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M-30 Ring-Road Project Financial Structure MAY 2007. INDEX. Project description Company structure Financial structure Quality Service Model Benefits. 2. Project Description. The Project: Remodelling of the roads and the area occupied by M-30 ring-road.

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slide1

M-30 Ring-Road Project

Financial Structure

MAY 2007

slide2

INDEX

  • Project description
  • Company structure
  • Financial structure
  • Quality Service
  • Model Benefits

2

slide3

Project Description

  • The Project: Remodelling of the roads and the area occupied by M-30 ring-road.
    • Road surface refurbishment. Mainly intersections
    • Reroute major sections through tunnels under the city areas
    • Allow the surface areas to be redeveloped into green park areas
  • Expected Benefits
    • Accident rate will fall significantly (aprox 45%)
    • Fuel consumption will reduce by 2.5 million liters per year.
    • 708 million hours of travel time will be saved over the next 30 years
    • Greenhouse gas emissions (CO2) will be reduced progressively from a 35,000 tons drop in 2007 to 64,800 tons in 2037

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3

slide4

Phase 1 works

14

  • . Refurbishment of the intersection between the M30 (nudo de la Paloma) and the Pio XII and Burgos Avenues.

2. Refurbishment of Calle Costa Rica and Plaza de J.M. Soler and their intersections with the M30.

3. Refurbishment of the M30 intersection with the Avenida de América (A-2).

4. Improvement of the intersection between the eje M-23 – O’Donnell and M30.

5. Improvement of the intersection between M30 and the A-3.

  • .1. Left lane of the intersection between Paseo de Santa Maria de la Cabeza and the A-3 from the south by pass of the M30.
  • .2. Right lane of the intersection between Paseo de Santa Maria de la Cabeza and the A-3 from the south by pass of the M30.

8. Connection between calle Embajadores and M40 ring road.

9. Burial underground of Avenida de Portugal from Paseo de Extremadura to M30.

10.1. Burial iunderground of the crossroad of Puente del Rey – Avenida de Portugal between Puente de Segovia and Marqués de Monistrol Avenue.

10.2. Burial underground of M30 from Puente de Segovia to Puente de San Isidro.

11.1. Burial undergound of M30 from Puente de Segovia to Puente de Praga.

11.2. Burial underground of M30 from Puente de Praga and Nudo Sur.

12. Service route for the M30 in the northwest area and addition of three lanes in the intersection with M30 west area.

14. Construction of a new access to the Avenida de la Ilustración with the Colmenar M-607 road.

12

1

2

3

Project Description

River Porject

10.1

9

4

10.2

5

11.1

7.1

11.2

7.2

Bypass

M-30

8

Sections of the works

Tunnels

4

4

slide5

Company Structure I

PPP – Public Private Partnership

  • Company evolution
    • Initially, “Madrid Calle 30 SA” was a 100% public company (direct management)

Constitution date: 21st May 2004

Initial Capital: €70 million, fully founded by the Madrid City Council

    • 23rd December 2004: Municipal agreement that transform the company into a public/private economy (indirect management)
  • Benefits of the Model PPP
    • Greater capacity of financing
    • Lower financial cost
    • Contractual schedule fulfilment. Infrastructure deadline and the commencement of the M&O process both on time.

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slide6

Company Structure II

  • “Public Tender offer for the M&O of the public service for the refurbishment, conservation and operation of the urban road M-30 by a public/private economy company.”
  • Private Partner incorporación date: 12th September 2005
  • Additions:
    • Hold 20% of MC30 shares
    • Provide a subordinated loan
    • Know-How of services performance included in the M-30 integral management agreement
  • Gains:
    • Management payments
    • Dividends for capital participation
    • Subordinate loan interests
  • Duration
    • 35 years from the constitution date. There is a put/call option on the 20th year

Private Partner

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6

slide7

Company Structure III

Dividends

Monthly payments

of Operating & Management

Equity

Equity

Subordinated Debt

Performance Payments

Interest & subordinated loan repayment

Dividends

Monthly construction payments

Interest & Loan repayment

Construction

Companies

Senior Debt

Bank Syndicate

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7

slide8

Company Structure IV

Contractual Structure

  • General agreement between MC30 and Madrid City Council.
  • Service Agreement between MC30 and the privately-owned company EMESA
  • Construction&Design Contracts between the MC30 and the Contractors
  • Shareholders agreement between Madrid City Council and the EMESA (private partner) on regards the equity participation on MC30.
  • Financing agreements between the banks and MC30. Additional interest rate coverage contracts.
  • Subordinateddebt from EMESA to MC30.

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8

slide9

Financial Structure I

(100)

  • Facility A = 1.350 Mill.€
  • Term 30 years, Grace period 5 years, Average loan life 24 years
  • Guarantee: Basic Payment

Debt

80%

  • Facility B = 1.150 Mill.€
  • Term 20 years, Grace period 3 years, Average loan life 14 years
  • Guarantee: Additional payment plus the rest of the Basic payment

TRIPLE 80/20

FINANCING SOURCES 100%

2.500 Mill.€

Share Capital

80%

Madrid City Council 80%

(12,8)

(16)

Own

Resources

20%

Private partner 20%

(3,2)

456 Mill.€

Subordinated Debt

20%

570 Mill.€

(4)

114 Mill.€

  • Ratio Senior Debt / Own Resources 80/20
  • Ratio Share Capital / Subordinated Debt 80/20
  • Ratio Municipality / Private Partner 80/20

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slide10

Financial Structure II

Additionally, it was defined a contractual relation between

Equity / Investment cost = 16%

Initial

Financial Model

Final

Financial Model

Differences

  • Construction Cost € 2.850,0 mill € 3.180,0 mill € 330,0 mill
  • Equity amount € 456,0 mill € 509,0 mill € 53,0 mill
  • Subordinated Debt € 114,0 mill € 127,3 mill € 13,3 mill

Temporary financial recourses

  • Senior Debt (B) (2007-2010) € 75,0 mill € 75,0 mill
  • VAT Loan (2007-2008) € 155,0 mill € 155,0 mill

10

slide11

Financial Structure II

  • Investment – Tunnel construction cost 3.180,00
  • Financial cost – Capitalized interest 318,97
  • Operational Cost 105,26
  • Taxes 0,00
  • Other Costs 1,00

USES

3.606,23

  • Equity 509,00
  • Subordinated Debt (A+B) 202,24
  • VAT Loan 0,00
  • Senior Debt 2.500,00
  • Annual Payments (M&O) 516,09

SOURCES

3.727,33

  • Repayment Facility B 102,81

18,30

  • Free Cash-Flow 31/December/2008

11

11

slide12

Financial Structure II

266,7 mill €

Monthly payments

By Operating & Management

407,2 mill €

101,8 mill €

Equity (80%)

Equity (20%)

202,3 mill €

Subordinated Debt

24,1 mill €

Performance Payments

Monthly works payments

3.180 mill €

(sin IVA)

Construction

Companies

2.500,0 mill €

Senrio Debt

Sindicato Bancario

12

12

slide13

Quality Service I

  • Madrid Calle 30 is the company responsible for developing the Operation and Management services of Madrid ring-road M-30
  • Conditions of service implementation
    • Fulfilment of the technical and quality standards fixed by the Administration and assumed by the Company in the bid proposal.
    • It was NEVER considered by the Madrid City Council the Direct toll or the Shadow toll as an alternative concessional model.
  • Payments: The administration annual payment is split in two components:
    • Basic Payment (€95,98 millions of 2005)

Initially fixed (at contract date) and constant. Annually updated by CPI

Can be considered as a Minimum Guaranteed Revenue

Guarantee the payment of part of the Debt Service (Facility A) to the financial institutions

    • Additional Payment (€170,70 millions of 2005)

The amount directly depends on service level (technical and quality standards)

Can present discounts according to the results of the M&O program audit

13

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slide14

Quality Service II

  • Risk and Venture: It´s fully accepted by the company Madrid Calle 30 SA
    • Basic payment is always guaranteed. Minimize part of the financial risk allowing MC30 to obtain better conditions (lower interest rates in Facility A)
    • Standards levels
        • Achieved: 100% of the Additional payment. No deductions are applied
        • Not achieved: Deductions are applied. The % discount over the Additional payment amount will be directly related to the audit result.
        • Higher levels achieved: No higher payments. In this situation, there is no back-to-back criteria.

Lower performance

Deductions are applied

Contractual

Service Levels

Contractual performance

100% of

Additional Payment

Higher performance

14

14

slide15

Quality Service III

Annual

Remuneration

266,68

Basic

Payment

95,98

Additional

Payment

170,70

(Values in Millions Euros of 2005)

15

15

slide16

Quality Service IV

ACCIDENT and EMERGENCY

Management

Indicator Definition: Percentage of incident, accidents and emergencies dealt with on time in relationship to the total number within an audit period.

Indicator value according to contractual standards levels: 100 %

Bi-annual audits to determine the service level given by MC30

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slide17

Model Benefits - Conclusions

  • The Administration obtains an important reduction in the total project cost.
  • The management of the M30 road it’s shared with the Privet Partner. From the general interest, the know-how and the resources provided by the PP increase the benefits achieved by the project.
  • The bi-annual testing quality and availability parameters, allow the Administration to directly supervise the private performance.
  • Transfer of construction risk and service capacity to the public/private economy company.

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