Catalysing Institutional Investment in Climate-Resilient Infrastructure

GIB Summit

May 2014

PwC

Our PwC Capital Projects and Infrastructure team

800 infrastructure projects being worked on

c.USD 175bn project finance deals

closed in 10 years

c.1000 professionals across the global network

PwC

Which CP&I sectors do we work in?

Our clients are typically in the following sectors but can be in any sector where a large scale investment is being considered or undertaken.

Energy

Government

Mining

Utilities

Mega-events

Transportation

Social infrastructure

Healthcare

Communications

PwC

What services do we provide to clients?CP&I serves the full project value chain for ownersand investors

The asset lifecycle

Strategic planning

Project planning

Project due diligence

Procurement Project finance

Asset operations and maintenance

Project execution and commissioning

• Market assessment

• Economic analysis

• Business case analysis

• Political assessment

• Organizational assessment

• Stakeholder management

• Dispute avoidance strategy

• Feasibility analysis

• Environmental assessment

• Regulatory strategy and assessment

• Schedule Analysis

• Business case analysis including capital investment

• Value analysis• Project risk

assessmentand analysis

• Project controls and risk analysis

• Financial assessment

• Financial risk analysis

• Procurement strategy

• Procurement/delivery modeling

• Contract packaging

• Strategy• Project

qualifications

• Finance raising and structuring

• Financial modeling

• Valuation• Acquisitions

and divestitures

• Deal structuring

• Risk distribution and allocation modelling

• Tax considerations

• Asset optimization

• Productivity improvement

• Financial management

• Compliance, reporting and tax

• Divestitures• Dispute

assistance• Refinancing

• Project management

• Project governance

• Project evaluation and reporting

• Start-up assessment

• Project close-out

• Post project audit

PwC

Our record over the last decadeProject Finance International – Global closed deals

Global by number of closed deals for 10 years to 2013Rank Adviser No. of

dealsValue

$’m

1 PwC 325 99,9862 Ernst & Young 251 68,9433 KPMG 156 57,4744 Macquarie 152 82,0495 HSBC 110 100,6826 Grant Thornton 99 10,4177 BNP Paribas 63 49,5888 SBI Capital 59 38,1609 Royal Bank of Canada 58 26,56610 Citigroup 45 46,287

Rank Adviser Value$’m

No. of deals

1 HSBC 100,682 1102 PwC 99,986 3253 Macquarie 82,049 1524 Royal Bank of Scotland 78,593 325 Ernst & Young 68,943 2516 Credit Agricole 58,336 97 KPMG 57,474 1568 SG 53,112 379 BNP Paribas 49,588 6310 Mizuho 48,811 13

Global by value of closed deals for 10 years to 2013

globally with 325 closed deals for 10 yrs ending December 2013

1st globally with closed deals value of

$99,986m for 10 yrs ending December 2013

2n

d

Source: PwC calculations based on Project Finance International, January 2014 Source: PwC calculations based on Project Finance International, January 2014

* excludes ineligible deals under the $20m threshold

PwC

Market leading thought leadership

July 20136

Issues pieces on disaster resilience and alternative financing trends

Industry pieces on transport, energy & capital projects

Future pieces on: global infrastructure market sizing with Oxford Economics,

dispute resolution & national infrastructure plans

Series on infra development in emerging markets

PwC

Trend: We think the financing source for infrastructure will increasingly transition from bank debt to institutional investors. But governments and project sponsors need to gain a clearer understanding the prerequisites needed for such a market to take root

There is a major need for large-scaleinfrastructure projects around the world.

Capital markets’ and institutional investors’ involvement in financing infrastructureprojects will steadily increase.

There remains a great deal of confusion among both governments and project sponsors abouthow best to access financing for infrastructure projects.

Demand for large-scale investment hasbeen complicated by the fiscal constraintsin many countries

The challenge is finding innovative ways for value-adding infrastructure to be funded and financed in a manner that is sustainable for both governments and infrastructure users.

Project bonds and non-bank lending could provide a flow of suitable highly rated assets directto pension plans and life insurancecompanies.Increasingly investors are showing willingness to take on construction / greenfield projects. Financing is still relatively

new and tied to the specific conditionswithin individual markets.

The key issue is structuring and fundingprojects to a level where they becomeFinanceable / bankable

+ -

PwC

Reasons that many infrastructure projects are currently delayed, especially in emerging markets

Required actions by governments and project sponsors

Major roadblocks

for infrastructu

re developmen

t

Land acqui-sition

Political &

regulatory risks

Value propo-sition

Revenue and

operating risks

• improvement of the political, legal and financial environment

• closing of the talent gap

• infuse leading practices in every phase of the lifecycle of their investments

• build transaction capacity

• public sector, private sector and multilateral banks have to work closely together

• long term planning and prioritisation of projects

PwC

Main issues & lessons learned to attract institutional investors (e.g. pension funds)

It is unlikely that pension funds will invest until key obstacles are overcome

Infrastructure still regarded as a specialist investment

Pension trustees & investment advisors are often not investment experts

Failure to promote the infrastructure proposition

Lack of reliable business models and business plans

Miss-match between geographic location of funds and infrastructure opportunities

Regulations & inflexible investment policies

Illiquidity of infrastructure projects vs immediate need for yield

Capital markets (e.g. infrastructure bonds or specialised infrastructure funds) can help fill the long-term

financing GAP

• Strong and transparent political and legal framework

• Develop programs with prioritized investment opportunities

• Develop transaction skills

• Improve governance and transparency in financial reporting

• Balanced tax and commercial policies

• Understanding investor appetite, development of sectoral and geographic focus

• Development of new sources and vehicles for private finance

Developing a functioning market

PwC

Market conditions for infrastructure bonds

Relative feasibility and attractiveness of financing infrastructure projects through the capital markets.