Procuring, Awarding & Financing the PPP Pipeline

Presentation by Brian Murphy

Chief Executive, NDFA Financing Irish Infrastructure

PPP Bulletin Conference

Conrad Hotel

Dublin, 19th November 2014

1

Agenda

• NDFA – Briefly, who are we? • Economic Backdrop • Stimulus Package & Pipeline • Programme – Delivery of Timelines &

Milestones • Challenges & Opportunities • Experience to date

2

Economic Backdrop: Investment grade Credit ratings

3

Economic Backdrop Gross Government debt stabilised at 123% of GDP in 2013

37.2

63.6

79.0 87.8

92.0

62.2

87.4

111.1

121.7 123.3

110.5 108.5 104.0

0

20

40

60

80

100

120

140

2009 2010 2011 2012 2013 2014F 2015F 2016F

Net Debt Cash balances/other liquid assets GG Debt

Source: CSO

4

Economic Backdrop Nominal GDP (€bn) forecasted to exceed pre-crisis peak in 2016

5.2% 5.3% 5.1%

0

50

100

150

200

250

Source: Department of Finance (Budget 2015)

5

Economic Backdrop 100% of 2014 funding completed, after first bond auctions in 3.5 years

Bank losses on NAMA haircuts,

rising ELA & Deauville Agreement

EU/IMF Programme

PCAR results

Moody's downgrade

EU/IMF loan rate reduction

LTRO announced by ECB

EU summit commitment

& NTMA issuance recommences

NTMA returns with syndicated bond deals

EU/IMF Programme Exit

1.76

0

5

10

15

20

25

Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 1410 Year 2 Year

OMT announced

Ireland issued €4.25bn across 5 auctions, each at a new record low 10-year yield: March (2.97%); April (2.92%); May (2.73%); July (2.31%) & Oct (1.63%)

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NDFA – Who are we?

• National Treasury Management Agency (NTMA) – Ireland’s National Debt Office

• National Development Finance Agency – One of 6 Business Units under the NTMA umbrella

• NDFA is one of a portfolio of finance/commercial activities

• Also New Era¹, NPRF/ISIF², NAMA³, State Claims Agency

• 1 NewEra – Shareholder Executive

• 2 NPRF – Pension/Asset Management, being restructured as ISIF

• 3 NAMA – ‘Bad’ Bank workout unit

7

Stimulus Package

• July 2012

• In response to Weak domestic economy Social Infrastructure deficits

• Policy Response constrained

• €2.25 billion including €1.40 billion in PPP projects – off balance sheet

8

PIPELINE

Education – 3 Projects

Health – 1 Project Justice – 1 Project Roads (NRA) – 4

Projects

9

DIT Grangegorman

Wexford Courthouse

Successful PPP track record in Ireland

• Historic 10 major inter-urban motorways/by-passes 6 education PPPs, including 23 schools International Convention Centre Major criminal courts complex Motorway Services Stations contract

• And more recently…. N17/18 (April 2014), Dublin Waste to Energy (Financial close September 2014)

Constraints in 2012

• Balance Sheet/Affordability

• Recent PPP History/Reputation

• Stakeholder/Market Reluctance

• IMF/Troika Agreement

• Construction Industry/Deliverability

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Response

• Listened to Market Concerns

• Approved Market Activation Measures

• Off Balance Sheet

• Reduce Bid Costs / Bid Timelines

• Reimbursement of Bid Costs (accommodation projects)

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Year 2014 2015 2016 2017 Contract Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Schools -SB3

Schools - SB4

Schools - SB5

Primary Care

GDA-DIT

Courts PPP

Roads

N17/N18

N25

M11

Service Areas

Prequal stage PT/Funding/award Construction Handback Period

Status of Current PPP pipeline – November 2014

Operational Support Tender stage

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Challenges/Opportunities

• Funding – transformation in appetite for Irish Assets

• Construction Sector – recovering but sector much smaller than 6 years ago

• Supply Chain Challenges

• Program providing financing , equity, and construction and supply chain (JV) opportunities

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Who is bidding?

PROJECT NAME EXPRESSIONS OF INTEREST SHORT LISTED

SCHOOLS – SB4 & SB5 6 3

GDA – DIT 5 3

COURTS PPP 5 4

PRIMARY CARE 4 3

N17/N18 7 4*

N25 5 4

M11 3 3

SERVICE AREAS 4 4 *BAFO for 2 subsequently held

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Future Developments

• Review of multiannual Government CAPEX to cover the period 2015-2019/20 well advanced

• Government have made it clear private capital has a critical part to play

• In education and health, demographics strongly underpin the need for social infrastructure – areas where PPPs have a good track record

• Recent budget announced €300m in Social Housing as part of as a €2.2bn PPP Programme

• NEW EU Commission on an EU Stimulus is encouraging

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Conclusion

• We have a healthy pipeline – future is bright

• Demographics underpin need in Housing, Health & Education

• While Government balance sheet constrained, opportunities for private capital

• Trend & Prognosis positive

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