Public Sector objectives
Deliver Infrastructure
Value for money
Balanced transfer of risk
Private sector investment
Compliance with legislation
Partnership
Funders objectives
Ensure risk mitigated
Security Arrangements
Ensure appropriate contracts
Public Sector Counterparty
Relationship
Partnership
Corporate objectives
Secure pipeline?
Price risks
Achieve appropriate return
Fundable project
Commercial contracts
Partnership
Infrastructure- Achieving the Balance
Investing in Infrastructure
Risk
The Operator
Partnership
EconomicRelationship
Environmental
Contractual
Security
Financing Structur
e
The contractor
Barclays View of the
WorldArrangemen
ts
Benefits
Balanced Approach to Infrastructure Finance
Bank DebtBank Debt
RiskManagem
ent
RiskManagem
ent
Private EquityPrivate Equity
Bond FinanceBond
Finance
BARCLAYS
Sample Infrastructure Experience
Cork School of Music
€75M million Term Loan
Mandated Lead Arranger
Sept 2005
€107 million Secured Bonds
Securitisation of the Scottish – Northern Ireland
Gas Pipeline
Joint Lead managerMarch 2005
Premier Transmission National Toll
Roads
€225 million
UnderwriterMay 2005
£458 millionSenior facilities for Terra
Firma’s acquisition of East Surrey Holdings plc
Joint Mandated Lead Arranger
November 2005
Terra FirmaPhoenix Gas
Barclays arranged over €15 billion of bank, bond & derivative finance to the Infrastructure sector in the last 12 months
€confidentialAcquisition Facilities
supporting the acquisition of Budapest Airport by BAA
Joint Mandated Lead Arranger
January 2006
€1 billionRevolving Credit Facility
ArrangerJuly 2005
Arranger and Joint bookrunner
October 2005
£,1573 million guaranteed bonds
Scotia Gas Networks
BAAAutoroutes du Sud
€3,500 millionAcquisition and Credit
Facilities for Abertis-led acquisition of Sanef
Joint Mandated Lead Arranger
December 2005
Albertis
Current Sources of Finance Senior Debt
Bank debt– Over a dozen project finance banks active in
Infrastructure/PPP, plus over 20 banks as participants– Long established, deep market– Used on around 70% of UK PPP– EIB another source
The Cork School of Music Barclays acted as Mandated Lead Arranger and Underwriter
of a €75M Loan and additional hedging facility to a Hochtief/Barclays Private Equity consortium. The project involves the construction of a specialist music school in Cork
When completed in the summer of 2007 it will provide the Cork School of Music with over 10,000m2 of state-of-the-art facilities - including more than 50 teaching/practice studios, a 500-seater auditorium, a drama theatre and movement room, a professional recording studio, electronic music studio, piano laboratories etc
Key financing issues to be addressed included
Replacement of contractor
Changes in financing market from date of original bid Planning Surplus Land
Cork School of Music
€75M million Term Loan
Mandated Lead Arranger Sept 2005
Current Sources of Finance Senior Debt
Bank debt– Over a dozen project finance banks active in
Infrastructure/PPP, plus over 20 banks as participants– Long established, deep market– Used on 70% of UK PPP– EIB another source
Bonds– Around 6 bond houses active as lead arrangers– Generally credit-enhanced by guarantee from monoline
insurer– 3 large well established monolines (MBIA, Ambac, FSA)– 4 recent entrants (FGIC, XL Capital, CIFG, Assured)– Require investment grade ratings
Scottish/Northern Ireland Gas Pipeline Northern Ireland Energy Holdings was set up as a ‘not for
profit’ concern to finance the sale of the Pipeline to Premier Transmission
Barclays Capital acted as Joint Bookrunner for £107 million guaranteed secured bonds for Premier Transmission Limited
The assets of the pipeline had been shadow rated at A1/A by the rating agencies but a monoline wrap by FGIC gave the deal a AAA rating.
Key financing Issues to be addressed included
This was the first European securitisation of a natural gas pipeline.
Size of deal
Management of order book to return highly competitive pricing
Need to provide additional facilities for liquidity , debt service reserve account and cost reserve account.
€107 millionSecured Bonds
Securitisation of the Scottish – Northern Ireland Gas Pipeline
Joint Lead managerMarch 2005
Premier Transmission
Advantages Disadvantages
Bond Financing
• Competitive cost if wrapped by monoline insurer
• Longer tenors available
• Fixed rate or index linked
• Requirement for rating agency involvement
• Requirement for production of Offering Circular and roadshow
• Less cost effective for deals below €150m
• Credit spread dependent on market conditions
• Covenant package required by monolines
Bank Financing
• More flexible in terms of drawdown and repayment
• Greater certainty over credit margin
• More cost effective for smaller deals
• Floating rate, although can use derivatives to fix
• More limited appetite for tenors over 30 years
• Syndication process required for larger deals
• For syndicated deal, larger number of parties relative to one monoline
Bank Versus Bond
Current Sources of Finance Junior
Subordinated debt– Generally provided by shareholders– Some specialist mezzanine lenders may look at
Infrastructure/PPP (Investec, GE Capital, CIT) Equity
– Number of specialist funds which act as financial investors in Infrastructure/PPP , alongside project sponsors (BPE, Equion, Innisfree, Mill Group)
Key Financing Issues Gearing
Debt Service Reserve Account/Facility
Cover ratios
Term of debt vs. concession length
Repayment profile
Maintenance Reserve Account prefunding and review
Current Financing Terms – It’s a competitive marketFinancial Element
Market Inception
2 years ago
Mature Market
Gearing 80% 90% 92%
Debt Tail (25 year deal)
5 years 18 months 12 months
Average Margin 1.25% 1% < 0.8%
Cash Debt Cover Ratio
1.25x 1.20x 1.15x
Equity Return 18% 15% 13%Decline unlikely
to continue
indefinitelyRange of sectors
increasing
Will Ireland get the balance right?
Challenge Indicators
Deliver pipeline Must meet timetables
In all sectors
Deliver Value for Money
Sensible risk allocation
Celebrate Success
Public Sector Reform Clear approvals process
Planning streamlined
Destination for Investment
Capital Markets Solutions
Significant Bidder Interest
No Reinventing the wheel
Evidence of learning from other markets
Contact Details
Niall Quinn Director
PFI & Structured Project Finance47-48 St Stephens GreenDublin 2
Direct 01 618 2662Mobile 004477 80 60 77 48Fax 01 662 3141e-mail [email protected] www.barclays.com
Barclays Bank PLC is regulated by the Financial Services Authority
Niall Quinn Director
PFI & Structured Project Finance47-48 St Stephens GreenDublin 2
Direct 01 618 2662Mobile 004477 80 60 77 48Fax 01 662 3141e-mail [email protected] www.barclays.com
Barclays Bank PLC is regulated by the Financial Services Authority
Our Track Record speaks for itself…
Barclays Bank Ireland PLC is regulated by the Financial Regulator. Registered Office: 47-48 St. Stephens Green, Dublin 2. Registered in Ireland. Registered No: 396330.
DisclaimerThis presentation has been prepared by Barclays Bank Ireland PLC, herein referred to as Barclays. Any pricing in this report is indicative and is not intended as an offer or solicitation for the purchase or sale of any financial instrument.
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Neither Barclays, nor any officer or employee thereof accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. Any securities recommendations made herein may not be suitable for all investors. Past performance is no guarantee of future returns. Any modelling or backtesting data contained in this document is not intended to be a statement as to future performance.
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Barclays Bank Ireland PLC is regulated by the Irish Financial Services Regulatory Authority.
Registered Office: 47/48 St. Stephen’s Green, Dublin 2. Registered in Ireland : Registered No. 396330