The EIB financing of PPPs in Portugal Pedro

The EIB financing of PPPs in Portugal Pedro Eiras Antunes Banco Europeu de Investimento IADB, 89 de Dezembro de 2005 1 1

… EIB lending for PPPs in the main countries … Geographical distribution of PPP portfolio 24% UK Portugal Spain Greece Denmark Germany Holland Poland Sweden Ireland Austria 19% Source: EIB 2

PPPs in Portugal • EIB involvement since the early 90 s: – 2 nd Tagus Bridge (Vasco da Gama) – Tramway (Metro Sul do Tejo) – Motorways (real and shadow tolled) – Health (in progress) 3

PPP in Portugal EIB involvement Projects Phase EUR m EIB ? Finalised 1027 Y Construction 940 Y Finalised 498 Y (7) SCUT (shadow toll) Construction (2 finalised) 4717 Y (6) Litoral Centro (real toll) Construction 633 Y Grande Lisboa (real toll) Tendered - Likely Douro Litoral (real toll) Tendered - Likely Fertagus (sub-urban rail) Finalised 40 N Construction 270 N Project - Likely Ponte Vasco da Gama AENOR (real toll) AEA (real toll) Metro Sul do Tejo (tramway) Metro Ligeiro do Mondego (tramway) (8) Hospitals (PPP) Tendered (4) Likely OTA Airport Project Likely TGV (high speed train) Project - Likely 4

EIB AS KEY FUND PROVIDER FOR THE PORTUGUESE MOTORWAY PROGRAMME 5

2007 REAL TOLL SHADOW TOLL 6

2007 REAL TOLL Motorways: • North Concession • Douro Litoral • BRISA Concession (1100 km) • Litoral Centro • West Concession • Grande Lisboa Km Real Toll 1610 7

2007 SHADOW TOLL SCUT motorways: • Interior Norte • Norte Litoral • Grande Porto • Beira Litoral-Alta • Costa da Prata • Beira Interior • Algarve Km Shadow Toll (SCUT) 912 8

Role of European Investment Bank (1) Ø EIB has assumed anchor financing role in all road PPP transactions to date. Ø Financing typically represents 35 -50% of all-in costs. Ø Commitments to date totals € 3 bn for 10 projects for an estimated investment cost of € 6. 3 bn. Ø Long term and flexible loans (25 -28 years maturity; 6 -10 years grace) with sculpted amortisation schedules. Ø Most borrowers have opted to lock into forward rate fixings but standard financing options also offered. Ø Readiness of EIB to assume post-construction project risk on a phased basis, generally (SFF also possible), on basis of no MAC and agreed performance criteria (forward/backward looking ADSCR/LLCR, etc). 9

Role of European Investment Bank (2) Ø Maximum project exposure limited initially to 75% (30% for real toll projects) but with maturing of programme, more aggressive approach subsequently adopted for key projects with robust traffic/financial profiles. Ø Release of guarantees of up to 100% envisaged for some schemes. Ø Security packages have consisted of syndications of Portuguese banks, Portuguese/international banks and international banks. Also monoline guarantees. Ø Outlook : on basis of very positive experience to date further strong support envisaged for future road PPP’s and possibility of extension to other sectors, notably health, in the future. 10

Motorway projects financed by EIB 11

Motorway projects financed by EIB LOAN STRUCTURE Concessionaire Loan Amount EUR m Signature Date Tenor Guarant. Type Beira Interior Scutvias 358 1999 25 (8) Banks + EIF Costa da Prata Lusoscut 190 2000 25 (6) Banks Interior Norte Norscut 324 2000 25 (7) Banks Algarve Euroscut 130 2001 25 (10) Monoline Beira Litoral/Alta Lusoscut 470 2001 27 (7) Banks Grande Porto Lusoscut 300 2002 27 (7) Banks Norte Litoral Euroscut 200 NA 25 (10) Monoline Lusoponte 306 1995 20 (10) Banks AEA 210 1998 23 (8) Banks Chaves Motorway Aenor 450 1999 25 (10) Banks Litoral Centro Brisal 264 2004 27 (6) Min 22 Banks Shadow toll Real toll Ponte Vasco da Gama Leiria Motorway 12

MOTORWAY PROJECTS RISK MANAGEMENT CYCLE Breakeven Concession Revenues Profit Loss Financial costs IRR Depreciation Variable O&M costs Fixed O&M costs tenor Equipment replacement and major widenings Capital Amortisation Construction investment RISK CONCENTRATION ZONE Source: CGD CASH FLOW STABILITY ZONE 13

MOTORWAY PROJECTS TYPICAL RISK ALLOCATION MATRIX NATURE TYPE Assumed by … Comments Construction Project Concessionaire Transferred fully or partially to contractors Construction Protests Concessionaire/Grantor High in real toll, convertion risks Construction Environment Concessionaire/Grantor Concessionaire in approved corridor, Grantor otherwise Construction Expropriation Concessionaire/Grantor Variable O&M Concessionaire O&M Traffic/Revenues Concessionaire Other Legislation Concessionaire Other Force Majeure Concessionaire/Grantor Other Planning Grantor Other Inflation Concessionaire/User Mitigated if shadow tolled Partially insurable Full or partial CPI indexation 14

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Portuguese SCUTS Typical contractual framework Direct Agreement EU Funds Host State (Grantor) EIB Guarantee Agent Guarantor Banks and EIB Concession Agreement Financing Intercreditors‘ Agreement Guarantee Agreement Accounting Agreement Guarantee Agreement: pledge of shares, rights and assets; Assignent of rights; Call-option Agreement Project Concessionaire (Special Facilitating Co. ) O&M Contract =<"BBB" Inter. Bank Agent Bank A Loan Agreement Co. A Construction Contract Shareholders‘ Agreement Co. B Operator Contractors Consortium Co. C Bank B 16

http: //www. eib. org 17