Los Angeles. Trans- Pacific Route. Manzanillo. NORTH SOUTH Americas Route (Pacific)

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2 Maritime space: Opportunity for cargo management Trans- Pacific Route Los Angeles Manzanillo Veracruz New York Freeport Kingston a Regional hub Global hub Routes and Terminal networks NORTH SOUTH Americas Route (Pacific) La Unión Balboa Manta Guayaquil Callao Manzanillo Feeder Global HUB : Logistics center for concentration, processing, and distribution of cargo and information, in East- West Regional HUB : Redistribution of cargo in areas of centralized routes, East-West with North-South routes. Cargo feeder ports. Mejillones NORTH SOUTH Americas Route (Atlantic)

3 Growth of maritime trade Growth rate of world trade is twice the rate of world GDP Maritime trade in TEUs grew almost three times the rate of world GDP Growth rate 11% World traffic -TEUs 7.7% World Trade 4.2% World GDP P

4 Employment creation at La Union Case 1: Labor-intensive firms (ARNECOM) ZAL: 73 acres x 500 jobs = 36,500 jobs Case 2: Logistics firms (RANSA) ZAL: 73 acres x 50 jobs = 3,650 jobs Case 3: Firms adding value to cargo (Uruguay) 4,500 jobs could be created. Descripction of ports of La Union y Acajutla

5 Employment generation at La Unión Case 4: Firms already installed at Port s adjacent areas (e.g. Cutuco Energy, AES Fonseca, Calvo) Case 5: Port operations- 1,500 jobs Case 6: Nearby areas to Port: 47,250 new jobs in those 5 industrial parks

6 Employment generation at La Unión Case 7: By small and medium firms (SMEs) in: construction, repair shops, food preparation services, etc. Case 8: By public services: security, health, education, etc. Case 9: Related to the naval activities related to maritime law enforcement Case 10: Jobs to be created in tourism related activities

7 Employment generation at La Union Case 11: Companies offering complementary services: Telecommunications, financial and insurance; maritime and land transportation; professional services, such as accounting and auditing, etc. Case 12: Vessels maintenance and repair Case 13: Various services to ships According to UNCTAD: It is estimated that 1 direct job creates 2 indirect jobs.

8 At present, El Salvador is a country with little presence in the maritime regional business Acajutla is the only port offering limited service to local markets Acajutla has very low productivity in relation to movements of TEU/hour/vessel: 2001: : 25, using ships cranes only Investments at the Port of Acajutla

9 Cargo volume estimated in 2033 (Acajutla and La Union) In TEUs 1 446,415 1 TEU Other different to TEUs 8 348,016 1 MT Present cargo volume: 2008 (Acajutla) 158,500 TEU 3 229,000 1 MT

10 Goal: becoming a REGIONAL HUB ports, thus need to be operated under: Excellent management Know-how of maritime business and 3 rd. generation ports Capacity of business creation through networking and powerful negotiations power with shipping lines Heavy and timely investment Present owner - operator, CEPA, does not have these capabilities.

11 Additional investment: $655.9 million Port La Unión: Ended: To do s: Port of Acajutla: To do s: Construction Fase I Equipment Fase I Construction Fase II, and Business development Investment to cope with infrastructure deterioration and improvements Business expansion

12 Loan for the construction of Port La Unión JBIC: $102.1 CEPA s share: $ 77.4 Total: $179.5 million

13 Historical Investment at Port of Acajutla In 46 years (since 1961) CEPA invested $30.8 million in equipment Operator will invest in 25 years, $104.2 million More than 3 times CEPA s investment in half the time. year land infrastructure equipment total $ 10,414, $ 2,090, $ 12,504, $ 11, $ 188, $ 199, $ 2, $ 5,422, $ 5,424, $ 525, $ 525, $ 71, $ 71, $ 107, $ 107, $ 379, $ 379, $ 42, $ 3,723, $ 3,765, $ 5,306, $ 925, $ 6,232, $ 4,461, $ 4,461, $ 3,203, $ 3,203, $ 444, $ 340, $ 785, $ 15,242, $ 1,852, $ 443, $ 17,538, $ 270, $ 3,882, $ 4152, $ 7,601, $ 3,555, $ 11,157, $ 224, $ 99, $ 323, $ 1,191, $ 1,191, $ 1,593, $ 186, $ 1,780, $ 68, $ 68, $ 15,242, $ 27,763, $ 30,867, $ 73,874,055.20

14 in need of an strategic partner that: Makes possible the additionally required investment in time Uses its expertise in business development Transfers technology to port operation

15 Concession Proposal Concession of both ports: Acajutla and La Union, according to natural inclination of each port Public-private contract : 10% government and 90% strategic partner Future development of 80.6 Acres (48.6 in La Unión and 32 in Acajutla) for logistic purposes now under CEPA s administration and control Period of concession: 25 years with possibility of another 10 Concessions in Latin America Similar cases in Latin America

16 Potential world-class firms interested in our ports Have already visited Have not yet visited 1 HUTCHINSON PORTS HOLDING, CHINA 9 SSA MARINE USA 2 PORT OF SINGAPORE AUTHORITY SINGAPUR 20 3 APM TERMINALS HOLANDA ICTSI Y MARUBENI PHILLIPINES/JAPAN 16 NIPPON YUSEIN KAISHA JAPAN 4 DUBAI PORTS DUBAI - UAE - KATOEN NATIE Belgium - PORTSAMERICA USA 8 MEDITERRANEAN SHIPPING CO., Switzerland - SUDAMERICANA AGENCIAS AÉREAS Y MARÍTIMAS, CHILE - Other firms interested : CONSORCIO MARÍTIMO SALVADOREÑO, EL SALVADOR

17 Government Revenue (25 years) Royalty (Payment to governement % of income per port services) Downpayment (min amount for concession) ACAJUTLA LA UNIÓN $2,255.6 million TOTAL $ % $60.0 Dividends $81.1 (per 10% of share participation) Taxes (VAT and Income Tax) $940.7 INVESTMENTS Local taxes $1, % $81.1 5% $655.9 $2, % Investment required

18 Government benefits Know-how from operator Shareholder 10% participation : paid-up and sustained by strategic parter thru entire contract Downpayment $60.0 million Royalties : $517.9 million VAT and Income taxes: $940.7 million

19 Dividends for $81.1 million Government benefits Risk of investment is transfered to strategic partner Government maintains strategic interests by holding a place at Board of Directors Government will receive an ongoing business at the end of the 25th year.

20 Human capital development Additional benefits Territorial and local development in the region of La Unión Enpowerment of geopolitical leadership of El Salvador in the Gulf of Fonseca Development of maritime culture

21 What is left to be done? Improvement of local infrastructure at sub regions of La Union and Acajutla Naval Force strengthening Institutional supports from: Municipality CEPA (Ports Comission) AMP (Ports-Maritime Authority) Territorial law and creation of areas under special regime ( ABRE- (ABRE areas bajo regimen especial).

22 What is left to be done? Develop a national strategy to promote logistic areas (in charge of government) Develop a municipal policy to promote investment and employment Develop a national logistic policy as indicated by the Ministry of Economics

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25 Area of port activities: Area of logistic activities: CORSAIN Calvo Cutuco Energy AES Fonseca TROPIGAS Adjacent area 95 Acres 89 Mz 611 m 580 m Total docking yard lenght: 1,794 m FASE II 66 Acres 603 m FASE I 124 Acres 57 Acres FASE III 78 Acres Adjacent area 54 Acres 7 Acres water treatment plant financed by AES

26 Area of logistic activities: Areea of port activities: Cars Yard: 36,000 m 2 Container Yard: 50,000 m 2 Warehouses (4): 30,000 m 2 Solid Bulk Warehouse: 30,000 TM Docks: 9 Acres

27 Dock length: 313 Depth: -8 a -12 Wide: 37 Dock length: North dock: 360 South dock: 336 Depth: -8 a -12 Wide: 28 meters Dock length: 270 Depth: -12 Wide: 19 Total dock length: 943

28 Investment by Operator (25 (25 years) $655.9 million $313.9 million (present value) ACAJUTLA LA UNION TOTAL Equipment $ % Infrastructure $ % Technology $29.1 5% $104.2 $551.6 $ % 84%

29 Construction (up to change 8) $161.3 Counterpart office $7.0 Interests paid to JBIC $4.8 Land acquisition $5.1 Fences $0.7 Design modification $0.6 Note: Local taxes are not included (pending of definitiion by Supreme Court). US$179.5 m.

30 Public-PrivatePrivate Partnership (PPP): Some examples Cristóbal Balboa Terminals of Cristóbal and Balboa: PPP 10% Government of Panama 90% Hutchinson Ports Holding (HPH) All government shares paid by HPH Operator commited to make all investments If equity is increased, government holds its 10% 10% Government receives incomes as a share holder and royalties over sales Cuenca del Plata Terminal of Montevideo: PPP 20% Government of Uruguay 80% Katoen Natie Government invest according to its share participation Government receives incomes due to royalties and share participation.

31 Some points about the proposal Operator of world class. Sound legal system provides safeguards for a 25 year investment Has flexibility to manage the business An attractive rate of return over investment The ports of El Salvador complement the regional chain of ports of operator. Government The government receives the know how from operator to become a regional hub. Receives a share participation which is paid by the operator. It is not committed to make any investment during the time of the concession. It is entitled to share dividends as a stockholder The government does not take the risk of investment It is entitled to receive a royalty over gross sales of port business The government receives income due to, income tax, VAT and municipal taxes because the operator has to comply with these payments. Has command on strategic topics through its share participation The governmet will receive an ongoing business in 25 years.

32 Master Concession: 28 ARGENTINA COLOMBIA CHILE ECUADOR MEXICO PANAMA PERU DOMINICAN REP JAMAICA BRAZIL GUATEMALA SANTA FE, ROSARIO CARTAGENA, BARRANQUILLA, STA. MARTA, BUENAVENTURA ARICA, SAN VICENTE ESMERALDAS, MANTA, GUAYAQUIL VERACRUZ, ENSENADA, L. CARDENAS, MANZANILLO, GUAYMAS, ALTAMIRA, MAZATLÁN BALBOA, CRISTOBAL, MANZANILLO, EVERGREEN MATARANI CAUSEDO, HAINA KINGSTON SANTOS BARRIOS

33 Concesiones maestras in process: 15 CHILE HONDURAS NICARAGUA PERU DOMINICAN REP COQUIMBO, TALCAHUANO, PTO. MONTT, PUNTARENAS PUERTO CORTES MONKEY POINT PAITA, PISCO, ILO, CHIMBOTE, SALAVERRY, IQUITOS, PUCALLPA, YURIMAGUAS PUERTO PLATA

34 Terminal concessions: 12 ARGENTINA CHILE PERU BUENOS AIRES (7 TERMINALES) VALPARAÍSO, SAN ANTONIO, IQUIQUE, ANTOFAGASTA CALLAO Terminal concessions in process: 8 CHILE GUATEMALA NICARAGUA ANTOFAGASTA, COQUIMBO, VALPARAÍSO, SAN ANTONIO, PTO. MONTT, PUNTARENAS QUETZAL CORINTO

35 Public Private Partnership (PPP): 5 CUBA HONDURAS URUGUAY PANAMA LA HABANA (GOBIERNO + SOCIEDAD ESPAÑOLA) ROATAN (EMPRESA NACIONAL PORTUARIA + ROYAL CARIBBEAN) TERMINAL DE MONTEVIDEO (AUTORIDAD PORTUARIA + KATOEN NATIE) TERMINAL BALBOA (ESTADO + HUTCHINSON) TERMINAL COLON (ESTADO + HUTCHINSON) State: 9 BRAZIL VENEZUELA GUATEMALA COSTA RICA EL SALVADOR FORTALEZA, RECIFE, SALVADOR, RIO DE JANEIRO MARACAIBO, PTO. LA CRUZ STO. TOMAS DE CASTILLA, LIMON-MOIN ACAJUTLA

36 : 2008: Management of ports in Latin America Master Concession: 63 PPP 5 Government as operator: 9 6% PPP 12% Government 82% Master Concession

37 TEU 180, , , , ,000 80,000 60,000 40,000 20, , Acajutla: Containers cargo 119,133 92, ,483 65,576 41, , Years 158,500 *Using ship cranes 2008P

38 Acajutla: Other type of cargo different from containers Solid Bulk 56% General 8% MT thousands 4,000 3,500 3,000 2,500 2,000 1,500 1, ,343 2, ,447 2,508 2,813 3, Years Liquid Bulk 36% 3,191 3, P

39 Origin of estimated cargo Port La Unión: Freight in containers: 1.38 milllion TEUs (Graph represents estimated freight in Port La Unión) Cargo not in containers: 800,000 Metric tons (imports for project of Energy using coal). Port of Acajutla: Cargo not in containers: 7.5 million Tons (Local cargo increased with regional cargo through operator ) Cargo in containers: 0.07 millions TEU (Generated by local cargo through feeder port) 4% dry canal 50,000 TEU, 290,000 TEU, 11% trans-shippingshipping and value added 160,000 TEU 21% regional cargo 880 mil TEU, 64% domestic cargo

40 ACAJUTLA: 50 years operation 2001: Opinion survey ECLAC 2001: Acajutla is the most inefficient port in Latin America Cargo in containers: 17,000 TEU 1,200 employees to manage 2.5 million TM Accumulated loss up to 2001: $20 million 8 movements /hour per ship 2006: 35% of requests for proposal deserted

41 ACAJUTLA: 50 years operation 2008 Poor additional investment: (1( single bulk crane from 1961; obsolete yard cranes) No operating profits Poor commercial management Very little investment in human capital ( only 2 practices) Limited development of additional areas to port section (Opsal Opsal, Diana, Iminsa y Cenérgica): 14% in 50 years Firms such as Rasa, Alcasa, Almapac, Fertica, Puma, Duke Energy, ARFS and Termopuertos: all of them in private land out of port area. 80 families invaded port land.

42 Annual dividends (10% Government) In 25 years: $80.9 million $24.9 million (Present Value) They will vary according to business development Years $ million