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BOT Red Line Concession Financial Advisory Proposal Tel Aviv May 2005

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Table of Contents

1. Taylor-DeJongh/More than Finance Credentials 2. Proposed Deal Team 3. Key Project Issues 4. Key Project Funding Issues 5. Technical Proposal – Commentary on Proposed Scope of Work 6. Financial Proposal 7. Conclusion

Appendices: I TDJ Credentials II MTF Credentials

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1. Taylor-DeJongh/More than Finance Credentials

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TDJ/MTF Consortium

TDJ

• Independent advice

• BOT and Government advisory expertise

• Infrastructure/Transport knowledge

• Knowledge of international financial institutions

MTF

• Extensive experience of local and international financial institutions for Israeli projects

• Knowledge of key stakeholders

• On the ground presence

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TDJ Credentials - Overview

� Leading independent advisory firm focusing on infrastructure sector

� Specialist focus on emerging markets, particularly Middle East

Global by Value

UBS Investment Bank 5

Macquarie Bank 4

KPMG 3

PWC 2

Taylor-DeJongh 1

Firm Rank

Source: Infrastructure Journal League Tables, Mid Year 2004

Middle East & Africa

by Number

Investec 5

BNP Paribas 4

ING Bank 3

SG 2

Taylor-DeJongh 1

Firm Rank

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MTF Credentials - Overview

� Incorporated: 2003

� Founder and Manager Director: Yossi Levy

� Mr. Levy was previously CFO Yam Tethys where he was negotiated the raising of more than US$400m of capital from domestic and international sources, was a part of the team negotiated and executed the I.E.C US$2Billion Gas Sale & Purchase Agreement and negotiated with Ministry of Finance and Infrastructure on the proposed New Oil & Gas Tax Regime

� MTF focuses on advising on raising capital for “asset-heavy” projects

� MTF employs economists, accountants and engineers on project basis

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Project Finance/BOT Advisory Experience

� TDJ is a leading international advisory firm specializing in project finance transactions, having closed over US$70 billion of project financings in 70 countries

� TDJ has experience in a wide range of project finance structures and concession arrangements, including Build-Operate-Transfer

� TDJ and its team have complete familiarity with project financing infrastructure projects

� TDJ’s reputation in the market is recognized by its peers and has been previously selected as “One of the Five Best Global Financial Advisors for 2003” (Project

Finance International)

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Transport/Infrastructure Experience

� TDJ has recently been appointed by the U.S. Department of Transportation to provide financial advisory services in relation to transportation infrastructure projects in the US. The mandate cover: analysis, term sheet preparation and assistance in negotiations

� TDJ team members have relevant infrastructure experience which includes:

Roads/Rail US, UK, France, Guinea, Russia, South America, Poland

Ports / Canals Panama, Indonesia, South Africa, Bulgaria, Argentina, Turkey, Yemen

Airports Ecuador, Colombia, Ghana, India, Turkey, Poland, Algeria, Bulgaria, Czech Republic, Ukraine

Sector Countries

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Government/State-Owned Entity Advisory Experience

Africa

Algeria

Cameroon

Egypt

Equatorial

Guinea

Ghana

Guinea

Madagascar

Mali

Mozambique

Namibia

Zimbabwe

Caribbean, Latin & South America

Argentina

Colombia

Venezuela

Philippines

Thailand

Vietnam

Asia

North America

United States

Middle East

Bahrain

Jordan

Saudi Arabia

Turkey

United Arab

Emirates

Yemen

Europe

Azerbaijan

Bosnia

Bulgaria

Croatia

Kazakhstan

Russia

Slovakia

Turkmenistan

Ukraine

Uzbekistan

Poland

Republic of

Moldova

Romania

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Knowledge of Potential International Financing Sources

� TDJ is the leading advisor for ECA and Agency financings and has closed deals with all of the following:

• Inter-American Development Bank (IADB)

• International Finance Corporation (IFC)

• International Bank for Reconstruction and Development (IBRD)

• Africa Development Bank (AfDB)

• European Investment Bank (EIB)

• Multilateral Insurance Guarantee Agency (MIGA)

• Corporacion Andina de Fomento (CAF)

Global

Multilaterals

Export Credit Agencies

and Bilateral Institutions

• COFACE

France

• US Ex-Im • OPIC

United States

The Netherlands

• NCM • FMO

• EDC

Canada

• EFIC

Australia

Austria

Belgium

• OND

• OeKB Italy

• Hermes • DEG • KfW

Germany

• JBIC

Japan

• KEXIM

Korea

• SACE

• ECGD • CDC

United Kingdom

• ERG

Switzerland

Spain

• CESDE

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Middle East/North Africa – Team Advisory Experience

Gaza Power, Palestine

$115 mm

Mishar Gas, Tunisia

$500 mm

SADAF Saudi Arabia

$500 mm

Kuwait PET, Kuwait

$150 mm

Gasfield & Pipeline, Oman

$800 mm

Saudi Butyl Rubber Saudi Arabia

BRITISH OFFSET

$450 mm

Gas Processing , UAE

$2 bn

Bahrain Power, Bahrain

$325 mm

Fertilizer Plant, Yemen

$300 mm

Yemen IPP, Yemen

DELMA POWER

$150 mm

Jordan IPP, Jordan

$400 mm

Jorf Lasfar, Morocco

$2.1 bn

Yemen Cement, Yemen

$125 mm

LAB Project, Saudi Arabia

GPC

$300 mm

Shuaiba, Kuwait

$1.2 bn

SCECO West, Saudi Arabia

$350 mm

Bahrain Desal, Bahrain

Confidential

RasGas LNG T3, Qatar

$1.4 bn

UAE Energy, UAE

$2.2 bm

QatarGas II, Qatar

$5 bn

QatarGas, Qatar

$600 mm

ALBA 5th Potline, Bahrain

$1.7 bn

NGL-4 Petrochem, Qatar

$400 mm

Kuwait Aluminum Smelter, Kuwait

$600 mm

CMS

Fujairah IWPP, UAE

$1.1 bn

Sonatrach T 4,5,6, Algeria

$250 mm

Q-Chem II, Qatar

$1.5 bn

EChem PVC, Egypt

$260 mm

JoPetrol, Jordan

$560 mm

Banagas, Bahrain

Confidential

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2. Proposed Deal Team

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Proposed Deal Team

� TDJ/MTF have dedicated senior resources to this important transaction, including experts in BOT, transport/infrastructure, and the region

ADDITIONAL SUPPORT AS REQUIRED

Afonso Reis e Sousa Vice President, TDJ

Guy Ranawake Director, TDJ

Yossi Levy MD, MTF

KEY TRANSACTION TEAM

Terry Newendorp Chairman & CEO, TDJ

SENIOR ADVISOR

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Senior Team Overview

Relevant

Experience

Terry A. Newendorp

Chairman and CEO

TDJ

Position

Education

Name

PG International Finance, University of Houston JD Honors, George Washington University BA Chemical Engineering, Purdue University

• 30 years of energy and infrastructure experience

• Over $30 billion of energy deals

• More than 300 deals closed in 50 countries

• Senior Advisor to U.S. Ex-Im Bank

Afonso Reis e Sousa

Vice President TDJ

MSc Economics and Finance - University of Warwick BSc (Econ) - London School of Economics

Yossi Levy

Managing Director, MTF

MBA, Finance & Accounting, Recanati Business School, Tel Aviv University

• Over 18 years extensive experience with the local business community and with local and international financial institutions

• Involved in raising local and international Debt and Equity in an amount exceeding $800MM

Guy Ranawake

Director

TDJ

MA, Economics, Cambridge University ICAEW Chartered Accountant

• 10 years of experience in project financing in the utility and infrastructure sectors

• Experience in infrastructure sector project finance, capital market and M&A transactions

• Extensive deal experience in Europe, Middle East, Africa and Australasia

• Over 10 years experience in the infrastructure, power and oil & gas sectors

• Track record includes advising sponsors on the financing of major limited-recourse project financings as well as evaluation of bids on behalf of concession authorities

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3. Key Project Issues

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Overview

� We understand that NTA is seeking to (i) minimize the time through to Financial Close and (ii) minimize the cost of the Project to the State

� However, as seen in the earlier Jerusalem Light Rail Project, such complicated projects can be delayed, particular where there is a limited track record of similar projects in the country

� The Financial Advisor will work with NTA to address key project issues with a view to obtaining a commercial deal within a reasonable time frame

� In the following pages, we have summarized some of the potential issues, based on a preliminary review of an early version of the Concession Contract

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Construction Risk

� Concessionaire is responsible for designing and constructing the Project

� NTA has required that Concessionaire largely be responsible for its own due diligence

� However, Concessionaire will seek to avoid accepting risk which it can not control e.g. archeological risk, contaminated soil, public utility infrastructure

� In addition, Concessionaire and Financiers are likely to wish to minimize risk of missing rights of way, the absence of which may delay the project (or at least substantial drawdowns on the senior debt facilities)

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Ridership Risk

� Ridership risk is the key risk during the operations period of the Concession Contract

� NTA has already proposed a risk sharing mechanism (Annex VII) with the Concessionaire, based on a forecast ridership numbers

� Financiers (and hence bidders) are likely to take a conservative view on forecast, given track-record on other light rail projects

� Concessionaire will look at how competing mode of transport (e.g. cars, buses) may impact forecast

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Operating/Service Quality Risk

� Concessionaire shall bear full and sole responsibility for operation and maintenance of Project

� Interface risk (i.e. between rails, rolling stock and signaling) has been minimized by placing responsibility of providing total solution with the bidders

� Operation and maintenance should be in accordance with Service Quality Criteria for which Service Quality Criteria payments are applicable

� Concessionaire will seek to be responsible for only those activities which it can control. For example, Concessionaire make seek to minimize risk of the following items: interface of light rail with roads; competition from buses and private transport; public utility works; unexpected increases in insurance premia

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Government Support and Termination

� State of Israel currently rated A- / A2 by S&P and Moody’s respectively – this should give comfort to Concessionaire of credit-worthiness of NTA but Concessionaire may still seek government guarantee

� Financiers benefit from repayment of senior debt facilities under Force Majeure termination (100%), early termination by State (90%) and early termination by Concessionaire (100%). This will assist in discussions with Financiers

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Other

� Adverse Conditions Clause provides some protection for concessions against act of war or terrorism. However this is still subject to Risk Sharing Mechanism

� Concessionaire may resist absence of compensation for failure to obtain Government approval within specified time period

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4. Key Project Funding Issues

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Financing Objectives

� Concessionaire is responsible for arranging finance for Project

� Concessionaire will seek to maximize leverage of Project in order to boost returns

� As a result, financiers will play an impact role in negotiations with NTA. Project will need to be seen to be “bankable”

� At the same time, NTA will seek to minimize State Grant and to transfer maximum risk to Concessionaire

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Financing Structure

� Concession Contract already specifies that Concessionaire is a company fully incorporated under Israeli laws and regulations

� In addition, Concession Contract limits flexibility of company and shareholders structure during life time of Concession

� Concession Contract contemplates (¡) establishment of Direct Agencies between State and Financiers and (¡¡) approval of changes to Finance Agreements

� Mezzanine finance likely to play an important role in supporting true equity, particularly with respect to risk of (i) slow ramp-up in passenger volumes or (ii) short-term interruptions or reductions in service

� Concessionaire likely to want to clarify sharing mechanism for future refinancing

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Financing Sources

� NTA will contribute to Project through State Grant (Implementation Phase and Operating Phase)

� Remaining Project Costs to be funded by:

- Concessionaire and Shareholder

- Financiers

� Equity likely to be in form of “true” equity and mezzanine debt

� Level of gearing will be determined by strength of project structure (up to 85%)

� Size of Project suggests that a combination of local and international financing sources will be accessed, dependent on procurement strategy of Preferred Bidder

� Financial Advisors have excellent relationship with both domestic and international financing institutions

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5. Technical Proposal – Commentary on Proposed Scope of Work

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Overview

� We accept in principle the scope of work circulated previously, but have consolidated some of the tasks as follows:

1- Review Contract Documents (I)

2- Negotiation and Amendment of Concession Contract (II, VII, VIII)

3- Analyse alternative financing structures (III)

4- Market Project to financial institutions (IV)

5- Assist in selection of bidders (X)

6- Assist in Financial close (IX)

7- Participate in meetings (NTA, Bidders, Financiers) (V, VI)

� However, it would all be helpful to gain further insight on NTA’s objectives on timing

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Review Contract Documents

� We have already received an earlier version of the Concession Contract which forms the basis of our preliminary comments

� As a first step, we would review the current version of the Concession Contract together with any comments received to date from potential bidders

� If not already received, we can provide commentary on expected comments from international institutions

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Negotiate and Amend Contract Documents

� We will assist NTA and White & Case (W&C) on the negotiation and amendment of contract documents, including the Concession Contract

� Financial Advisor will focus on those issues impacting on the financing (including financial covenants, security, termination arrangements, etc), and will provide a clear view on what is “bankable”

� We have worked with W&C on many other transactions, including Qatar Gas II, and have a good relationship with the firm

� As part of this process, we will seek to establish the key objectives of both NTA and the Bidders

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Analyse Alternative Funding Structures

� We would review the existing financial model (if available) and either (i) assist TASC in refining and updating the model; (ii) take over ownership of the model; or (iii) develop a new financial model

� Typically, potential bidders will create their own financial models and funding structures which will be submitted as part of their bid

� We would review these financial models and verify that the assumptions made are reasonable – if not, we would ask bidders to revisit their assumptions

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Market Project to Financing Institutions

� We understand that the Concessionaire is responsible for financing the Project

� Typically, the Concessionaire will have already marketed the Project to selected financial institutions and arranged ‘committed’ facilities, if required.

� We may assist the Concessionaire in its negotiations with financing institutions. However, this will usually be limited, unless a particular source of financing will be used in all three bids

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Assist in evaluation of proposals and selection of preferred bidder

� Following receipt of revised offers, we will review both Technical and Financial Proposals of each offer and make a recommendation to NTA

� It is likely that a further round of negotiation with the preferred bidder (s) will take place – the key objective must be to maximize competition tension between bids for as long as possible

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Assist in Financing Close

� Finally, we will work with NTA and W&C to reach Financial Close in the most time-efficient manner

� Further input may be required beyond Financial Close in order to monitor progress of the Project. However, the level of support required at this stage is likely to be limited

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Participate in meetings with NTA, Financiers and Bidders

� We will participate in all relevant meetings, both internal (NTA) and external (Bidders, Financiers)

� We will expect that most meetings would take place in Israel. However, to minimize cost, we would also make use of conference calls, emails etc.

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6. Financial Proposal

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Proposed Fee Structure

� We would propose the following fee structure:

Mobilization fee of [US] payable on signing engagement letter

Consulting fees, payable monthly in arrears as set on table:

� Expenses (including travel, accommodation, communication and translation) would be reimbursable by NTA

MANAGING DIRECTOR

DIRECTOR VICE

PRESIDENT ASSOCIATE ANALYST

Hourly rate

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No Conflict Statement

� The Financial Advisors confirm that they currently have no conflict of interest on advising on this transaction

� We would immediately notify NTA if any potential conflict were to arise in the future

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7. Conclusion

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Why TDJ/MTF?

Government experience (Including Israel)

On the ground presence

Dedicated Senior Team

Leading Independent Adviser

BOT Expertise

Knowledge of International and

Domestic Financing Sources

Infrastructure Expertise

Competitive Proposal

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Appendices

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Appendix I – TDJ Credentials

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Appendix II – MTF Credentials

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CONTACT INFORMATION

Taylor-DeJongh Ltd. More Than Finance Ltd

Terry Newendorp Chairman and CEO

1101 17th Street, NW

Suite 1220 Washington, DC

20036 United States of America

T 1 202 775 0899 F 1 202 775 1668

Email: tnewendorp@taylor-dejongh.com

Yossi Levy Managing Director

Herzliyya Business Centre 85 Medinat Hayehudim St.,

Israel

T 972 (0) 9 970 2774 F 972 (0) 9 970 2776

Email: ylevy@morethanfinance.co.il

Guy Ranawake Director

4 Millbank

Westminster London

SW1P 3JA Unites Kingdom

T 44 020 7233 4000 F 44 020 7340 2188

Email: granawake@taylor-dejongh.com

Taylor-DeJongh Inc.