Creating bankable deals with government in the face of fiscal pressure

1. Deals Creating bankable deals with government in the face of fiscal pressure Strictly Private and Confidential Draft 15 November 2012

2. Agenda Page

3. – PPPs are... • Public private partnerships (PPPs) are arrangements between government and private sector entities for the purpose of providing public infrastructure, community facilities and related services Improvement/Expansion of public facilities Creating bankable deals with government in the face of fiscal pressure •

4. – PPP structures can improve project and service delivery Creating bankable deals with government in the face of fiscal pressure •

5. Section 1 – The Global and Regional Experience Globally, governments understand that infrastructure development sets the stage for sustainable growth Germany –US$42B Canada –US$12B EU –US$252B Japan –US$129B China –US$585B+ USA –US$150B India - US$500B Singapore –US$13.2B Australia - US$4.7B In 2009, CIBC World Markets est. global infrastructure spend in 20 years at $35 trillion. The above projected spend between 2009 – 2015. Creating bankable deals with government in the face of fiscal pressure • 2

6. Section 1 – The Global and Regional Experience The infrastructure project finance global market is rebounding; the Caribbean needs to engage… Annual Private Finance Invested Globally • Market • Overall global project finance market volume stood at US$227.9bn for 2010 • 15% average growth from 2004 to 2008, 40% reduction from 2008 to 2009 • 54% increase in 2010, making up more than half the dip experienced in 2009 Global Loans by Sector (US$m) Source: Project Finance International Creating bankable deals with government in the face of fiscal pressure • 3

7. Section 1 – The Global and Regional Experience Infrastructure development can help to grow private sector business activity and spur economic growth The use of PPPs is not restricted to the delivery of a physical structure such as a road or a building, but includes the delivery of services, and will be of utmost importance, where the Caribbean does not have certain specialist skills • Wastewater treatment and sewerage facilities • road network – upgrade or maintenance • Power plants • Renewable energy options • agriculture and agro processing • Education infrastructure – upgrade or build schools • Healthcare facilities – upgrade or build facilities • National Security – prisons – upgrade or new rehabilitation centres • Low cost housing Creating bankable deals with government in the face of fiscal pressure • 4

8. Section 1 – The Global and Regional Experience Caribbean countries have a long list of capital needs, some of which are already being satisfied through PPP structures Between 1990 and 2010, total PPI Investment in LAC region was approximately US$614 billion - 37% of the overall PPI globally. Current investments in the region relate to road infrastructure, hospitals, power generation, tourism, education, among other key areas. Creating bankable deals with government in the face of fiscal pressure • 5

9. Section 2 – The Caribbean PPP opportunity Despite broad defining characteristics in the Region deals are being done, and more opportunities exist! • Population: 42 million (Cuba and Haiti makes up approximately 50% of that) • GDP (per capita): US$11K (avg) • Debt to GDP ratios: 80% - >100% • Ratings: Below investment grade , except for Trinidad among independent nations) • FDI: circa US$ 4 – 5 billion in 2011 • Small states: • Vulnerability to external shocks (incl. natural disasters) • Significant reliance on tourism and other services • High dependence on imports • High government debt Cuba and Haiti are still largely unexplored, international entities are already focussed on the opportunities – these are approximately 50% of the region’s population. Creating bankable deals with government in the face of fiscal pressure • 7

10. Section 2 – The Caribbean PPP opportunity Many paths... One destination Creating bankable deals with government in the face of fiscal pressure • 8

11. Section 3 – Indicative deal structure Funding Sources for infrastructure development come from number of sources Construction Companies Infrastructure Funds Text Bond Market Govt. Pension Funds Multilaterals Banks Creating bankable deals with government in the face of fiscal pressure • 10

12. Section 3 – Indicative deal structure PPP structures Public sector Govt payments User payments services PPP contract Project company(SPV) Equity Debt Investors SPV shareholders Bank/Banks Construction Maintenance Redevelopment Design Construction Operating Maintenance Equipment Subcontractors Subcontractors Creating bankable deals with government in the face of fiscal pressure • 11

13. Section 3 – Indicative deal structure Successful PPPs need to resolve issues related to: • … Both public and private sector need to have aligned objectives • Defined purpose • Alignment between stakeholders • Clear expectations: • Value • Return • Timetable • Project Size • Political v Regulatory environment • Rigor in project selection • Market confidence Creating bankable deals with government in the face of fiscal pressure • 12