istanbul discussion paper - oecd.org · credit suisse solution partners mena has a great future...

CONFIDENTIAL

November 2006

Thoughts on PPPFinancings

Credit Suisse Solution Partners

Discussion Paperfor the OECD MENA Initiativeon Governance and Investmentfor Development


W-European experience points to trends to be expected in MENA

� W-European characterictics– Legal frameworks differ significantly from country to country– PPP sector-mix varies from country to country– PPP structures usually enhance delivery quality of large projects and services

� On budget & in time delivery– Potential drawbacks

� Higher cost of capital� Significant transaction advisory costs� Social effects

– Country patterns� Most active: UK, France, Spain, Italy, Portugal� Emerging: Germany, Scandinavia, CEE incl Russia

– Voracious appetite for assets and predictable cash-flows from infrastructure investment funds

� Barriers to development– Lack of specific legal frameworks– Complexity of government structures (e.g. federal, regional, local responsibilities)– Heterogenous political will to apply PPP structures– Intransparent procurement processes


Increasing use of PPPs across Europe

Discussion ongoing Project in procurement Many procured projects, some projects closed Substantial number of closed projects

Substantial number of closed projects, majority of them in operation

CANDIDATE &COUNTRIES

Aus

tria

Bel

gium

Den

mar

k

Finl

and

Fran

ce

Ger

man

y

Gre

ece

Irela

nd

Italy

Luxe

mbo

urg

Net

herla

nds

Nor

way

(Not

EU

)Po

rtug

al

Spai

n

Swed

en

UK

Cyp

rus

Cze

ch R

epub

lic

Esto

nia

Hun

gary

Lativ

a

Lith

uani

a

Mal

ta

Pola

nd

Slov

akia

Slov

enia

Bul

garia

Rom

ania

Turk

ey

CentralAccommodationAirports

Defence

Housing

Health & Hospitals

IT

Ports

Prisons

Heavy Railway

Light Railway

Roads

Schools

Sports & Leisure

Water & Waste Water(Incl. Solid Waste)

ACCEDINGCOUNTRIESMEMBER STATES NEW MEMBER STATES


MENA has a great future from a bank/investor perspective

� MENA/Emerging Markets– Legal and fiscal situations vary greatly– Mostly low transparency of procurement and privatisation processes– Real GDP growth of 5% p.a.+ is twice the population growth rate and hence is triggering increasing demand

for improved services and infrastructures� transport, healthcare, education, utilities

– PPP specific know-how largely with companies and institutions from outside the region – needs to beimported but each country will develop its own specific PPP model and has to create its own knowledge pool� Legal, financing, policy

– Gulf countries’ financial systems awash with liquidity from oil & gas sector, with inflows also from Central Asia– Public capital markets growing but small compared to needs and fully developed regions– Demand for Islamic investments is driving fast growth of Islamic capital market

� Capacity for corporate issues and PPPs limited – investors need education– Already about 35 private equity funds with about $5bn investment capital domiciled in and focused on MENA


But success depends on the objectives

� Valuemaximisationsubject toachieving otherobjectives

� Optimal, but notexcessively riskycapital structure

� Optimise mix ofone-off proceedsand ongoingdividends

OptimiseValue

� Invest in sufficientcapacity to meetpredicted trafficgrowth

� Clarify ongoingrole of authority inplanningprocesses

� Ensure alignmentwith customerneeds: timing,scale, cost

Investment inInfrastructure

� Development ofverticallyintegrated serviceoffering related toinfrastructure

� Focus on profitableand sustainablegrowth

� Secure sufficientfinancial flexibility

� Focusedinternationalexpansion strategy

Support BusinessStrategy

� Majority stake andcontrol remainswith the authority

� Clarify shareholderrights and role ofBoardrepresentatives

� Specific assetownership andpossible rentalterms

OngoingInfluence and

Control

PPP Process Design / Choice of Method�Strategic interests of the authority must be protected in a manner

that can be clearly communicated to and understood by investors�Long term successful solution�Minimise residual risks

� Public� Explore employee

participation� Protection of

rights� Incentive

schemes� Consider

ownershiprestrictions

Share Ownership

Credit Suisse can design a process that enables the authority to achieve its objectives, whilst also takinginto account the objectives of the Company and the requirements of the potential investors.

PPP Objectives

� Impact on:� Economy of the

region� Employment� Environment� Security & safety

� Tariffs and servicelevels toincentivise trafficgrowth

� Third party access� Public consultation

and PR

Protect the PublicInterest


Financing Trends

� New debt market technology– Senior debt that PIKs (accreting swaps)– Mega tenor (60 – 80 years)– Allows distributions to equity despite not paying current interest– Hybrids are equity for credit rating but debt for tax deduction: the perfect product

� Investors are searching for yield– Collapse in government bond yields, low IRRs– Investors must go into corporate assets as well as financial investments– Take and hold investors who need a yield but do not want to exit– IRRS can be as low as 10% for a toll road with no project risk – raises equity prices

� Returns– Primary PPPs can be financed with 20-25% equity and yielding 13-15% IRR

� Investors– Most North American pension & life insurance companies can now invest directly into unlisted assets and

infrastructure funds– Universe of specialist financial investors is growing fast: from the beginnings of Macquarie and Babcock &

Brown to 25 and more independent entities


Credit Suisse snapshot

� Premier global financial institution� Three divisions: Private Banking, Investment Banking, Asset management� Key numbers/financial information

– Market cap: $62 billion– Assets under Management: $1.15 trillion– Return on Equity: 21.7%– 63,000 employees in 26 countries and 57 locations– 150 years “young”

� Involvement in PPPs has changed its nature over time– Founded to finance the Gotthard railway tunnel through the Alps because there was no state funding– From bank financier…– To capital market oriented financier…– And infrastructure investor


Credit Suisse presence in the region

Doha

Representative office

since March 2006

Teheran

Representative office

since 1979

Istanbul

6 Professionals

Cairo

6 Professionals

Representative Office since

1978

Dubai

75 Professionals

Representative office since

1994

Branch office since May 2005

Full banking license DIFX

since January 2006

Abu Dhabi

7 Professionals


1978

Riyadh

Saudi Swiss Securities JV

2006

Beirut

5 Professionals


1999

Credit Suisse Offices

in the MENA region


Credit Suisse as infrastructure investor

� Announced on May 30 this year Global Infrastructure Partners (GIP) is a $1bn50/50 partnership between Credit Suisse and General Electric

� Combination of financial market know-how of Credit Suisse and industrial know-how of General Electric and both companies‘ global footprint and financialstrength

� The joint venture will invest world-wide in power generation and transmission, gasstorage and pipelines, water assets, airports, air traffic control, ports, railroadsand toll roads.

� Capitalisation likely to increase with identification of suitable targets� First investment was made in September 2006 together with insurance group

AIG: purchasing London City Airport (GIP‘s share: 50%)


Credit Suisse as advisor - recent sector deal highlights

Air Transport Metro Transport Sea Toll Roads

NA

Rendered a fairnessopinion to the board of

abertis on the proposedmerger with Autostrade

Ongoing

Financial Advisor

NA

Feasibility study for thestate of Illinois on the

privatization of Illinois tollroad system

Ongoing

Financial Advisor

2003

Sale of CSX’s shippingbusiness to Carlyle Group

Financial Advisor

US$300m

2006

Provided financing forMacquarie for their

acquisition of APRR,French Toll Road

Approx US$120m

SPO offering 170 millionordinary shares

representing 3.4% of thecompany

2005

Joint Bookrunner /Sole International

Bookrunner

2005

Joint Lead Manager

Macquarie InfrastructureGroup

A$675m placement

2005

Co-Lead Manager

IPO primary offering 26million ordinary shares

representing 28% of thecompany

Approx €950m

US$ 1,100m

2004

Sole Adviser on theprivatisation of MaltaFreeport - a leading

Mediterraneantransshipment terminal to

CMA-CGM

US$304m

Placement of 236,000,000ordinary shares

2003

Sole Bookrunner

Co lead manager andbookrunner for P&O’sUS$190m rights issue

2003

Sole Bookrunner

2002

Sole Advisor

Sale of Ocean Car CarrierDivision to a Consortium

US$1.5 billion

Sole Advisor

2000

Sale of 72% strategicstake to Perez y Cia

US$151m

Advising the DutchGovernment in relation to

the potential privatisation ofConnexxion Group

(Netherlands)

Ongoing

US$1,000m

Joint-Bookrunner forLaidlaw’s US$406m HY

notes and co underwriter ofits US$600m bank deal - to

finance their exit fromChp11

2003

CS advised Roadway Corpon its sale to Yellow Corp.

2003

CS acted as Co-Bookrunner for Deutsche

Bahn’s €850m 15-yr seniorunsecured bond and

€500m follow on

2003

Co-bookrunner

CS is acting as advisor tothe Dutch government on apre-IPO private placement

Ongoing

Advising the city ofChicago on the sale of

Chicago Midway Airport

Ongoing

Chicago MidwayAirport

1994

Adviser to London RegionalTransport in connection with

the disposal of LondonBuses’ 10 operating

subsidiaries

2001

Sole Bookrunner

CS was Sole Bookrunnerfor CSX Corporation’sUS$450m ConvertibleDebentures issuance

Sole Global Coordinator onthe $1bn IPO of Grupo

Aeroportuario del Pacifico

2006

2001–2002

Sole Adviser to the UKGovernment on the saleof a 46% stake in the UKair traffic control (NATS)

to a strategic investor

US$ 1,400m

US$ 2,100m

Advised the HungarianGovernment on the

privatisation of a 75-1%stake in Budapest Airport

2005

Budapest Airport

2004

Acted as sole bookrunneron the CHF500m bondissue of Zurich Airport

Zurich Airport

Sole Bookrunner


Credit Suisse was hailed as “the pre-eminent investment bank in the emergingmarkets.” The editors said, “Excellence in debt and equity business combined with asolid M&A platform means that Credit Suisse stands out from its rivals.

- Euromoney Awards for Excellence 2006

Credit Suisse: #1 Global Platform in Emerging Markets

Best Investment BankEmerging Europe

2006

#1

Best Equity HouseLatin America

2006

#1

Best Investment BankGlobal Emerging Markets

2006

#1

“it is in capital markets that the bank shines most.” In equities, Credit Suissewas ranked number one in IPOs in emerging markets globally, as well as numberone in each of the three major regions in 2005, executing landmark transactionssuch as the USD 9.2 billion IPO of China Construction Bank, acting as bookrunneron three of the five largest IPOs in Russia and dominating issuance out of Brazil.


“Credit Suisse has demonstrated its commitment to the region by leading the way inestablishing a presence in the Middle East’s capital markets”, culminating in “thebank’s most innovative equity transaction”, the €825 million exchangeable bond forWeather/Orascom Telecom in Egypt.


Best Equity HouseMiddle East

2006

#1

Best Equity HouseBrazil & Mexico

2006

#1

Best Equity HouseChina2006

#1

US$416mFollow-onJune ‘06

US$1,983mABB

April ‘06

US$795mFollow-onMarch ‘06

US$1,003mIPO

February ‘06

US$457mIPO

February ‘06

US$1,393mConvertibleJanuary ‘06

US$455mIPO

December ‘05

US$983mExchangeableFebruary ‘06

US$891mIPO

December ‘05

US$403mIPO

November ‘05

US$7,585mIPO

October ‘05

US$394mIPO

September ‘05

US$966mIPO

July ‘05

US$1,352mIPO

September ‘05

US$436mABB

June ‘05

US$422mIPO

June ‘05

PyaterochkaUS$639m

IPOMay ‘05

US$1,557mIPO

February ‘05

US$616mIPO

April ‘05

US$320mIPO

May ‘06


Consistent Project Finance LeadershipBroad Awards League Tables

Source: Dealogic Global Project Finance Review.

2003Project Finance Bond House ofthe Year

� CSFB

POS. FINANCIAL ADVISOR AMT % SHARE1 HSBC Holdings plc $12,238 11.4%2 Royal Bank of Scotland Group plc 11,734 11.0%3 Citigroup Inc 11,175 10.4%4 Societe Generale 8,990 8.4%5 Credit Suisse Group 5,468 5.1%

2005 Global Project Advisory($ in millions)

POS. BOOKRUNNER AMT % SHARE1 Citigroup $4,404 21.9%2 Goldman Sachs Group Inc 4,088 20.3%3 Lehman Brothers Holdings 2,146 10.6%4 Credit Suisse Group 946 4.7%5 Credit Agricole SA 795 3.9%

2005 Global Project Bonds($ in millions)

POS. ARRANGER AMT % SHARE1 Royal Bank of Scotland Group $6,657 6.1%2 BNP Paribas SA 5,059 4.6%3 Societe Generale 4,734 4.3%4 Credit Agricole SA 4,579 4.2%5 Credit Suisse Group 3,488 3.2%

2005 Global Project Loans($ in millions)

POS. ARRANGER AMT % SHARE1 Credit Suisse Group 2,722 12.5%2 Citigroup Inc. 2,636 12.1%3 Morgan Stanley 1,129 5.2%4 Banco Bilbao Vizcaya Argentaria SA 1,096 5.0%5 BNP Paribas SA 1,025 4.7%

2005 Americas Project Loans($ in millions)




2005Renewables Deal of the Year� Hawkeye Renewables, US$185 mm

- Euromoney- Project Financial Magazine

Merchant Deal of the Year� Boston Gen., US$800 mm

- Euromoney

EMEA Petrochemical Deal of theYear� Q Chem 2

- Euromoney

2004

North American Deal of the Year� Astoria Energy, US$700mm

- Project Finance Magazine

2003

North American Deal of the Year� FPL Energy American Wind,

US$380 mm- Project Finance Magazine- Project Finance International

Renewable Deal of the Year� FPL Energy American Wind,

US$380 mm- Project Finance Magazine

Deals of the Year

2004

Best Global Finance Bank

� CSFB

Best North American ProjectFinance Bank

� CSFB

Best Power Project Finance Bank

� CSFB


Note: As of 4/20/2006

Credit Suisse understands the financing markets for project financing - it does morefinancings than any other investment banking

Historic Dominance In Capital Markets Project FinancingsFull Credit To Lead Manager, 1992-2006 YTD

Continued Dominance In Capital Markets Project FinancingsFull Credit To Lead Manager, 2000-2006 YTD

Total Rated Projects 1992-2006 YTD

(US Dollars in millions) (US Dollars in millions)

$34,153

$8,489$9,396

$15,862$16,467

Credit Suisse Lehman Citigroup GoldmanSachs

MorganStanley

98

5137

1925

$3,979$4,720

$7,057$8,993

$15,835

35

21 14

10 4

Credit Suisse Lehman Citigroup GoldmanSachs

MorganStanley

19

98

51

2537

Credit Suisse Citigroup Lehman GoldmanSachs

MorganStanley

Note: As of 4/20/2006

Note: As of 4/12/2006

Comprehensive Financing Capabilities

2005 America’s Project Loans

$1,025

$2,722 $2,636

$1,096$1,129

Credit Suisse Citigroup MorganS l

Banco Bilbao BNP Paribas

Source: Dialogic Global Project Finance Review.

(US Dollars in millions)


Credit Suisse – widespread experience in MENA

Middle East Financing Track Record

Strong Investment Banking Franchise

Audi Investment Bank BondIssue

Joint book on MTN issueFloating Rate Note

Lead arranger on $2.4bnacquisition financing of Cell Tell

$2bn Syndicated Term LoanFacility Revolver

The State of Qatar DebutEurobond Offering

Ras Laffan LNG 2009 Sr.Secured Notes

First Public Corporate IslamicSukuk Offering from the GCC

Investcorp Preference ShareIssue

€825m Weather Exchangeableinto Orascom Telecom

2005 $891m privatisation Sultanate of Oman Airport Privatization Joint lead on IPO Advisor on $2.1bn sale of DSMpetrochemical division to SABIC

AMERICAN EXPRESS BANK EGYPT

Sale of Amex Egypt to EAB Sale of EAB to Credit Agricole& Mansour Group

Advisor on Telsim acquisition 2006 Capital Increase (Pending)

Saudi International Bank FalconIV CBO Ltd.

Privatisation of Qatar Telecom(Q-TEL)

Advisory on license acquisition

Advisory Mandate Privatisation of Taweelah A1 andA2, Abu Dhabi

Joint Bookrunneron 14 offerings since 1997


Credit Suisse Presence in Turkey

� Branch established in 1998

� Fully operational banking license

� Trading activities performed locally until

2004

� Ongoing discussion regarding the purchase

of a broker license to increase research and

sales / trading platform

� Representative office for coordinating

marketing activities and local coverage� Used as a liaison office and has no local tax

presence

� Strong presence in all product areas with

dedicated resources in Investment Banking,

Debt Capital Markets, Equities, Fixed

Income and Private Banking

� Recent key hires to strengthen Credit

Suisse’s coverage presence in Istanbul

History Today


Credit Suisse - highly experienced in TurkeyEC

M

2005

US$216 million

Initial Public Offering

Joint Bookrunner

2004

US$194 million

Efes BreweriesInternational NV

Initial Public Offering

Lead Manager

2005

Advisor to Telefonicain the Turk Telekom

Privatisation

2000

US$286 million

Secondary Offering

Global Co-ordinator

1998

US$55 million

Secondary Offering

Co-lead Manager

1998

US$250 million

Securitisation ofInternational Credit

Card VoucherReceivables

Lead Manager

1997

US$115 million

Secondary Offering

Lead Manager

1998

US$651 million

Privatisation Offering

Co-lead Manager

1998

US$651 million

Privatisation Offering

Co-lead Manager

2006

US$275 million

IPOSole Global

Coordinator & SoleBookrunner

Adv

isor

y

2005

US$276 million

Advisor to Coca ColaIcecek Turkey in itsacquisition of a 51%stake in Efes Invest

Credit Suisse advisedBanca Intesa on the

Disbank process

2005

Credit Suisse advisedTemasek on the

Yapi Kredi process

2005

Credit Suisse advisedNational Bank of

Greece on the Garantiprocess

2005

€275 million

Advising UniCredit andKoç Group´s JV in theacquisition of c.7.3%Yapi Credit Minorities

20062006

Advisor to NationalBank of Greece

in the acquisition of46% of

Finansbank

US$2,774 million

2006

Credit Suisse advisedNational Bank ofGreece on the

Denizbank process

US$2,440 million

2006

Advisor to Kocbank onits merger with Yapi

Kredi

US$4.600 million


DISCLAIMER

This document was produced by and the opinions expressed are those of CREDIT SUISSEas of the date of writing and are subject to change. It has been prepared solely forinformation purposes and for the use of the recipient. It does not constitute an offer or aninvitation by or on behalf of CREDIT SUISSE to any person to buy or sell any security. Anyreference to past performance is not necessarily a guide to the future. The information andanalysis contained in this publication have been compiled or arrived at from sourcesbelieved to be reliable but CREDIT SUISSE does not make any representation as to theiraccuracy or completeness and does not accept liability for any loss arising from the usehereof. The issuer of the securities referred herein or a CREDIT SUISSE GROUP companymay have acted upon the information and analysis contained in this publication before beingmade available to clients of CREDIT SUISSE. A CREDIT SUISSE GROUP company may,to the extent permitted by law, participate or invest in other financing transactions with theissuer of the securities referred herein, perform services or solicit business from suchissuers, and/or have a position or effect transactions in the securities or options thereof.

Neither this document nor any copy thereof may be sent to or taken into the United Statesor distributed in the United States or to a US person, in certain other jurisdictions thedistribution may be restricted by local law or regulation.

This document may not be reproduced either in whole, or in part, without the writtenpermission of CREDIT SUISSE. © 2006 CREDIT SUISSE

istanbul discussion paper - oecd.org · credit suisse solution partners mena has a great future...

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