FIDIC Centenary ConferenceProject Finance Workshop

Date: September 2013

2

Overview of the greenfield infrastructure finance marketAvailability of new products gathering pace in Europe

• Currently there is limited long term bank debt liquidity, with many banks only providing short-term maturities (although some long term liquidity does still exist for certain clients which may be sufficient for smaller projects).

• In Europe, EU / governments are encouraging pension and fund management companies to participate in the funding of infrastructure projects.

• New structures are emerging as a result of bank market constraints and various governmental infrastructure initiatives

• First project bonds have closed in the UK, France and Spain over the last months

• Infrastructure financing In the emerging markets remains dominated by development banks, multilaterals institutions and commercial banks under export credit agencies insurance cover

Funding and credit markets have suffered

a period of extreme dislocation over the

last few years leading to great uncertainty in

respect of capacity and price

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Global project finance trends

Global Project Finance transaction volumes$bn

255203

275320

249

0

50

100

150

200

250

300

350

400

450

2008 2009 2010 2011 2012

0

100

200

300

400

500600

700

800

900

1,000

Q3 Loan Bond Equity # of projects

# of projects

290 325

357 408

(?)

11360

100 10560

62100

120 130

120

9570

70107

60

5550

65

60

20

0

50

100

150

200

250

300

350

400

450

2008 2009 2010 2011 3Q 2012

0

100

200

300

400

500

600

700

800

900

1,000

Europe Asia Americas MENA # of projects

(?)

$bn # of projects

Transaction volumes by region

YE Q3 YE Q3 YE Q3 YE Q3 YE Q3

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Bank debt still the preferred route

4

Greenfield finance structures in EuropeNeed to adapt bank model and favour alternative funding options

Traditional long-term bank debt continues to be the

source of finance for legacy deals closing now

And a number of funding options have emerged to support the more limited

bank debt that is currently available

Structure Types Examples

Bank debt

- International

- Domestic

• Long-term amortising debt of 20+ years

• “Soft” mini-perm (cash sweeps, large margin step ups)

• “Hard” mini-perm

• Bank debt bridge to bond

• PFI standard, French & Dutch PPP

• M25, Manchester waste, A41

• Utilities / brownfield / trains

Government Co-Lending

• All funding from financial close

• Bank construction debt facility take-out

• Completion payment

• Partial underpinning

• Direct funding

• French rail projects

• Dutch Milestone Payment

• Buckinghamshire waste

• Tyne Tunnel

• M25, FSTA, LUL

• Manchester waste (TIFU & WDA)

Project Bond

• Public listed bond

• Private placements

• With our without credit enhancement (PCBE)

• Direct lending

• Castor

• N33 in the Netherlands

• Cité Musicale in France

• Several PFI in the UK

Multilaterals / ECA

• EIB / EBRD

• IFC in emerging Europe

• ECAs

• EIB has lent to most TEN-T / TEN-E projects

• IEP in the UK

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5

Greenfield finance structures in the emerging marketsProject finance is still driven by the Multilaterals and the ECAs

In most cases, commercial banks appetite will be

maximized with adequate ECA / PRI cover

Structure Types Examples

Multilaterals / DFI

• Direct lending up to a percentage of the project costs

• Take project risk

• USD funding is the preferred route

• A/B loans

• IFC

• EIB

• EBRD

• Proparco / DEG / FMO

Regional / national development banks

• Domestic / regional focus

• Usually provide local currency financing

• Direct lending

• ADB

• IADB

• IDB

• BNDES / BANOBRAS

• IDC /DBSA

Export credit

Cover

• ECA covered commercial facility

• 100% political risk and a significant portion of commercial risk

• Europe: HERMES, COFACE, SACE, etc..

• Asia: NEXI, KSURE, etc…

• South Africa: ECIC

• US EXIM

Export Credit

Direct Lending

• Some ECAs can propose direct funding in addition to insurance cover

• JBIC

• KEXIM

PRI Providers• Insurance product offering commercial banks a

100% political risk cover

• MIGA

• Private insurersRESTRICTED

6

Europe 2020 Project Bond Initiative

On 28th February 2011, the European

Commission launched a public consultation on

the "Europe 2020 Project Bond Initiative"

The Initiative’s objective is to help the private

project companies to attract capital market

funding from investors such as pension funds

and insurance companies

The Europe 2020 Project Bond initiative has been identified in

the Annual Growth Survey as a priority

measure to enhance growth

The “Need”

• Massive investment volumes are needed in order to develop “smart, upgradedand fully interconnected infrastructures” which will foster the completion of theEU internal market

• Over the next decade EU/EC/EIB estimate Euro 1.5 to 2 trillion ofinvestments for TEN-T Networks, Energy and Information and Communicationtechnologies

• In the transport area, the assessment of the Member States reveals that aroundEuro 21.5 billion per year is needed in the post-2013 period to removesignificant bottlenecks, construct missing cross-border links, and interconnecttransport modes

EU 2020 PB Initiative

“The Project Bond Initiative should provide EU support to private "projectpromoters" issuing bonds to finance in particular infrastructure projects. Thisshould help them attracting capital market financing from institutional investors.”

Source: EU - Consultation on "Europe 2020 Project Bonds" to fund infrastructure / Press Release

Severe constraints on Government Budgets…

Capital Markets / Institutional

Investors

Increased regulatory capital requirements especially for

banks…

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Europe 2020 Project Bond Initiative (cont’d)

The consultation was open for comments

from 28th February to 2 May 2011

EU Commission allocated a 224m€ to

enhance c. 4.4bn€infrastructure debt for

pilote projects until new budget

Following the completion of an impact

assessment, the Commission voted the budget supporting the implementation of the

Europe 2020 project Bond Initiative

First project closed in August 2013

Main features of the Project Bond Initiative

Aim • Attracting capital market financing from institutional investors

EC/EIB Role • Absorbing part of the project risk by uplifting the rating of senior bonds

Availability

• Capped

• Assessment of economical / technical feasibility

• Assessment of cost-effectiveness

• Prospect of financial viability

Europe 2020 Project Bond Initiative

• The European Commission and the European Investment Bank launched early 2011 public consultation into the “Europe 2020 Project Bond Initiative”. EU budget (2014-2020) was recently voted with specific measures to support infrastructure including the project bond initiative

• This initiative is designed to stimulate projects bonds by improving the ratings of senior debt with the EC and EIB absorbing part of the risk of a project

• The intention is to focus on transport (TEN-T) and energy (TEN-E) projects and could also support, under certain conditions, refinancing efforts of infrastructure projects currently under construction

• The proposal is not designed to replace historic monoline structures. The initiative will consist of:

– Targeting a rating up-lift to ‘A’ range (rather than AAA under the historic monoline model)

– Credit enhancement will be achieved via subordinated loans or subordinated liquidity facili ty (maximum 20% of the total bond funding of an individual project)

– The EIB may also be prepared to act as controlling creditor

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8

Government support for infrastructure financingInfrastructure United Kingdom

Infrastructure United Kingdom

• . Infrastructure UK (IUK) is a 60 strong unit within UK Treasury with a core remit to:

– Provide greater clarity and coordination over the planning, prioritization and enabling of investment in UK infrastructure

– Improve delivery of UK infrastructure through achieving greater value for money

• Key initiatives include:– A National Infrastructure Plan, setting out UK Government strategy in key areas

– A UK Guarantees scheme to enable funding into infrastructure projects in the UK

– Working with the pension industry to develop infrastructure investment models

– Updating the PPP/PFI model to PF2 to capture developing best practice

– Delivery team support on a small number of identified major projects

– Cost efficiency initiatives on existing and future infrastructure projects

– Working to support inward investment in UK infrastructure

IUK was established in 2010 and works the

strategic level within the UK government to

support departmental delivery teams

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UK guarantees schemeOverview

• HM Treasury’s UK Guarantees Scheme seeks to make use of the UK Government’s balance sheet to accelerate major infrastructure development

• Overriding focus is on improving deliverability, rather than value for money, with the objective being to kick start critical projects that may have stalled because of adverse credit conditions

• Projects must be of national importance and are subject to key qualification criteria

• Guarantees are only one option. The form of the support will vary with the requirements of individual projects but could include:

– Direct funding

– Contingent support

– Explicit wraps or guarantees

• Sectors and possible candidate projects include:

– Transport: Crossrail Rolling Stock PPP, Mersey Gateway Bridge

– Utilities: Thames Tideway Tunnel

– Energy: UK Green Deal

– Communications

– Accommodation

• First deal in the form of £75m guaranteed debt for the coal-to-biomass conversion of Drax coal-fired power station

HM Treasury announced the UK Guarantees

scheme in July 2012

To establish the product, it is initially being made

available to projects that could also be funded

commercially

The strategic long-term intention is to focus on

projects that are not able to access funding

without support

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HSBC Project & Export Finance

11

HSBC Experience and Credentials A Global Leader in Project Finance

HSBC has a record of sustained success over many years in Project Finance and Export Finance. This on-going high performance is evidenced by HSBC being ranked highly in various 2012 league tables

HSBC has also won numerous industry awards for excellence demonstrating our consistent ability to deliver

Global - PF Advisory

# Company USDbn Deals

1 State Bank of India 20.1 48

2 Credit Agricole CIB 17.9 4

3 Mizuho 17.4 2

4 RBS 16.8 5

5 HSBC 11.9 20

6 RBC 7.4 10

7 Korea Dvpt Bank 6.9 23

8 Societe Generale 6.9 2

9 Rothschild 6.8 4

10 Macquarie 6.8 17

Middle East & Africa - Arranging

# Company USDM Deals

1 HSBC 1,901 13

2 State Bank of India 1,897 4

3 IDBI Bank 1,196 2

4 BNP Paribas 1,093 7

5 Masraf Al Rayan QSC 1,000 1

6 Barclays 945 10

7 National Commercial 882 4

8 Standard Bank 855 5

9 Standard Chartered 841 7

10 Societe Generale 752 6

Global - Arranging

# Company USDbn Deals

1 State Bank of India 16.3 58

2 Mitsubishi UFJ 14.8 117

3 SMBC 9.1 80

4 Mizuho 8.1 62

5 HSBC 7.5 63

6 Korea Dvpt Bank 6.2 33

7 BoA Merrill Lynch 4.8 19

8 Credit Agricole CIB 4.6 43

9 BNP Paribas 4.4 51

10 China Dvpt Bank Corp 4.2 8

Source: Dealogic Source: Dealogic Source: Dealogic

Global Advisor of the Year2011

Most Innovative Bank for Infrastructure & Project Finance2009 , 2010, 2011

emeafinance

Oil & Gas Financial Advisor of the Year2012

Best Project Finance House2010Best Project Finance Advisor2008, 2009, 2010

PFI Awards 2012: Deal Awards• Americas Deal of the Year: Sabine Pass LNG• Asia Pacific Oil & Gas Deal of the Year: APLNG• Asia-Pacific Deal of the Year: Ichthys LNG• Middle East & Africa Energy Deal of the Year: Tamar• Middle East & Africa Petrochemical Deal of the Year: Egyptian

Refinery Company

Project Finance 2012: Deals of the Year• Asia-Pacific Multisource Deal of the Year - Ichthys• Asia-Pacific Oil & Gas Deal of the Year – APLNG• African Oil & Gas Deal of the Year – NNPC / ExxonMobil• EMEA Oil & Gas Deal of the Year – Tamar• Middle East Petrochemicals Deal of the Year – Jubail Acrylics

Power Financial Advisor of the Year2012

Best Project Finance Bank in Africa -2013

Best Project Finance House in Middle East and Latin America – 2012

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HSBC Experience and Credentials Market leading position in ECA financing

MLAs European ECA financing 2012

# Company USDm Deals

1 HSBC 1,693 11

2 DNB Bank ASA 986 9

3 Santander 902 4

4 Citi 800 7

5 ING 702 6

6 Credit Suisse 551 3

7 SMBC 512 4

8 Mitsubishi UFJ 508 7

9 Mizuho 267 2

10 Nordea Markets 244 3

MLAs Global ECA financing 2012

# Company USDbn Deals

1 Mitsubishi UFJ 9.4 59

2 HSBC 8.3 74

3 JPMorgan 6.2 33

4 Sumitomo Mitsui 5.0 56

5 Mizuho 5.0 45

6 Citi 4.8 36

7 ING 4.2 26

8 Deutsche Bank 3.4 32

9 Santander 3.3 25

10 BNP Paribas 3.2 39

Best Global Export Finance

Bank2011

Best Export Finance Arranger

In Asia-Pacific2012

Best Export Finance Bank in

Asia-Pacific2012

MLAs Middle East & Africa ECA financing 2012

# Company USDm Deals

1 JP Morgan 1,564 5

2 BNP Paribas 1,508 12

3 HSBC 1,388 10

4 Mitsubishi UFJ 684 4

5 Citi 565 5

6 ING 557 2

7 Societe Generale 428 7

8 Deutsche Bank 333 7

9 Standard Chartered 279 4

10 SMBC 266 2Best Export

Finance Bank Asia-Pacific

2011

HSBC has a record of sustained success over many

years in Export Finance. In 2012 HSBC ranked number

two globally after arranging 74 individual ECA-transactions totalling USD 8.3 billion and

capturing a 7.3% market share

HSBC has been ranked top MLAs in both Europe,

Middle East & Africa and for JBIC deals

Source: Dealogic 2012

MLA JBIC financing 2012

# Company USDm Deals

1 Mitsubishi UFJ Financial Group 3,738 19

2 Mizuho Financial Group 1,581 12

3 Sumitomo Mitsui Financial Group 912 9

4 HSBC 258 2

5 Citi 251 2

6 Uni Credit 218 1

6 Sumitomo Mitsui Trust Holdings 218 1

6 Standard Chartered Bank 218 1

6 Shinsei Securities 218 1

6 SG Corporate & Investment Bank 218 1

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13

Why HSBC?Timeline of HSBC Project & Export Finance success in 2012-2013

May 2012

Sydney Desalination Plant

AUD 1.64 billion Syndicate Facility

.

MLA, Hedge Provider and Pre-Financial Close Swap Arranger

September 2012

Dart Energy

USD 100m Senior Secured RBL FacilitySingapore

Sole Arranger / Structuring Bank

October 2012

Madinah Airport Project

USD 1.1 billionSaudi Arabia

Mandated Lead Arranger, Traffic, Technical, Environmental and Modeling Bank, Working Capital Facility Provider, and Hedge Coordinator

August 2012

InkiaCerro del Aguila

USD 534 millionFinancing of a 504 MW net hydroelectric facility in PeruPeru

Joint Mandated Arranger

July 2012

Kimanis Power SdnBhd

MYR 1.48 billionMalaysia

Sole Coordinating Bank, Joint Lead Arranger, Joint Lead Manager, Joint Shariah Advisor and Hedge Provider

July 2012

Intercity Express Trains

GBP 2.4 bnUK

Financial Advisor, MLA, Swap Execution and Account Bank

June 2012

Lundin Petroleum

7 year Amortising RBL FacilityUSD2.5 billionEurope, Asia

MLA, Documentation Bank, Hedging Bank, Bookrunner

November 2012

Bhakrani Wind Farm Project

USD 80 millionIndia

Structuring Bank, Mandated Lead Arranger, Hedge Provider, Account Bank, IntercreditorAgent, Facility Agent, LC Provider

September 2012

MXN 8,125 mm

15-yr Fixed Rate &20-yr Real Fixed RateMexico

Joint Structuring Agent& Bookrunner

May 2012

USD 1.9 billion

Integrated Acrylates ComplexUAE

Financial Advisor, Mandated Lead Arranger, Onshore and Offshore Account Bank, Offshore Security Agent, and Hedge Bank

June 2012

Egyptian Refinery Company

USD 3.7 billionEgypt

Pathfinder Bank,Mandated Lead Arranger, Hedging Counterparty and Offshore Account Bank

July 2012

Sabine Pass LNG regasification terminal

USD 3,600 millionUSA

JLA, Bookrunner , Hedge Provider, and Documentation Bank

September 2012

Carrington PowerFinancing of 884MW CCGT

GBP434mUK

MLA, ECA Agent, Account Bank, Hedging Bank

August 2012

EnerjiSA TufanbeyliPower Project

EUR750mTurkey

MLA

May 2012

USD8.5 billion

Project Finance FacilitiesAustralia

Mandated Lead Arrancer

January 2013

Advised CDPQ on the investment in a portfolio of approximately 1,500 MWs of operating wind farms

USD500m

Exclusive Financial Advisor

April 2013

Buckinghamshire Waste PPPWaste from Energy Plant

GBP 223mUnited Kingdom

Financial AdvisorMandated Lead ArrangerFacility AgentSecurity Trustee Hedging Bank

March 2013

CochraneFinancing for a 472MW coal-fired power project

USD 1,055m

Chile

Mandated Lead Arranger

January 2013

Takoradi IPP330MW gas fired

USD440m

Ghana

Financial Advisor

December 2012

Integrated petrochemical complex

USD 3,200 millionMexico

B Loan MLA, SACE Facility Lender, Hedge Provider, Interest Rate Swap Co-coordinator, Cross Currency Swap Sole Coordinator

January 2013

Expansion financing of the CPC crude oil pipeline

USD 500mRussia

MLA/Bookrunner

February 2013

USD 300m

300MW TarfayaWind Project

Morocco

Financial Adviser

May 12 Jun 12 Aug 12 Sep 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13Oct 12Jul 12

March 2012

270 MW Lincs offshore wind farm

GBP1,000mUK

Coordinating Bank, MLA

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14

Disclaimer

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