FINANCING TRANSPORTATION INFRASTRUCTURE IN SPAIN: SUCCESSFUL SCHEMES AND CASE STUDIES

1. FINANCING TRANSPORTATION INFRASTRUCTURE IN SPAIN: SUCCESSFUL SCHEMES AND CASE STUDIES U.S. - Spain Forum on transportation & housing finance Washington, November 2002

2. Index I.- Caja Madrid: A Brief Overview II.-Transportation Concessions in Spain: Successful Schemes III.- Financing Transportation Projects IV.- Case Studies: M-45 / R-2

3. I.- Caja Madrid: A Brief Overview

4. Caja Madrid In Spain: The oldest bank (300 years) 2nd largest Savings Bank and 4th largest universal banking group (with assets aprox. € 66.7 Billion.) Strongest market share in the Madrid Region: 16% (6% share of the Spanish market). Overall solid and profitable retail franchise Sound core business. Low-risk business profile Strong expansion, growth and diversification over the last five years

5. Today: Caja Madrid´s Business Structure FOUNDATION SOCIAL WELFARE Comercial Banking Investment Banking Other Busineses Asset Management Retail Treasury Two Networks: Capital Markets E- business - Madrid region IFI´s Venture Capital - Periphery Corporate Finance Real Estate SME´s Industrial Portfolio Bank Assurance Real Estate developers NH-AHORA Private Banking

6. Caja Madrid Group 2001 CONSOLIDATED HIGHLIGHTS & CREDIT RATINGS (In Euro billion) (In Euro million) 66.7 486 Bis Ratio 12,5% 437 63.2 50.6 373 Efficiency Ratio 46,4% Coverage Ratio 245,2% Bad Loans Ratio 0,68% 1999 2000 2001 1999 2000 2001 Attributable Profit Total Assets LONG TERM AA- Aa2 AA SHORT TERM A-1+ P-1 F1+

7. Top mandated arrangers of European project finance loans (October 2002) Mandated arranger name Loan Amt ($m) Transactions Share 1.- Westdeutsche L. Girozentrale 1,356.48 5 11.2 2.- Barclays Bank 1,080.32 6 8.98 3.- Societé Generale 951.02 5 7.91 4.- Royal Bank of Scotland 875.84 7 7.28 5.- Bank of Scotland 862.13 8 7.17 6.- Mizuho Corporate Bank 687.63 2 5.72 7.- European Investment Bank 427.05 1 3.55 8.- Caja Madrid 358.93 4 2.98 9.- Intesa BCI 355.16 3 2.95 10.- Abbey National plc 349.66 5 2.91 17.- BSCH 183.98 3 1.53 18.- BBVA 165.01 2 1.37

8. Loan Portfolio LOAN PORTFOLIO AS OF JUNE 02: € 2.351 billion INDUSTRY BREAKDOWN GEOGRAPHIC BREAKDOWN

9. Recent Infrastructure Financings CLIENT / PROJECT PROJECT DESCRIPTION VOLUME (€ million) ABRA TERMINALES MARÍTIMAS Construction and Operation of containers terminal in Bilbao Harbour 69.5 ALAZOR INVERSIONES Bridge financing for Madrid R3 and R5 roads 181 Construction and Operation of Estepona-Guadiaro toll road AUSOL 150.2 INFRAESTRUCTURAS Y RADIALES Construction and Operation of R-2 toll road and M-50 beltway road 424.0 INFRASPEED High speed rail link between Amsterdam and Belgium border 1,200.0 GRANDE OPORTO Shadow toll road (Portugal) 700 LUSOSCUT - AUTOESTRADAS DA COSTA DA PRATA Mira - Oporto road (Portugal) 432.7

10. Recent Infrastructure Financings CLIENT / PROJECT PROJECT DESCRIPTION VOLUME (€ million) IBERPISTAS Construction and Operation of A-6 Avila-Segovia toll road 300.0 NORSCUT, CONCESIONARIA DE AUTOESTRADAS Viseu - Chaves road (Portugal) 697.0 LUSOSCUT, BEIRAS LITORAL E ALTA IP-5 road (Portugal) 967.0 MEPSA Barcelona Harbour chemicals pier 20.4 RUTA DE LOS PANTANOS Madrid “Pantanos” road 70.1 SCUTVIAS, AUTOESTRADAS BEIRA INTERIOR Abrantes - Guarda road (Portugal) 746.0 UTE ARCO SUR GC-1 road in Gran Canaria 60.1

11. Recent Infrastructure Financings CLIENT / PROJECT PROJECT DESCRIPTION VOLUME (€ million) AUTEMA Terrasa - Manresa road 160.0 CONCESIONES DEL ELQUI CONCESIONES DE LOS LAGOS Los Vilos - La Serena toll road (Chile) 338.4 CONCESIONES DE MADRID Madrid M-45 motorway 135.8 UTE CANALS AGULLENT Canals - Agullent road 40.4 CINTRA New investment financing 360.3 EUROTUNNEL Channel Tunnel 343.0 ONTARIO OTR 407 Ontario 407 by pass $C 3,200.0

12. Recent Infrastructure Financings CLIENT / PROJECT PROJECT DESCRIPTION VOLUME (€ million) UTE NUENO-HUESCA Nueno-Huesca road financing 21.9 UTE SAN VICENTE Cantábrico road financing 99.1 TRANSPORTES FERROVIARIOS DE MADRID Madrid-Arganda suburban train 107.0 TAFIRA UTE Tafira by pass 26.4 AUTEMA Terrasa - Manresa road financing 72.0 AUSOL Málaga-Estepona toll road 361.0 ARPEGIO-METRO DE MADRID Expansion of Madrid´s underground system 261.4

13. II.-Transportation Concessions in Spain: Successful Schemes

14. General Considerations Basic regulatory framework for private sector participation in infrastructure projects dates back to 1972 (Law 8/1972 establishes legal framework for the construction, operation and maintenance of roads under concession schemes) Further developments since 1972 have provided a stable and reliable framework for investors and lenders A bill currently under consideration will consolidate and strenghen the concession system A key element is the strong support and involvement of the Spanish Administration

15. Goals of regulatory efforts Assumption of key risks by private sector - Construction - Operation & maintenance - Traffic - Financing Affordable tolls Mobilisation of large amounts of private financing into infrastructure projects Reallocation of Public Sector financing priorities

16. Successful Concesion Schemes Shadow toll concessions Real toll concessions

17. Common Features Strong government support, typically involving: - Concession agreement whith government undertakings - Maintenance of economic and financial equilibrium - “Responsabilidad Patrimonial” (Compensation upon early termination of concession) Specific terms (tenors of concessions, bidding criteria, maximun tolls, potential subsidies,etc) on a case-by-case basis Maximun concession tenor of up to 75 years

18. Main Features of Shadow Toll Concessions Granting authority (either central government or regional authorities) makes payments to the concession company according to the use of the road Payments made by granting authority are not considered as public indebteness Tipically, upside for investors is limited (reduction of toll payments upon achieving certain traffic volumes; reduction of concession tenor upon meeting certain returns, etc) Traffic is more predictable Lower traffic uncertainty may allow for more efficient financing schemes (bond financing and securitisation)

19. Main Features of Real Toll Concessions Tolls payable by users Higher traffic uncertainty Typically, upside for investors is not limited Financing structure typically more conservative

20. Toll Roads in Spain

21. III.- Financing Transportation Projects

22. Financing Transportation Projects Up to date , infrastructure projects in Spain have been mostly funded by banks due to the competitiveness and flexibility of such financing: - Willingness to provide long tenors - Competitive pricing - Consistent with high leverages - Willingness to evaluate and assume traffic risk Banks willingness reflect: - Comfort with regulatory framework and strong involvement of the Administration - Successful track record of toll road concessions - Users acceptance of toll roads (annual ADT in toll roads has increased by 4,93% and 7,01% in the periods 1981-2000 and 1995-2000, respectively)

23. Financing Transportation Projects However, Capital Markets funding (Bond finanicng an securitisation) will become increasingly popular due to: - Need of longer tenors - Bank financing will not be enough to meet needs derived from the 2002-2007 infrastructure plan - Implications of BIS capital requirements on banks - Regulatory support (Concession bill facilitates capital markets transactions) Initially, “Wrap-Ups” from monolines will play a key role (Ex. Pamplona-Logroño toll road; Ruta de los Viñedos)

24. IV.- Case Studies: M-45 / R-2

25. Radial 2 Toll Road Part of a network of four access roads to Madrid from suburbs (high proportion of conmuting traffic). Granting Authority Ministerio de Fomento (Ministry of Public Works/Development) Description 80,9 Km real toll road, from Guadalajara to the M-50, Madrid´s third untolled beltway. The R-2 will go parallel to the N-II, an untolled road connecting Madrid to Zaragoza and Barcelona. A key feature is the obligation to build, free of charge, a portion of the untolled M-50.

26. Radial 2 Toll Road Key Sponsors Dragados Group and Acciona Status Under construction (expected commercial operation: 2nd half 2003); financial close in mid-2002 Concession Tenor 24 years Tolls Maximun levels established in concession agreement. Adjusted by inflation

27. Radial 2 Financing Structure Total Project Cost Approx. € 500 million Debt/Equity 85/15. In Addition, a small contingent line of credit and equity has been committed to cover initial cash flow deficits Debt/Tenor 21 years (Tenor may be reduced by one year if concession tenor is not extended by one year) Average Life 16.6 years Syndication Led by Caja Madrid, with BBVA and Banesto as co-lead arrangers, and syndicated among 27 banks

28. M-45 Shadow Toll Road Partial Beltway in Madrid, split into three tranches awarded to three different consortia Granting Authority Comunidad de Madrid (Madrid´s Regional Government) Description 14,1 Km shadow toll road, from the N-II untolled road to Eje O´Donell (R3) Key Sponsors Acciona, Dragados Group, FCC

29. M-45 Shadow Toll Road Status In commercial operation since mid. 2002. Financing closed in 2000. Original Conccesion Tenor 25 years Tolls Payable by the granting authority according to usage. However, revenues in excess of a predeterminated annual level do not generate payments (i.e. the sponsors´ IRRs are capped

30. M-45 Financing Structure Original Total Project Cost Approx. € 131 million Debt/Equity 85/15. In addition, a € 26 million contingent line of credit was committed to cover potential construction modifications requested by the granting authority Debt/Tenor 22 years, back-ended amortizacion profile DSCR 1.25 (minimum and average) DEBT Participants Banking tranche and EIB/EIF tranche, guaranteed by banks