International Finance Presented by: Eva Lewis January 22, 2013 The - PowerPoint PPT Presentation

International Finance Presented by: Eva Lewis January 22, 2013 The information presented in this presentation is for information and discussion purposes only, no reliance for any other reason should be placed on the information presented. The information reflects the views of the presenter and does not constitute any type of advice by Citi or any of its subsidiaries or affiliates.

Agenda  Overview – The Jamaica Logistics Hub Opportunity  Significant Issues and Opportunities in Infrastructure Financing  Public Sector Debt & Need for Infrastructure Investment  Current Trends: Infrastructure Finance  Overview of Forms and Sources of Funding for Infrastructure Project Finance  Overview of Official Agency Financing − Advantages & Limitations of Agency Solutions  Public-Private Partnerships (PPPs) and Benefits − Types of PPP Contracts  Forms and Sources of Funding for International Trade Finance  Supply Chain Financing and Benefits  Questions and Answers The information presented in this presentation is for information and discussion purposes only, no reliance for any other reason should be placed on the 1 information presented. The information reflects the views of the presenter and does not constitute any type of advice by Citi or any of its subsidiaries or affiliates.

Overview – The Jamaica Logistics Hub Opportunity Citi welcomes the opportunity to discuss international financing regarding the logistics hub. We believe there are significant opportunities for funding infrastructure development projects and other financing requirements relating to the logistics hub in Jamaica over the upcoming years. Why is the proposed logistics hub critical?  Expansion of the Panama Canal expected to be completed by June 2015  Increased economic activity  Increased competition, products and services A logistics hub is a specified area responsible for the coordination,  Access to foreign capital and investment transportation, organisation, sorting and delivery of goods for both local and  Expansion, modernisation and privatisation of international transit. the Kingston Container Terminal The information presented in this presentation is for information and discussion purposes only, no reliance for any other reason should be placed on the 2 information presented. The information reflects the views of the presenter and does not constitute any type of advice by Citi or any of its subsidiaries or affiliates.

Significant Issues and Opportunities in Infrastructure Financing  Public sector debt crisis changes dynamics of what governments can do alone  Governments significantly underinvested – Squeezed public finances will see a turn towards private investment Public Sector Debt but – Vital that investment continues for future social and economic security Massive Need for  Massive new investment needs Infrastructure Investment – New projects for growth (Greenfield) – Backlog of maintenance, renewal and extension (Brownfield)  Local and Regional Governments  Sovereign Wealth Funds  Policy Banks Investment in  Pension Funds Infrastructure  Public Private Partnerships – Contracting the private sector for needs often fulfilled by public sector – Forms and source of funding  European crisis – Impacting European bank capital and ability to continue project finance activities – Impacting cost of funding of periphery ECAs Diminishing Liquidity from  Bank Regulatory Changes the Bank Market – Basel lll negatively impacting bank’s EM risk capital – Basel lll penalizing project finance  Development of LCY Debt Capital Markets The information presented in this presentation is for information and discussion purposes only, no reliance for any other reason should be placed on the 3 information presented. The information reflects the views of the presenter and does not constitute any type of advice by Citi or any of its subsidiaries or affiliates.

Public Sector Debt & Need for Infrastructure Investment Government debt and social issues  Demand for infrastructure is set to continue to expand significantly in the decades ahead – Driven by major factors of change such as global economic growth, technological progress, climate change, urbanisation and growing congestion – As global population continues to grow, emerging markets become industrialised, and developed markets need to replace ageing infrastructure, the need for project finance (primarily senior secured), will continue to grow  Significant Forward Investment Need – It is estimated that over US$50 trillion in capital investment will be required for roads, water, energy, airports, telecommunications and rail between 2010 and 2030 in OECD countries alone (1) – India’s 2012 – 2017 five-year plan embeds US$1 trillion equivalent for infrastructure and power needs – Estimated investment in alternative energy power generation sources in the U.S. of up to $800 billion over the next 5 – 10 years  Government debt creates challenges to infrastructure development – Necessary development of ageing infrastructure systems is difficult to meet due to squeezed public finances – Requirement for private sector involvement as well as sustainable, efficient infrastructure solutions  Infrastructure development necessary despite government debt constraints – Infrastructure ensures service and good delivery, promoting growth and prosperity, ultimately providing significant social and economic benefits, and enhancing public finances – A 60% improvement in infrastructure productivity could provide US$1 trillion in annual savings (2)  Port capacity could expand by 30% by maximizing the efficiency of current operations – Failure to progress would cost in terms of congestion, environmental problems, unreliable supply lines and blunted competitiveness 1. OECD. Infrastructure to 2030 : Telecom, Land Transport, Water and Electricity McKinsey Global Institute, “Infrastructure Productivity: How to Save $1 Trillion a Year” , January 2013 2. The information presented in this presentation is for information and discussion purposes only, no reliance for any other reason should be placed on the 4 information presented. The information reflects the views of the presenter and does not constitute any type of advice by Citi or any of its subsidiaries or affiliates.

Current Trends: Infrastructure Finance Given global investment needs across power, transport, and social infrastructure, as well as natural resources, the demand for project finance going forward will remain significant. Significant Forward Investment Need  As the world’s population continues to grow, emerging markets become industrialized, and developed markets need to replace ag ing infrastructure, the need for project finance (primarily senior secured), will continue to grow – It is estimated that over US$50 trillion in capital investment 1 will be required for roads, water, energy, airports, telecommunications, and rail between 2010 and 2030 in OECD countries alone – The European Commission estimates € 1.5 – 2 trillion of investment needs in infrastructure / power across the E.U. over the next 10 years – India’s 2012 – 2017 five-year plan embeds US$1 trillion equivalent for infrastructure and power needs – Estimated investment in alternative energy power generation sources in the U.S. of up to $800 billion over the next 5 – 10 years Historically Bank Market Funded  Historically, 90 – 95% of all project finance debt globally has been funded by bank and ECA lenders – Percentage of project finance in the U.S. that is bond funded is meaningfully higher: 20 – 25% (mostly power / pipelines) – In the U.S., “core” infrastructure is mostly financed in the tax -exempt market  Non-recourse nature of project / infrastructure financings engenders need for a specialized skill set in this space, the bulk of which is concentrated in the banking sector Institutional Investors Will be Needed to Fill the Void  The scaling back of bank lending to this sector translates into an important opportunity for meaningful institutional investor involvement, particularly given the long duration nature of project / infrastructure assets  Significant depth of potential capacity, particularly in the U.S. credit markets  Standing precedents of power, oil and gas, mining, and infrastructure projects having all been financed via project bonds, on both a greenfield and brownfield basis  Ratings infrastructure exists: each of Moody's, S&P, and Fitch have published ratings criteria specifically for project finance  Secured nature of financings, together with stable cash flow profiles and comparatively high recoveries in default comprise the building blocks for a compelling relative value proposition  Significant investments from pension funds and insurance companies for long-dated assets 1. Source: OECD. Infrastructure to 2030 : Telecom, Land Transport, Water and Electricity The information presented in this presentation is for information and discussion purposes only, no reliance for any other reason should be placed on the 5 information presented. The information reflects the views of the presenter and does not constitute any type of advice by Citi or any of its subsidiaries or affiliates.