FINANCING TRANSPORTATION INFRASTRUCTURE IN SPAIN: SUCCESSFUL SCHEMES AND CASE STUDIES

U.S. - Spain Forum on transportation & housing finance

Washington, November 2002

Index

I.- Caja Madrid: A Brief Overview

II.-Transportation Concessions in Spain: Successful Schemes

III.- Financing Transportation Projects

IV.- Case Studies: M-45 / R-2

I.- Caja Madrid:

A Brief Overview

Caja Madrid

In Spain:

The oldest bank (300 years)

2nd largest Savings Bank and 4th largest universal banking group (with assets aprox. € 66.7 Billion.)

Strongest market share in the Madrid Region: 16% (6% share of the Spanish market). Overall solid and profitable retail franchise

Sound core business. Low-risk business profile

Strong expansion, growth and diversification over the last five years

Today: Caja Madrid´s Business Structure

FOUNDATION SOCIAL WELFARE

Comercial Banking Investment Banking Other Busineses

Retail

Two Networks:

SME´s

Real Estate developers

Private Banking

- Periphery- Madrid region

Treasury

Capital Markets

IFI´s

Corporate Finance

Industrial Portfolio

Asset Management

E- business

Venture Capital

Real Estate

Bank Assurance

NH-AHORA

Caja Madrid Group 2001 CONSOLIDATED HIGHLIGHTS & CREDIT RATINGS

AA-

Bis Ratio

Efficiency Ratio

Coverage Ratio

Bad Loans Ratio

12,5%

46,4%

245,2%

0,68%

1999 2000 2001

50.663.2

66.7

Total Assets

1999 2000 2001

373437

486

Attributable Profit

(In Euro billion) (In Euro million)

A-1+

Aa2

P-1

AA

F1+

LONG TERM

SHORT TERM

Top mandated arrangers of European project finance loans (October 2002)

Westdeutsche L. Girozentrale 1,356.48 5 11.2

Abbey National plc 349.66 5 2.91

Barclays Bank 1,080.32 6 8.98

Societé Generale 951.02 5 7.91

Royal Bank of Scotland 875.84 7 7.28

Bank of Scotland 862.13 8 7.17

Mizuho Corporate Bank 687.63 2 5.72

European Investment Bank 427.05 1 3.55

Caja Madrid 358.93 4 2.98

Intesa BCI 355.16 3 2.95

1.-

2.-

3.-

4.-

5.-

6.-

7.-

8.-

9.-

10.-

BSCH 183.98 3 1.53

BBVA 165.01 2 1.37

17.-

18.-

Mandated arranger name Loan Amt ($m) Transactions Share

Loan Portfolio

22,1%9,4%

10,4%

5,4%

17,8%1,8%

11,7%

21,3%

Infraestructuras Energía

Medioambiente Telecomunicaciones

Industria OcioAdquisiciones Activos

77%

9%

11%3%

ESPAÑA EUROPA SUDAMERICA EEUU

INDUSTRY BREAKDOWN GEOGRAPHIC BREAKDOWN

LOAN PORTFOLIO AS OF JUNE 02: € 2.351 billion

Recent Infrastructure Financings

ABRA TERMINALES MARÍTIMAS

ALAZOR INVERSIONES

Construction and Operation of containers terminal in Bilbao Harbour

69.5

CLIENT / PROJECT PROJECT DESCRIPTION VOLUME (€ million)

Bridge financing for Madrid R3 and R5 roads 181

AUSOLConstruction and Operation of Estepona-Guadiaro toll road 150.2

INFRAESTRUCTURAS Y RADIALESConstruction and Operation of R-2 toll road and M-50 beltway road

424.0

INFRASPEEDHigh speed rail link between Amsterdam and Belgium border

1,200.0

GRANDE OPORTO Shadow toll road (Portugal) 700

LUSOSCUT - AUTOESTRADAS DA COSTA DA PRATA

Mira - Oporto road (Portugal) 432.7

Recent Infrastructure Financings

IBERPISTAS

NORSCUT, CONCESIONARIA DE AUTOESTRADAS

Construction and Operation of A-6 Avila-Segovia toll road

300.0

CLIENT / PROJECT PROJECT DESCRIPTION VOLUME (€ million)

Viseu - Chaves road (Portugal) 697.0

LUSOSCUT, BEIRAS LITORAL E ALTA

IP-5 road (Portugal) 967.0

MEPSA Barcelona Harbour chemicals pier 20.4

RUTA DE LOS PANTANOS Madrid “Pantanos” road 70.1

SCUTVIAS, AUTOESTRADAS BEIRA INTERIOR 746.0

UTE ARCO SUR GC-1 road in Gran Canaria 60.1

Abrantes - Guarda road (Portugal)

Recent Infrastructure Financings

AUTEMA

CONCESIONES DEL ELQUI CONCESIONES DE LOS LAGOS

Terrasa - Manresa road 160.0

CLIENT / PROJECT PROJECT DESCRIPTION VOLUME (€ million)

Los Vilos - La Serena toll road (Chile) 338.4

CONCESIONES DE MADRID Madrid M-45 motorway 135.8

UTE CANALS AGULLENT Canals - Agullent road 40.4

CINTRA New investment financing 360.3

EUROTUNNEL 343.0

ONTARIO OTR 407 Ontario 407 by pass $C 3,200.0

Channel Tunnel

Recent Infrastructure Financings

UTE NUENO-HUESCA

UTE SAN VICENTE

Nueno-Huesca road financing 21.9

CLIENT / PROJECT PROJECT DESCRIPTION VOLUME (€ million)

Cantábrico road financing 99.1

TRANSPORTES FERROVIARIOS DE MADRID

Madrid-Arganda suburban train 107.0

TAFIRA UTE Tafira by pass 26.4

AUTEMA Terrasa - Manresa road financing 72.0

AUSOL 361.0

ARPEGIO-METRO DE MADRID 261.4

Málaga-Estepona toll road

Expansion of Madrid´s underground system

II.-Transportation Concessions in Spain: Successful Schemes

General Considerations

Basic regulatory framework for private sector participation in infrastructure projects dates back to 1972 (Law 8/1972 establishes legal framework for the construction, operation and maintenance of roads under concession schemes)

Further developments since 1972 have provided a stable and reliable framework for investors and lenders

A bill currently under consideration will consolidate and strenghen the concession system

A key element is the strong support and involvement of the Spanish Administration

Goals of regulatory efforts

Assumption of key risks by private sector

- Construction

- Operation & maintenance

- Traffic

- Financing

Affordable tolls

Mobilisation of large amounts of private financing into infrastructure projects

Reallocation of Public Sector financing priorities

Successful Concesion Schemes

Shadow toll concessions

Real toll concessions

Common Features

Strong government support, typically involving:

- Concession agreement whith government undertakings

- Maintenance of economic and financial equilibrium

- “Responsabilidad Patrimonial” (Compensation upon early termination of concession)

Specific terms (tenors of concessions, bidding criteria, maximun tolls, potential subsidies,etc) on a case-by-case basis

Maximun concession tenor of up to 75 years

Main Features of Shadow Toll Concessions

Granting authority (either central government or regional authorities) makes payments to the concession company according to the use of the road

Payments made by granting authority are not considered as public indebteness

Tipically, upside for investors is limited (reduction of toll payments upon achieving certain traffic volumes; reduction of concession tenor upon meeting certain returns, etc)

Traffic is more predictable

Lower traffic uncertainty may allow for more efficient financing schemes (bond financing and securitisation)

Main Features of Real Toll Concessions

Tolls payable by users

Higher traffic uncertainty

Typically, upside for investors is not limited

Financing structure typically more conservative

Toll Roads in Spain

III.- Financing Transportation

Projects

Financing Transportation Projects

Up to date , infrastructure projects in Spain have been mostly funded by banks due to the competitiveness and flexibility of such financing:

- Willingness to provide long tenors

- Competitive pricing

- Consistent with high leverages

- Willingness to evaluate and assume traffic risk

Banks willingness reflect:

- Comfort with regulatory framework and strong involvement of the Administration

- Successful track record of toll road concessions

- Users acceptance of toll roads (annual ADT in toll roads has increased by 4,93% and 7,01% in the periods 1981-2000 and 1995-2000, respectively)

Financing Transportation Projects

However, Capital Markets funding (Bond finanicng an securitisation) will become increasingly popular due to:

- Need of longer tenors

- Bank financing will not be enough to meet needs derived from the 2002-2007 infrastructure plan

- Implications of BIS capital requirements on banks

- Regulatory support (Concession bill facilitates capital markets transactions)

Initially, “Wrap-Ups” from monolines will play a key role (Ex. Pamplona-Logroño toll road; Ruta de los Viñedos)

IV.- Case Studies:

M-45 / R-2

Radial 2 Toll Road

Part of a network of four access roads to Madrid from suburbs (high proportion of conmuting traffic).

Ministerio de Fomento (Ministry of Public Works/Development)

80,9 Km real toll road, from Guadalajara to the M-50, Madrid´s third untolled beltway. The R-2 will go parallel to the N-II, an untolled road connecting Madrid to Zaragoza and Barcelona. A key feature is the obligation to build, free of charge, a portion of the untolled M-50.

Granting Authority

Description

Radial 2 Toll Road

Dragados Group and Acciona

Under construction (expected commercial operation: 2nd half 2003); financial close in mid-2002

Key Sponsors

Status

Concession Tenor 24 years

Tolls Maximun levels established in concession agreement. Adjusted by inflation

Radial 2 Financing Structure

Debt/Equity

Approx. € 500 millionTotal Project Cost

85/15. In Addition, a small contingent line of credit and equity has been committed to cover initial cash flow deficits

Debt/Tenor 21 years (Tenor may be reduced by one year if concession tenor is not extended by one year)

Average Life 16.6 years

Syndication Led by Caja Madrid, with BBVA and Banesto as co-lead arrangers, and syndicated among 27 banks

M-45 Shadow Toll Road

Partial Beltway in Madrid, split into three tranches awarded to three different consortia

Granting Authority Comunidad de Madrid (Madrid´s Regional Government)

Description 14,1 Km shadow toll road, from the N-II untolled road to Eje O´Donell (R3)

Key Sponsors Acciona, Dragados Group, FCC

M-45 Shadow Toll Road

Original Conccesion Tenor

25 years

Tolls Payable by the granting authority according to usage. However, revenues in excess of a predeterminated annual level do not generate payments (i.e. the sponsors´ IRRs are capped

Status In commercial operation since mid. 2002. Financing closed in 2000.

M-45 Financing Structure

Original Total Project Cost

Debt/Equity

Debt/Tenor

DSCR

DEBT Participants

Approx. € 131 million

85/15. In addition, a € 26 million contingent line of credit was committed to cover potential construction modifications requested by the granting authority

22 years, back-ended amortizacion profile

1.25 (minimum and average)

Banking tranche and EIB/EIF tranche, guaranteed by banks