The document provides an overview of infrastructure investment opportunities in BRICS countries. It discusses the state of infrastructure in Brazil, Russia, China and other countries. For Brazil, it outlines major infrastructure programs and public-private partnerships for projects related to the World Cup and Olympics. For Russia, it discusses the legislative framework for PPPs and examples of large transportation projects. For China, it notes the large scale of existing investment and a new initiative to develop more private financing of infrastructure projects across sectors.

1. BRICS
Infrastructure Investment
May 2014

2. Outline
• Economic Overview
• Project Finance
• Brazil
• Russia
• China

3. Economic Overview

4. Real GDP Growth Rate

5. GDP in Perspective
No. Country/State GDP 2012 Population Per Capita GDP
1 United States 16,244.58 314.15 51,709
2 China 8,229.38 1,354.04 6,078
3 Japan 5,937.77 127.61 46,530
4 Germany 3,427.85 80.52 42,569
5 France 2,612.67 63.38 41,223
6 United Kingdom 2,484.45 63.71 38,999
7 Brazil 2,247.75 196.53 11,437
8 Italy 2,014.38 59.39 33,916
9 Russia 2,004.25 143.00 14,016
10 California 2,003.48 38.04 52,666
11 India 1,858.75 1,227.19 1,515
12 Canada 1,821.45 34.70 52,488
13 Australia 1,555.29 22.92 67,857
14 Texas 1,397.37 26.06 53,623
15 Spain 1,323.21 46.77 28,294
16 New York 1,205.93 19.57 61,621
17 Mexico 1,183.51 117.06 10,111
18 Korea 1,129.60 50.00 22,590
19 Indonesia 877.80 244.47 3,591
20 Turkey 788.04 74.89 10,523

6. Human Development Index Rankings
2012 HDI
rank Name
2012 HDI
Value
2012 Life
Expectancy
at Birth
2010 Mean
Years of
Schooling
3 United States 0.937 78.7 13.3
55 Russian Federation 0.788 69.1 11.7
85 Brazil 0.73 73.8 7.2
101 China 0.699 73.7 7.5
na World 0.694 70.1 7.5
121 South Africa 0.629 53.4 8.5
136 India 0.554 65.8 4.4
UNDP Human Development Index

7. Unemployment Rate

8. Inflation

9. General Government Gross Debt as
%GDP

10. General Government Total
Expenditure as %GDP

11. Total Investment as %GDP

12. WEF Quality of Infrastructure Rankings
• Russia #45
• China #48
• South Africa #66
• Brazil #71
• India #85

13. Project Finance

14. Project Finance
• Ring-fenced financing to isolate project risks
and performance
• Non-recourse or limited recourse
• Highly leveraged – debt/equity of 90/10 –
60/40
14

15. Project Finance
15

16. Cash Flow Waterfall
Equity returns
Taxes
Debt Service
Opex
Revenue
 Project operational expenses
take priority
 Lenders are in a senior
financing position
 Equity is in a subordinate
financing position
 Equity dividends are paid only
after all other costs are
covered
16

17. Project Finance Contracts
17

18. Brazil

19. Brazil Infrastructure Programs
• Plan Aceleração do Crescimento (PAC), or
growth acceleration plan introducedin 2007
• PAC1: $300bn 2007-2010
• PAC2 $500bn 2011-2014
• Healthcare, Energy, Water Supply, Transport
• Mostly state and local government controlled
• Historically invested 10% of GDP but recently
investing closer to 2% of GDP

20. P3 in Brazil
• History of P3s going back to 1990s
• $325bn investment in telecoms and energy
• Split between concessions and divestiture
• 2004 P3 law aimed to expand into new sectors

21. International Games
Infrastructure
• Large amount of infrastructure projects/
stadium construction and remodeling
needed in Brazil to prepare for World Cup
June-July 2014, 2016 Summer Olympics
• Brazil dropped the traditional state
monopoly on infrastructure to bring in
private investors for these major
infrastructure challenges
21

22. Needed Infrastructure
• 600,000 international fans expected to join
3m Brazilian fans for the World Cup
• Infrastructure requirements:
– Hospitals
– Roads
– Airports
– Sports stadiums
22

23. Sao Paulo Airport
• New São Paulo Guarulhos opened in May
2014
• $1.3 billion renovation & expansion
• GRU (Airports South Africa-ACSA) private
consortium paid $7.3 billion for concession in
2012: 5x minimum set by government

24. Other Airports
• Triunfo of Brazil and Egis of France won the
Viracopos Airport concession in Campinas
near São Paulo for R$1.7bn
• Engevix of Brazil and Corporación America of
Argentina won a Brasília deal with a bid of
R$2.0bn
• Public monopoly Infraero retains 49% stake in
all airport deals

25. Unfinished Projects
• Monorail from Congonhas airport in Sao
Paulo’s to the south of the city will not be
ready until 2015
• Cuiabá light rail will open at end-2014

26. Olympic Plans
• $16.5 billion total cost
• $10.8 billion public infrastructure budget
announced in April 2014
• Includes 27 projects in urban development &
public transport, including 4th metro line for
Rio
• Major projects (Deodoro Olympic Park) still in
tender stage

27. Russia

28. Overview
• Tradition of infrastructure investment
• Highly developed compared to
developing country peers
• $10bn Russia Direct Investment Fund
launched in 2011 to co-invest with
SWFs & private investors
• Major infrastructure project pipeline,
with increased emphasis on P3s
28

29. Projects
• Currently over 400 P3 projects being
implemented in Russia in the following
sectors:
• Education
• Transportation
• Wastewater
• Alternative Energy
29

30. Legislation
• Most of these projects are being carried out
under regional rather than federal P3
legislation
• 2005 Federal Law on Concession Agreements
currently the only national P3 law in Russia
– Provides guidelines for concession agreements
specifically
– Amended in 2010 to simplify concession process,
especially regarding public utility infrastructure
30

31. Projects
• Notable P3 projects in Russia that have
reached financial close include the following:
– $750 million M-1 road project from Moscow to
Minsk
– 1.5 billion euro M-10 road project from Moscow
to St. Petersburg
• Includes construction of 650km of new highway to ease
congestion on the M-10 highway
31

32. Pulkovo Airport P3
• $1.5bn Pulkovo airport 30-year concession
• Reached financial close in 2010
• Managed by North Capital Gateway
• VTB, Fraport & Capelouzos
• Includes construction of new terminals as well as overall
re-construction and modernization of the airport
• Financing from NIB, EBRD, IFC, BSTDB, Eurasian
Development Bank, Vneshekonombank, international
commercial banks
• 1st airport P3 in Russia, 1st green building in St. Petersburg
• Phase I opened December 2013
32

33. Western High Speed Diameter
• 46km toll road across St. Petersburg
• Largest P3 toll road in the world
• Central section includes three bridges and a
tunnel
• Features advanced traffic management and tollng
technologies
• Commercial close Dec-2011
• Financial close Dec-2012
• Constructed by Turkish-Italian consortium Astaldi-
Ic Istas Insaat

34. WHSD Financing
• RUB212.7bn ($6.4bn) project cost
– Russian Govt RUB50bn
– Vnesheconombank RUB25bn
– Eurasian Development Bank RUB10bn
– Equity RUB9bn
– VTB Capital RUB8.5bn
– Gazprombank RUB8.5bn
– EBRD RUB8.2bn

35. Project Pipeline
• $1.7bn Lena Bridge project recently awarded
• Moscow-Kazan High Speed Rail
• Trans-Siberian Railroad Upgrading
• Moscow Central Ring Road
• New Metro P3 projects enabling legislation
expected 2014

36. China

37. China Infrastructure Investment
• One of the highest investment levels in the world,
at 50% of GDP since the 1980s
• Centrally planned investments have led to over-
investment: unoccupied housing, unused
commercial real estate, etc.
• Severe problem with quality of construction, legal
responsibility, liability & risk assignment
• Developing capital market including risk-taking
(recent bond defaults)
• New initiative to develop P3s

38. China Announces Private
Infrastructure Finance Initiative
• State Council announces opening of private
finance of infrastructure in April 2014
• 80 projects announced across sectors, from
transportation to energy to extractive sectors
• Additional sectors under consideration include
utilities, airports and water conservation
• Supporting guidelines and decentralized decision
making also announced as part of the initiative
• SOEs & provinces announcing major
infrastructure programs requiring billions of
dollars of investment

39. Thank you!
Brien Desilets
Managing Director
bdesilets@claretconsult.com | www.claretconsult.com