alstom experience in rail project structuring & funding

Alstom Experience in Rail Project Structuring & Funding

Semaine de la France – Dar Es Salam – 04/2017

Pierre SCHWING

© ALSTOM SA, 2016. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authorisation, is strictly prohibited.

ALSTOM - 12/04/2017 – P 2

Agenda

Alstom presentation

Prerequisites for Rail Transportation Project Development

Alstom Project and Export Finance Experience

Financial solution 1 : Buyer credits with Export credit agencies

Financial solution 2 : International Financial Institutions

Financial solution 3 : Public Private Partnerships

Conclusion

Questions and Answers


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Tram, metro, suburban/regional, high speed,very high speed, locomotive

Components: traction, bogie, motor45%

Maintenance Modernisation Spare parts, repairs & overhaul Support services

23%

A leading position in rail transport

Signalling solutions portfolio for:- Main lines- Urban- Control and security

Sold as products or solutions

20%

Integrated solutions Infrastructure 12%

A group with annual sales of over €6 billionNote: all figures including the signalling activity recently acquired from General Electric


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32,000 employees working on 105 sites in 60 countriesserving 200 customers

An organisation around 7 Regions

Being a reference player in each Region

NORTH AMERICA

1,900EMPLOYEES

9%OF SALES

LATIN AMERICA

2,800EMPLOYEES

9%OF SALES

EUROPE

13,600EMPLOYÉS

40%OF SALES

FRANCE

9,200EMPLOYEES

18%OF SALES

CIS

300EMPLOYEES

1%OF SALES

ASIA PACIFIC

2,700EMPLOYEES

11%OF SALES

MIDDLE EAST

1,500EMPLOYEES

12%OF SALES

AFRICA

Note: all figures including the signalling activity acquired from General Electric


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Alstom Transport: A global leader in the rail industry

Four activitiesTRAINS SYSTEMS*

SERVICES SIGNALLING

*Including Infrastructure

For 2 operating modesUrban Mainlines


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Integrated urban system to enhance efficiency

Global approach• Comprehensive solutions for

optimised costs, reduced delivery times, optimal performance…

• Attractis: new integrated tramway system

• Axonis: 1st economical and quick-to-build metro system

Infrastructure• Track laying: Appitrack• Electrification: APS, SRS, Hesop,

Citadis Ecopack• Electromechanical: stations & depots

Dubai Citadis, 100% catenary-free line (UAE)

Metro system, Panama


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Rabat

Casablanca

Oran

Annaba

Algiers

Tunis

Cairo

Istanbul/Ankara

Johannesburg

Mostaganem

OuarglaConstantineSetif

Lagos

Head office / Business officeIndustrial site

Project

Rolling Stock activityJoint venture/ partnership

Components activityServices activitySignalling activity

Infrastructure activityLaboratory

Main JVs

Cabliance (Morocco), Cital (Algeria),

Gibela (SA) , Riyadh Track JV (Saudi)

Riyadh

Dubai

Baghdad

AlgeriaNCASouthern AfricaMiddle East

Tel Aviv/ Jerusalem/ Haifa

Lusail

Fes

MEA Presence: More than 2,500 employees


ALSTOM - 12/04/2017 – P 8

Agenda

Alstom presentation






Conclusion



ALSTOM - 12/04/2017 – P 9

Project Planning of a typical Urban Rail Project

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

• Feasibility Studies• Prepare RFQ• Stakeholder Engagement• Political GO

1

2

3 4

1

• Tendering• Evaluation• Contract Signature2

• Design & Engineering• First Turn Soil• Construction• Commissioning

• Start of Commercial Service• Operation

4

3


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Pre-tendering phases

FEA

SIB

ILIT

Y ST

UD

Y PH

ASE

STAT

US

QU

O

AN

ALY

SIS

Ridership study Land use assessment Social, economic and land use planning strategy Route identificationPR

E-PL

AN

NIN

GPH

ASE

Identification of public transport strategic corridors Operations conditions and performance Arbitration between transportation modes Technical feasibility Economic viability

Transportation master plan Road network operations Origin & destination for existing buses, candongueiros, railways Passenger demand and demographic analysis


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CAPEX are about equal to OPEX over Lifetime

Investment vs Operational Costs

Investment(Design, Engineering, Construction, Manufacturing, Testing, Commissioning)

Operation(Maintenance, Labour, Energy)


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Ratio depends on:• Ridership• Urban traffic policy

(tolling, parking, preference given to public transport,...)

• Tariffs’ policy(social context, affordability,...)

Revenues from trafic do not cover full OPEX costs and can not repay at all CAPEX costs

Fare-box Recovery Ratio


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Agenda

Alstom presentation






Conclusion



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Highlight on strategic projects with structured financing won by Alstom Transport in the recent years

Dubai Al Safooh Tramway : Multisourced ECAs coupled with an islamic facility

Kazakhstan KTZ locomotives : To date the largest ECA single ECA for Kazakhstan to date

Egypt Cairo Metro L1, L2, L3 : French Agency for Development (“AFD”)

Egypt Beni Suef Modernization of railway signalling : Project financed by IBRD/WB

India Delhi Metro signalling : JICA loan

India Kochi Metro : DMRC has awarded the Contrats for Rolling Stock, Signaling and Electrification to Alstom. Project partially financed by AFD (facility 180MUSD)

India Dedicated Freight Corridor between Bhaupur et Khurja : World Bank

Morocco 1st High speed train of Africa : French Soft Loan

Morocco Tramway de Casablanca : French soft loan

Panama Metro L1 : COFACE and CESCE financings coupled with a 250 MUSD MIGA guaranteed financing

Santo Domingo Metro : ONDD (Belgium) Buyer’s Credit

Venezuela Metro Los Teques Linea 2 : COFACE Buyer’s Credit


ALSTOM - 12/04/2017 – P 15

Developing tailor-made financing approaches to support our customers

Alstom has a centralized and highly skilled team of professionals at the forefront of financial engineering, whose mission is to secure the best financing solutions for our

Customers.4 deals awarded « deal of the year » by the finance community (Trade Finance Magazine).


ALSTOM - 12/04/2017 – P 16

Agenda

Alstom presentation






Conclusion



ALSTOM - 12/04/2017 – P 17

Tied financing vs. untied financing

Tied Financing Untied financing (IFI)

Typical source

ECA backed financing:• COFACE for French sourcing• SACE for Italian sourcing• CESCE for Spanish sourcing• DD for Belgian sourcing• KUKE for Polish sourcing

Soft Loans:• French Protocol• Credito del Rey (Spain)

Multilateral agencies:• World Bank / EBRD• Asian Development Bank• European Development Bank• African Development Bank (ADB)

Bilateral agencies:• Agence Française de Développement• KFW

Constraints• Ruled by OECD consensus• Minimum ECA national content

requirement

• Strict agencies’ rules• Does not allow direct negotiation procurement• Contract often awarded to the lowest priced offer

Advantages

• Tied to our offer• Allows direct negotiation without

RFP• Up to 14 years repayment• Includes security of payment

scheme• Can be politically supported

• « Free » PIO• Better transparency in procurement process


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Solution 1 : Buyer’s creditHow does it work?

Buyer’s Credits are ruled by an OECD gentlemen agreement :

• Allows long reimbursement periods, up to 14 years for railway projects

• Can finance up to 85% of imported/offshore part

• Can finance the local part for an amount up to 30% of the imported part

• Can finance the ECA’s premium and the Interest During Construction

• Minimum interest rates are defined by the OECD

• Fixed or floating rates are possible

• Reimbursements usually start at provisional acceptance of the equipment

• Environmental & social impacts must be considered


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Solution 1 : Buyer’s creditHow does it work?

Contractual structure reflected in financing

documents

Financing documentation largely

standardised

Direct payments from the lending bank hence

quicker collection of cash

Loan can be disbursed directly to exporter as

work is performed under contract and/or to

borrower in reimbursement of

amounts already paid to exporter

As an example , the French Export Credit Agency is named COFACE(Compagnie Française d‘Assurance pour le Commerce Extérieur).Support from Coface can be obtained subject to s sufficient Frencheligible content. Each file will require the approval by the FrenchMinistry of Finance.

Commercial BankExport credit Agency

(e.g. COFACE or Other)

Tanzania

Ministry of Finance

Delivery contract

Loan agreement

Guarantee

GuaranteeOr borrower

Tanzanian transport authority


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Agenda

Alstom presentation






Conclusion



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Solution 2 : International Financial Institutions

Abidjan


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22

Egypt: Beni Suyef- ENR - Modernization of railway signalling- TIS – 120 MEURCustomer : Egyptian National Railways (ENR)Project financed by IBRD/WB.

India : Kochi Metro: DMRC has awarded the Contrats for Rolling Stock, Signaling and Electrification to Alstom. Project partially financed by AFD (facility 180MUSD)

Vietnam: Hanoi Line 3 metro project estimated to 1.2billion Euro. It will be financed by EIB, AFD, ADB and RPE

Greece: Several projects (revamping of electrification Acharnae – Tithorea 9 ME, electrification of the extension of Metro line 3, 30 ME, etc...) all financed by European Cohesion Fund and own funds of the governement, but this latter being also financed by EIB.

22

Examples of contracts financed by IFIs


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Export Credit IFI Loan Local Market

Lender Banks(with ECA guarantee)

International Financial Institutions Local banks

Borrower Client(Government guarantee) Local public Authorities Client

Repayment period

14 years maximum

10 / 15 years

Short

Cost of financing

OECD framework

Expensive

Process & timing

Buyer’s credit, versus IFI loans : what’s the difference ?


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Agenda

Alstom presentation






Conclusion



ALSTOM - 12/04/2017 – P 25

PPP : Generic Contractual Structure

Construction Consortium (EPC)

Shareholders

Project Company(SPC)

Operation & MaintenanceCompany (O&M)

Concession

contract

Capital subsidy

Availability-based payments

Fare

Passengers

Lenders

EPC Contract (turnkey) O & M

contractInterfacecontract

PublicAuthority


ALSTOM - 12/04/2017 – P 26

Nottingham LRTPPP SPV : Tramlink

Contract type : Concession contract with public support- 660 million euros- Length : 30 years- CAPEX : Private financing : 60 %; Public financing: 40%- Operating subsidy

17 km lines 2 & 3 including Rolling Stock:- 22 LRVs- Civil Work - Power supply, signalling, track- System engineering- Operation & Maintenance

Project history :> 12 months between award and financial close

Main milestones : - Contract signature : December 2011- Financial Close: December 2011- Revenue service phase for new lines: June 2015

ALSTOM’s roles in the project : - Co-sponsor and minority shareholder of the SPV- Member of the EPC and O&M subcontractor


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Prerequisites to reach PPP bankability

• Strong support of gov/public authorities− major public subsidies upfront− no traffic risks for the concessionaire company− availability payments based on performance

• Legal concession frame with international standards, including:− adequate compensation in case of early termination− possibility for banks to step-in prior to termination

• Strong experienced international partners for construction, operation & finance

• New lines / greenfield scope of works


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Agenda

Alstom presentation






Conclusion



ALSTOM - 12/04/2017 – P 29

Conclusions and Way Forward

• A mix of various financial solutions is usually required for largeinfrastructure projects

• A bilateral financing is faster and easier to implement vsInternational Financial Institutions

• The Sovereign guarantee is a prerequisite to cover the projectfinancial feasibility

• Government should also strongly support the Project with statefunding


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Agenda

Alstom presentation






Conclusion



ALSTOM - 12/04/2017 – P 31

Disclaimer

This document is provided on the express understanding that the information containedherein will be regarded and treated as strictly confidential. By retaining it the recipientundertakes that it is not to be delivered and nor shall its contents be disclosed to anyoneother than the intended recipient, and nor shall it be reproduced or used, in whole or in part,for any purpose other than for the purpose described herein, without the prior writtenconsent of Alstom.Whilst every effort has been made to ensure the accuracy and completeness of theinformation contained in this document, no responsibility is accepted by the Alstom or thetreatment by any court of law, tax, banking or other authorities in any jurisdiction of anytransaction based on the information contained herein.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted,on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise,without the prior written permission of Alstom.

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