Energy Infrastructure and New Sources of Capital

1. Energy Infrastructure andNew Sources of Capital Hugo Verdegaal, Managing Director Citi Oil & Gas Banking Banking June 25th, 2008 Strictly Private and Confidential

2. Table of Contents

3. 1. Emerging Market Context

4. “Infrastructure” broadly defined comprises assets in Transportation, Energy, Power, Water, Waste, Telecom and some other sectors that offer stable, comparably low-risk, long-term cash flows, that are often inflation-protected, contractually secured and regulated by state and/or federal authorities. Global Infrastructure Market • Massive need for global infrastructure investment • The OECD estimates a $53 trillion need for infrastructure investment through 20301 • Constitutes approximately 2.5% of world GDP • Rising social costs are increasing the need for private investment • Growth of public sector debt and deficits are spurring privatizations • Increasingly greater awareness and appreciation of private sector contributions Estimated Average Annual World Infrastructure Expenditure ($ in billions) Source: OECD 1: Excludes ports and airports 2: OECD countries, Russia, China, India and Brazil only 1

5. GDP Growth in Major Emerging Markets Source: Economist Intelligence Unit. 2

6. Per Capita Energy Consumption Source: Economist Intelligence Unit 3

7. Energy Infrastructure Requirements in Emerging Markets 4

8. 2. Privatization Trends

9. Infrastructure Demand – Why Private Investors Are Piling Up Risk mitigated by regulation/contract High Entry Barriers Often monopolies High gearing capacity Inflation hedged Inelastic demand Long maturity Stable equity return Higher return compared to similar risk profile assets Low Correlation with other asset classes 5

10. Private projects Asset sales PPP Deals Stage of market development Expanding portfolios Secondary market Development plus Corporate privatization Public sector or traditional private sector Full private Sector activity Public and private equity and debt. Full scale M&A Project/asset Advice Equity and debt Portfolio gearing Banking Products Demanded Bonds Export Credit GTS Asset and corporate Equity / debt. Small and sporadic M&A Infrastructure Supply – From Public to Private Typical Government Dynamics Fiscal discipline Search for efficiency Previous underinvestment Stimulate growth Privatization - trade sale - IPO PFI / PPP style projects Contracting out Infrastructure activity in the private sector Typical Sector Dynamics A larger proportion of infrastructure moves to the private sector, the secondary market becomes more efficient, and the sector develops until it demands the full range of banking services. 6

11. Kinder Morgan Midstream Energy Companies Private Capital Invested in Infrastructure 2006/2007 Estimated Cumulative Investments in Infrastructure (Transaction Value in $ billions) United Utilities Puget Energy TXU Corp ICA Farac package I Peel Holdings Associated British Ports PD Ports 7

12. Governments have several ways to involve the private sector. Each method would meet specific government needs and objectives. Private Sector - Infrastructure Options for Government Conventional Procurement Public Private Partnerships (PPP) Privatisation Asset Sales • Procurement of assets by the public sector using government funding PPP • Umbrella term covering a variety of procurement initiatives • Often Government shareholders • Corporate or strategic reasons • May not involve investment. May be source of funds for Government; monetisation of assets PFI • One form of PPP is PFI • Essentially a concession / project finance where investment is required • Sale of Public Sector infrastructure assets • Statutory regulation • Assets privately owned for fixed period or in perpetuity PPP/PFIs is a method of procurement of services that is more efficient than traditional procurement (i.e. that delivers “value for money”), while retaining government ownership of infrastructure assets 8

13. 3. Private Equity in U.S. Energy Infrastructure

14. Infrastructure Where Private Capital Invested in the U.S. in 2007 / 08 The surge of private capital raised for infrastructure investments led to a number of successful transactions in the U.S. last year. Investments were made in Power/Energy, Ports, Rail, Roads, Telecom & Water/Waste. Gas T&D Source Gas Arkansas Western Gas CNG Holdings Colonial Pipeline (USA) NGPL Power Cogentrix Northern Star Generation TXU* Puget Energy ConEd Black Hills Ports Carrix, Inc (US, International) MTC AmPorts (US, Latin America) Maher Terminals (US, Canada) Roads Northwestern Parkway Capital Beltway HOT Lanes Miami Tunnel Telecom Global Towers – Communication Towers Water / Waste Synagro Waste Industries Railroads Florida East Coast Other UE Waterheater 9 *Significant merchant generation

15. 4. Major Infrastructure Funds

16. Recent Private Funds Raised Testimony to Market Strength A number of new private infrastructure funds – primarily managed by investment banks and private equity groups – have been announced since the start of 2006. A shortlist below already accounts for over $150 billion in new capital Source: Citi estimates, Probitas Partners.(*) Notes fund raising in progress. 10

17. Leadership Capability Risk Profile Established Infrastructure Players Greenfield Construction Growth Growth Seasoned Operation Risk Premium: 8–10% Risk Premium: 6–8% Risk Premium: 3–6% Risk Premium: 2–3% Construction Construction Investors looking for morestable cash flows and yield Construction companies are willing to assume higher risk levels Investors who desire lower risk/more mature assets Scope of Opportunity/Development 11

18. Volume of capital for infrastructure equity is expanding and larger deals can be achieved. Volume of Capital Increasing, Enabling Larger Deal Sizes New and larger direct investors Increasing allocations to infrastructure Volume of capital for infrastructure has increased significantly • Equity raised or allocations to funds for direct investment estimated at US$330bn • This capital is mostly targeted at developed markets infrastructure • Historically dominated by Australian and Canadian investors • There are strong signs of interest from European and Middle Eastern investors and we expect US interest to follow Increasing volume of capital More experienced investors Single deal size capacity has increased Fewer investors required to achieve a sale • Single ticket capacity has increased substantially • Larger names can invest over US$1bn in a single transaction • Reduces the number of parties required in an auction 12

19. Sovereign Wealth Funds – A New Source of Infrastructure Capital • Sovereign Wealth Funds (SWFs) are big, and getting bigger • As SWFs grow and multiply, more activity is moving to the aggressive end of the spectrum: • More direct acquisitions and strategic transactions • Growing involvement in the alternative investment industry • In most cases, SWFs are largely passive investors looking to take non-control minority stakes and simply earn a stable return • Examples include the equity placements by Citigroup and Merrill Lynch as well as GIC’s involvement in Ferrovial’s bid for BAA • Governments are weighing perceived threats of SWFs against potential benefits. Managing political risk in SWF-related transactions is key Sovereign Wealth Funds 13

20. 5. Case Study: BORCO

21. Case Study: BORCO Terminal Acquired by First Reserve On February 2, 2008, Petroléos de Venezuela (“PDVSA”) signed an agreement to sell its wholly-owned subsidiary, Bahamas Oil Refining Company (“BORCO”), to First Reserve Corporation (“FRC”) for US$900 mm. Transaction Highlights Acquisition Rationale • BORCO is a crude and products storage terminal located in Freeport, Bahamas with an installed storage capacity of 19.7 million barrels and 3 deep-water jetties • First Reserve has agreed to buy 100% of BORCO for US$900 million in cash, before any adjustments, to take over BORCO’s operations • First Reserve has formed a strategic partnership with Shell • Shell has already agreed to a contract to occupy a significant portion of the storage capacity • Vopak has reached agreement with First Reserve to form a strategic joint venture • The terminal will be operated by Vopak • Vopak will acquire a 20% interest in the terminal, which will be named Vopak Terminal Bahamas • Deal Multiples • Firm Value / 2008E EBITDA multiple of 19.1x • Firm Value / Storage Barrel of US$45.70 • This transaction is part of PDVSA’s strategy to monetize its non-core international assets • The transaction is expected to close in 1H2008 • Citi acted as exclusive strategic & financial advisor to PDVSA in this transaction • Strategic Geographic Location • Within 80 miles of the Florida coastline • One of the few deepwater marine terminals equipped to handle VLCC’s and ULCC’s that can service the U.S. East Coast • Flexible Service Options • Capability to receive, store, heat, blend and transfer crude oil, fuel oil, diesel, gasoline, jet fuel, naphtha and ballast water • Significant Growth Opportunities • Maximization of local, Florida and East Coast markets via transshipment, bunkering, and tug & towing • 208 acres of undeveloped land to build additional storage terminals • Existing permit for development of an onsite refinery • Favorable Tax and Regulatory Environment • No income or capital gains taxes • Freeport is a bonded area with favorable import regulations • Strategic Positioning Going Forward • First Reserve will be able to develop strong relationships with its clients, primarily Shell, as operator of the terminal 14

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