WIXLIB

111:15 – 12:30 - Panel 3 - Tansa““ProjectProject Finance: from BankingSolutions to Capital Market Solutions”Solutions”

2Project Finance: From BankingSolutions To Capital Market SolutionsPresented ByCalyon Corporate and Investment Banking

3IntroductionzEvolution of financing options available to finance single assetszCapital Market SolutionszCase StudyzPerspectives

4Project Finance TransactionszPredominantly a commercial bank marketzApplicable to high maintenance transactions Heavily covenanted Typically requires close monitoring, especially during construction phase Requires asset expertise to grasp the stakes Typically assets with long lives best suited for long term financings

5Evolution towards Capital MarketszDrivers: Sponsor standpoint:zBank mini-perm take out refinancingszDecrease in credit spreads for long tenorsInvestors standpoint:zzzOverall decrease in corporate yields make this class of assets attractiveSavvy investors have the capability to analyze and assess project financetransactionsTwo types of capital market avenues: Project Bonds Term B Loan

6Capital Markets Solutions

7Capital Markets: Term Loan BzSub-Investment Grade Issues:zIncludes so-called “Term Loan B” market, high-yield market, both also called the “leveraged loan”market – overlapping investors with a variety of preferred investment currencies.z“Term B”: variable rate fully-funded term loans, usually large liquid issues, short maturities (7 to 10years), cash sweeps instead of scheduled amortization; limited financial ratio maintenancecovenants.z“High Yield”: includes smaller issues requiring less liquidity, longer term, fixed coupon, little or noamortization; limited financial “occurrence covenants.”zSub-Investment grade transactions in PF world tend to involve acquisitions rather than new builds.zIssuers tend to be privately-owned, with less credit-rating sensitivity, often smaller developersteamed up with private equity.zIncreasing leverage is the primary objective of these issues; speed of execution and flexibility areother objectives – pricing is less important.

8Capital Markets : Project Bondszz“The Project Bond Market”: refers to private placement type of issues(Typically Reg. D or 144A)backed by single assets financed in a projectfinance way.Specific features of Project Bonds include: Fixed coupons Long tenors and deferred amortization Make whole premium in case of prepayment Typically limited number of disbursements over a relatively short period of time.zProject Bonds are principally issued in refinancings for new builds or bridgeloan takeouts for acquisitions.zIssuer-sponsors tend to be strong “strategics” or public companies protectinghigh credit ratings and share prices.

9Capital Markets : Project BondsGlobal PF Market by funding sources : 1994-2005180160140Amounts in billions120100Volume TotVol 12002200320042005

10Capital Markets : Project BondsThe Project Bond market volume declined mildly in 2005: its share ofthe overall market dropped from 32% in ’03 to 16% in ‘05World-wide Non-Recourse Project Bonds issuance 35bn35% 30bn30% 25bn25% 20bn20% 15bn15% 10bn10% 5bn5% 0bn0%19971998199920002001 2002Global Project Finance Bond DebtSource: Project Finance International200320042005As % of PF Financing (RH)

11Capital Markets : Project BondsRobust 54% growth in North America did not offset drastic declines inSouth America and Australia and zero issuance in EuropeWorld-wide Project Bonds issuance, by geography 35bn 30bnEurope 25bnAsiaMiddleEast&Africa 20bnAustralia&NA 15bnSouthAmericaUK 10bnNorthAmerica 5bn 0bn20042005Source: Project Finance International

12Capital Markets : Project BondsOil & Gas and Power dominates global issuance, jointly accounting for63% of global volumeWorld-wide Project Bonds issuance, by sectorInfrastructure14%Mining3%Petrochemicals1%Oil and Gas36%SocialInfrastructure/PFI19%Power Source: Project Finance International27%

Are Capital Markets Products Replacing Bank Loans inProject Finance?zUS Experience: Capital demand is concentrated in acquisitions rather than new builds right nowProject Bonds (senior tranche investment grade) continue to take their share of the market,principally as a refinancing solution for project initially bank-financed. Project bonds typicallymonetize an improving or stabilizing credit story. (e.g. completed power plant; up-ratedinfrastructure).Leveraged loans (B loans, high yield) are marginalizing the bank solution in acquisitions andcertain refinancing (especially merchant power).zProject Finance banks have credit tolerances that are too narrowzB loans provide faster execution and less structure than Project Finance banks.zProject bank loans still prevail in construction situations, bridges to bond take-outs andsmaller projects.zBond can be combined with Bank Tranches and with Bank providing supportingLetters of Credit and Working Capital facilities.13

14Comparative TablezSuccess in the US, less so in Europe: the Distribution AngleAmericasBankBondEuropeB LoanBankBondTenorUp to 20yearsUp to 30years7 to 10 yearsUp to 30yearsGenerally 10yearsRepaymentAmortizingAmortizingCash SweepAmortizingBulletInterest RateFloatingFixedFloatingFloatingFloatingTarget RatingNAIG and highnon IGNon IGNAHigh IGPrepayment PenaltyNAMake Whole0 - 2 yearsNANA

15Case Study: Tenaska Alabama II

16Case Study: Tenaska Alabama IIOctober 2003z Transaction Description: 410,500,000 project bond financing secured by a peakingplant in central Alabama. z Challenging Aspect:Maximizing the financing proceeds - up to 95% of the projectcosts. Low equity resulted in lower than typical debt servicecoverage ratios. Tenaska Alabama II Partners LP 410,500,000 Senior SecuredNotes due 2023z Solution:“Monetization” of long-term off-take contract with Coral Powerwhose obligations were guaranteed by Coral Energy Holdingswhose obligations are in turn guaranteed by Shell OilCompany. 144a/Reg S Private Placement Joint Lead Managing Bookrunner Obtained Baa3/BBB- ratings but marketed deal as derivativeShell risk which resulted in more attractive credit spread.1st refinancing of a mini-perm in the capital markets.z Calyon Role:Lead Managing Bookrunner. The transaction was recognizedas 2003 “Americas Bond Deal of the Year” by Project FinanceInternational and “Single Asset Deal of the Year” byEuromoney. Obtained over 1.2 billion in orders.

17Case Study: Tenaska Alabama IIOctober 2003z Transaction Description: 26,600,000 Letter of Credit facilities to cover DSR andProject LC needs. 5,000,000 Working Capital facilityz Challenging Aspect:Tenaska Alabama II Partners LP 31,600,000 410,500,000Senior SecuredNotes due 2023 zSolution: Cash waterfall Pari-passu treatment of all financings.144a/RegProjectS PrivateFinancePlacementJoint on with 144A bond offering.zCalyon Role: Lead Arranger.

18Perspectives

19Will the U.S. Experience be replicated globally?Distinguishing Features of US andGlobal MarketsImplicationLarge investor universe in the US withdiversified appetite across asset classesand credit ratingGood outlook for Banks, Term Loan Band US denominated issues placed in theUS marketExpanding investor universe in Europebut European project finance banks aremuch more aggressive lenders in theirhome marketsProject Bonds are less competitive withthe long term low margin project loansprevailing outside of the U.S. Market.Beginning of Term loan BThe universe of project issuers outside ofthe US market is smaller and hastraditionally been dominated by largehighly rated strategicsProject bonds applicable to:- Diversify source of funding- Provide access to another source ofliquidity.

20Credentials

21Calyon Credentials – Project BondsFirm UnderwritingsWindsor Financing LLCBethpage Energy CenterPinelawn Power LLCTenaska AlabamaPartners LP 285,500,000Senior Bonds due 2017 52,000,000Subordinated Notes due 2016 108,516,000Series A Certificates due 2025 14,631,000Series B Certificates due 2020 102,213,000Senior Secured Notesdue 2025 361,000,000Senior Secured Notesdue 2021200520042005144a/Reg S Private PlacementSole Arranger / Underwriter144a/Reg S Private PlacementSole Arranger / Underwriter144a/Reg S Private PlacementCo Arranger2006144a/Reg S Private PlacementJoint Lead ManagerRockland CapitalEnergy InvestmentsPrime Power Sales I LLCTenaska Virginia PartnersKiowa Power PartnersTenaska Alabama IIPartnersFPL Energy FarRockaway Peaking, LLC 50,000,000Senior Secured Notesdue 2009 483,500,000Senior Secured Notesdue 2024 642,000,000Senior Secured Notesdue 2013/21 410,500,000Senior Secured Notesdue 2023 117,000,000Senior Secured Notesdue 20202005144a/Reg S Private PlacementSole Arranger2005144a/Reg S Private PlacementJoint Lead Manager2005144a/Reg S Private PlacementJoint Lead Manager2003144a/Reg S Private PlacementJoint Lead Manager2003Reg D Private PlacementSole Arranger

22A Global Securitisation Network of ExpertiseAmericaEuropeAsia US CP Conduits : Capital calls Residential MortgageWarehousing Auto loans Trade receivables Residential Mortgage, leasing, creditcard, auto loan, Commercial Real Estate Public Finance Trade receivable Transportation (aircraft, car and truckfleet ) Whole businesssecuritisation/leverage Finance Alternative Risk Transfer ABS : Commercial Real Estate Transportation (aircraft, train ) Public Finance Energy and Infrastructure Alternative Risk TransferResidential mortgageAuto LoanCommercial MortgageAlternative Risk Transfer

23Fixed Income Institutional SalesCalyon has key relationships with leading institutional investors.– Issuers can leverage our deep knowledge of institutionalinvestors and close working relationships with the leadingplayers in the industry.– We have an established relationship with each of the top 25institutional holders of corporate securities.– Below is a sampling of Tier I (invest from 25 - 100 million pertransaction) and Tier II (invest from 5 - 50 million pertransaction) investors that have played key roles in virtually allof our recent lead-managed transactions:Tier I InvestorsTier II 2425Top 25 Instituional HoldersPrudential Global Asset ManagementAIG Global Investment ManagementMetropolitan Life Insurance CompanyAEGON USATeachers Insurance & Annuity AssociationNew York Life Investment ManagementGE Financial Assurance Holdings, Inc.Pacific Investment Management Co.Fidelity Management & Research CompanyNorthwestern Investment Management CompanyING Investment Management Inc.John Hancock Life Incurance CompanyAlliance Capital Management L.P.Hartford Investment Management CompanyAllstate Investments, LLCPrincipal Capital Income Investors, LLCState Farm Insurance CompaniesPPM America Inc.The Vanguard Group, Inc.CIGNA Retirement and Investment Management Inc.Nationwide Insurance CompaniesDelaware Lincoln Investment AdvisersAmerican Family Life Assurance Company (AFLAC)David L. Babson & Company, Inc.American Express Financial Advisors

24Calyon – Credit TradingzzzMarket-Making Investment Grade limits Banks and finance companies Industrials and utilitiesClose Cooperation with Origination Strong involvement with new issues pricing Management of residual primary positionsAccount Focus zExpand automated trading capability in Europe and US through Bloomberg and Market AccessCDS Trading zTake advantage of the existing sales network within CAI/CLA to expand flow activities inEurope, AsiaMarket making in single name CDSzSegmented customer listzServicing of structured portfoliozBasis trade proposal to customerszBank’s hedging needsIntegration with Calyon global strategy Coordination with European Desk (24 hour global trading support for positions) Strong involvement in new issue pricing