AfricaRail 2009 Johannesburg, 26th June 2009 Opportunities and risks facing

1. www.railworkinggroup.org • AfricaRail 2009 • Johannesburg, 26th June 2009 • Opportunities and risks facing • asset owners, investors and governments • Howard Rosen • Principal, Howard Rosen Solicitors, Zug, Switzerland • Chairman, Rail Working Group Howard Rosen Solicitors

2. Introduction www.railworkinggroup.org • Exploring rolling stock financing options • What is the government’s proper role? • Providing adequate security for financiers and the problems of identification • Different ways to build rail equipment into BOT structures • Allocating asset risk and ensuring viable contracts and partnerships Howard Rosen Solicitors

3. Exploring rolling stock financing options www.railworkinggroup.org • Government “subsidies” and loans • Aid Agency/Export Credit Agency support • Using equity and cash flow • Debt finance • Unsecured • Secured • Leasing • Rolled into other financings Howard Rosen Solicitors

4. What is government’s proper role? www.railworkinggroup.org • Shareholder conflicts of interest • Government financial support • When is state aid acceptable • The complexities of competition • Budgetary constraints and efficient resource allocation • Government as a supporter and facilitator Howard Rosen Solicitors

5. Providing adequate security for financiers www.railworkinggroup.org • Is a government guarantee possible or acceptable? • Alternative security can constrain credit lines • Real asset based finance • means creating unimpeachable security • Local law and how “Luxembourg” will help Howard Rosen Solicitors

6. The problems of identification www.railworkinggroup.org • Identification is essential to creating the security • ….. but there are serious problems at the moment • Differing reasons for identification • Who allocates the numbering and is it secure? • Notification of changes (avoiding reliance on debtor) • replication of numbers Howard Rosen Solicitors

7. Different ways to build rail equipment into BOT structures www.railworkinggroup.org • The BOT consortium as the one stop shop • Convenient • Risk spreading but • Cross contamination risks for consortium and operator Howard Rosen Solicitors

8. Different ways to build rail equipment into BOT structures www.railworkinggroup.org • Or is it better to deconstruct? • Can provide customised solutions and flexibility to operator • May maximise tax benefits • Facilitates multiple use of rolling stock • Focuses on credit lines and government support where absolutely needed Howard Rosen Solicitors

9. Allocating asset risk www.railworkinggroup.org • What are the risks? • Asset valuation • obsolescence • Financing costs • Operating risks • Third party liabilities • Who should carry the risks? • Transferring risk • Buy backs and guarantees • Leases Howard Rosen Solicitors

10. ….. and ensuring viable contracts and partnerships www.railworkinggroup.org • The secret of effective contracts • Defining agreements required • Specifying the parties • Applicable law • Identifying clearly the relationship and responsibilities • Establishing registrable security • Looking ahead Howard Rosen Solicitors

11. www.railworkinggroup.org • The Opportunities and Risks (Conclusion) • Rolling stock financing comes in different shapes and sizes • Government can work better as a facilitator rather than a cash cow but this depends on true asset based financing • BOT structures are tremendously useful but sometimes deconstruction can help • And in the end it’s all about asset risk allocation and management; have the courage to seize the challenges and ensure governments support you Howard Rosen Solicitors

12. www.railworkinggroup.org • AfricaRail 2009 • Johannesburg, 26th June 2009 • Opportunities and risks facing • asset owners, investors and governments • Howard Rosen • Principal, Howard Rosen Solicitors, Zug, Switzerland • Chairman, Rail Working Group • E-mail: howard.rosen@railworkinggroup.org • www.legalease.ch Howard Rosen Solicitors