11 September 2009 The Manager The Manager Companies Section - PDF document

11 September 2009 The Manager The Manager Companies Section Companies Section Australian Securities Limited New Zealand Exchange Limited Pages: Seventeen (17) pages Dear Sir Lend Lease Investor Presentation on Public Private Partnerships Please find attached a presentation given to investors on public private partnerships. Yours faithfully Sally Cameron Group Executive Investor Relations Lend Lease Corporation Limited Telephone +612 9236 6111 ABN 32 000 226 228 Facsimile +612 9252 2192 Level 4, 30 The Bond www.lendlease.com 30 Hickson Road Millers Point NSW 2000 Australia

Public Private Partnerships Investor Presentation Mark Menhinnitt Head of PPP

Agenda PPP Model & Rationale 1 PPPs & Fit with LLC Strategy 2 Market Observations 3 Market Attractiveness 4 Key Strategic Actions 5 Canada & Capella Capital 6 2

PPP Model & Rationale 1 “Public Private Partnerships are partnerships between the public sector and the private sector for the purposes of designing, planning, financing, constructing and/or operating projects which would be regarded traditionally as falling within the remit of the public sector.” Origination Origination Development & Project The PPP value chain Development & Project Advisory Fees Management Management Equity Returns Dev. Fees Construction Construction Equity Uplift PM Fees Const. Asset / Fund Management Asset / Fund Management Equity Margins underwrite fees Operations, Maintenance AM Fees Operations, Maintenance Const. & Lifecycle & Lifecycle Success Fees / Savings IM Fees Bid Cost FM Margins Multipliers. Lifecycle Savings 3

PPP Model & Rationale 1 Two Distinct Market Sectors & Sub Segments: Economic Infrastructure markets (with/without patronage risk) e.g. : � Roads & Bridges � Transport � Ports � Segments within Utilities & Municipal Services Social Infrastructure (availability payment - no/limited patronage risk) e.g. : � Health � Housing � Education � Justice � Segments within Utilities & Municipal Services Our focus is predominantly Social Infrastructure where there is an “availability payment” model. 4

PPP Model & Rationale 1 Simplified Deal Structure Government Equity Subscriptions Project Agreement License/Ground Lease Finance Development Project Company Agreements and D&C (SPV) & Funding Agreements AM & FM Operations Agreements 5

PPP Model & Rationale 1 Why are Governments attracted to the PPP model? � Government can accurately measure the “Total Cost of Ownership” warranted by the private sector � Integration of Design/Construction/Operations/Maintenance/Life-cycle costs into quarterly payments � Far greater governance, transparency and discipline of government spend � Record of on-time delivery vs patchy performance by public agencies � Competitive process drives innovation and continuous improvement � No commitment required unless PPP model delivers value improvements = value for money and vastly improved accountability 6

PPPs & Fit with LLC Strategy 2 Public Private Partnerships are awarded based on the ability to add value over and above what the government can achieve themselves. Successful PPP players: � Deliver value via integration across � Product Development � Detail design and construction � Asset operations, facilities and lifecycle management � Project Financing and Transaction Management � Foster long term partnerships with Government entities � Innovate and continuously improve product and process Lend Lease is well positioned in the PPP market with strong credentials as a partner, owner, manager, developer, financier and deliverer. 7

Market Observations & Issues 3 Observation Opportunity/Impact � Will limit quantum of equity capital available from banks, requiring more equity New capital adequacy ratios will limit availability of and pricing of project participants for large projects equity. � Provides Lend Lease with more opportunity to move into the project equity and origination space. � Bank finance is currently the principle source of debt capital. Re-Fi risk and bank Equity and debt capital markets disruptions - disappearance of aggregation limits are an issue. mono-line credit enhancers. � PPP bonds are sought after assets by pension & life insurance funds. Bond financing is expected to return over time – market still exists in Canada. � Limited bank debt capacity per project is impacting major projects. Limited capacity, tenor and cost of bank debt impacting underwriting of � Higher debt spreads and Re-Fi risk reducing PPP value for money to Government. PPP’s at bid stage � Governments moving to co-lender, capital infusion and/or loan guarantee models � Governments have shifted to availability models for critical economic infrastructure. Major private sector losses on Toll Roads and Tunnels � Lend Lease’s focus is projects with availability payment models. � Opportunity for Lend Lease to strengthen UK position and establish origination Fewer organisations active in the origination space platforms in Australia and Canada. � Governments looking for long term partnerships with stable managers and owners 8

Market Attractiveness 4 Strategy / Competitive Advantage Template MHPI Criteria UK Australia Canada (Actus) � � � � Scale Sectors � � � � Scale Projects � � Deep & Visible Pipeline � x � � � � High Barriers to Entry � � � � Ability to create differentiated proposition Ability to secure market franchise & leverage � � � x x follow on business � � � � Ability to leverage capability into other sectors � � � � Ability to integrate/participate in full value chain 9

Market Attractiveness 4 Financial Template Criteria MHPI UK Australia Canada (Actus) (incl. fee/margin streams) � � � � � Moderate Peak Capital Requirements x � � Velocity of capital N/A � x Bid costs exposure pre-award x � � � � Closing costs exposure post award x � � � � Cash positive & earnings accretive within 1 year � � � � Financial return for service provided or risk taken � � � � Return on project equity (& equity risk) � � � � x BU overhead required/recoverability 10

Key Strategic Actions 5 UK Status Secure partnerships with preferred local authorities with Lancashire and Birmingham secured. Expect to bid 2-3 major programs per large scale education, housing & utility needs year, subject to government funding. Increase velocity of project equity & rationalise bid costs Underway - business model being revised to speed up capital recycling and improve bidding efficiencies. Lift returns from origination, development and Upfront success fees for development and project origination included in construction project returns, in addition to equity yield and equity uplift. Establish PPP Infrastructure Fund/Equity Partnerships Underway. Actus (USA) Win key remaining housing projects and deliver well Progressing but relatively slow due to the impact of the GFC. against existing backlog Continue to leverage opportunities from existing Continuing. Fort Hood Single Soldiers development – conversion of existing installations including barracks small FH inventory to SS + build new FH units. Convert subsequent phases of Army lodging & set up for Phase 1A of Army lodging closed August 2009. Follow on phases including Navy lodging program elements of future groups now being developed. Navy lodging to follow. Continue to develop DoD utility privatisation program Under development. Pursuing government incentives for renewable energy including renewable energy projects on military installations. 11

Key Strategic Actions 5 Canada Status Establish Canadian PPP origination and management Underway. Sponsor JV in place for first project to pass local experience criteria. platform Bulk of capability exists within current LL Americas platform. Bid 2-3 PPPs in FY10, leveraging Actus & Global Underway. Bid underway for Alberta Schools II (C$300M). Bid team being capabilities formed for next target project in Ontario. Implement D&C strategy Underway. Leverage LL role as sponsor to create PPP D&C business (similar to Actus approach). Initial D&C JV being formed to pursue Healthcare market. Develop FM strategy & implement Currently working with Tier 1 FM providers. Strategy under review Australia Establish PPP origination and management platform – Complete. Capella Capital partnership established. close & incubate JV deal Close first PPP equity transaction in FY10 Complete – SA school project closed in July 2009. LLC provided Financial Advisory services and holds 50% equity position. Bid 2-3 major PPPs as originator & secure 1 preferred Underway. Equity positions secured on 2 major hospital projects where BLL is position. Secure equity positions on BLL PPP projects. undertaking D&C role. Establish PPP Infrastructure Fund or Equity Equity Fund/Partner strategy under development. Partnerships to act as long term equity holder. 12