Skanska's Infrastructure P3 Projects and Public-Private Partnerships

1. Skanska and Public-Private Partnerships Sam Headon, Commercial/Legal Director

2. Contents • Skanska’s I-4 Ultimate P3, Florida’s largest transport project • About Skanska • P3s for Infrastructure • P3 Structure • Contracting into a P3 • Questions

3. Skanska • Founded 1887 • Top 10 global construction co. • Construction and Development • US and Europe • 43,000+ employees • $18 billion revenue (2015) • Sustainability focused • Listed on Nasdaq OMX • Fortune 500 & UN Global Compact

4. Skanska Infrastructure Development • Daily pre-task planning occurs at all Skanska jobsites • 100+ employees • P3s: US, UK, Nordics • Develop, bid, close, operate P3 projects • 33 projects • Current portfolio 9 projects • Roads, hospitals, schools, airports • www.skanska.com/ppp

5. Skanska ID in the US • Top growth market • Active in about 10 states • Headquartered in Alexandria, VA • Diverse team of 40 • Projects: • Elizabeth River Tunnels • I-4 Ultimate • LaGuardia Central Skanska’s Elizabeth River Tunnels Project

6. Skanska’s P3 lifecycle • Develop and invest in projects in our home markets • Add value by experienced operational managementand financial engineering • Divest our mature assets at the right time Asset mgmt. Project Development Divestment Identify Qualify Bid Close Own Exit

7. LaGuardia Central New York City Port Authority of NY & NJ New central terminal, central hall, parking garage, supporting infrastructure $4 B construction value 2016 Financial Close 6 year construction 35 year concession Equity: Skanska, Meridiam, Vantage Construction: Skanska, Walsh Market risk Skanska’s LaGuardia Central Project

8. Public Private Partnerships: What is it?

9. US Market Drivers • TrumpInfrastructure Policies • US infrastructure graded D+ • $3.6 trillion needed by 2020 to maintain existing infrastructure • Large budget deficits • PPP model becoming more accepted as one way to procure infrastructure services Governor Cuomo groundbreaking of LaGuardia Central

10. P3 for Infrastructure • Partnership – shared responsibility … a government venture which is funded and operated through a partnership of government and private sector companies • Public maintains ownership • Long-term contractual relationship / provide public service • Assume financial, technical and/or operational risk in the project • Non-recourse project finance • Long term revenue stream: user fees, shadow tolls • Availability or market risk • Remember: “One Tool in the Toolbox” • DBFOM: Design-Build-Finance-Operate-Maintain

11. Benefits of PPP (DBFOM) • An Alternate Delivery Method • Cost Reduction • Risk Transfer • Accountability/Innovation • Investor Incentives/Efficiency Skanska’s I-4 Ultimate has achieved the highest Envision sustainability ranking

12. Risk Transfer • Skanska’s Elizabeth River Tunnels Project Example of areas in which the private sector typically accepts project risks Financing Financing Permits Permits Program Program Force Majeure Force Majeure Organization Organization Design Design Construction Construction O&M O&M Availability Availability

13. “Infra P3 - 10 Commandments” • Party best able to manage specific risks should assume such risks • Money spent now is more valuable • Single Point Accountability • Documents must fit together • Sponsors must be “patient capital” • Client Owners, Lenders’ enable, Equity risk/return • Multi-Party Oversight • Limited recourse financing • Lenders’ debt is not guaranteed • How do you win: Design, Schedule, Risk

14. Public Private Partnerships: How does it work? Skanska’s New Karolinska Solna is the world’s largest hospital P3

15. P3 Structure Customer/Users Public Entity Concession Agreement Payment for services Skanska ID Special Purpose Company Lenders Partner(s) Designer, Contractor and Supplier Operator and Maintenance Sub

16. Rating Agencies Lenders’ Advisors PUBLIC CLIENT Sponsor Advisors Direct Agreement P3 Agreement Direct Agreement Direct Agreement Consulting Engagements Consulting Engagement EQUITY DEBT TIFIA, PABs, short-term bank loans SPC Senior Financing Documents Equity Documents Parent Company Guaranty EPC JV Parents Parent Company Guaranty EPC Contract O&M JV Parents O&M Contract EPC JV Agreement Cross-indemnities Interface Agreement PCGs Design-Build Contractor (JV) O&M Provider(s) O&M JV Agreement Key Consultants Consulting Agreement Supply Contract Design-Build Contract O&M Support Contract Civil Subcontractors OEM Supplier PCGs Professional Services Agreement Design Agreement Design Subs Lead Designer CJV Agreement Cross-indemnities

17. Flow Down of Risk • Design-Build Contract “back-to-back” with Project Agreement • obligations and liabilities assumed by Design-Builder • Design-Builder to recognize rights of the Client (for example, right of the Client to inspect work, approval rights and right of access to project site) • Rights available to Design-Builder only to extent received by Developer under the Project Agreement • Note: Lender performance security requirements key driver

18. Project Finance Sources

19. Financing P3 Projects • Recent Toll Risk Revenue Deal in the market • P3 Capital Structure ~13% ~3% ~6% N/A Skanska ID - Confidential

20. Two compensation models

21. Key Criteria for Successful P3 • Enabling legislation • Political will, stakeholder support • Budget for upfront costs • Expertise of client, advisors • Clear standards of evaluation • Long-term vision • Environmental & Sustainability • Quality/Price Skanska has developed more than 40 schools in the UK via public-private partnerships.

22. Contracting Into a P3

23. P3 Structure Customer/Users Potential Client Public Entity Concession Agreement Payment for services Skanska ID Special Purpose Company Lenders Partner(s) Designer, Contractor and Supplier Operator and Maintenance Sub Potential Client

24. When are services performed? • Develop Period: Owner/Owner Project Engineer • Qualify/Bid Period: Owner/CJV • Construct Period: CJV • Construct/Operate Period: CJV • Exit: New Owners – Secondary Market Due Diligence? Asset mgmt. Project Development Divestment Develop Qualify Bid Construct Operate Exit

25. Survey Engineers’ Value • Private and public partners engage survey engineers • Owner • Measurement of elevations and distances; key to Owner’s preliminary engineering, technical feasibility, unique project needs. • Design and construction • Design – key influence to design – • Construction - determining important boundary points through pre-construction and construction site. • Determine best materials and construction techniques that should be used for that specific project

26. Next Steps: How do I get involved? • Qualified subcontractors are integral to P3 delivery • Follow the pipeline • Sponsors/CJV provide forums • Direct solicitation • Understand potential work areas • Become qualified, registered subcontractor • MWBE firms first • Engage with teams • Project Survey Lead, Construction Manager or Procurement Department • Competitively bid your services

27. Public Private Partnerships: Opportunities

28. Growth Areas and Opportunities • Skanska’s Elizabeth River Tunnels new immersed tunnel • More US-based contractors getting involved in PPP • Competition growing • Availability payment trend continues, with increasing client funding • Increasing interest in design-build-finance projects from clients (excluding the long-term O&M) • Several contractors getting into the O&M business (going after different parts of the value chain) • Many projects being developed but political risk remains high

29. P3 (Infra) opportunities in the US by State/Territory Courtesy: Norton Rose 2016 Courtesy: Norton Rose 2016

30. Thank you. Any questions?