Conceptual Proposal under the Public-Private

Conceptual Proposal under the Public-Private

Transportation Act of 1995

August 13, 2012

The Carlyle Group, 1001 Pennsylvania Avenue, NW, Washington, DC 20004

Contact: Aaron Gold, Tel: (212) 813-4771, Fax: (212) 813-4843, [email protected]

August 13, 2012

Mr. Ryan Pedraza

Program Manager

Office of Transportation Public-Private Partnerships

600 East Main Street, Suite 2120

Richmond, VA 23219

Re: Alternative conceptual proposal for the long-term concession of certain port facilities

owned by the Virginia Port Authority

Dear Mr. Pedraza,

In accordance with the Public Private Transportation Act of 1995 (“PPTA”) and in regards to the

unsolicited conceptual proposal submitted by APM Terminals (“APMT”) on April 4, 2012 (the

“APMT Proposal”), Carlyle Infrastructure Partners, L.P. (“CIP”), the dedicated infrastructure

investment team of The Carlyle Group (“Carlyle”), is pleased to submit this alternative

conceptual proposal for the operation of the following facilities owned or operated by the

Virginia Port Authority or its affiliates (collectively, the “Port Facilities”):

! Norfolk International Terminals in Norfolk, Virginia (“NIT”);

! Portsmouth Marine Terminal in Portsmouth, Virginia (“PMT”);

! Newport News Marine Terminal in Newport News Virginia (“NNMT”);

! The Virginia Inland Port in Front Royal, Virginia (“VIP”); and

! APM Terminals Virginia (“APMTVA”).

The Carlyle Group

Carlyle (NASDAQ: CG) is one of the world’s largest alternative asset managers, with

approximately $159 billion under management as of March 31, 2012. Founded in 1987 in

Washington, DC, Carlyle has grown into one of the world’s largest and most successful

investment firms, with more than 1,300 professionals operating in 32 offices in North America,

South America, Europe, the Middle East, North Africa, Sub-Saharan Africa, Japan, Asia and

Australia. It either manages or assists in managing over 200 portfolio companies including

companies in maritime shipping, rail, freight & logistics, and manufacturing.

Headquartered in Washington, D.C., Carlyle is a global private equity firm with strong Virginia

connections. Many Carlyle employees live and/or work in the Commonwealth of Virginia (the

“Commonwealth”). In 2011, Carlyle increased its commitment to Virginia by opening an office

in Rosslyn, Virginia with approximately 190 employees. Carlyle’s portfolio of companies

includes significant Commonwealth companies, including Booz Allen, which has over 12,000

Page 2 Executive Summary

employees at its headquarters in McLean, Virginia, and Hampton Roads Bankshares, Inc.,

which has over 600 employees and is headquartered in Norfolk, Virginia. In the Mid-Atlantic

region, Carlyle portfolio companies have over 32,000 employees, including nearly 13,000 located

in Virginia, in businesses that are among the leaders in the industrial, aerospace, and consumer

sectors. Our proposal is therefore submitted with Carlyle’s strong commitment to the

continued economic growth and development of the Mid-Atlantic region.

Carlyle Infrastructure Partners

Having first-hand knowledge and direct experience in the North American freight

transportation system, including investments under a public-private partnership framework,

Carlyle has made investments in this area a priority in a dedicated infrastructure fund. CIP is

the entity submitting this proposal. The CIP team will lead the investment in the Port Facilities

on behalf of the dedicated infrastructure fund, which was established in 2006 with more than

$1.1 billion in assets under management. The Carlyle infrastructure fund focuses on private

equity investments in infrastructure, primarily in the U.S. and Canada. One of CIP’s first

acquisitions was ITS Technologies & Logistics, LLC, one of our nation’s leading intermodal

terminal operating companies with more than 60 facilities in the U.S. and Mexico. CIP also

invested in and helps manage Qube Holdings, a publicly-traded Australian intermodal logistics

company, and is the lead investor in a 35-year public-private partnership with the State of

Connecticut Department of Transportation to renovate, operate and maintain 23 of the State’s

on-highway service plazas.

Summary of Alternative Proposal Structure and Valuation

In July 2009, the CIP team submitted a proposal for a concession of the Port Facilities that

placed significant emphasis on a genuine “partnership” with the public sector. This proposal

maintains a similar commitment to partnership and calls for a 48-year concession with the VPA,

in consideration of which CIP would offer an up-front investment, as well as fixed annual

payments and participation by the VPA in a profit-sharing program, aligning the

Commonwealth and Carlyle in the success of the Port Facilities.

Our preliminary indicative valuation range, which is based on the net present value of these

three cash flow streams to the VPA, is $1.8 to $2.1 billion. We believe this compares favorably

to the aggregate net present value of $1.5 to $1.9 billion, or the total of Fixed Concession

Payments and Revenue Sharing, presented in the APMT Proposal. Additionally, we believe the

existence of an up-front investment in our alternative proposal provides the VPA with

immediately available capital for re-investment in its infrastructure. At such time as the

information is made available, we would elaborate further with regard to other areas of

potential value to the VPA.

Page 3 Executive Summary

The CIP team is in discussions with world-class marine terminal operators that are interested in

providing services to the Port Facilities under long-term operating contracts. As we engage in

further due diligence, we will determine which of the various operators is best-suited for

providing the Port, its shipping customers, and Commonwealth residents the best blend of

service and competitive reach into global markets.

We believe the primary mission of the concession team you select for Virginia’s Port Facilities is

to operate the Port Facilities in a safe and secure manner, with a clear understanding of the

stewardship role in managing its economic and environmental resources, and to vigorously

increase the Port Facilities’ market impact in the local, regional, and national economies. And,

consistent with our record of sustainable practices and good stewardship, CIP will be a

supportive investor and manager of that mission.

Other General Matters

This letter, together with the attached response prepared in accordance with the requirements

of PPTA guidelines, is a statement of our intent, is not a legally binding agreement on CIP and

shall not give rise to any legal consequences in any respect. It is our intent to answer to the

fullest extent all questions as required pursuant to the PPTA guidelines. We intend to promptly

provide additional response and/or explanation upon notice, if necessary. CIP is responding to

this invitation for alternative proposals in good faith and with the intent to answer all questions

fully and provide any and all information necessary to comply with this opportunity to

respond. We have interpreted the PPTA framework to the best of our abilities. Knowing that

the Commonwealth's checklist for unsolicited proposals was crafted to apply to a broad range

of projects, we would request that if the Commonwealth, for whatever reason, perceives that

our alternative proposal does not answer some section or question in a fulsome and complete

manner, we be afforded the opportunity to clarify or elaborate to the satisfaction of the

Commonwealth.

Thank you for the opportunity to submit this proposal. We would like to reiterate our interest

in the Port Facilities and our firm belief that CIP is uniquely qualified to enter into a strategic

partnership with the Commonwealth with respect to the long-term operation of the Port

Facilities and to promote job creation and economic development in the region.

Yours sincerely,

Robert W. Dove

Managing Director

Signature on file

THE VIRGINIA PORT AUTHORITY CONCEPTUAL PROPOSAL UNDER PPTA OF 1995

TABLE OF CONTENTS

I. PROJECT DESCRIPTION AND APPROACH ............................................................................... 5

A. Project Description ........................................................................................................................... 5

B. Proposed Concession Structure and Preliminary Assumptions ................................................ 5

C. Preliminary Indicative Valuation ................................................................................................... 5

D. Partnership with World-class Operator ........................................................................................ 6

E. Operating Transition ........................................................................................................................ 6

F. Partnership with the VPA ................................................................................................................ 6

G. Partnership in Protecting the National Interest ........................................................................... 7

H. Project Management Team and Advisor Biographies ................................................................ 7

II. DESIRABILITY OF THE PROJECT .............................................................................................. 10

A. Growing the Port of Virginia ........................................................................................................ 10

B. Carlyle: Global Firm with Local Interests in Virginia ............................................................... 10

C. Leadership in the Development and Implementation of Best Practices................................. 10

D. Safety as a Principal Focus ............................................................................................................ 11

III. FEASIBILITY OF THE PROJECT ................................................................................................. 13

A. Sector Focus and Track Record of Public-Private Partnership Success .................................. 13

B. CIP and Carlyle’s Financial Background..................................................................................... 18

C. Concession Financing Plan ........................................................................................................... 18

D. Continue to Employ Local, State or Federal Resources ............................................................ 18


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I. PROJECT DESCRIPTION AND APPROACH

I - A. Project Description

This conceptual proposal is for a 48-year concession for the operation of the following facilities

owned by VPA or operated by affiliates (collectively, the “Port Facilities”):

! Norfolk International Terminals in Norfolk, Virginia (“NIT”);

! Portsmouth Marine Terminal in Portsmouth, Virginia (“PMT”);

! Newport News Marine Terminal in Newport News Virginia (“NNMT”);

! The Virginia Inland Port in Front Royal, Virginia (“VIP”); and

! APM Terminals Virginia (“APMTVA”)

CIP would form a de novo entity that would be the concessionaire responsible for the operation,

maintenance, financing, and capital improvement of the Port Facilities (the “Concessionaire”).

The Concessionaire, with the support of the CIPIP team, would provide capital for

improvement of the port operation and supporting infrastructure during the concession and

lease term.

I - B. Proposed Concession Structure and Preliminary Assumptions

Our preliminary indicative bid structure includes an up-front payment, combined with a long-

term stream of annual payments and profit-sharing. This bid takes into consideration the

following:

! A forecast of projected container volumes, market share, operating efficiency and

margin, etc.;

! Optimizing asset and operational oversight pursuant to the concession agreement

and pursuant to Federal and Commonwealth statutes;

! Security and environmental requirements and negotiations;

! Certain annual, indexed payment to the VPA;

! Certain annual, indexed payment to the local communities, in the form of either

property tax or payment in lieu of taxes;

! An assumed (permanent) return of the tax revenues to the Transportation Trust

Fund; and

! Some defeasance or assumption of the outstanding Port Revenue and

Commonwealth Port Fund Debt.

I - C. Preliminary Indicative Valuation

Our preliminary indicative valuation range, which is based on the net present value of the three

payment streams described below, is $1.8 to $2.1 billion. Our preliminary modeling, which is


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subject to due diligence, indicates that the following combination of up-front investment, as

well as annual cash payments and profit-sharing could be achievable:

! Up-front cash investment: $250 million to $300 million

! Annual cash payment: $35 million to $45 million

! Annual profit-sharing: 20% to 30%

Combined with all required future capital expenditures and return of the tax revenues, the

value to the VPA could increase substantially. The capital required for the up-front investment

would come from the Carlyle infrastructure fund and potentially associated investment vehicles

and other financing sources.

I - D. Partnership with World-class Operator

CIP’s strategy is to partner with companies that are leaders in their industries, support their

management teams, and invest in their growth. The CIP team has relationships and has had

discussions with several world-class marine terminal operators that are interested in providing

services to the Port Facilities under long-term operating contracts. As we engage in further due

diligence, we will determine which of the various operators is best-suited for this opportunity.

I - E. Operating Transition

CIP does not anticipate any interruption in the flow of operations as a result of the prospective

transaction. Our team’s extensive experience in the acquisition of infrastructure assets and

entities should provide the Commonwealth with confidence that the transaction can be

executed with no material disruptions.

I - F. Partnership with the VPA

Under CIP’s alternative proposal, VPA would continue to be a public sector entity with the

primary role of monitoring, securing, and promoting general economic development. VPA

would be an important strategic partnership and would continue to have a strategic interest in

the Port Facilities as it would be the key liaison between CIP and the Commonwealth. We

envision that, under a comprehensive concession and lease agreement, there would be various

reporting requirements on behalf of the Concessionaire and that the VPA would be the agency

responsible for monitoring on behalf of the Commonwealth.

We assume that VPA will maintain the necessary staff for abovementioned functions and we

intend to provide the VPA with an annual, inflation indexed cash flow stream to support such

operations. And, consistent with CIP’s proven public-private partnership structure of incentive


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alignment, we would intend to provide the VPA with a meaningful long-term profit-sharing

arrangement driven by CIP’s successful management and operation of the Port Facilities.

At the end of the concession period, stewardship of the Port Facilities would revert to the VPA.

I - G. Partnership in Protecting the National Interest

When discussing long term strategy of the Port Facilities, it is essential to mention Carlyle’s

commitment to a continuing partnership with the U.S. Navy, the U.S. Fleet Forces Command

(USFLTFORCOM), the U.S. Coast Guard, the Department of Defense, and other critical federal

agencies that have operations in and around the area. The Carlyle team has direct experience

working with Naval Station Norfolk, many of the type commanders, and the Coast Guard’s

Atlantic Command (LANTAREA). We intend to collaborate closely with these critical national

security and homeland security assets and we understand not only their national importance,

but the critical role these government installations play in the regional economy, and also know

of the importance of maintaining Virginia’s role in home porting national maritime assets.

I - H. Project Management Team and Advisor Biographies

Carlyle’s dedicated infrastructure team from CIP includes a deep bench of industry

professionals well-versed in public-private partnerships and acquisitions. The CIP team is

working in partnership with its advisors from BMO Capital Markets, a best-in-class financial

advisory team with deep knowledge and experience in the North American ports and logistics

sector. The following individuals will be the primary contacts with the Commonwealth.

CIP Team

Robert Dove, Managing Director

Mr. Dove is a Managing Director and head of CIP. He joined Carlyle from Bechtel Enterprises,

the finance, development and investment arm of Bechtel Group. At Bechtel Enterprises, Mr.

Dove was an executive vice president and also an equity partner of Bechtel Group. Mr. Dove

led infrastructure development activities and managed a portfolio of infrastructure investments,

including investments in mass transit, airport and wastewater treatment assets. Mr. Dove has

extensive M&A, financing and investing experience, having participated in all stages of

infrastructure project investment, from initial equity investment through operational

enhancement and financial recapitalization and ending with exit. Among other leadership

positions, Mr. Dove is a member of the board of directors at ITS Technologies and Logistics,

LLC, Qube Holdings and Project Service LLC, all described further in Section III.

Aaron Gold, Principal

Mr. Gold is a CIP Principal and an expert in acquisitions in the transportation and related

infrastructure sectors. Prior to joining Carlyle, he led Highstar Capital’s acquisitions of two

marine terminal operators, P&O Ports North America, a U.S. East and Gulf Coast operator, and


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MTC Holdings, a principally U.S. West Coast operator. Working closely with both companies,

Mr. Gold was also the interim Chief Financial Officer until the integration of the management

teams was complete and Ports America was formed. Since joining Carlyle in 2011, Mr. Gold has

evaluated ports and port-oriented logistics operations in North America and globally for

investment purposes. In addition, Mr. Gold has evaluated a number of public-private

partnerships and is a board member of CIP’s portfolio company, Project Service LLC.

John Flaherty, Principal

Mr. Flaherty is a CIP Principal. Prior to joining Carlyle, Mr. Flaherty was Chief of Staff of the

U.S. Department of Transportation (“USDOT”), where he provided policy, program,

operational and staff management for all operations at the Department including the

development of the Secretary’s Congestion Management Initiative, the Committee on Maritime

Transportation System, and the Office of Freight and Logistics. Mr. Flaherty represented the

USDOT on the National Security Council’s Counterterrorism Security Group and helped

develop the National Strategy for Maritime Security. In the private sector, Mr. Flaherty has

been a senior consultant to transportation companies, and transportation security companies.

Tomas Peshkatari, Vice President

Mr. Peshkatari is a CIP Vice President and is experienced in acquisitions in the transportation

and other infrastructure sectors. Since joining Carlyle in 2006, Mr. Peshkatari has evaluated

several investment opportunities in ports and port-oriented logistics operations in North

America and globally. Mr. Peshkatari is actively involved with CIP’s investment in current

portfolio companies ITS Technologies & Logistics, LLC and Qube Holdings. He works closely

with both companies, evaluating greenfield business development opportunities with Qube

Holdings in the intermodal terminal, port and rail sectors, and was the interim Chief Financial

Officer of ITS Technologies & Logistics, LLC during the transition period after CIP’s acquisition.

BMO Capital Markets Team

Jeff Holt, Managing Director

Mr. Holt has over 30 years of experience in investment banking working with large maritime

ports and infrastructure clients, having structured over $24 billion in debt obligations and other

securities. Jeff has served as a senior investment banker on projects for the Ports of Long Beach,

Los Angeles, Oakland, Portland, Seattle, San Diego, Charleston and the Port Authority of New

York/New Jersey. Rail and intermodal experience includes the Alameda Corridor and Reno

ReTRAC. Advisory services associated with acquisitions include the purchase of a minority

stake in Carrix Inc., an international terminal operator, and assisting Ports America on several

terminal acquisitions. Mr. Holt is also a member of the U.S. Transportation Research Board.

Eric Zampol, Director

Mr. Zampol has more than a decade’s experience in infrastructure investment banking. His

experience includes advising on the acquisition of a minority stake in Carrix Inc. and several

terminal acquisitions for Ports America. Within the capital markets space, Mr. Zampol has

helped structure over $20 billion of securities for infrastructure entities, including the Ports of


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Seattle, San Diego and Oakland in addition to experience with rail projects such as the Alameda

Corridor and the Reno ReTRAC project.


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II. DESIRABILITY OF THE PROJECT

II - A. Growing the Port of Virginia

Together, the VPA’s Port Facilities and related road and rail infrastructure form one of the most

successful networks of cargo handling marine terminals on the East Coast. CIP is committed to

maintaining this status and providing the necessary resources to increase the Port Facilities’

competitiveness and national market share. CIP is prepared to deploy its resources and utilize

its worldwide network to attract additional businesses to the area.

In cooperation with Commonwealth, federal and private enterprises, the current leadership has

made an outstanding effort to leverage the Port Facilities’ naturally deep shipping channel with

port, road and rail infrastructure. We will continue to support the current strategic direction

and provide our expertise to grow the Port Facilities and contribute to the economies that

depend on them for employment and resources.

CIP recognizes that the enhancements of the Heartland Corridor, the Crescent Corridor

initiative and the widening and deepening of the Panama Canal will provide the Port Facilities

with substantial competitive advantages. Our strategy would be to invest in the Port Facilities

in order to attract additional shipping customers and cargo volume, as well as create a

compelling environment for the development of manufacturing facilities and distribution

centers.

II - B. Carlyle: Global Firm with Local Interests in Virginia

Headquartered in Washington, D.C., Carlyle is a global private equity firm with strong Virginia

connections. Many Carlyle employees live and/or work in the Commonwealth of Virginia (the

“Commonwealth”). In 2011, Carlyle increased its commitment to Virginia by opening an office

in Rosslyn, Virginia with approximately 190 employees. Carlyle’s portfolio of companies

includes significant Commonwealth companies, including Booz Allen, which has over 12,000

employees at its headquarters in McLean, Virginia, and Hampton Roads Bankshares, Inc.,

which has over 600 employees and is headquartered in Norfolk, Virginia. In the Mid-Atlantic

region, Carlyle portfolio companies have over 32,000 employees, including nearly 13,000 located

in Virginia, in businesses that are among the leaders in the industrial, aerospace, and consumer

sectors. Our proposal is therefore submitted with Carlyle’s strong commitment to the

continued economic growth and development of the Mid-Atlantic region.

II - C. Leadership in the Development and Implementation of Best Practices

Carlyle is committed to the development and implementation of investment best practices. A

founding member of the Private Equity Council, Carlyle is committed to:


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! Consider environmental, public health, safety, and social issues associated with

target companies when evaluating whether to invest in a particular company or

entity, as well assuring the period of ownership.

! Seek to be accessible to, and engage with, relevant stakeholders either directly or

through representatives of portfolio companies, as appropriate.

! Seek to grow and improve the companies in which they invest for long-term

sustainability and to benefit multiple stakeholders, including on environmental,

social and governance issues. To that end, Private Equity Council members will

work through appropriate governance structures (e.g. board of directors) with

portfolio companies with respect to environmental, public health, safety, and

social issues, with the goal of improving performance and minimizing adverse

impacts in these areas.

! Seek to use governance structures that provide appropriate levels of oversight in

the areas of audit, risk management and potential conflicts of interest and to

implement compensation and other policies that align the interests of owners

and management.

! Remain committed to compliance with applicable national, state, and local labor

laws in the countries in which they invest; support the payment of competitive

wages and benefits to employees; provide a safe and healthy workplace in

conformance with national and local law; and, consistent with applicable law,

will respect the rights of employees to decide whether or not to join a union and

engage in collective bargaining.

! Maintain strict policies that prohibit bribery and other improper payments to

public officials consistent with the U.S. Foreign Corrupt Practices Act, similar

laws in other countries, and the OECD Anti-Bribery Convention.

! Respect the human rights of those affected by their investment activities and seek

to confirm that their investments do not flow to companies that utilize child or

forced labor or maintain discriminatory policies.

! Provide timely information to their limited partners on the matters addressed

herein, and work to foster transparency about their activities.

! Encourage their portfolio companies to advance these same principles in a way

which is consistent with their fiduciary duties.

II - D. Safety as a Principal Focus

Carlyle recognizes safety and health management as the principal elements of proper port

management and will continue the VPA’s practices of ensuring a safe working environment for

the benefit of all employees, contractors and terminal users. Adhering to the following

principles of health and safety management is of critical importance:

! Implement safety management systems to effectively manage safety and health

risks


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! Seek continuous improvement in our safety and health performance taking into

account evolving customer expectations, management practices, scientific

knowledge and technology

! Ensure that all equipment and systems are adequately designed and maintained

for safe working conditions

! Comply with all applicable laws, regulations and standards and, where adequate

laws and regulations do not exist, adopt and apply standards that reflect our

commitment to safety and health

! Involve employees and contractors in the improvement of safety and health

performance

! Inform the employees, contractors and visitors of their responsibilities as laid out

by this policy and ensure these responsibilities are understood by all

! Provide relevant safety training to individual employees and hold them

accountable for managing safety and health in their area of responsibility

! Conduct periodic reviews and safety and health audits on all operations and

activities to assure compliance with this policy and

! Ensure the effectiveness of this policy by conducting an annual policy review

Through its ownership of companies (described further below) that handle intermodal cargo

to/from port facilities, Carlyle has demonstrated its emphasis on ensuring that our companies

develop, implement and maintain first-class safety standards.


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III. FEASIBILITY OF THE PROJECT

III - A. Sector Focus and Track Record of Public-Private Partnership Success

Carlyle has investment teams focused on various aspects of transportation and logistics in

North America.

Carlyle has a long history of investments in the sector, including, among many others, a

commitment to invest in container, dry-bulk, tanker vessels and other shipping assets that will

help provide capacity globally for the largest ocean carriers, as well as a recently announced

commitment to provide capital to short-line rail operator, Genesee & Wyoming Inc., for its

announced acquisition of RailAmerica, Inc.

Carlyle Infrastructure Partners (“CIP”), the team that would lead the firm’s prospective

investment and management in the Port of Virginia, focuses on investing in infrastructure

assets and operations that deliver long-term, sustainable returns. The team is composed of nine

investment professionals with over 100 years of collective experience with infrastructure and

transportation investment and management. The team has a combination of investment,

development, structuring, and asset management capabilities that are critical for success in the

infrastructure sector.

CIP considers maritime ports and inland intermodal container transfer facilities (“ICTFs”) as

core infrastructure assets. Carlyle’s infrastructure team has explored and has performed

detailed due diligence on several maritime port assets, ICTFs and stevedoring companies with

operations along the U.S. East Coast, Gulf Coast and West Coast, United Kingdom, Mexico,

South America and Southeast Asia. We describe our investments in ITS Technologies &

Logistics, LLC and Qube Holdings below.

In addition, CIP has substantial experience in forming public-private partnerships that provide

a long-term alignment of the interests of the public sector and the private sector capital

provider. Described further below, Project Service LLC is a 35-year concession between the

Connecticut Department of Transportation and CIP. This public-private partnership has

resulted in substantial investment in public-use operations, job creation and overall economic

benefit.

We believe that our industry expertise, combined with our track record of investment in

successful public-private partnerships will be of paramount importance to the success of a

prospective concession of the Port Facilities.

ITS Technologies & Logistics, LLC

ITS Technologies & Logistics, LLC (“ITS”) is a leading intermodal services company, which

generates over 90% of its revenue from a) lift-on / lift-off of containers and roll-on / roll-off of


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cars from trains and trucks b) the maintenance and repair of transport and lift equipment and c)

checkpoint administration. Other services include drayage, rail switching, near-dock port

operations, and chassis pool services.

ITS operates over 60 facilities in the US and Mexico performing over 6 million lifts and handling

over 1 million cars annually.


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ITS Terminal Locations

ITS serves Class I railroads, shippers and port authorities across and has long standing

customer relationships with all its customers. ITS has over 1,600 employees and its operating

management team has an average industry experience of nearly 30 years.

Qube Holdings

Qube Holdings (“Qube”) is Australia's largest integrated provider of import and export

logistics services with national operations that provide a broad range of services.


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The Ports & Bulk division has diversified operations from Port Hedland in the west, where it

stockpiles and loads iron ore for export markets, through to Port Kembla in the east where it

handles motor vehicles, heavy machinery and project cargoes. The Logistics division has

strategically located facilities in all capital city ports and provides road and rail container

transport, customs and quarantine services, container parks, intermodal terminals, warehousing

and international freight forwarding. Qube Logistics is developing the largest rail-served

intermodal and distribution center in the suburbs of Sydney.

Qube Port Locations

Qube is publicly listed on the Australian Stock Exchange, has revenues of over $800 million, a

market capitalization of approximately $1.4 billion and employs more than 4,500 people across

Australia.

Project Service LLC

Project Service LLC (“Project Service”) is the concessionaire under a 35-year concession

agreement with the Connecticut Department of Transportation (“ConnDOT”). An entity

funded by CIP and Subway restaurant entities (the “Investors”) in 2009, Project Service

committed to funding the redevelopment, operation and maintenance of 23 on-highway

services plazas providing fuel, food, beverage and rest facilities to motorists along several major

highways in Connecticut.


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Under the concession, the Investors expect to fund approximately $230 million in improvements

and upgrades, including $180 million in renovations and improvement and $50 million in

ongoing maintenance. To date, the improvements at several facilities have resulted in fuel and

food and beverage sales that substantially outpace the results from the facilities in their prior

form. The following photos show the I-95 Milford Northbound service plaza before and after

renovation (completed March 2012).

BEFORE: I-95 Milford Northbound Service Plaza

AFTER: I-95 Milford Northbound Service Plaza

In addition, we expect to create 375 new service and construction jobs, a 50% increase in what is

available at these sites today. We partnered with the Service Employees International Union to

provide continuity and service jobs at the 23 sites and created new construction work as well.

We estimate that the concession structure provides $500 million of economic benefit to the State

of Connecticut. In return for the right to collect revenue from various fuel and retail tenants

that Project Service brought in to occupy the plazas over the period of the concession, Project

Service makes a monthly lease payment to, and shares revenue with, ConnDOT. The result is a


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long-term alignment and partnership between public and private entities to improve the quality

of services provided to Connecticut motorists.

III - B. CIP and Carlyle’s Financial Background

Carlyle Infrastructure Partners, L.P., a Delaware limited partnership, was established in 2006

with over $1.1 billion under management to focus on private equity investments in

infrastructure, primarily in the U.S. and Canada. In addition to committed capital available in

its dedicated fund, CIP leads investments in partnership with its investors and affiliates.

CIP is an affiliate of Carlyle, one of the world’s largest alternative asset managers, with

approximately $159 billion under management as of March 31, 2012. Carlyle’s successful track

record and history of delivering upon our commitments has earned us a solid reputation within

the investment community. Given the relative size of our organization, we view our reputation

of fair and consistent dealings with partners, managers, our investors and sellers as being one of

our most important assets. This has proven to be a key differentiating quality in past

transactions. For more information about Carlyle, refer to http://www.carlyle.com/.

III - C. Concession Financing Plan

No grants or loans are requested from the Commonwealth or VPA. The “sources” of the

acquisition financing will likely include debt and equity, the exact ratio of which is to be

determined. In terms of “uses,” we propose to provide a substantial up-front payment to the

Commonwealth, on-going lease payments to VPA, certain local payments and expanded profit-

sharing as discussed in Section I. Additionally, the return of the tax revenues to the

Transportation Trust Fund may have a substantial value to the Commonwealth, as will the

expected capital expenditures to expand throughput. As more refined views are developed on

the valuation through due diligence, CIP will provide an update to the Commonwealth on the

financing plan.

CIP expects significant capital will be invested in the Port Facilities and, at the completion of

concession term, the Port Facilities released by CIP to the VPA in an equivalent or superior

condition. No operational or maintenance costs are to be absorbed by the Commonwealth other

than for pre-existing conditions.

III - D. Continue to Employ Local, State, or Federal Resources

No local, Commonwealth or Federal resources are anticipated to be required beyond those

typically associated with a private terminal operation. For instance, certain security services

may be contracted through a governmental entity and a local agency may act as a conduit for

the issuance of tax-exempt bonds. Moreover, we anticipate continuing to work with

governmental entities on joint projects such as channel dredging and the potential development


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of Craney Island and any expansion of the current VPA facilities. Overall, we look forward to a

public-private partnership that is beneficial to the nation and the Commonwealth.

Signature on file

Documents

Conceptual Proposal under the Public-Private