6 June 2012Role of the Investment Bank         Adam Nicolopoulos, President & CEO
Investment Bank & the I-Banker              Function & Services              Expertise              Relationships         ...
How I got here from there…© Copyright                                    2
Clients – upstream, downstream & internal              Corporates (buy side / sell side)              Governments / public...
Investment Banking Services              Advisory                                    Research              Valuations     ...
Key Lessons Learned The Conductor                      More than Economics © Copyright                                    ...
May opportunities…but beware of the risks…© Copyright                                       6
Infrastructure Characteristics & Drivers       Investment drivers                Key project attributes / comments        ...
Clients – Project sponsors – a diverse               universe...               Contractors                   Asset Operato...
Multiple Sectors                          Single Purpose Company                          Greenfield / brownfield         ...
The Market & Participants (sample names)© Copyright                                           10
Skill Sets              Analytics                                      Negotiations              Presentation             ...
How are the parties organized?                                   Project team & advisors / areas of expertise             ...
Typical Cash Flow Profile – Greenfield Project                             800                             600            ...
Brownfield Project – Operating Asset                             800                             600                      ...
Capital Structure and Providers of Capital                                             NewCo – Project Co          Equity ...
...so how do we establish the cost of capital?                           Equity:                             Debt:        ...
...so how do we establish the cost of capital?                            Equity:                              Debt:      ...
Advisory Team – coordinationFinancial Advisor –              Provides analysis and advice regarding                       ...
Background: 2005 – 2007BARRON’S, May 8, 2006    © Copyright The Bond Buyer, Mar.27, 2007   BusinessWeek, May 7, 2007      ...
Background: 2005 – 2007 – the “Feast” years♦The investors discover US infrastructure♦Macquarie/B&B model & financial engin...
US Investment Banking Approach© Copyright                                      21
Chicago Skyway Projected Traffic and  RevenueToll Rates                                                  Projected Gross T...
Chicago Skyway Sale ♦ Macquarie Infrastructure Group (45%) and Cintra (55%) purchased a 99-year concession   for $1.82 bn ...
2009:© Copyright              24
The Present – Debt markets♦Cost of debt is very high♦Credit is now scarce♦Demise of monolines - difficult to reach investm...
The Equity market  ♦Debt pricing approaching cost of equity  ♦ 7 - 8% cost of debt  ♦Equity is “repricing”  ♦Infrastructur...
Equity Funds    ♦Evolution of equity returns    ♦Infrastructure: not recession-proof    ♦New fund structures    ♦New Playe...
Lessons Learned (…not Murphy’s Laws)       Aim for win – win       Know what you … do not know       It is about people   ...
ADN Capital Ventures, Inc.ADN Capital Ventures, Inc. (“ADN”) delivers financial advisory services to clients who are devel...
Adam D. Nicolopoulos ♦ Involved in over 60 project finance /private finance /concession type transactions in the US and   ...
Sample    deals♦ Expert witness on an international arbitration case involving a major multi-billion euro road infrastruct...
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Edmonton - Role of the investment bank

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  1. 1. 6 June 2012Role of the Investment Bank Adam Nicolopoulos, President & CEO
  2. 2. Investment Bank & the I-Banker Function & Services Expertise Relationships Organization & Groups Fees Skill sets Mobility of Skills© Copyright 1
  3. 3. How I got here from there…© Copyright 2
  4. 4. Clients – upstream, downstream & internal Corporates (buy side / sell side) Governments / public sector (sell side) Investors Banks / Peers Internal Management Colleagues Team peers© Copyright 3
  5. 5. Investment Banking Services Advisory Research Valuations Credit rating Acquisitions Negotiations Capital structuring Tender management Capital raising Financial implementations Market sounding Debt issuance and underwriting Equity Debt© Copyright 4 4
  6. 6. Key Lessons Learned The Conductor More than Economics © Copyright 5
  7. 7. May opportunities…but beware of the risks…© Copyright 6
  8. 8. Infrastructure Characteristics & Drivers Investment drivers Key project attributes / comments High barriers to entry Defined risk profile Monopolistic characteristics Capital intensive Facilitators of Importance / necessity Strategic links economic growth Contract amounts Sizeable $200 – $multi-billion Well / reasonably Established traffic pattern Business model defined risk profile Industry growth rate Revenue growth expectation Attractive IRR and upside potential Return on investment Scope for additional revenues Stable, predictable, 20–50 years and up to 99 years Cash flow quality long-term investment© Copyright Key ….regulation! 7
  9. 9. Clients – Project sponsors – a diverse universe... Contractors Asset Operators ACS Dragados Port operators (PSA) Vinci Road operators (Autostrade) Bouygues Airport operators (TBI) Sanska Rail Operators (Virgin) Bank Fluor… Others Corporate Developers Financial Sponsors Relationships Cintra Infrastructure Funds Abertis Pension Funds Hochtief PPP Private Equity Macquarie Institutional investors Serco and others…parties who DEVELOP…and of course, Governments and the Public Sector © Copyright 8
  10. 10. Multiple Sectors Single Purpose Company Greenfield / brownfield Project versus Corporate Pros & Cons Long term cashflow prospect Size - $20 million - $ billions Infrastructure & energy High barriers of entry Monopolistic characteristics© Copyright 9
  11. 11. The Market & Participants (sample names)© Copyright 10
  12. 12. Skill Sets Analytics Negotiations Presentation Risk analysis / assessment Excel Client management Capital structuring Documentation Critical thinking / Expressing yourself ideas & concepts … and lots of other skillsets Market analysis Credit skills BUT ….. Are you willing to go …the extra mile?© Copyright 11 11
  13. 13. How are the parties organized? Project team & advisors / areas of expertise Financial Revenue Technical Insurance Legal Capital Providers Owners Other investors - Sponsors – Equity sponsors Technology PPA/ Offtake Utility / Industrial Supplier Agreement Client Fixed Price Operations and Project Company Contractor Construction Maintenance Operator Contract - SPC Agreement Credit Agreement and Security Senior debt Fees Byproducts/ Enabling providers / bond legislation Services holders State – governance Permits© Copyright 12
  14. 14. Typical Cash Flow Profile – Greenfield Project 800 600 This image cannot currently be display ed. 400 This image cannot currently be display ed. Millions of US$ nominal This image cannot currently be display 200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 year of concession (200) Opex Capex (400) Senior debt interest & fees Senior debt repayment Dividends Tax (600) Equity subscribed Debt drawdown Total Revenues (800)© Copyright 13
  15. 15. Brownfield Project – Operating Asset 800 600 This image cannot currently be display ed. 400 This image cannot currently be display ed. Millions of US$ nominal This image cannot currently be display 200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 year of concession (200) Opex Capex (400) Senior debt interest & fees Senior debt repayment Dividends Tax (600) Equity subscribed Debt drawdown Total Revenues (800)© Copyright 14
  16. 16. Capital Structure and Providers of Capital NewCo – Project Co Equity investors Debt lenders (10% — 30%) (70% — 90%) Candidates — Project sponsors — Project vendors Bank market Capital markets — Operators — Financial investors Syndicated loan Bond issues market — TIFIA or — 144A Credit — Bonds IPO / Equity capital enhancement — Monoline wraps markets©____________________ Copyright (1) Does not include public sector support (grants or guarantees) 15
  17. 17. ...so how do we establish the cost of capital? Equity: Debt: Shareholders / financial investors Lenders / debt capital markets Benchmark + Margin Expected Returns All in Cost of Debt© Copyright 16
  18. 18. ...so how do we establish the cost of capital? Equity: Debt: Shareholders / financial investors Lenders / debt capital markets Risk free rate (treasuries) Risk free rate (treasuries) + + Construction risk + Project risk premium Revenue model + + Operation risk Swap rate + + [Seniority] + [Premium] Ownership premium Expected Returns Margins [250 – 400bp] IRR [12% – 28%]© Copyright 17
  19. 19. Advisory Team – coordinationFinancial Advisor – Provides analysis and advice regarding financial and commercial aspects ofTender coordinator project / valuations Bid documents & negotiationsEngineering Consultant Establishes scope and specifications of construction and operations work Assists preparation of bid documentsTraffic and Revenue Consultant Provides project traffic and revenue projections to support others…Legal Consultant & others… Provides legal guidance Assists preparation of bid documents © Copyright 18
  20. 20. Background: 2005 – 2007BARRON’S, May 8, 2006 © Copyright The Bond Buyer, Mar.27, 2007 BusinessWeek, May 7, 2007 19
  21. 21. Background: 2005 – 2007 – the “Feast” years♦The investors discover US infrastructure♦Macquarie/B&B model & financial engineering♦Low interest rate environment & availability of debt♦Banks with underwriting capacity♦Abundant equity♦High multiples and “rosy forecasts” © Copyright 20
  22. 22. US Investment Banking Approach© Copyright 21
  23. 23. Chicago Skyway Projected Traffic and RevenueToll Rates Projected Gross Toll Revenue($ in millions) ($ in millions)$6.00 3,500 Project ed Gross Toll Thereafter, tolls rise annually at WSA Base maximum of: 3,000 WSA Alt ernat ive 5.00 a) GDP b) CPI c) 2% 2,500 4.00 2,000 3.00 1,500 2.00 1,000 1.00 500 0.00 0 1992 1996 2000 2004 2008 2012 2016 2005 2014 2022 2030 2039 2047 2055 2064 2072 2080 ♦ Assuming 3% inflation, toll increases in real terms from $2.00 to $3.04 in year 50 ____________________ (1) Wilbur Smith Associates April 2004 forecast at then current $2.00 toll; through 2020 then grown at 1.5%. (2) Wilbur Smith Associates April 2004 forecast at programmed toll increases; through 2020 then grown at 1.3%. © Copyright 22
  24. 24. Chicago Skyway Sale ♦ Macquarie Infrastructure Group (45%) and Cintra (55%) purchased a 99-year concession for $1.82 bn ♦ Acquisition financing: $1 bn of debt + $800 m of equity ♦ Refinancing (less than a year) of $1.4 bn of debt (FSA wrapped) + $400 m of equity ♦ In the market to monetize depreciation ($200 – 300 million) ♦ Asset overview — 7.8 miles elevated roadway / 3 lanes in each direction — Current tolls are $2.00 per car and $1.20 per truck axle Toll Schedule Passenger US$2.00 US$2.50 US$3.00 US$3.50 US$4.00 US$4.50 US$5.00 + greater of 2% or CPI or nominal GDP/capita cars Nighttime Trucks— US$1.00 US$1.20 US$1.80 US$2.40 US$3.00 US$3.50 US$4.20 + greater of 2% or CPI or nominal GDP/capita per axle 2005 2008 2011 2013 2015 2017 2020 2023 2026 2029 2032© Copyright 23
  25. 25. 2009:© Copyright 24
  26. 26. The Present – Debt markets♦Cost of debt is very high♦Credit is now scarce♦Demise of monolines - difficult to reach investment grade♦Flight to quality♦Only the highest quality projects are funded♦Fewer players – withdrawal of foreign banks♦Shortage of underwriting © Copyright 25
  27. 27. The Equity market ♦Debt pricing approaching cost of equity ♦ 7 - 8% cost of debt ♦Equity is “repricing” ♦Infrastructure funds’ loss of value ♦Lower multiples ♦Equity is …standing by, but not ready to take action ♦Emergence of new generation of infra funds© Copyright 26
  28. 28. Equity Funds ♦Evolution of equity returns ♦Infrastructure: not recession-proof ♦New fund structures ♦New Players ♦Pension funds ♦Private Equity ♦More conservative capital structures© Copyright 27
  29. 29. Lessons Learned (…not Murphy’s Laws) Aim for win – win Know what you … do not know It is about people Always keep your cool, it is not about you Beware of … HUBRIS… Do not forget to be …. HUMBLE© Copyright 28
  30. 30. ADN Capital Ventures, Inc.ADN Capital Ventures, Inc. (“ADN”) delivers financial advisory services to clients who are developing,financing and implementing transportation, energy and other related infrastructure projects in theprivate and public domains. ADN is led by seasoned investment bankers and finance professionalsin the global capital markets with a successful track record in project execution and wealth ofcorporate relationships.As an independent advisor, ADN focuses on its clients’ interests and provides advice to assist clientsin optimizing and achieving their financial and commercial objectives. Our practice includes strategicadvisory and project development services with an office in San Francisco and presence in Europe.Our team has hands-on experience in a variety of projects such as public-private partnerships (“PPP”),long-term concessions, public projects and privately developed projects, including independent powerprojects, in the United States and internationally. We deliver expertise and provide advisory services onall aspects of infrastructure finance and project development to a broad range of clients. At the sametime our team offers M&A and capital raising consultancy services as necessary.Having operated in over 20 countries, the ADN team brings experience in what makes projectssucceed. Over the last two years our advisory practice has grown, and we currently provideadvisory services on a transaction portfolio exceeding $2.5 billion of aggregate investments. Adam Nicolopoulos President and Founder, Phone: +1 415-785-4613 Cell: +1 415-246-1765 Suite 7 Fax: +1 415-532-2873 810 College Avenue, Kentfield E-mail: anicolopoulos@adncv.com California, 94904© Copyright 29
  31. 31. Adam D. Nicolopoulos ♦ Involved in over 60 project finance /private finance /concession type transactions in the US and internationally; ♦ Total transactional experience exceeds $45 billion of total investment value; ♦ Visiting Scholar at Stanford University’s Collaboratory for Research on Global Projects since November 2007; ♦ Two international “deal of the year” awards for novel infrastructure deals: 2003 and 1997;Adam has spent well over 18 years with UBS Investment Banking Division (London, Zurich, New Yorkand San Francisco) focusing on funding transportation infrastructure and energy/power generationassets. His clients included private sector developers, contractors, government authorities, and publicbodies. In addition to UBS, Adam worked for NatWest Markets (presently known as RBS) from 1994 until1997 in London in its project advisory group and with Mission Energy (1994).On the private side, he has advised investors, international contractors and developers in structuringoptimal financing solutions (bonds, bank debt and/or equity financing) and successfully implementingfinancings. In the US, he advised on over 10 PPP/PFI and concession deals, including advising bidderson tenders for the Indiana Toll Road and Northwest Parkway and the development of two greenfieldcontainer port terminals in the Gulf of Mexico. His services included advising public authorities andgovernment enterprises, (NJ DOT), on the application of suitable public-private partnership models fortheir infrastructure sector.Mr. Nicolopoulos holds an MBA from Stern School of Business at NYU (honors / full academicscholarship), an MSc in Mechanical Engineering from the University of California, Berkeley (honors) anda BSc in the same field from Columbia University. Certifications include Series 7 and 63. He has spokenat over 30 national and international conferences on topics relating to PPPs and financial innovation. © Copyright 30
  32. 32. Sample deals♦ Expert witness on an international arbitration case involving a major multi-billion euro road infrastructure project in Europe.♦ Advised a major electronics conglomerate on a M&A buy-side mandate in the US solar renewable sector.♦ Advised a solar PV project developer on structuring and raising funding (equity and debt) toward the development of utility scale projects (around 25 MWs each).♦ Advising on finance strategy and capital raising for start-up technology companies active in the clean & green tech renewable sectors.♦ Advising Sea Point LLC (www.sea-point.net) a private company on the development, structuring and procurement of both equity and debt financing for a private 900,000 TEUs (twenty-foot equivalent unit) container trans-shipment port facility in Venice, Louisiana.♦ Advised CalTrans (California DOT) on efficient development of solar power projects on sites and land controlled by the agency;♦ Advised Solyndra on project transactions;♦ Was involved from the outset in the formation and launching of a $2 billion private equity infrastructure fund targeting the public pension funds in the US and Canada.♦ Member of an advisory team working with TxDOT on the application of PPPs and road concession contracts in Texas.♦ Advising a Caribbean government (confidential) on its national debt restructuring and application of public private partnerships (PPPs) on key transportation infrastructure assets (including an airport, a port, a ferry passenger terminal, and others).♦ Developer (confidential) on strategy, capital (debt and equity) and financing of 94 MW wind farm portfolio (four wind farms) in Europe.♦ Advised a major international concession/development company on positioning for major infrastructure and PPP projects in Europe.♦ Advised Halivourgiki, one of the largest industrial groups in Greece, on the development, strategy and financing of an 880 MW gas fired power station in Greece and their negotiations with partners as co-sponsors.♦ Advised an international road operator (confidential) on their tender for the Alligator Alley Road, Florida.♦ Advised Dragados SPL on its tender for the acquisition of a container port terminal in the Mediterranean Sea.♦ Advised on the successful sale of an ownership interest in a 17.85 MW wind farm under development (fully permitted) in Greece. Assignment included the selection of and negotiations with strategic international investors. Driving • Integrity • Excellence • Character • Independence © Copyright Values • Commitment • Social responsibility 31

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