MACQUARIE CAPITAL
PRESENTATION TO NCPPP
P3 CASE STUDIES – PUERTO RICO
October 2012
STRICTLY CONFIDENTIAL
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2012 Macquarie Capital (USA) Inc.
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MACQUARIE CAPITAL// PAGE 1
CONTENTS
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1
ESTABLISHING PUERTO RICO’S PPP PROGRAM
3
A
2
CASE STUDIES: HIGHWAYS
4
9
3
CASE STUDIES: AIRPORTS
14
4
CASE STUDIES: SCHOOLS
19
5
CASE STUDIES: DETENTION FACILITY
21
MACQUARIE CAPITAL// PAGE 2
1
ESTABLISHING
PUERTO RICO’S
PPP AUTHORITY
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MACQUARIE CAPITAL// PAGE 3
PUERTO RICO PPP ACT
The Government Approved Act 29, the Public-Private Partnership Act on June 8, 2009

The Act declares as public policy:
—
To favor the establishment of Public-Private Partnerships in order to complete projects that develop and maintain infrastructure
—
Share the risk of developing, operating and maintaining PPP projects
—
To improve the services rendered and the functions of the Government

Places responsibility in the Puerto Rico Public-Private Partnerships Authority (“PR PPPA”) to implement PPPs

Priority Projects
—
Transportation
—
Energy
—
Water
—
Airports & Ports
—
Social Infrastructure

Created as part of Government-wide strategic reform to improve the economy

Most successful P3 entity in the U.S.

—
Speed of execution
—
Diversity of asset classes
—
In-house legal and financial talent
Modelled after Partnerships British Columbia
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PR PPPA ORGANIZATION
PPPA STRUCTURE
The PR PPPA is governed by the Board of Directors
Board of Directors
The Board is comprised of five members:

President of the Government Development Bank
(“GDB”)

The Secretary of the Treasury

The President of the Planning Board

Two persons representing the public interest
Executive Director
Supporting Staff
Partnership Committees Structure
For all PPP projects, Partnership Committees are created
to oversee the selection of proponents and negotiations of
Partnership Contracts.
Key Partnership Committee functions include:

Engagement of advisors, experts or consultants to
assist in the Committee’s functions

Approval of procedures for RFQ, RFP and evaluation
and selection for the Partnership

Evaluation and pre-qualification of contractors to
participate as proponents

Evaluation of submitted proposals and application of
the evaluation criteria to select the best proposal(s)

Engagement in or supervision of negotiation of
Partnership Contracts

Oversee proper compliance with regulations and
procedures during the negotiation and award of
Partnership Contracts
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Partnership Committees
President of
the GDB
(or delegate)
 President may
be represented
by his/her
delegate
Head of
Partnering
Government
Entity
Member of
the Board of
Directors of
Partnering
Government
Entity
Government
Experts
 May be
represented by
his/her delegate
 Must have direct
authority over the
project
 If the Entity does
not have a Board
of Directors, the
member will be
the entity head
 May be his/her
delegate
 Chosen by the
Board of
Directors of the
Authority due to
experts’
knowledge and
experience
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PUERTO RICO STRATEGIC MODEL
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PUERTO RICO PPP AUTHORITY DECISION
MAKING PROCESS
1
Government Entity
 Refers project to PPPA
Board of Directors
2
Does Not Proceed
PPPA
Board of Directors
 Determines whether to
order a Study of
Desirability and
Convenience
 Develops an inventory of
proposals
 Analyzes the Study and
decides whether to
proceed to create a PPP
Decision
Proceed
3
 Designation of a specific
Partnership Committee for
the referred project
4
Study of Desirability and
Convenience
7
Governor
6 PPPA Board of Directors
and Government Entity
Final
Approval
 Evaluates the Report
 Decides on Proponent and
Contract
PPPA
Board of Directors
5
Request for
Qualifications and
Proposals
Partnership
Committee
 Selects proponent
 Negotiates contract
 Writes Partnership Report
Source: Puerto Rico Public-Private Partnerships Authority (www.p3.gov.pr)
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PUERTO RICO PPP AUTHORITY
MACQUARIE ACTED AS FINANCIAL ADVISOR TO OVERSEE THE FAST TRACK DEVELOPMENT OF PUERTO RICO’S PPP PROGRAM
PROJECT BACKGROUND
Key Deliverables

Macquarie was mandated as advisor to help the establishment of the PR
PPPA in September 2009
 Mission statement and program goals

The Board of Directors of the PR PPPA approved a list of 8 assets that
should go into immediate PPP procurement
 Public sector comparator (PSC) methodology
—
 Desirability Study methodology
Type of assets included 3 toll roads, an airport, power plants, school
modernization projects, and a new water automatic metering and
collections system
 Communications strategy
 Initial review of assets
 Fatal flaw analysis

PR PPPA issued a RFQ for Advisory Services Pool (financial, technical,
legal and environmental) in November 2009
 Detailed asset review

PR PPPA issued two RFP for Financial Advisory Services in January 2010
 Template for RFQ / RFP documentation
—
RFP for the PPP procurement of Certain Toll Roads in Puerto Rico
—
 Template for Concession Agreement (or PPP
Contract)
RFP for the PPP procurement of Luis Munoz Marín International Airport
in San Juan
 Review of fiscal and public accounting treatment

Macquarie was mandated with the role of financial advisory for the PPP
procurement of Certain Toll Roads in April 2010
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PUERTO RICO PPP AUTHORITY
MACQUARIE DELIVERED 29 QUALITY DELIVERABLES ON TIME AND AN EXTRA 23 DELIVERABLES AS THE NEEDS OF THE PPP
AUTHORITY EXPANDED
SCOPE OF WORK

Complete a list of key deliverables to assist in the establishment of the PR PPPA which would facilitate the future procurement process
KEY TASKS

Amend PPP regulations to expand power of the Authority and clarify the roles of the Authority and PPP Committee

Develop communications plan, conference materials and two education courses

Prioritize assets by using three-tiered review to identify top PPP candidates

Draft Desirability Study process, RFQ, RFP, and Concession Agreement
FAST TRACKED ESTABLISHMENT OF PR PPPA

Assignment was finished within three months (December 2009) allowing the Authority to quickly launch the first procurements early
2010
—

Macquarie produced 29 required deliverables as well as an additional 23 deliverables as needs of the Authority expanded
Able to finish mandate in relatively short period of time due to continuous dialogue and coordinated efforts between Macquarie and PR
PPPA
FLEXIBLE STAFFING WITH A FOCUS ON SUCCESS

Team of 4 grew to 12 based on expanding needs of assignment, drawing from heads of roads, airports, and utilities team – all with
global experience
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2
CASE STUDIES:
HIGHWAYS
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CASE STUDY
PR-22 & PR-5 CONCESSION
MACQUARIE ACTED AS FINANCIAL AND STRATEGIC ADVISOR FOR PUERTO RICO’S CONCESSION OF PR-22 AND PR-5.
Historical PR-22 & PR-5 Revenue (FYE June 30)
PROJECT BACKGROUND
100.0
The assets being concessioned:


PR-22 is a 52-mile toll road which serves as the key conduit
connecting San Juan to the key industrial and tourist western
region of the Commonwealth.
PR-5 is a 4-mile toll road connecting the key cities of Bayamón
and San Juan.
PR-22 and PR-5 combined for approximately $90 million in toll
revenue in 2009.
90.0
Revenues ($MMs)

3.9
1.4
80.0
4.0
4.2
70.0
60.0
50.0
40.0
30.0
66.1
68.3
2004
2005
85.7
90.8
86.3
85.1
2006
PR-22
2007
PR-5
2008
2009
20.0
10.0
Puerto Rico attempted to monetize value in PR-22 in 2008 but was
unsuccessful.
0.0
Macquarie was also engaged for the initial project to assist in
establishing the Puerto Rico Public-Private Partnerships Authority
and the related legal framework.
Historical PR-22 & PR-5 Transactions (FYE June 30)
PR-22 & PR-5 GEOGRAPHIC OVERVIEW
Transactions ($MMs)
120.0
100.0
80.0
6.7
7.6
8.0
8.6
60.0
40.0
89.6
92.8
87.3
87.7
85.5
85.4
2004
2005
2006
PR-22
2007
PR-5
2008
2009
20.0
0.0
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CASE STUDY
PR-22 & PR-5 CONCESSION
Winning Consortium Overview
 GSIP is an investment fund specializing in
Key Transaction Overview
Client
Puerto Rico Public-Private Partnerships
Authority (“PPPA”)
Concession Term
40 years
Macquarie’s Role
Financial and Strategic Adviser to PPPA
Transaction Value
$1,136 million with an additional $56m of
near-term capital works (together with an
estimated $600m of additional investment
over the term of the concession project)
Winning Proponent
Goldman Sachs Infrastructure Partners and
Abertis Infraestructuras
Financing Highlights1
EV/EBITDA (2012): 17.8x
infrastructure with over $3 billion in capital
 Approximately $10 billion in investments
around the world
 Acquired the first FARAC Toll Roads
concession in Mexico for $4 billion
 Abertis Infraestructuras is among the top 10
D/E: $725m / $421m
transportation operators in the world
Equity Split: 55% GSIP / 45% Abertis
 Presence in 15 countries where it directly
Fully committed bank debt from 12 banks
manages over 2,300 miles of toll roads
 Manages the Teodoro Moscoso Bridge in
Toll Rates
Fixed at current rates until Jan. 1, 2014;
Escalation at CPI plus 1.5% per annum
afterwards
Capital Improvement
Concessionaire responsible for near-term
capital works that must be completed on an
accelerated basis
Puerto Rico
1Source
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Abertis press release on June 21, 2011
MACQUARIE CAPITAL// PAGE 12
CASE STUDY
COMPARISION OF PROPOSALS
Criterion
Morgan Stanley Infrastructure Inc. and OHL Concesiones
Autopistas Metropolitanas de Puerto Rico, LLC – Abertis Infraestructuras
and GS Infrastructure Partners II
Completeness of Proposal
Proponent fulfilled the requirements of completeness.
Proponent fulfilled the requirements of completeness.
Financial Technical and
Professional Reputation
MSIP and OHL both cited their annual profitability and
previous investments to support this criterion. OHL cited
their management and operations of 4,414km of toll
roads globally to demonstrate operating expertise and
diverse experience around the world.
GSIP and Abertis both highlighted their significant cash
reserves and liquidity lines. Abertis evidenced its capacity
that allowed it to manage 360 million toll transactions on its
toll roads. Abertis also cited that it currently operates over
2,300 miles of toll roads in fifteen countries.
Financing Plan
Proponent submitted a detailed Financial Plan. The
Financial Plan included a negotiated Term Sheet with
the commitment of 7 banks.
Proponent submitted a detailed Financial Plan. The
Financial Plan included a negotiated Term Sheet with the
commitment of 12 banks.
Operating Plan
Proponent submitted a detailed schedule for Accelerated
Safety Upgrades and satisfactory Operating Plan.
Proponent presented a detailed cost estimate to comply
with Accelerated Safety Upgrades in five years. The
Operating Plan set out proposed organizational chart
and proposed approach on employment and transition.
Proponent submitted a detailed schedule for Accelerated
Safety Upgrades and satisfactory Operating Plan. Proponent
presented a detailed cost estimate to comply with
Accelerated Safety Upgrades in three years. The Operating
Plan presented an organizational chart and emphasized on
the steps to ensure a smooth transition.
$960,450,000.00
$1,080,000,000.001
Offer of Concession Fee
1Original Concession
STRICTLY CONFIDENTIAL
Fee excluding interest-rate movement change of $56 million
13 13
MACQUARIE CAPITAL// PAGE
CASE STUDY
PR-22 & PR-5 CONCESSION
1
Mandate
2
Desirability Study
 Puerto Rico PublicPrivate Partnerships
Authority (“PPPA”)
mandates Macquarie as
financial advisor.
 Completed Desirability Study for
Puerto Rico Toll Roads including
Value for Money analysis.
 Purpose of Study was to determine
and analyze various service needs
and select the most efficient option
to fulfill those needs.
April 2010
June 2010
3
 Issued Request for Qualifications.
 8 respondents submitted responses to the RFQ:
1) Abertis Infraestructuras and Goldman Sachs Infrastructure
Partners II, L.P.
2) CCR (Companhia de Concessōes Rodoviárias)
3) Citi Infrastructure Investors and Itinere Infrastructuras, S.A.
4) Grupo ODINSA, S.A.
5) ICEIN S.A. and CONCAY S.A.
6) Interplan-Grodco-Consorcio Remix Development Group
7) JP Morgan IIF Int’l Acquisitions Ltd.
8) Morgan Stanley Infrastructure Inc. and OHL Concesiones
A copy of the Desirability Study and RFQ can be
found on the PPPA’s website: (www.p3.gov.pr)
6
Announcement
 The successful
consortium was GSIP &
Abertis.
 Commercial Close in
June 27, 2011 and
Financial Close in
September 22, 2011.
June – September 2011
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5
RFP Process
RFQ
June 2010
4
RFP
 Organized multiple meetings, onsite due diligence trips and
conference calls with Proponents.
 Advised PPPA on key terms of
Concession Agreement
 Shortlisted 4 Proponents based on scoring criteria for RFP Process:
1) Abertis Infraestructuras and Goldman Sachs Infrastructure
Partners II, L.P.
2) CCR (Companhia de Concessōes Rodoviárias)
3) Citi Infrastructure Investors and Itinere Infrastructuras, S.A.
4) Morgan Stanley Infrastructure Inc. and OHL Concesiones
 Issued RFP and draft Concession Agreement to shortlisted
Proponents with access to the Data Room.
November 2010 – June 2011
November 2010
MACQUARIE CAPITAL// PAGE 14
3
CASE STUDIES:
AIRPORTS
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MACQUARIE CAPITAL// PAGE 15
LMM PRIVATIZATION
ASSET OVERVIEW
Luis Muñoz Marín International Airport (LMM) is located in San Juan, the capital of Puerto
Rico, and is the largest airport in the Caribbean region

Location

— Carolina, Puerto Rico
— 6 miles east of San Juan



2 runways (9,783 ft and 8,016 ft)
Concourses
—
4 concourses with 42 gates
—
San Juan metro area
—
Capacity for 20 million passengers
—
Population of approximately 2 million
Passengers
8.2 million (CY 2011)
Market share in PR
—

—
Catchment area
—

Runways
Over 90% of total pax traffic1
Traffic mix (CY 2011)
—
82% origination & destination (O&D), 18%
connecting2
—
O&D: 86% domestic, 14% international2
—
Vacation (36%), Visiting Friends and Relatives
(26%), Business (17%), Cruise (5%), Relocation
(4%), Other (12%) 3
Source: 1. Puerto Rico Department of Economic Development, 2011 2. InterVISTAS 3. University of Puerto Rico study, June 2011
Note: All annual figures refer to fiscal year unless otherwise noted.
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LMM PRIVATIZATION
ASSET OVERVIEW
The process to obtain a lease for the LMM airport in San Juan was complex and competitive,
involving major players in the infrastructure space


Aerostar Airport Holdings
Stage
Timing
— Grupo Aeroportuario del Sureste (ASUR)
RFQ Issuance
July 5, 2011
— Highstar Capital
RFQ Responses Due (12 respondents)
August 8, 2011
First Shortlisting (6 proponents)
September 23, 2011
RFP Issuance
October 2011
Indicative Proposals Due
March 15, 2012
Second Shortlisting (2 proponents)
Late March 2012
Grupo Aeropuertos Avance (GAA)*
— Ferrovial Aeropuertos
— Macquarie Infrastructure and Real Assets (MIRA)

Puerto Rico Gateway Group
Final Proposals Due
July 10, 2012
— GE Capital Aviation
Revised Offer of Leasehold Fee Due
July 16, 2012
— Allegheny County Airport Authority
Notification of Preferred Proponent
July 19, 2012
— TIAA-CREF
Lease Agreement Executed
July 24, 2012
— OpTrust (replaced by IFM)
FAA Approval Process
Ongoing
— Airmall USA

Fraport AG & Goldman Sachs Infrastructure Partners

Flughafen Zürich AG, Public Sector Pension
Investment Board (PSP), Camargo Corrêa & Gestión e
Ingeniería IDC

GMR Infrastructure & Incheon International Airport
Corporation
* Advised by Macquarie Capital
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MACQUARIE CAPITAL// PAGE 17
LMM PRIVATIZATION
OUTCOMES
Aerostar Airport Holdings (Aerostar) was the highest bidder, offering an upfront payment to
the Puerto Rico Ports Authority (PRPA) of US$615 million
Final Process
Winning Consortium


GAA and Aerostar were named final shortlisted
proponents in March 2012

From March until June, final due diligence and financing
preparations were made by the two consortia

Final proposals submitted on June 10
— Grupo Aeroportuario del Sureste (ASUR)
— Owner and operator of nine airports in Mexico
— Highstar Capital
— US private equity firm specializing in energy
and transportation investments
— Upfront payments were within 10% of each other,
triggering a best and final offer (BAFO) process

Revised offers delivered on June 16

Aerostar consortium named
preferred bidder on June 19
Macquarie

Summary of final and BAFO proposals below
50%
Aerostar is a 50-50 partnership

Offered US$615 million upfront payment to PRPA

US$1.4 billion of capital improvements over lease
Ferrovialterm
50%
Total value of US$2.6 billion to Puerto Rico
Macquarie
Final Proposal:
US$531 million
US$540 million
Revised Offer:
US$615 million
US$567 million
Source: Puerto Rico Public-Partnerships Authority, Company press releases
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MACQUARIE CAPITAL// PAGE 18
4
CASE STUDIES:
SCHOOLS
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MACQUARIE CAPITAL// PAGE 19
SCHOOLS
Modernization program to renovate around 100 schools in Puerto Rico
Project Background
Map of the First 28 School PPPs




More than 1,500 active schools
First 28 schools

Serving about 485,000 students

Benefit 14,865 students

About 70% of public schools were built more than
forty years ago

Design-Build-Maintain

$1.4bn to restore the physical structures conditions
of those schools
The Modernization Program

About 100 schools in Puerto Rico

Expects to impact 50,000 students

$664m in committed investment

All municipalities will have at least one school
included into the Program

It is also into consideration the possibility of
building a few new schools

Consortia were selected for 64 schools
Financing will be provided by the public sector

Through Qualified School Construction Bonds

Authorized by Federal Government through the
American Recovery and Reinvestment Act
Source: Puerto Rico Public-Partnerships Authority,
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MACQUARIE CAPITAL// PAGE 20
SCHOOLS DELIVERED
Basilio Milan Middle School, Toa Baja
Before
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After
MACQUARIE CAPITAL// PAGE 21
SCHOOLS DELIVERED
Alfredo Dorrington School, Homigueros
Antonio Acaron School, Cabo Rojo
Blanca Malaret School, Sabana Grande
Isidro Sanchez School, Luquillo
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5
CASE STUDIES:
CORRECTIONAL FACILITY
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MACQUARIE CAPITAL// PAGE 23
CORRECTIONAL FACILITY
“New Beginning” Partnership between the PR PPPA and the Juvenile Institutions
Administration (“JIA”) for a new social treatment complex
Project Background
Project Timing and Consortiums


RFQ issued on March 22,2012

RFQ due on May 4, 2012

Received 11 Statements of Qualifications

4 consortia were shortlisted on August 8, 2012
The partnership arises from the following needs of the JIA



Need to enhance infrastructure conditions and
establish a contract systematic maintenance with
performance-based-metrics
Need to continue making progress towards full
compliance with civil cases applicable to juvenile
correctional system
Need best-practice and high-standard detention
and treatment accommodations that comply with
the American Correctional Association guidelines
(“ACA”)

Need to continue strengthening the rehabilitation
and social treatment programs for the juvenile
population in Puerto Rico; and

Need to address facility fragmentation in the
correctional system and achieve savings

Consists of developing a new social treatment complex
with 600 beds in Yauco

Design, Build-, Finance and Maintenance contract

Could provide estimated savings of $4.1m annually


Alianza Renacer (Brookfield Infrastructure/Aecom)

Balfour Beatty Capital

NBC Yauco (Desarrollos Metropolitanos)

Plenary Properties Puerto Rico (P3R)
RFP to be issued
Source: Puerto Rico Public-Partnerships Authority,
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MACQUARIE CAPITAL// PAGE 24