Skálafjarðartunnilin and Finance of this

2. Skálafjarðartunnilin and Finance of this 12. Apr 2010 David Reinert Hansen

3. Introduction • David Reinert Hansen • Education • Master of Science in Civil Engineering from the Technical University of Denmark • Master of Business Administration in Technology, Market and Organisation from Copenhagen Business School • Tunnel experience • 1999-2006: Managing Director for the tunnel companies P/F Vágatunnilin and P/F Norðoyatunnilin, during planning and building of the tunnels, and start-up of operations and toll-collecting • 2006-2008: Chief Technical Officer for P/F Skálafjarðartunnilin during planning and preparation of application for concession • Currently • CEO for Vagar Airport, taking Vagar Airport from being a state administration into a commercial company and at the same time extending the airfield and the terminal • Attached to P/F Skálafjarðartunnilin as technical consultant • Email • david.reinert.hansen@gmail.com

4. Faroe Islands Norðoyatunnilin 2006 Vágatunnilin 2002 Skálafjarðartunnilin 2016 ? Sandoyartunnilin 20??

5. Comparison of sub-sea tunnel projects

6. The problem / The idea / The solution

7. The problem / The idea / The solution

8. The problem / The idea / The solution

9. The alignment

10. The alignment

11. The alignment

12. The alignment

13. Pre-investigations Core drilling Seismic Safety assessments Requirements to alignment Preliminary design Cost estimate Traffic predictions Inncome estimate Diverse requirements to the alignment Safety Traffic Geological limitations In accordance with general planning of the highways Acceptable to the municipalities to be connected by the tunnel Environmental considerations Basis

14. Geologicalpre-investigations Refraction seismic High resolution Reflection seismic Core drilling

15. Geology – model

16. Geology – model

17. Traffic, investment and cashflow

18. Traffic, investment and cashflow

19. Traffic, investment and cashflow

20. Traffic, investment and cashflow

21. Traffic, investment and cashflow

22. Investing in Infrastructure Infrastructure assets are in demand due primarily to Relative independence from business cycle risk Long-duration Consumer demand is typically price inelastic Historically stable, predictable and yield dominated operating cash flows Source: Morgan Stanley & RREEF Real Estate and Infrastructure Research 22

23. Investing in Infrastructure Internal rates of return from infrastructure assets have ranged from 9% - 18% Returns depend on the specific characteristics of the asset, including its stage of development - whether it is “Greenfield” (i.e., a project that needs to be constructed) or “Brownfield” (existing asset) 23

24. Investing in Infrastructure Including infrastructure investment with moderate returns and expected low correlations in a portfolio with other asset classes could improve the optimal risk-return tradeoff in a portfolio – in terms of increased return and decreased risk Infrastructure assets are especially attractive to the long-term investor - pension funds in particular, looking to solve pension deficit problems 24

25. Changes in relation to finance and interest

26. What are we doing now? • Updating traffic model, using Rambøll as consultant • Taking into account changes in population, car-ratio, and time and vehicle costs • Updating cost-estimate, using Sintef as consultant • Taking into account changes in codes of practice, market situation, and political requests • Updating financial model • Taking into account changed financial situation in relation to interest rate, share capital proportion, expected return on share capital • Negotiating consession terms with the Government

27. What are we doing next? • With updated traffic model, cost estimate, financial model, and known concession terms • Preparing presentation material about the project • June 2010 • Contact with potential investors • August/ September 2010 • Contact with potential loan providers • September/ October 2010 • Preparing final design • Preparing tender

28. The movie