ESPO Presentation May 2012

2012 European Sea Ports Conference on
PORT FINANCING AND INVESTMENS

‘tapping the global investment sector’

John P.M. Verschelden Connecting investors with port
infrastructure markets

ESPO-SOPOS, May 2012 www.port-investor.com contact@port-investor.com

InduStreams & Port Investor
Port Investor is an activity of Hong Kong based InduStreams Limited

The Mission

 InduStreams’ mission is to create a more transparent, connected
and informed infrastructure market place
 Port Investor was launched as a specific sector pilot with focus on
port infrastructure investing and the global port industry

The Vision

 UNLEASH the full potential of each port group and market
 CONNECT all important port markets with investors and
industry players
 EMPOWER the market by creating new ways and models for
investors and ports to come together

Magnitude and appetite

 $100+ trillion in the funds
management sector

 big appetite for increased allocation
to infrastructure investments

 pension and insurance funds alone
may quadruple their infrastructure
holdings

 no lack of cash in the funds sector

 public debt in EU and budget deficits
push private financing


Magnitude and appetite (2)

More than $100 trillion just in the funds management sector alone (globally
much more when industrials, operators, developers, governments etc. are
included).

There is big appetite for increased allocation to infrastructure investments not
least given the volatile stock and bonds markets.

Pension and insurance funds alone may be looking to quadruple their
infrastructure holdings (and they combined control more than 50% of the
global funds under management).

There is no lack of funds and with the public debt situation in most EU
countries and many others the need for private financing is maybe at the
highest it has been for the last several decades.


Investor diversity

OPERATORS INVESTMENT FUNDS AND PRIVATE EQUITY
Bulk Financial investor Container terminal Macquarie Infrastructure Group
Oil and liquid terminal Brookfield Infrastructure Partners
Container Bulk terminal JP Morgan Infrastructure Fund
$10+ million Operator Free/logistic/property zones Citi Capital Advisors
DEVELOPERS SOVEREIGN FUNDS
Greenfield Brownfield
Construction Abu Dhabi Investment Authority
Marine infrastructure China Investment Corporation
Developer Majority Economic zones Government of Singapore Investment Corporation
Port industry/logistic zones Malaysia Mining Corporation
Acquisition Oil & Liquid
CARGO OWNERS PENSION AND INSURANCE FUNDS
Container shipping Ping An (2nd biggest Chinese insurance fund)
Logistic Zone $100+ million Oil shipping, Bulk shipping Ontario Teachers Pension Fund
Mineral companies ATP (biggest Danish fund)
Energy companies APG (biggest Dutch fund, 3rd biggest globally)
Agriculture companies
Seed investor Free Zone
DEVELOPMENT BANKS AND INSTITUTIONS
PARTNERS World Bank and IMF
Minority $1+ billion South American, Asian, EU related development banks and funds
Middle Eastern port groups IFU and other niche banks


Investor diversity (2)
The investor space and its many constituents is much wider and varied than
most think. They vary greatly in their investment objectives, preferences, size
etc. From big institutional investment funds with more than $100 billion to small
operators and funds with less than $50 million to invest.

The diversity in the target investment size, investment stage, investment
horizon, target shareholding and investor role, proposition to project owners
etc is vast.

On the one extreme you have very short term focused funds often with high
return requirements (15-20%) and on the other you have very long term
focused e.g. pension funds with fairly low return requirements (5-10%), each
seeking to invest in their own part of the value creation chain (refer later slide).

The great diversity among investors, their preference and propositions to
owners offers great potential to develop, fund and operate most projects with
reasonable commercial foundation.


The value creation chain

Creating the product Scaling the
Expand
– from greenfield to investment – from low
operation to high yield

Seed Implement Grow Mature Transform

Seeding the investment - from Creating the market -
idea, opportunity or need to building the top line and Divest
attractive proposition foundation for efficiencies

Continued value
creation…


The value creation chain (2)
The diversity in preference across the chain (not only in investment types)
gives further opportunities to make new developments viable and free up
capital.

PE’s and operators typically have interest in the implementation/development
and growth stage whereas institutional investors (including pension funds)
have more interest in the mature stage. The seed stage is a significant
challenge for most, often requiring several parties to come together or for
someone to play the seed investor role which however is uncommon in the
port sector.

In most cases there are better owners out there allowing parties to either free
up their capital for other developments or bring down debts or commitments.

An example of a chain with changes in ownership could be a PE together with
say a developer doing the seed investing, an operator doing the actual
development and growth phases and a pension fund acquiring the asset once
it reaches a more mature stage.

World views
Port Executive Investment Banker


World views (2)
Perhaps the greatest challenge in tapping The Port Executive CV
into the potential that lies in between the
global investor community and the  30 years in transportation and port
infrastructure sector is the chasm that related sectors
 Deep and practical industry and
exists between the people on each side.
management experience
 Massive industry executive network
A good example would be the port (often however local)
executive on the one side and an
investment banker on the other. The Investment Banker CV

Each come with completely different  MBA from top business school and
backgrounds, look at value creation from fast paced investment banking
career
different perspectives and operate in
 Deal and investment execution
entirely different circles. experience across many sectors
 Strong network within the financial
Very fundamentally we need to bridge this “eco-system”
chasm to create stronger engagement
between the two sectors.

Early engagement


Early engagement (2)
Back in the day when the Ford T was a hit it was a very different economic
reality. They designed and made one model for the entire market. Today of
course none of us would buy a Ford T, we have very specific tastes when it
comes to buying a car and none of the major car companies would dream of
designing and making a new model without asking the consumer.

Infrastructure is only viable if it has two happy users. The one of course is the
physical user, the shipping line, the terminal operator, the logistics company
etc. The other is the investor. And whereas the magnitude, appetite and
diversity with investors is great, they are also becoming increasingly
demanding on what they place their money in (infrastructure no longer has a
“safe” label on it).

Engaging the investor community early is free and can often contribute to
further options and solutions than was originally conceived. Not doing so has
had consequences – failed projects and years of delay. But doing it effectively
is key.


Collaborative models


Collaborative models (2)
Technology (not least the internet) is allowing business collaboration to take place in
a completely different way than was possible just a decade ago and are today widely
recognized as the critical component in facing the challenges of tomorrow – whether
that is environmental, personal health or something as basic as getting the right
infrastructure in place.

It is however not the technology itself that is important, that is just a lever. It is the
massive communities out there with expert knowledge and networks to decision
makers in hundreds of different fields and sectors that have the potential we need to
un-tap, such as the port executive in Ghent and the investment banker in Hong
Kong.

The port challenge as we see it is that each port have an amazing depth of
knowledge and local community but little engagement with the global investor
community.

There are hundreds of collaborative models out there (as basic as forming consortia
across phases and investor types). Some are creating online platforms - we think
much of the solution lies in the knowledge and capabilities of industry executives
and experts.

Messages from Asia
Some quotes recently picked up:

“ We fear authorization and approval procedures are complicated and difficult for
a Chinese company to invest in Europe. We are not sure how to proceed and
hesitant to spend resources.”

“ I’m not sure we are welcome. Are European projects not mainly for European
investors, developers and operators?”

“ We have a strong name in China but fear that in Europe our competencies and
contributions as a company will not be valued in the same way as it is in China.”

“ We would like to partner with a European port, but don’t know who to engage.”

“ Going international, including investing in Europe, is part of our long term vision,
however on we see very few real opportunities to invest.”


And what is Europe’s reality today…?

 Long term limitations on public funding due to budget constraints and the
need to bring down public debt

 Need to stimulate Europe’s economy with new initiatives and new
investments for economic growth and reduction of unemployment

 A changed appetite and (often) ability with traditional parties like banks to
fund port infrastructure projects

How to break the deadlock?

To create a more transparent, connected and informed ports
infrastructure market place (InduStreams’ vision)
16

APPENDIX
INVESTOR PROFILE EXAMPLES


Pension fund example

Objective Pension and insurance funds typically invest to secure long term stable returns (e.g. 5-10%).

Typical investment size Typically look to invest $100-200 million as minimum per investment for their own share and
therefore total investment size target often above $500 million.

Role and shareholding target Often limited to that of a “financial” investor and thus typically looking only to take a minority
position and for many are not allowed to have the main managing role.

Investment stage and In general look for acquisition opportunities ore constellations whereby they mitigate
holding period development and commercial risk and look to hold assets for long periods (30+ years).

Emerging trends include pension funds seeking to take ownership along side entire port
owners (land lords) as that further diversifies their risk across more assets.

Proposition to asset/project Primarily bring lower cost of capital to the table (can live with lower returns) but also
owners sometimes specific capabilities and global brand.


Operator example

Objectives Operators and some developers typically seek to grow their portfolio as primary objective and
require medium to high returns (e.g 10-15%).

Typical investment size Most investment sizes are relevant ranging all the way from $10-20 million to above $1 billion
(although in latter case it might only be a few in the industry that would want to do that alone).

Role and shareholding Most operators would like majority and management and an operational role often a must have.
target

Investment stage and Do green fields as well as acquisitions often without any specific holding strategy, but most tend
holding period to just “hold on” once they secure an investment.

Proposition to asset/project Operators typically bring significant know-how and skill and sometimes actual business to their
owners projects.


Private equity fund example

Objectives Private equity and many PE type infrastructure funds invest on behalf of other funds (e.g.
institutional funds such as pension fund) and look to achieve strong returns over a shorter
period (e.g. 15-20%), but are typically also willing to take on greater risk.

Typical investment size As with operators PE’s invest in small, medium as well as very large scale investments
(substantial diversity).

Role and shareholding Many PE’s are looking to take majority but for most however minority is also an option. Some of
target the more sector specific ones would look to have a strong operational role as well whereas
others would not have operational capability or interest.

Investment stage and Most constellations and stages are relevant for PE’s, but acquisitions are gaining popularity. PE’s
holding period and similar funds often look to hold the asset for 8-10 years.

Proposition to asset/project Very mixed value proposition depending on the fund in question but do have the benefit of
owners being very focused (once they raise a fund the money has to be spent over a short time period
or the clients will withdraw the funds again) and thus tend to work effectively and with urgency.


Sovereign wealth fund example

Objectives Sovereign wealth funds and other government type funds have many different agendas but of
course mostly to further the interests of the nation they have been mandated by. Consequently
they also operate on a very wide return range (0-20%).

.
Typical investment size Work almost exclusively with larger scale investments, most in excess of $500 million and often
more than $1 billion.

Role and shareholding Almost exclusively look for a financial stake but may well want extensive influence.
target

Investment stage and Green fields and brown fields are both scope, however projects typically need to be among key
holding period projects nationally or within the region.

Proposition to asset/project Given the government leverage and wide return spectrum SWF’s can come with many different
owners kinds of propositions and sometimes fit where no others are relevant.


More profiles and info…

…is available - feel free to contact us on contact@port-investor.com


APPENDIX
INDUSTREAMS AND PORT INVESTOR


History

InduStreams was founded in 2011 with a mission to create
a more transparent, connected and informed
infrastructure market place.

We launched Port Investor in July 2011, a specific sector
pilot with focus on port investing and the global port
industry.


The vision

UNLEASH
The full potential of each port group and market. There is more
than $1 trillion in unrealized investment potential. We want to
enable an explosion in investment activity.

CONNECT
All important port markets with investors and industry players.
Together, there are more than 5,000 globally.

EMPOWER
The market by creating new ways and models for investors and
ports to come together


Status - InduStreams

InduStreams
ultimate scope

Infrastructure spans the entire
infrastructure sector
and beyond. With
Port Investor we
have a strong base
in the infrastructure
sector and are
already now
branching into other
transportation
segments such as
Port Other Energy & Social airports, social
Etc.
Infrastructure Transportation Renewables Infrastructure infrastructure and
energy and
renewables related.


Status – Port Investor

 200+ port groups and 1,000+ investors and executives in the
community and increasing
 China Port Investor and other regions are being launched
 Port-Investor.com launched
 Port Investor LinkedIn group launched (400+ members)
 Representatives for Asia, Europe, Latin America and Africa in
place already


Global engagements

 For ports we primarily collaborate
with three sides 1) port groups 2) 25+ ENGAGEMENTS WORDLWIDE
project and asset owners and 3)
investors
 Investors engage us to find
investments that fit their specific
requirements

 Project owners engage us to solicit
investors or consortia of investors

 Port groups engage us to reach out
to the wider investor community to
fast track infrastructure
developments and seek collaborative
solutions


ESPO Presentation May 2012

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ESPO Presentation May 2012