financing constraints Debt required for 4G concession program is large relative to the Colombian financial market Local long term financing sources Debt financing Bank commercial loans Bank investments Pension fund portfolios Insurance company portfolios Data is for June 2012 Note: Values in USD Billions, Updated at Dec-2012

4G program financing: The proposal Structured project financing 4G program financing will target broad participation: Banks, multilateral institutions, development banks, institutional investors and private equity funds Government is prioritizing the role of long term investors (institutional investors): Long term repayment flows and demand risk coverage Mixed project funding: Soft mini-perms loans and operating asset securitization

Mixed financing strategy Financial Closing Debt commitments for 1/3 of total financing needed Bank loans Loans from other infrastructure investors Refinancing after construction phase Asset Based Securities Long term loans from institutional investors Bidding process Pre-construction Construction O & M Signing of Contract End of construction phase certification End of the contract Retribution flows according to availability* Refinancing during construction phase Securities with credit risk enhancement Loans from infrastructure investors/funds * Discounts are applied up to a threshold related to the infrastructure availability (availability, service level and quality standard)

Securitization structure Underwriting commitments Originators Issuers Securities Investors UF 1 Tranche j Inv. 1 % UF 1 … Inv. n - 2 … … … Cession Lead Bank/Fund Contingent purchase Tranche k Multilaterals / development Banks Substitution / firm commitment UF m % UF m $$$ $$$ 17

Mitigation alternatives Remaining Risks: Mitigation alternatives Securitization after construction is completed Third party guarantees for credit risk during construction phase Construction (Cost, licensing, and land availability) Predetermined discount caps affecting repayment flows Financing structure and sizing according to the perceived volatility from availability payments Strong insurance coverage requirements Recurrent non-availability of infrastructure as cause for early termination of the contract Operational (Non-availability, service levels and quality standards) Overcollateralization Third party liquidity guarantees / reserve account Securitization with tranches / subordination Liquidity (traffic) Adequate and timely causes for early termination Repayment of investments and expenses are covered by predetermined liquidation formulas Predetermined contractual terms and procedures for takeover rights by creditors Early termination MODOS

Agenda The target and ground preparation The plan in motion: 4th generation of roadway concessions The project financing challenge The timetable

4G Program Timetable 1st Round FONADE 4 1st Round PROSPERITY 5 Rounds # of projects 1Q 2012 2Q 2012 3Q 2013 4Q 2012 1Q 2013 2Q 2013 4Q 2013 1Q 2014   1st Round FONADE 4 Prequalification Bidding process 1st Round PROSPERITY 5 2nd Round FONADE 7 3rd Round FONADE 12 2nd Round PROSPERITY 1st Round ADAPTATION FUND 3 2nd Round ADAPTATION FUND

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