An Independent, Value-Added Infrastructure Investment Firm

Transcription

1 An Independent, Value-Added Infrastructure Investment Firm

2 HIGHSTAR CAPITAL 1 Overview Highstar Capital ("Highstar") is an independently owned and operated infrastructure investment firm directly investing $5.5 billion from our fund and co-investment partnerships. Since our inception in 1998, through our first three funds, we have directed the investment of approximately $15 billion in a diversified group of infrastructure businesses in the energy, environmental services and transportation sectors, both within the United States and globally. Highstar s capital base is broadly diversified, with over 80 institutional investors, including major pension plans, financial institutions and endowments. Highstar develops and executes value-added strategies around core infrastructure businesses and assets that offer real and sustainable value creation opportunities. We invest in opportunities where we see strong growth prospects, coupled with sustainable downside protection through multiple economic cycles. We work with best-in-class portfolio management teams, including management teams we have either created or significantly re-oriented. Highstar has implemented its investment strategy in a number of prior investments including its investments in Southern Star Central Gas Pipeline ("Southern Star") where earnings before interest, tax, depreciation, and amortization ("EBITDA") grew by 22% during the period of Highstar s ownership and InterGen, a global power generation business, where EBITDA grew by 55% during the period of Highstar's ownership. Highstar built the Southern Star management team from scratch and significantly reorganized and re-directed the existing InterGen management team, which faced serious operational issues when Highstar acquired the business. Highstar sold its interests in Southern Star and InterGen in 2005 and 2008 respectively. Currently Highstar manages a portfolio of majority owned strategic infrastructure assets, including the Ports America Companies, the largest independent maritime port operator in North America, Star Atlantic Waste Holdings, which owns major waste management businesses in the northeastern and southeastern United States, and Utilities, Inc., a water and wastewater management business in the United States with operations in 15 states. Collectively, Highstar s majority owned portfolio companies employed approximately 15,000 people in Highstar also has significant minority investments in Kinder Morgan, Inc., a leading US energy infrastructure business, and London City Airport, a niche airport located next to Canary Wharf in East London, England.

3 2 HIGHSTAR CAPITAL HIGHSTAR CAPITAL 3 The Highstar Team The Infrastructure Asset Class Highstar has an experienced team of 20 investment professionals, supported by a group of external senior advisors actively involved in the Highstar investment and portfolio management process (including four former CEOs of Highstar portfolio companies). Highstar s investment team is supported by a fully dedicated team of professionals in legal, finance, accounting, investor relations, human resources and information technology functions. Highstar s Founder and Managing Partner, Christopher Lee, has over 30 years experience in infrastructure finance and investment on both the corporate and financial side. Our senior management team is currently comprised of six Partners and four Managing Directors. Our Partners and Managing Directors have, on average 20 years and 12 years of experience, respectively. At the heart of the Highstar Team is our Executive Committee, which was formed by Mr. Lee concurrent with the closing of Highstar III to provide leadership continuity and participation in strategic direction and decision-making by the Firm s key stakeholders. Currently, the Executive Committee is comprised of five of Highstar s Partners with two ex-officio members. When we closed our first fund in 2000, infrastructure investing was a relatively nascent proposition. Since then infrastructure investing has become a dynamic and rapidly growing asset class, based in part on relatively low correlation to other investment strategies, a potentially attractive risk-reward equation, possible inflation mitigation and the opportunity for patient, value focused investors to invest in long-life assets through multiple economic cycles. In our experience, the infrastructure sector has consistently generated attractive investment opportunities. Going forward, Highstar expects a growing number of investment opportunities in infrastructure, including through the greater use of Public Private Partnerships as governments throughout the world seek to incentivize the replacement of aging infrastructure and to utilize infrastructure investment as a key tool in achieving economic recovery. According to Booz & Co., modernizing and expanding water, electricity, and transportation systems in the United States, Canada, and Western Europe collectively will require approximately $16 trillion in new investment. 1 We also seek to invest in attractive opportunities through distressed sales resulting from the depressed economic and financial environment. 1 Source: Booz & Co. April 2007 Report.

4 4 HIGHSTAR CAPITAL HIGHSTAR CAPITAL 5 Investment Strategy Investment Approach Highstar seeks infrastructure opportunities where we can draw on our nearly 250 years of collective investment experience and work with best-in-class portfolio company managers to deliver superior results and value with a disciplined and rigorous focus on attaining attractive risk-adjusted investment returns. We believe that effective cash flow management, both in terms of growing revenues and appropriately managing cost and capital expenditures, is a key driver of sustainable success for our portfolio company management teams, and we supervise them accordingly. That means relentless attention to detail and execution against plan. We also believe in making sure that we and our portfolio company management teams keep sight of our long-term objectives and value creation strategies and objections. That means leadership, vision and never losing sight of "the main goal." Above all else we work hard to maintain efficient and productive communications with, and oversight and motivation of, our portfolio company management teams. We are a value-driven, growth-oriented investor. Typically, we do not seek investments in low-growth, annuity-like assets such as toll roads, social infrastructure or Government sale-lease back arrangements. Instead, we focus on dynamic infrastructure operating businesses and service providers. We seek to invest only where there is a real and sustainable value creation opportunity and execution strategy. Highstar is a proactive, leadership-oriented investment manager. We focus our investments where we are the majority investor or, at a minimum, where we believe that we can be a highly influential minority investor with a strong and enduring alignment of interest within a like-minded investor group. Infrastructure investing can be a large scale, complex undertaking, often requiring investment partnerships/consortia. As a long standing successful practitioner in this space, Highstar has significant experience and a strong track record in working with investment partners on an accretive basis. We believe that successful partnership is all about shared values, alignment of interest and a mutually sustainable commitment to setting and achieving goals through good times and bad. Highstar firmly believes that infrastructure investing is a public trust, involving a number of key stakeholders. This includes effective and responsive public sector regulation to insure appropriate standards of safety, environmental soundness, consumer service, labor standards and fair and equitable pricing. We and our portfolio companies work closely with our regulators and other key stakeholders to insure best practices in the vital services we provide to the public. Sound environmental management is a particularly important focus for us and our portfolio companies. For example, Advanced Disposal Services, Highstar s waste management business in the southeastern United States, permits, engineers and operates facilities to isolate and contain waste from the surrounding environment, leachate collection systems to remove harmful liquids that form in landfills and protect surrounding groundwater, and landfill gas collection systems to capture methane and protect the environment from excess air emissions. Highstar s waste management business in the northeastern United States, Interstate Waste Services, recycles over 72,000 tons of paper and over 12,000 tons of glass, aluminum and plastic each year. Since our inception, Highstar has avoided investment opportunities that were principally reliant on high leverage or other forms of financial engineering. Instead, we have sought to create sustainable growth in our portfolio companies, both organically and through the execution of strategic acquisitions. For example, Highstar s U.S.-based waste management platform, Star Atlantic, has made over 30 acquisitions since Highstar acquired the first Star Atlantic company, North East Waste Services, in November Since 2006, Star Atlantic s EBITDA has grown by over 50%. While we believe that infrastructure is an attractive and growing asset class, we also recognize that infrastructure investing is not without risk, including political and regulatory risk, operational risk and environmental risk. Infrastructure cash flows, moreover, are not immune to the vagaries of economic cycles. Accordingly, we believe that understanding and appropriately pricing risk as well as seeking to mitigate risk is an essential skill in infrastructure investing. Highstar places great emphasis on thoughtful risk management in our investment process, and we devote significant care, time and attention to risk identification and ongoing risk mitigation. Diligently seeking and executing appropriate risk-adjusted investment returns is a critical component of our investment strategy and process. Highstar takes a long term view towards building portfolio value. This remains the case through the current recession where Highstar has continued to commit significant capital to growing our portfolio companies and improving their market share, efficiency and environmental stewardship. Recently we have announced approximately $200 million of additional near term investments in port expansion projects in Oakland, California and Baltimore, Maryland. Highstar s operation in the Port of Oakland is at the forefront of developing green operating technologies and practices to dramatically reduce diesel emissions. In its first month of operation, the terminal successfully implemented the California Air Resource Board s clean truck program to ensure all trucks servicing the port meet new, strict emission standards. And, future development plans call for the conversion to largely electric cranes, container handling equipment, and shore power for ships at berth to reduce emissions by up to 90% per container handled compared with conventional West Coast marine terminals. In fact, our port operating company, Ports America, is the largest operator of alternative fuel equipment in the U.S. maritime industry. Finally, Highstar places great importance on transparency and timely and effective communications. We work hard to deliver informative and timely communications to our investors and our other stakeholders. For example, we were among the first portfolio management teams in our sector to establish fair value accounting policies and standards in anticipation of ASC Topic 820 in full consultation with our investors.

5 6 HIGHSTAR CAPITAL HIGHSTAR CAPITAL 7 Conclusion Highstar Executive Committee This year marks the 10th anniversary of the Highstar funds. Throughout the decade we have successfully followed a disciplined, long-term value-focused infrastructure investment strategy and approach. The current recession, coupled with the wholesale impairment of the global financial system, presents significant challenges that Highstar is prepared to address in partnership with its portfolio companies. The severity of the economic and financial downturn is the strongest test yet of the resilience of the Highstar Team and our firm s investment approach and strategies. Highstar has been proactively managing its portfolio companies to "stay ahead of the curve" since the first storm clouds appeared in the summer of We remain confident about the quality of our investments, the strength and experience of the Highstar Team and the long term benefits of our value focused infrastructure investment strategy and approach. Christopher H. Lee Founder and Managing Partner Mr. Lee is the Founder of Highstar Capital and has served as its Managing Partner since the inception of the Highstar Franchise in Mr. Lee has over 30 years of experience investing in and financing infrastructure businesses. He is chairman of Highstar's Investment Committee and Executive Committee. Apart from Highstar, Mr. Lee serves on the Board of Directors for the South Street Seaport Museum in New York City and is a member of the Zanvyl Krieger School of Arts and Sciences at The Johns Hopkins University Dean s Advisory Board. Mr. Lee received a BA from The Johns Hopkins University. Christopher R. Beall Partner, Co-Head of Investments and Portfolio Management Mr. Beall joined Highstar in Mr. Beall has over 11 years of experience investing in and financing infrastructure investments. Mr. Beall serves on Highstar Capital s Investment Committee and Executive Committee and has been a member of the portfolio company investment teams across all of Highstar s core infrastructure sectors. Mr. Beall received a BS from Oklahoma State University and an MBA from Harvard Business School. James J. Kowalishin Partner, Co-Head of Investments and Portfolio Management Mr. Kowalishin joined Highstar as a Senior Advisor in 2008 and became a Partner in Mr. Kowalishin has over 18 years of experience investing in and financing infrastructure businesses. He is Co-Head of Investments & Portfolio Management and serves on Highstar Capital s Investment Committee and Executive Committee. Mr. Kowalishin received a BA from the University of Saskatchewan. Scott D. Litman Partner, Chief Operating Officer and General Counsel Mr. Litman has worked with the Highstar Team since 2003 and joined Highstar full time in Mr. Litman has over 11 years of experience as an attorney, working primarily in fund formation, direct investing, mergers and acquisitions and finance. Mr. Litman supervises Highstar Capital s operations, including the legal, finance, human resources and communications functions. He serves on Highstar Capital s Investment Committee and Executive Committee. Mr. Litman received a BA from the University of Pennsylvania and a JD from Cornell Law School. Mr. Litman is admitted to practice law in the State of New York and is a member of the New York State and New York City Bar Associations. Michael J. Miller Partner, Co-Head of Investments and Portfolio Management Mr. Miller joined Highstar in Mr. Miller has over 20 years of experience investing in and financing infrastructure investments. He is Co-Head of Investments & Portfolio Management and serves on Highstar Capital s Investment Committee and Executive Committee. Mr. Miller received a BS from Rensselaer Polytechnic Institute, an MBA from the University of Chicago, and is a CFA charter holder.

6 8 HIGHSTAR CAPITAL HIGHSTAR CAPITAL 9 Current Highstar Portfolio Companies Advanced Disposal Services, Inc. ("ADS") specializes in the collection, transportation and disposal of non-hazardous municipal solid waste and construction and demolition waste. ADS owns and/or operates landfills, transfer stations and collection operations in Florida, Georgia, Alabama and Mississippi. ADS is based in Jacksonville, Florida. Highstar has a majority interest in ADS and first invested in September Highstar holds its interests in ADS through Highstar s controlled waste management platform in the U.S., Star Atlantic. Interstate Waste Services, Inc. ("IWS") is a vertically integrated waste collection, transportation and disposal business that specializes in disposal of non-hazardous municipal solid waste and construction and demolition waste. IWS owns and/or operates landfills, transfer stations and collection operations in New York, New Jersey, Pennsylvania, Maryland, Massachusetts and Vermont. IWS is based in Ramsey, New Jersey. Highstar has a majority interest in IWS and first invested in November Highstar holds its interests in IWS through Highstar s controlled waste management platform in the U.S., Star Atlantic. Sustainable Energy Solutions, LLC ( SESCo ) was formed to serve as a platform to develop landfill gas to energy projects. The projects capture methane, a potent and pollutive heat-trapping gas, and either destroy it through a flare facility or convert it into an energy source that can replace more traditional non-renewable energy resources. SESCo is based in Jacksonville, Florida. Highstar s initial investment was made in August London City Airport ("LCY") is a niche airport that primarily serves the London business passenger market. London City Airport is conveniently located less than three miles from Canary Wharf and six miles from central London with routes to most major European business centers. The airport handled approximately 3 million passengers in Ports America Chesapeake, LLC ( PACH ) was awarded a 50-year concession to upgrade and operate the Seagirt Marine Terminal in the Port of Baltimore, Maryland. PACH has committed to build a new 50-foot deep water berth in the port to maintain Baltimore s competitive position along the east coast. Bert construction commenced in March 2010 and is expected to be completed by PACH is based in Baltimore, Maryland and commenced operations in January MTC Holdings ( MTC ) provides independent marine terminal operations to container shipping companies, roll-on/roll-off shippers, and general cargo and stevedoring services at 32 locations at key strategic ports principally on the west coast of the United States, including Oakland, Los Angeles/Long Beach and Seattle/Tacoma. MTC is based in Iselin, NJ and Highstar s initial investment was made in July AMPORTS, Inc. ( AMPORTS ) is the largest portside processor of automobiles for import, export and domestic distribution in the US and Mexico and handled over 500,000 vehicles in 2009 at eight locations on the east and west coasts. AMPORTS is based in Jacksonville, FL and Highstar s initial investment was made in June SkyBitz, Inc. delivers real-time tracking and information management solutions to mobile assets, including trucking, railroad, logistics and container shipping companies. SkyBitz is based in Sterling, Virginia. Highstar has a minority interest in SkyBitz and first invested in November Utilities, Inc. ("UI") is a water and wastewater utility holding company with approximately 300,000 customers located in 15 states, with a principal focus in the high growth areas of the Sunbelt region including Arizona, Florida and Nevada. UI is based in Northbrook, Illinois. Highstar has a majority interest in UI and first invested in April LCY is located in Royal Docks next to Canary Wharf in East London, England. Highstar owns a minority interest in LCY which was acquired in October Kinder Morgan, Inc. ("Kinder Morgan") is the General Partner of Kinder Morgan Energy Partners, a leading and highly diversified North American energy infrastructure business. The Kinder Morgan companies own an interest in or operate more than 37,000 miles of pipelines that transport primarily natural gas, crude oil, petroleum products and CO 2, and approximately 180 terminals that store, transfer and handle energy related products such as gasoline and coal. Kinder Morgan is based in Houston, Texas. Highstar owns a minority interest in Kinder Morgan and first invested in May Ports America, Inc. ("PAI") is the largest independent marine terminal operator on the US Atlantic and Gulf Coasts. Ports America handles containerized cargo, roll-on/roll-off cargo, cruise line passengers and general cargo at 23 locations including New York, New Jersey, Philadelphia, Baltimore, Miami, New Orleans, Tampa and Houston. PAI is based in Iselin, New Jersey and Highstar s initial investment was made in March Ports America Outer Harbor Terminal, LLC ( PAO ) is a partnership between Ports America and Terminal Investments Limited, an affiliate of Mediterranean Shipping Company, the second largest container shipping line in the world. PAO was awarded a 50-year concession to upgrade and operate five container vessel berths. PAO is a 160-acre facility based in Oakland, California and Highstar s initial investment was made in March 2009.

7 10 HIGHSTAR CAPITAL HIGHSTAR CAPITAL 11 Examples of Highstar s Value Added in Realized Investments American Ref-Fuel Holdings Corporation ("Ref-Fuel") a waste-toenergy business in the north eastern United States. Highstar invested in Ref-Fuel from April 2004 to June Highstar had a 40% interest in Ref-Fuel with a financial partner invited by Highstar to participate in this investment. Highstar Value-Added: Highstar independently sourced the Ref-Fuel investment opportunity on a proprietary, negotiated basis. Prior to the acquisition of Ref-Fuel by Highstar and our partner, this business had been owned on a joint venture basis ("JV") by a financial investor and a strategic investor respectively. We and our partner separately bought each of the separately owned JV pieces of Ref-Fuel in two independent transactions, each priced at a discount for non-control. We and our partner subsequently combined both of the prior JV ownership pieces of Ref-Fuel into a combined ownership structure. We then sold 100% of Ref-Fuel to a strategic buyer at a significant control premium with accretive investment results for Highstar and our partner. InterGen N.V. a global power generation platform in Europe, Australasia and Mexico. Highstar invested in InterGen from August 2005 to October Highstar had a 50% interest in InterGen with a financial partner invited by Highstar to participate in this investment. Highstar also created a successful coinvestment program in InterGen for our limited partners. Highstar Value-Added: Highstar, in coordination with our financial partner, refocused the InterGen management team from a developer mindset to a disciplined operational and financial orientation. This included: Successfully addressing significant operational and related issues in InterGen s power plants in the United Kingdom and Australia. Re-orienting the Company s capital structure from a patchwork of project financings to an integrated corporate approach. Highstar successfully executed a sale of our interests in InterGen on an accretive basis in October 2008 despite the significant turbulence in the global capital markets following the Lehman Brothers bankruptcy. Southern Star Central Corp. ("SSC") a 6,000 mile interstate natural gas pipeline that provides transportation and storage services to customers in the mid-western United States. Highstar invested in SSC from November 2002 to August Highstar had a 98% interest in SSC. Highstar Value-Added: Highstar purchased SSC from a major, publicly traded integrated energy services company. Prior to Highstar s ownership, SSC had no dedicated management team and was instead managed under a shared services program. Highstar built a best-inclass, stand alone management team and directed the related implementation of all related service and support systems, including customer service and marketing, legal, finance and accounting, management information and information technology. Under Highstar s direction, SSC s new management team significantly improved the quality of customer service and labor and regulatory relations. This enabled an accretive rate case outcome which paved the way to a sale of SSC to two financial investors on attractive terms for Highstar. Northern Star Generation, LLC ("NSG") an investment platform created by Highstar to acquire a diversified portfolio of power generation facilities throughout the U.S. from a major integrated energy services company. Highstar invested in NSG from June 2004 to August Highstar had a 50% interest in NSG with a financial partner invited by Highstar to participate in this investment. Highstar also created a successful co-investment program in NSG for our limited partners. Highstar Value-Added: Prior to Highstar s ownership, the NSG power plant portfolio had no dedicated management team and was instead managed under a shared services program. Highstar built a best-in-class, stand alone management team, including a CEO who had worked with Highstar in a prior investment, and directed the related implementation of all related service and support systems. Closely working with Highstar, NSG s new management team significantly improved the operational performance and value proposition of the power plants in the NSG portfolio. Under Highstar s direction, NSG was able to renegotiate several existing long term electricity and gas supply contracts on a highly accretive basis to NSG. This complex process significantly benefitted from the expertise of Highstar. Taking a disparate group of power generation assets and turning them into a wellmanaged, effective and efficient power generation company, enabled Highstar to sell its share of NSG to a financial buyer on a highly accretive basis.

8 For more information please contact: Christopher Lee Founder and Managing Partner T (646) E christopher.lee@highstarcapital.com Vivian Tongalson Director of Fund Communications T (646) E vivian.tongalson@highstarcapital.com May 2010

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