Rail PPP s in the Middle East. MEED Presentation 27 September 2005

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1 Rail PPP s in the Middle East MEED Presentation 27 September 2005

2 Focus of Presentation 1. ADCB Macquarie Corporate Finance a) Macquarie Bank b) Abu Dhabi Commercial Bank c) The Joint Venture 2. Rail Public Private Partnerships (PPP s) in the Middle East From the perspective of a financial investor Key Challenges / Risks 3. Other Factors for Success 2

3 Macquarie s global experience The Macquarie Group provides specialist investment, advisory and financial services in select markets around the world, with 6,670 employees in 23 countries Key statistics Market capitalisation 9bn Total assets 31bn Funds under management 55bn Managing 67 Assets across 14 countries History Founded in 1969 as the Australian subsidiary of UK merchant bank Hill Samuel Listed on the Australian Stock Exchange in 1996 Offices in all major financial centres and in London since 1989 Leading global specialist in infrastructure Offices in all major financial centres Dublin Vancouver Toronto London Frankfurt Munich Chicago Geneva Vienna San Francisco New York San Jose Madrid Tianjin Tokyo San Diego Seoul Florida Shanghai Hong Kong Annual net profit ( m) Note: Year-end 31 March 2005 Kuala Lumpur Singapore Jakarta Sao Paulo Brisbane Cape Town Johannesburg Perth Sydney Adelaide Auckland Melbourne Wellington 3

Samuel Listed on the Australian Stock Exchange in 1996 Offices in all major financial centres and in London since 1989 Leading global specialist in infrastructure Offices in all major financial

4 Macquarie Bank: Recognised Market Leader Australia s strongest locally-owned bank, Macquarie has continued to achieve... market leadership Euromoney we believe Macquarie will maintain if not extend its leadership position across the core businesses in which it competes Morgan Stanley Dean Witter In a class of its own...a unique investment bank with outstanding profit and growth record...and market leadership Salomon Smith Barney Macquarie Bank Awards in 2004 Investment Bank of the Year Insto Distinction Awards 2004 Debt House of the Year Insto Distinction Awards 2004 Hybrid House of the Year Insto Distinction Awards 2004 Mortgage Bank Securities House of the Year Insto Distinction Awards 2004 Financial Adviser of the Year Project Finance International 2004 Equities Analyst of the Year: Greg Dring CFO Magazine 2004 CFO of the Year: Greg Ward CFO Magazine 2004 Equity House of the Year FinanceAsia 2004 Best Brokerage FinanceAsia Awards 2004 Best Domestic Investment Bank Asset Asian Awards 2004 Best Domestic Bank Asset Asian Awards 2004 Innovative Deal of the Year: ConnectEast Insto Distinction Awards 2004 Project Finance Deal of the Year: ConnectEast Asiamoney Awards 2004 Best Project Finance Deal: ConnectEast FinanceAsia Awards 2004 Most Innovative Deal: ConnectEast FinanceAsia Awards 2004 Asia-Pacific Transport Deal of the Year: ConnectEast Project Finance 2004 IPO of the Year: Pacific Brands CFO Magazine 2004 IPO of the Year: Pacific Brands Asiamoney 2004 IPO of the Year: Pacific Brands FinanceAsia 2004 Structured Finance Transaction of the Year: ALE Property CFO Magazine 2004 Best Equity Linked Deal: TICkETS FinanceAsia 2004 North American Transport Deal of the Year: Chicago Skyway Project Finance 2004 Macquarie s record...makes it a standout performer in investment banking Business Review Weekly...investment banking strength, domestic dominance and global capacity... CS First Boston Macquarie Bank...continues to justify its reputation as the most dynamic and innovative Australian Bank Euromoney 4

..a unique investment bank with outstanding profit and growth record.

5 Abu Dhabi Commercial Bank (ADCB) ADCB total assets and market capitalisation US$bn Total Assets Market Capitalisation Note: Values as at 30 June 2005 Abu Dhabi Commercial Bank ( ADCB ) was formed in 1985 as a public shareholding company with limited liability, upon the merger of Emirates Commercial Bank and Federal commercial Bank with Khaleej Commercial Bank The Government of Abu Dhabi, through ADIA, holds 65% of the ADCB, with the remaining 35% held by UAE institutions and nationals Strong track record in arranging debt and syndication for infrastructure projects ADCB is a leading bank in the UAE and is well established in the region The Bank employs 1,200 staff throughout its network of 38 branches, 36 in the UAE and two in India ADCB is listed on the UAE stock market and with a market capitalisation of approximately US$9.7bn, is one of the largest in the region Amongst UAE banks, ADCB has the second largest deposit base with total assets as at 30/06/2005 of AED 46.8 billion and FY05 first half net profit of AED 844million ADCB handles payment instructions, letters of credit and guarantees through a network of 36 branches in India (Mumbai and Bangalore). ADCB also offers credit card, investment, trade and project financing services ADCB is a leading investment bank in the UAE 5

of Emirates Commercial Bank and Federal commercial Bank with Khaleej Commercial Bank The Government of Abu Dhabi, through ADIA, holds 65% of the ADCB, with the remaining 35% held by UAE institutions

6 ADCB / Macquarie ADCB and Macquarie have the same vision Development of regional infrastructure Combination of international infrastructure expertise & experience with local knowledge and presence Diversified provider of specialised infrastructure services Project structuring and delivery services Seeking to acquire suitable infrastructure assets Advisory services for Brownfield and Greenfield projects Arrangers of debt and equity for infrastructure projects The joint venture is already engaged on infrastructure projects in the region Team on the ground experienced in transport including rail eg Seoul Subway No 9 and Yongin LRT in S Korea, London Underground PPP in the UK 6

infrastructure assets Advisory services for Brownfield and Greenfield projects Arrangers of debt and equity for infrastructure projects The joint venture is already

7 Rail PPP s in the Middle East Can rail projects succeed as public private partnership transactions in the Middle East from the perspective of a financial sponsor? Yes, but it depends on the risks to be taken by the financial sponsor 7

from the perspective of a financial sponsor?

8 Key Challenges / Risks for Rail PPP s Rail is a complex risk proposition. Key challenges include: High Upfront Capital Cost Integration Risk Complex Contractual Structures Patronage risk 8

9 High Upfront Capital Cost Significant amount of upfront capital required Particularly for new networks Is there sufficient liquidity to finance all projects competitively? Yes, if structured well We believe there is appetite for well structured rail projects in the Middle East ADCB Macquarie has appetite for well-structured rail projects in the Middle East 9

Yes, if structured well We believe there is appetite for well structured rail projects in

10 Integration Risk Integration of systems, rolling stock, signals, civil works, etc Who takes integration risk? 2 potential solutions: Separate project manager asked to take risk Often uneconomical Strong lead contractor wraps entire project Preferred solution 10

2 potential solutions: Separate project manager asked to take

11 Complex Contractual Structures Numerous different entities involved Complex contractual arrangements Use of International standards where appropriate Head contractor structure reduces complexities 11

arrangements Use of International standards where

12 Patronage Risk Revenue estimates based on passenger forecasts If wrong, represents very large risk to financial investors Revenue guarantee from government desirable Particularly for new networks where it is harder to forecast usage 12

financial investors Revenue guarantee from government

13 Other Factors for Success Partnership between foreign and local entities Foreign expertise, proven delivery Local knowledge Rail Projects should be part of a Systematic Plan Part of a bigger picture, for example: Freight rail: should be underpinned by a sound business proposition eg consideration of ports, industrial areas Passenger rail: Innovation may help make a project profitable eg real-estate cross-investment (Hong Kong MTR) Early involvement of financial investors Ensures well structured project for maximum risk transfer and competitive financing terms 13

proposition eg consideration of ports, industrial areas Passenger rail: Innovation may help make a project profitable eg real-estate

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