M-30 Ring-Road Project

Financial Structure

MAY 2007

Project description

Company structure

Financial structure

Quality Service

Model Benefits

2

INDEX

3

Project Description

3

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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Phase 1 works

Tunnels

M-30Sections of the works

12

14

1

2

3

4

5

7.1

7.2

8

11.

2

11.1

10.2

9

10.1

1. 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-3.7.1. Left lane of the intersection between Paseo de Santa Maria de la Cabeza and the A-3 from the south by pass of the M30.7.2. 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.

Pro

jec

t D

esc

rip

tio

n

River Porject

Bypass

5

Company Structure I

5

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.

PPP – Public Private Partnership

6

Company Structure II

6

“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

Pri

vate

Par

tner

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

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Company Structure III

7

Equi

tyEquity

Senior Debt

Interest & Loan repayment

Subordinated Debt

Monthly paym

ents of O

perating & M

anagement

Performance PaymentsInterest & subordinated loan repaymentDividends

Dividen

ds

ConstructionConstructionCompaniesCompanies

ConstructionConstructionCompaniesCompanies

Monthly construction

payments

Bank Syndicate

8

Company Structure IV

8

 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.

Subordinated debt from EMESA to MC30.

Contractual Structure

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Financial Structure I

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Ratio Senior Debt / Own Resources 80/20

Ratio Share Capital / Subordinated Debt80/20

Ratio Municipality / Private Partner 80/20

OwnResources

20%

Debt

80%

Share Capital 80%

Subordinated Debt 20%

Madrid City Council 80%

Private partner 20%

FIN

AN

CIN

G S

OU

RC

ES

100

%

(100)

(16)

(4)

(12,8)

(3,2)

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

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

456 Mill.€

114 Mill.€

2.500 Mill.€

570 Mill.€

TR

IPL

E

80/2

0

Financial Structure II

Additionally, it was defined a contractual relation between

Equity / Investment cost = 16%

Subordinated Debt € 114,0 mill € 127,3 mill € 13,3 mill

Construction Cost € 2.850,0 mill € 3.180,0 mill € 330,0 mill

Equity amount € 456,0 mill € 509,0 mill € 53,0 mill

InitialFinancial Model

FinalFinancial Model Differences

Temporary financial recourses

Senior Debt (B) (2007-2010) € 75,0 mill € 75,0 mill

VAT Loan (2007-2008) € 155,0 mill € 155,0 mill

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11

Financial Structure II

11

Investment – Tunnel construction cost3.180,00

Financial cost – Capitalized interest 318,97 Operational Cost 105,26 Taxes 0,00 Other Costs

1,00

US

ES

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

SO

UR

CE

S

3.727,33

Repayment Facility B 102,81

Free Cash-Flow 31/December/2008 18,30

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Financial Structure II

12

Equity

(80%)

Equity (20%)

Senrio Debt

Subordinated Debt

Monthly paym

entsB

y Operating &

Managem

ent

Performance Payments

ConstructionConstructionCompaniesCompanies

ConstructionConstructionCompaniesCompanies

3.180 mill

€(sin

IVA

)

Sindicato Bancario

Monthly w

orks paym

ents266,7 m

ill €

24,1 mill €

2.500,0 mill €

407,2 mill

€101,8 mill €

202,3 mill €

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Quality Service I

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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

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Quality Service II

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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

Contractual performance

Higher performance

Co

ntr

actu

alS

ervi

ce L

evel

s Deductions are applied

100% of Additional Payment

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Quality Service III

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Annual Remuneration

266,68

(Values in Millions Euros of 2005)

DESGLOSE COMPONENTE ADICIONAL DE LA REMUNERACIÓN

Gestión integral, servicios técnicos y dirección de las obras 17,40%Atención a incidencias , emergencias e incidentes 7,60%Explotación de la red 5,00%Gestión de la seguridad en túneles 5,00%Operaciones de limpieza 1,20%Operaciones de conservación de elementos de drenaje 5,00%Operaciones de conservación de taludes 2,40%Operaciones de conservación de cerramientos 1,20%Operaciones de jardinería, plantaciones y vegetación 4,80%Operaciones de conservación de firmes 9,50%Operaciones de conservación de estructuras, obras de fábrica y muros 9,80%Operaciones de conservación se señalización horizontal 2,40%Operaciones de conservación se señalización vertical 2,30%Operaciones de conservación de sistemas de balizamiento, isletas y bordillos 1,00%Operaciones de sistemas de contención 5,30%Operaciones de mantenimiento del sistema de gestión de tráfico 5,10%Operaciones de mantenimiento de instalaciones eléctricas y electromecánicas 7,50%Operaciones de conservación y mantenimiento de instalaciones en túneles 7,50%

100,00%

BasicPayment

95,98

AdditionalPayment170,70

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Quality Service IV

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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 %

AC

CID

EN

T a

nd

EM

ER

GE

NC

YA

CC

IDE

NT

an

d E

ME

RG

EN

CY

Man

agem

ent

Man

agem

ent

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

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Model Benefits - Conclusions

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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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