FDSeminar Financiering na Basel III Paul Lievens - Jan De Nul

11FDSeminar Financiering – Financiering na Basel III Thursday, November 27th 2014

Project Bonds: Problem or solution?

Case study: A11 Brugge-Knokke Highway


A Case study: A11 Brugge-Knokke Highway

FDSeminar Financiering – Financiering na Basel III

Thursday, November 27th 2014

Paul Lievens - CFO Jan De Nul Group




1. Jan De Nul Group in short

2. A11 Brugge-Knokke Highway

2.1 Academic Thoughts or Reality?

2.2 The A11 Project Case

2.2.1 Key investment Highlights

2.2.2 Contractual Structure

2.2.3 Key Parties & References

2.3 The A11 Story line: From preferred Bidder till Contractual and Financial Close

2.3.1 Starting point in 2012: From BAFO to Preferred Bidder

2.3.2 The chosen option: September 2013

2.3.3 The spring 2014 Implementation

2.4 The Morning after - Conclusions

Table of contents




1 Jan De Nul Group in short




Jan De Nul Group is a world leading dredging and maritimeconstruction company. The bulk of its dredging operations relate toland reclamation, capital dredging, maintenance dredging and offshoreenergy related works. Moreover, the Group is also a leadingconstruction company in Belgium, where it specializes ininfrastructure works and technically complex realizations. A third polerelates to the in-house developed expertise in treatment of pollutedsoils (Envisan) and Brownfield Development (PSR).

Finally, the Group has undertaken important works in the offshore wind-Farm construction industry.

Jan De Nul is a Diversified World Leader




The Group enjoys a very balanced and diversified geographical mix,

not being exposed to the performances of any one region. Recently the

Group executed following notable works:

Dredging works in Oman, Australia, Brazil and Vietnam;

Offshore works in Norway, United Kingdom and Russia;

Civil Works in Panama and Belgium;

Environmental works in Romania, France and Belgium;

Wind-Farm construction in Sweden and Belgium.

Jan De Nul is a Diversified World Leader




Turnover by segment

2,114 mio €

Dredging and Marine Works

Civil Works

Environmental Works2,124 mio €

2,110 mio €

Offshore




Turnover by region




The Group has funded its EUR 2,3Bn (2007-2013) expansion

investments for more than 70% by operational cash generation.

Therefore, the financials and credit metrics today, at the end of the

Capex programme are very healthy.

The shareholders of this family owned Group have consistently

retained the generated profits in the Group, strengthening the

balance sheet to a Solvency of more than 50%, a sector-wide high.

EBITDA remains in the range of 20/25% of turnover.

JDN Demonstrates Sound Financials




Turnover

0

500

1,000

1,500

2,000

2,500

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

million euro

Total Consolidated Turnover

Dredging Works

Civil & Environmental Works




Key Figures

2013 2012 2011 2010 2009

Turnover 2,123,853,739 2,114,200,407 2,109,890,068 1,800,695,893 2,103,222,108

EBITDA 550,470,269 510,085,492 458,368,010 373,623,521 492,845,910

Depreciation 310,563,339 293,824,332 239,256,315 256,281,313 174,257,682

EBIT 239,906,931 216,261,160 219,111,695 117,342,208 318,588,228

Financial Result -81,855,104 -33,111,591 12,803,555 24,911,514 -20,931,142

Extraordinary Result -4,826,806 -633,913 -3,230,665 7,155,538 -2,909,678

RESULT FOR THE YEAR 123,301,975 116,173,106 200,799,655 112,691,953 253,227,964

Fixed Assets 2,204,826,838 2,353,080,776 2,383,606,109 2,156,634,428 1,773,808,973

Capital & Reserves 2,078,252,461 1,994,939,389 1,876,207,745 1,748,744,180 1,611,197,621

Subordinated creditors 112,667,884 112,667,884 75,167,884

EQUITY 2,190,920,345 2,107,607,273 1,951,375,629 1,748,744,180 1,611,197,621

EBITDA/Turnover 26% 24% 22% 21% 23%

EBIT/Turnover 11% 10% 10% 7% 15%

Result for the year/Turnover 6% 5% 10% 6% 12%

Solvency (equity based) 58% 56% 51% 50% 48%




EBITDA Evolution

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

0

100

200

300

400

500

600

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EBITDA Evolution

EBITDA

EBIT

EBITDA / Turnover




Solvency Position

835

983

1286

1377

1611 1749

1951

21082191

57%55%

53%

47% 48%

50%51%

56%58%

0%

10%

20%

30%

40%

50%

60%

70%

0

500

1000

1500

2000

2500

2005 2006 2007 2008 2009 2010 2011 2012 2013

EU

R m

illio

ns

Equity

Solvency




Long term funding alternatives

EU and/or US Private Placement

5 – 15 years

€0

€800

€700

€600

€500

€400

€300

€200

€100

0 4 166 8 102 12 14

Tenor (years)

Siz

e (

€m

)

BCP

Short

term

Syndicated

Loan

3 years /

portion

5 years

Subordinated debt &

Preferences sharesLease

Public Bond

5 - 7 years

€ 400 m

CP program

€ 550m

Syndicated

Loan

Schuldscheine




PPP and DBFM

Export Finance Toolbox

The quest for long term commercial credit




2. A11 Brugge-Knokke Highway

2.1 Academic Thoughts or Reality?




1) Allen & Overy – The future of Credit

2013 Publication

“Project and asset finance, once the sole domain of banks and monoline

wrapped bonds, has started to look to the capital markets to seek funding. This

started in the form of banks financing their project and asset finance inventory

through securitising or repackaging their project and asset finance assets, but

has now extended to borrowers seeking direct (re)financing from the capital

markets – the so-called =project bonds=.”

“Ironically, this is likely to require increased levels of state support for the

underlying projects either through direct financial support or more

accommodating underlying contractual and regulatory regimes.”

Quotes




2) The Economist

March 22nd 2014

“ A long and winding road”

“European lenders, which used to dominate infrastructure financing, are now

busy repairing their dented balance-sheets.”

“Basel 3 rules are steering banks away from the long term loans required by

infrastructure projects. The one exception is Japanese banks, which have

stronger balance-sheets and are keen to put money to work.”

“Banks are not only wary of making long-term loans, they are also reluctant to

take as much risk as before.”

Quotes




The transition from banks to investors is not seamless

Insurers and pension funds often dislike greenfield projects

What about construction delays and cost overruns

Profitability of the assets

The end of bank financing for infrastructure projects has been

predicted in the past and banks are (again?) still making (more?)

loans

Actual momentum has been created through High activity in the corporate bond market

Historically low yield on quality sovereign debt

What if sovereign yields should increase sharply (for example a

reversal of quantitative easening)

...

However




2.2 The A11 Project Case




http://www.tdpartners.com/





Project location




2.2.1 Key Investment Highlights

Strategic Project

– The A11 is part of the Trans-European Transport Network (“TEN-T”), and part of the Flemish ‘missing link’ package of PPP road projects

– It will connect Bruges and Knokke and improve access to the port of Zeebrugge

– The term of the concession is 33.5 years, with expected 3.5 years of construction and a subsequent 30 years operational phase starting at

the issuance of the Availability Certificate

– The project incorporates nearly 90 civil engineering structures, including twin bascule bridges, two viaducts and three tunnels.

Solid Contractual

Framework

– Grantor is the Flemish Region (AA/Aa2) through its Agency for Roads and Traffic and the department of Mobility and Public Works.

– Further, the Flemish Region is a shareholder in the Project through Via Invest NV, a collaboration between the Flemish Region (49%) and

PMV (51%), a government-owned independent investment company. Via Invest will hold 39% of the shares in the Project

– The Concession Agreement follows established market standards in the Benelux market. It shows standard construction and maintenance

obligations, which are subcontracted on a full back-to-back basis

Robust and

Predictable

Financial Profile

– Pure availability-based revenue mechanism. Transaction is not exposed to demand or traffic risk

– Equity sponsors with a long term investment approach

– Credit profile enhanced by an unfunded standby letter of credit (so-called Project Bond Credit Enhancement instrument) provided by the

European Investment Bank

– Rating of A3 assigned by Moody´s

Defined and

Predictable Cost

Structure

– Fixed-price fixed-term lump-sum turnkey construction contract, back-to-back with DBFM Agreement and supported by a strong construction

performance security package.

– Construction scope qualifies as medium complexity with limited, yet appropriately mitigated technical challenges

– Operations and maintenance contract is on a firm (indexed) basis, back-to-back with DBFM Agreement and supported by a strong security

package. O&M Contractor comprises the same parties as the construction contractor thus, ensuring minimal interface between construction

and maintenance

Experienced

sponsor group with

strong local

footprint

– First class sponsors group, well-skilled, resourced and experienced, with proven track record

– Strong local presence of the sponsors in Belgium and established cooperation with Via-Invest resulting from ongoing road projects (“Kempen

north-south missing link” with Jan De Nul and Aswebo; “R4 Gent” with TDP PARTNERS




2.2.2 Contractual structure of the project

1 DBFM Agreement

6 EPC Contract

2 Equity 2a Sub Debt

7 Maintenance Contract 8Interface & Coordination

Contract

3Senior Notes (ltd recourse

To the Issuer

5Subordinated

PBCE Instrument

VIA BRUGGE N.V.

VIA INVEST

Holding Company

Flemish Region1

6 7

€30.4m Sub Debt

THV EPC (Construction JV) THV MTC (Maintenance JV)8

€1.6m Equity

€43.2m Sub Debt

€2.3m Equity

2a

2

2

Project Company

2a

Bond holders

EIB

3

5

+/-€566m Limited recourse

Senior Bonds

20% of Senior Debt

dropping to 10%

post completion

Individual private

shareolders

100% ownershipOwnership structure of VIA BRUGGE N.V.TDP 50%

Jan de Nul NV 39%

Van Laere NV 3%

Franki Construct 2%

Aswebo NV 3%

Aclagro NV 3%

Subordinated debt

Subordinated debt

Subordinated debt

Via A11 N.V.




Jan De Nul N.V.The company

– Jan De Nul Group ranks at the top of the international dredging

industry as well as being one of the largest civil engineering and

environmental contractors with a total turnover in 2011 of EUR

2.1bn and a total workforce worldwide of 6,000 employees

– Jan De Nul Group executes dredging and reclamation projects

from start to finish: capital dredging and maintenance works in

ports, deepening of channels, rock or sand bank dredging in

open sea, specialized dredging services for the offshore

industry, beach replenishment, rock revetment, etc.

– Civil works are also an important part of the Group activities. All

key activities, from design to execution, are carried out by its

own engineers and equipment, whether it concerns buildings,

wastewater treatment plants, sewerage or pipe works, quay

walls, tunnels, bridges, railways, roads or locks

– Beside the design and build of projects, Jan De Nul Group has

also acquired the necessary knowledge to execute PPP projects

such as the current execution of the Kempen north-south

missing link

– Through its environmental subsidiary Envisan, the Group is

experienced in all fields of environmental technology: soil and

groundwater rehabilitation, remediation of polluted soils and

environmental dredging, processing of waste and alternative raw

materials

– Jan De Nul Group operates in compliance with several certified

management systems: ISO 9001, ISO 14001, OHSAS 18001

and VCA

Financials JAN DE NUL N.V. (in EUR ‘000)

– Belgian Projects:

– New Railway Connection Schuman-Josaphat in Brussels (EUR

210m)

– D&B of the Water Treatment Plant of Brussels North (EUR 235m)

– Construction of the Interchange in Lummen (EUR 43m)

– Second lock Waaslandhaven (EUR 272m)

– Kempen North-South Missing Link (EUR 180m)

– DBM Amoras sludge treatment plant (EUR 118m)

– Ivoz-Ramet lock (EUR 43m)

– International Projects:

– D&B Manifa (USD 1,000m)

Realised / ongoing projects

2013 2012 2011

Sales 1,233,447 1,058,452 1,081,393

EBITDA 168,485 106,058 77,141

EBIT 139,292 60,794 28,993

Net

result 22,795 114,838 83,147

Equity 1,016,955 994,159 884,358

Total

assets 1,503,985 1,366,142 1,338,088

Financials JDN GROUP (in EUR ‘000)

2013 2012 2011

Sales 2,123,854 2,114,200 2,109,890

EBITDA 550,470 510,085 458,368

EBIT 239,907 216,261 219,112

Net

result 123,302 116,173 200,800

Equity 2,078,252 1,994,939 1,876,208

Total

assets 3,799,230 3,781,745 3,830,452




Franki Construct N.V.The company

– Franki Construct is a Belgian construction company specialized

in civil engineering, industrial buildings, environmental projects,

tunnel constructions, office & apartment buildings and

renovation works

– Franki Construct is an 85% subsidiary of Belgian Willemen

Group

– The Willemen Group comprises several companies active in the

building sector, from suppliers and contractors to project

developers. These companies complement each other to

guarantee the clients a tailored solution.

– The Group is active in several areas of the building industry: civil

engineering, industrial construction, residential and general

utilities construction.

– Next to its general contracting activity, the Willemen Group has

specific subcontractors within its own organisation, such as pile

foundations, roofing, sanitary installations, HVAC and raised

floors

– The group's solid base is in Belgium, and it is challenged by

many possibilities abroad. Currently the group is active in

several Central and Eastern European countries

– Willemen Group employs over 2.000 people and creates indirect

employment for many more people

– All branch offices together realize impressive projects

representing all together an annual turnover of EUR 400m

– DBM Westerschelde tunnel (EUR 775m)

– PPP project Brabo 1 (EUR 124m)

– Railway tunnel under central station of Antwerp (EUR 50.4m)

– Pedeviaduct for railway traffic, Antwerp (EUR 42m)





Aswebo N.V.The company

– Aswebo is a Belgian major road construction contractor, which

also operates its own concrete and asphalt production facilities

– The 4 asphalt facilities are in Brugge, Gent, Lummen and Villers-

le Bouillet

– The Aswebo group also holds 50% of the shares of Kumpen, a

Belgian construction company located in Hasselt

– In May 2011, Willemen Group acquired the Aswebo Group

situated in Gent


PPP (DBM) projects

– “Kempen north-south missing link” (EUR 180m)

Maintenance of highways

– Asphalt pavements:

– A17 Aalbeke-Roeselare in 2012 (EUR 4.9m)

– A18 Middelkerke-Nieuwpoort in 2012 (EUR 1.9m)

– E314 resurface of rutting in 2012 (EUR 2.9m)

– Reinforced concrete pavement:

– E34/N49 Moerbeke-Zelzate in 2012 (EUR 13m)

– E313 in 2012 (EUR 15m)

– E17 Kruishoutem in 2010 (EUR 18m)

Sewerage Works:

– N50 Oostkamp in 2011 (EUR 4.5m)

– N8 Kortrijk in 2010 (EUR 7m)

– Diksmuide Heernisse 2010 (EUR 5.6m)

Civil and road projects:

– Beernem-Oostkamp railway tunnel in 2012 (EUR 11m)

– Gent-St-Pieters-Landegem in 2011 (EUR 5.4m)

– R0 Renovation viaduct Vilvoorde in 2011 (EUR 6.5m)

– Zeebrugge inner port in 2011 (EUR 3.5m)

Industrial projects (ports, industrial areas, etc):

– Zeebrugge Bastenakenkade in 2011 (EUR 3.6m)

– Evolis Kortrijk in 2010 (EUR 4m)

– PSA Bruges in 2010 (EUR 6.7m)




Aclagro N.V.

The company

– Aclagro is an independent, privately owned company and an

integrated group consisting of four divisions: infrastructure, soil

and demolition work, soil sanitization and water purification and

recycling and soil remediation. Besides those activities, the

group also started an activity of brownfield-development

– As a contractor Aclagro concentrates on four core activities:

infra, earth and demolition work, soil sanitization and

groundwater purification and finally recycling and soil

remediation.

– A complete vertical integration combined with an extensive

machine fleet and the present human capital, makes the group

unique in its strength, speed and quality of implementation

– The activities of the ‘Infra’ division are grouped into 5 main

activities:

– Road construction and infrastructure works

– Collector and sewerage work

– Railway work

– Hydraulic engineering work

– Civil engineering

– Aclagro has grown into an established figure in road

construction with an excellent track record. Amongst others, they

work for cities, municipalities, the Flemish community, the

provinces, private customers, Aquafin, TMVW, de Lijn, port

companies and inter-municipality groups

– Their operating area for ‘Infra’ covers the provinces East

Flanders, West Flanders and Antwerp

– Aclagro operates in compliance with several certified

management systems: ISO 9001, ISO 14001 and OHSAS

18001. Aclagro is also certified for specific standards: BELAC

07-05, a quality management standard for asbestos removal and

Achilles (groep 1, 2 & 4), a certificate for ‘Soil and groundwater

sanitization

– City renovation project in Ghent: Tondelier (formerly known as

the ‘Gasmetersite’). The PPP-contract was signed end of March

2012 and comprises the infrastructure works and city

development of a 70.000 m² former industrial site in the city

centre of Ghent. The new project comprised the Construction of

500 houses and some public buildings

– Road & sewarage work for 2nd bridge over Schelde, Temse (€ 2

m)

– Construction of a rotary junction at Bellevue site in Ghent (€ 2

m)

– Infrastructure works for the golf course “Hof ter Hille”, Koksijde

(€ 11 m)

– Road construction works at Flanders Expo Gent (€ 5,3 m)

– Renovation of the city center of Gistel (€ 5,8 m)





TDP PARTNERSThe company

– TDP Partners is an unlisted investment fund incorporated in 2007

– The focus is predominantly on investments in early stage

infrastructure and selective real estate assets where there is a

degree of construction and development risk, including primary

Public Private Partnerships

– The fund invests in companies, projects and infrastructure related

assets in sectors such as transport and logistics infrastructure,

utilities, social and healthcare infrastructure, communication

networks, etc.

– The fund invests in equity or equity-linked instruments

– The fund has a term of 12 years

– The return and exit of investors will be realized through interim

cash distributions and capital gains on the investment portfolio

– The fund predominantly targets investments in the Benelux, but

can also invest in the neighbouring countries together with a

Benelux industrial or financial sponsor

– The manager of the fund is Inframan, a joint venture between

Gimv, a listed Belgium investment company, and Belfius Bank

and Insurance

– Investors typically include insurance companies (Ethias), pension

funds (Pensio-B), financial institutions (Belfius, VDK) and (semi)

public entities (SRIW, Vlaams Toekomstfonds, Vlaams Zorgfonds)

Belgian investments and projects:

– Brabo 1 (tramway in Antwerp) with Heijmans and Franki

– Via Invest R4 Ghent Ring Road

– Marche-en-Famenne prison with Eiffage

Other European investments and projects(a):

– Optimep, four penitentiary facilities in France, through a JV with

Eiffage

– DUO2 project and Komfort project through a JV with Ballast

Nedam in Netherlands

Realised / ongoing investments

(a) Investments in France and the Netherlands out of DG Infra Yield, not DG Infra+






Algemene Aannemingen Van Laere N.VThe company

– Van Laere was founded in 1938

– Throughout the years it grew into a multidisciplinary group with

activities in Belgium, Luxemburg, the Netherlands and France

and is a subsidiary of Ackermans & van Haaren diversified

group, which is quoted on the Belgian stock exchange

– General Contractor Van Laere is active in the construction of

office buildings, hotels, utility buildings, civil - and hydraulic

engineering and environmental projects of a different kind

– The company is highly experienced in the construction and

engineering of civil works. Van Laere was involved in the

construction of several civil works such as (immersed) tunnels,

bridges and quay walls

– Van Laere is one of the most experienced engineers and

constructor of parking buildings and underground parking lots in

Belgium. The construction activities at the various building sites

are supported by its central services and workshops, established

mainly in Burcht

– The expertise and experience of the more than 480 employees

(Group) is a guarantee for good quality. Van Laere has its own

technical equipments to execute the works and is certified ISO

9001 and VCA

– DFMO Liefkenshoektunnel, Antwerp (Tunnel) (EUR 166m)

– Piet Heintunnel, Amsterdam (Tunnel) (EUR 119m)

– Deurganckdok, Antwerp (Quay Walls) (EUR 167m)

– Asdam, a drilled railway tunnel, Antwerp (Tunnel) (EUR 69m)

– Albert II-dock and Wielingendock, Zeebrugge (Quay Walls)

(EUR 50m)

– Brabant Zuid (open ramp length +/- 1 km, for the construction of

new motorway A16. The ramp is to be constructed in the

framework of the HSL between Antwerp and Amsterdam) (EUR

27m)

– Brabant Noord (construction of 4 bridges over A16 and IC track

for local roads, construction of 2 bridges over Mark River for the

new A16) (EUR 20m)

– Quay Wall B2, Kanaaldok, Antwerp (EUR 20m)

– Civil constructions for the railway, Hoeilaert (EUR 32m)

– Civil works for the railway, Braine l’Alleud (EUR 40m)





Nominated subcontractors and advisers to the ConsortiumNominated subcontractors

Subcontractors on an exclusive and on a back-to-back basis:

– Victor Buyck Steel Construction (twin bascule bridges):

– VBSC is an internationally renowned, Belgian based steelwork

contractor with production plants in Belgium and Malaysia

– VBSC offers steelwork services from early design and

engineering stages on to final erection of the steel

construction, including fabrication, corrosion protection and

transport

– The company has experience from PPP- and DB(FM)-projects

such as the North-South Kempen Missing Link (PPP/DBFM)

and the Boulevard Bridge (D&B) in Belgium, the TGV East

Viaduc Jaulny in France, and the Prins Claus Bridge and

Demka Rail Bridge in the Netherlands

– In 2011, VBSC had sales of EUR 76m

– Fabricom GDF Suez (electro-mechanical works):

– Fabricom specialises in technical installations and services

for, amongst others, infrastructure markets

– Fabricom’s expertise covers a wide and varied range of

technical disciplines, including electrical, instrumentation,

mechanical, industrial piping, automation, and maintenance,

as well as specialist applications

– The company is 100% Belgian and is part of the Benelux

Business Unit of GDF SUEZ Energy Service

– Fabricom has been involved in PPP projects Diabolo, Brabo 1

and North-South Kempen Missing Link

– In 2011, Fabricom had a turnover of EUR 653m

Technical and architectural:

– Grontmij (engineering)

– Zwarts & Jansma Architects

– Bureau Bas Smets (landscaping)

– Schlaich Bergermann und Partner (integrated bridges and

viaducts)

– Iv-Infra (RAMS analysis)

– Steers Davies Gleave

Financial, legal and insurance:

– Deloitte

– Stibbe

– Vanbreda

– NautaDutilh

Advisers Bankers

- Deutsche Bank

- Belfius

- Bayerische Landesbank

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2.3 From preferred Bidder Phase to Contractual and Financial Close




The A11 Project was launched in the period when long term banking

financing became overwhelming scarce

Two financial bids, in parallel, had to be forwarded in the BAFO phase

Via Brugge Consortium was awarded the status of ‘Preferred Bidder’

in December 2012, following the BAFO submission of October 2012

Besides an operational action plan (design evaluations, building permit,

introduction,...) an important part of the scope of works was addressed

to the choice of the most appropriate funding structure i.e the bank

financing versus the capital market option

From preferred Bidder Phase to Contractual and Financial Close




2.3.1 Starting point

Bank Financing

Bank commitments including EIB Long

term Financing

Developed Term Sheets

Indicative rating issued (Moody’s)

PBCE Term sheet

Contractors Support Package

Intercreditor Principles developed with

EIB

Mandated Banks (joint Lead Managers

and Bookrunners)

Bond Financing

And

Extensions Term sheet and tuning

Final & detailed Bond Placement Plan:

Tuning term sheet PBCE

Rating Confirmation

Contractors Support Package

Developed

Intercreditor Principles tuned

Tuned roles of Mandated Banks

Or

Choice

of

the

option

to

be

lifted

[≤ 12/2012]

From BAFO to Preferred Bidder Phase

Alternatives, fairly far developed 12/2012

[>dec 2012]

Alternatives further developed till 9/2013

Bank Financing

Bond Financing




Challenges:

Long lasting and demanding process

“Bankers Motivation”

EIB “dual” structure

Workload on existing advisors

Need for different approaches and future (new and supplementary)

advisors

2.3.1 Starting point




Assessment Phase led to a decision for a public listed fully

underwritten Bond option

This solution also allowed for a deferred drawdown mechanism

2.3.2 The Chosen option: September 2013




2.3.2 The Chosen option: September 2013

Underwritten Bond Option Public Bond Option Bank Option

Key benefits • Full certainty on pricing of the

bonds prior to contract award

• Maximum execution certainty

(and less complex execution

compared to Public Bond

Option)

• Avoidance of negative cost of

carry due to deferred drawdown

mechanism

• Market pricing achievable as a result of public bookbuilding process • Certainty on pricing of bank

facilities

• Low execution risk; standard

credit documentation

Key risks/

downsides

• Underwritten bond spread

may not be the optimum

achievable price when

compared to a public issue that

gets placed when markets are

strong (largely offset by

absence of negative cost of

carry)

• Higher costs for EPC

contractor related to stronger

security package

• More extensive credit

documentation compared to

bank financing

• Potential for market movements between now and financial close to cause

widening of spreads. Pricing on the bonds only firm once bookbuilding is

finalised (not prior to contract award)

• Negative cost of carry (can partially be addressed through GIC and

potential better pricing)

• Higher costs for EPC contractor related to stronger security package

• More extensive credit documentation vs bank financing

• Longer lead time

• Banks might discuss

remuneration fees for further

extension




New parties to the deal

Legal Bond Advisors: - (Advisor to the Banks)

- ( (Advisor to the consortium)

- (Advisor to EIB)

in Global coordination with existing legal parties: -

-

-

and Financial ( , )

and Technical Advisors ( )

First set of documents was delivered in a time slot of 10-12 weeks

before Christmas 2013

2.3.3 The implementation Phase

(PMV)

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Decision making processes needs to be strongly aligned between all

involved parties and their related governance

In a second stage some hurdles arised

EIB as a tainted investor within Belgian Legislation

Domestic legislation in different European countries “acted” differently

on deferred drawdown mechanism of the board

Gap of timing between financial & contractual close already reduced to

a bare minimum posed some challenges on swap risks

This led to a second documentation round

2.3.3 The implementation Phase (2)

Via-Invest NV

PMV Flemish

Region

51%

45%

Via Brugge NV

Aclagro

NV

Franki

Construct

NV

A.A. Van

Laere NVTDP

PARTNERS

Ondernemin

gen Jan De

Nul NV

Aswebo

NV

Via A11 NV

39% 61%

DBFM Agreement

THV EPC Via Brugge

THV MTC Via Brugge

EPC Contract (Design&Build)

3% 2% 3% 3%39% 39%

MTC Contract (O&M)

15% 10% 15% 15%

49%

Inte

rfac

e A

gre

em

en

t

PBCE Provider

[EIB]

PBCE AgreementLC (min 20% - 10% in

ops)

Shareholders Agreement HoldCo

Principal /

Paying Agent

Bond

Custodian

Security

TrusteeAccount

Bank

Project

Agent

Paying Agency Agreement

Bond Trust Deed

Bond Custody Agreement

Common Terms Agreement

Security Trust and Intercreditor Deed (Shareholder Lenders – PBCE Provider – Bond Purchasers – Issuer – Shareholders – Security Trust – Bond Trustee)

Project Agent Agreement

EPC:

MTC: [45%] [15%] [10%] [15%] [15%]

Inframan

NV

11%

Shareholders Agreement ProjectCo

Bond TrusteeBond

holders

Clearing

System

Bond Purchase Agreement

Bond Purchasers

EIB - Allianz

Master Definitions Agreement (all parties except THV EPC – THV MTC)

Payments

Payments

Direct Agreements (DBFM Direct Agreement, EPC and MTC Direct Agreement)

Shareholders Lenders (Loan agreement)

Account Bank Agreement




2.4 The Morning after - Conclusions




+ -

Truly alternative for bank financing

Deferred payment feature makes a Project

bond “act” as a bank loan

Documentation is heavy but standarised in

an Anglo-Saxon approach

Organisation of documentation process can better –

a too large number of parties

Agent roles remain vague and cross domain

responsibilities unclear

Reporting needs are more important

Minimum project size, given overhead cost, seems

to need a minimum threshold of 250/300 mio €

“National Discretions” from local Regulators

Learning market

Tender documents should be aligned when alternative funding is looked for

Yes, we dit it !!

The Morning after and... Conclusions




Economy & Finance

FDSeminar Financiering na Basel III Paul Lievens - Jan De Nul