Yangtze Investment Opportunities

YANGZI PORTSINVESTMENT OPPORTUNITIES

IN CHINA’S BIGGEST GROWTH ENGINE

Port Investor - February 2012By InduStreams

The Yangtze River – An overview

The Yangtze runs through 10 provinces covering a region of 430 million population that contributes about 25% of China’s GDP

In 2010 more than 1300 mn tonnes of cargo and 7.3mn TEU (containers) were transported on the Yangtze

The combination of continuous improvement in capacity (depth and navigability), focus on developing the Western regions and improving the environment create strong fundamentals for continued growth in Yangtze area

The Yangtze river stretches about 6,300km from Tibet to Shanghai of which 2,600km is navigable

Lower reach covers the section between Nanjing and Shanghai, it is the main river transportation channel of the Yangtze River Delta (YRD), which is one of the most developeded regions in China

YRD include the provinces of Jiangsu, Zhejiang and Shanghai. With 130 million people it contributes 22% of GDP and 28% of export/import of China. Expect to maintain as the key manufacturing and export/import center of the country.

Throughput in this section is about 70% of total Yangtze throughput In terms of cargo weight.

A large share of the current volume in the lower reach come from transshipment of bulk cargo between ocean ports and up river ports. But….

Ocean going vessels ships can reach Nanjing but no further up due to bridge blocked way.

New developments continue to take place throughout the YRD and in particular on the north bank.

The Lower Reach

NanjingNantong

Taizhou

Yangzhou

TaicangChangshu

ZhangjiagangJiangyin

Changzhou

Zhenjiang

Taica

ng

Nantong

Changsh

u

Zhan

gjiag

ang

Jiangy

in

Taizh

ou

Changzh

ou

Zhen

jiang

Yangzh

ou

Nanjin

g0

20406080

100120140160

Throughput (mill tons)

The middle reach covers the section between Nanjing and Yichang city, and the economies and provinces of Anhui, Jiangxi, Hunan and Hubei.

Hinterland provinces have a population of total 223 million, contributing 13% of national GDP.


The middle provinces are gaining weight in national industry output and consumption. Transportation via Yangtze has been considered as key factor of development by all provinces in this section.

Deptht varies from 3m to 9m in this section allowing for vessel size of 3,000 to 5,000 tonnes or 100-300 TEU for container shipping.

New development are seen in many of ports in this section and particularly in Wuhan.

The Middle ReachWuhu

Tongling

Maanshan

Anqing

Jiujiang

Wuhan

Wuhan

Yueyang

Jingzhou

Yichang

Middle reach ports: Wuhan - Nanjing

Middle reach ports: Yichang - Wuhan

Maansh

anW

uhu

Tongli

ng

Anqing

Jiujia

ng

Yuey

ang

Wuhan

Jingzh

ou

Yichan

g0

40

80


The Upper ReachWanzhou

FulingChongqing

LuzhouYibin

The upper reach covers the section between Yichang and Yibin, it is largely only Chongqing city and part of Sichuan province

A population of 110 million live in the area with an associted economy of (GDP) $328 billion or about 6% of national GDP.


Rapid volume growth has been seen in this area particularly Chongqing. The “Go West” policy and the improvement of navigation condition caused by the Three Gorges Dam clearly played a role.

Ships from Chongqing port can be as big as 350 TEU or 5,000 tons. All ships has to pass the Dam to reach lower section of Yangtze

New development are seen in many of ports in this section and particularly in Chongqing.

Chongqing Luzhou Yibin0

102030405060708090

100


Chongqing data include Fuling and Wanzhou

Infrastructure investment funds looking for investments with growth potential or acquisitions

Pension and insurance funds with allocation for infrastructure in Asia or China that have potential to provide stable cash flows

Private equity funds looking for small to medium sized investments with high potential upsides

Seed investors looking to place early capital for potential sell off at later stage (e.g. to a consortium)

Container, bulk, oil and other operators with interest to develop and cooperate with local port groups and governments

Developers and contractors with ability to take on large marine infrastructure investments

Who might this be relevant for?

EXAMPLE 1 – PORT WIDE PARTNERSHIP

Investment model(an example)

This purely an illustrative slide for a JV formed with a local Port Group. Most agreements are made on a negotiated basis in China and therefore most models are possible. Many port areas have substantial options for further logistics developments on the landside.

Land+ Equity

Resource+ Equity

PortGroup Investor

Joint Venture

NewPort

LogisticArea

50% 50%

China Consortium and how to participate

We have cooperation with global as well as local Chinese operators, funds, developers, port groups and many others.

As development and collaboration opportunities emerge we involve clients that we have formalized cooperation with and (if relevant) parties that may benefit our existing client network for specific developments or acquisitions.

China Consortium is already in motion in several locations. If you would like to be part of it please contact us at [email protected] and we would be glad to discuss your needs and relevant scope for the Chinese infrastructure market. For more information about developing markets with Port Investor see appendix or go to:

www.port-investor.com/marketdevelopment

mailto:[email protected]

http://www.port-investor.com/marketdevelopment

APPENDIXChina Consortium by Port Investor

Massive container, dry bulk, oil and liquids markets - representing an immense share of world throughput

New segments such as bio fuel and others in rapid development

Limited competition - many ports with one controlling port group

Strong interest with local governments to attract “multinationals”

Negotiated deals are the norm (vs open tender) Less competition for developments More deal flexibility

11 Of the worlds

20 biggest portsand 50+ large

“secondary” ports

>25% Of world container

throughput

>60% Of world ironore demand

CHINA IN THE WORLD TODAY(a few key numbers on the Chinese economy and its Port Sector)

1.3Billion people

10Trillion USD

PPP adjusted GDP

>400 Mill. tons

of crude oil demand + target to further

increase oil supply reserves

But tapping into this potential requires a significantly different approach than most take - it requires a new model that engages local stakeholders in a positive way. For investors just bringing money the window of opportunity may well have passed in China.

10%Consistent growth last 30 years – may overtake the US by

2030

Opportunities in the Chinese Port Sector

Deal

Leaddevelopment

Focusedmarket engagement

Market scanning and intelligence

1 - 5

10 - 50

100 - 500

1,000 – 5,000

Many believe they can avoid building the pyramid – it’s an illusion, the deals you get access to are only as good as your pipeline.

The deal pyramid illustrates a few key rules of the marketplace:

a) The quality of the output is determined by the input – poor market scanning and market intelligence leads to poor leads

b) The most valuable deal leads are created pro-actively through focused market engagement

c) Each deal lead requires a strong contact and engagement base to develop into an actual investment

d) Only a few of the potential market targets will end up as deals - without a substantial pipeline no investments or deals

Typical challenges in securing investments

Deal

Leaddevelopment

Focusedmarket engagement

Market scanning and intelligence No or little market intelligence

available through desk research

Local presence required for any real insight – several sources

often required for verification

Multitude of local stakeholders including local government and port entities – wide engagement often req.

Any real engagement requires local relations and a real proposition to both

government and port

Actual leads eventuate from close dialogue and relation development – often very unstructured

Once into a stage of exploration of cooperation there is often presumed

exclusivity for a period

With the blessing of local partners and government, deals can be cut quickly

Many Chinese constituents like building on partnerships – one deal can lead to a

larger number of leads and deals

Challenges in the Chinese Port Sector

WHAT A group of operators, investors, and

developers many of which have world leading technology, experience and funding capability

Not a consortium in the traditional sense – there is no forced collaboration just collaboration opportunities in the many markets and sectors

WHY Combined leverage makes it possible to

create much more clout in the local markets

Complementary skill-sets from major port infrastructure fields that will allow synergies as each seek to develop in the market

We have been active in the Chinese port market for nearly a decade – the market and its constituents are well suited to engage with this form of “consortium”

The purpose of China Consortium

DEVELOPERS OPERATORSINVESTORS

Free ZoneMarine Infra.Construction

ContainerOil & LiquidDry Bulk

CONSORTIUM

Pension FundPrivate EquitySovereign Fund

CARGO OWNERS

Shipping linesPort industriesEnergy and resources

PORT PARTNERS

AsiaLatin AmericaMiddle East

APPENDIXMarket Development with Port Investor

Why?Thousands of ports, assets and projects…

…hundreds of different investment models……an infinite amount of opportunities!

The challenge – how to tap the potential?

Too little time – too few resources…Too big – too small…

Too expensive – too risky…Too early – too late…

The solution – risk free market engagement and effective deal creation!

+Deal

Develop

Engage

Market intelligence

and scanning

1-5

10-20

50-100

1,000-5,000Matching propositions

500 investment models

5,000 markets

50,000 targets

What?

Greenfield Brownfield

Acquisition

Container

Bulk

Oil & Liquid

Logistic Zone

Free Zone

Majority

Minority

Financial investor

Developer

Operator$10+ million

$100+ million

$1+ billion

Seed investor

Whether it is acquisitions, green fields, majority, minority, mature assets, high upside propositions, oil, container or bulk…

Whether in China, Middle East, Europe, Latin America or any other nation or region…

The opportunities exist or can be created!

Singapore Dampier Corpus Christi London SouthamptonShanghai Hamburg Gladstone Bergen WilhelmshavenRotterdam New York Primorsk Taichung CalaisTianjin Nantong Bremen Bombay BaltimoreNingbo Vancouver Long Beach Barcelona Forth PortsGuangzhou Yantai Corpus Christ Sao Sebastiao BilbaoQingdao Nanjing Algeciras Lake Charles PittsburghHong Kong Kitakyushu Pohang Trieste YanbuQinhuangdao Tangshan New Orleans Texas City KarachiDalian Itaqui Grimsby Baton Rouge New MangaloreBusan lianyungang Beaumont Saldanha Bay TampaNagoya Tubarao Huntington Paradip Milford HavenShenzhen Marseilles Constantza Jeddah OdessaSouth Louisiana Newcastle Mobile Tees LeghornHouston Kobe Hampton Roads Manila ParanaguaAntwerp Amsterdam Ports St. Petersburg Alexandria PaulsboroUlsan Osaka Valencia Taranto TarragonaChiba Tanjung Pelepas Plaquemines Gothenburg ValdezPort Hedland Sepetiba Dunkirk Tampa Texas CityPort Kelang Richards Bay Madras Jubail LiverpoolRizhao Hay Point Jawaharlal Nehru Tanjung Priok SavannahYingkou Novorossisk Los Angeles Zeebrugge BrisbaneKaohsiung Tokyo Genoa Mormugao LubeckInchon Santos Calcutta Durban PascagoulaYokohama Le Havre Izmit Duluth-Superior Angra dos Reis

Who?Pension funds, terminal operators, free zone developers, insurance funds, oil storage

operators, shipping lines, sovereign wealth funds, bulk operators, logistics zone operators, private equity funds, construction companies, industrials, general

investment funds, port groups…

…that wish to invest…that wish to operate…that wish to develop…that wish to partner

…that wish to collaborate

The great thing about this?

There are many more potential partners to cooperate and find solutions with than there are competitors!

How?

Deal

Develop

Engage

Market intelligence

and scanning

1-5

10-20

50-100

1,000-5,000

Purpose Target PropositionStep 0Create the foundation

Step 1Focus among the many

Step 2Engage the most relevant

Step 3Deal development

Step 4Closing the deal

Now!

Contact us on [email protected]...

…and let us help you start developing the propositions you want!

For more information on our market development process and the opportunities in the market place please refer to the appendices.


APPENDIXChoosing your scope

All constituents have different needs as concerns the target locations and the type of investments. These are just a small handful of examples.

Greenfield Brownfield

Acquisition

Container

Bulk

Oil & Liquid

Logistic Zone

Free Zone

Majority

Minority

Financial investor

Developer

Operator$10+ million

$100+ million

$1+ billion

Seed investor

How can we help you……relevant scope (1)

Singapore Dampier Corpus Christi London SouthamptonShanghai Hamburg Gladstone Bergen WilhelmshavenRotterdam New York Primorsk Taichung CalaisTianjin Nantong Bremen Bombay BaltimoreNingbo Vancouver Long Beach Barcelona Forth PortsGuangzhou Yantai Corpus Christ Sao Sebastiao BilbaoQingdao Nanjing Algeciras Lake Charles PittsburghHong Kong Kitakyushu Pohang Trieste YanbuQinhuangdao Tangshan New Orleans Texas City KarachiDalian Itaqui Grimsby Baton Rouge New MangaloreBusan lianyungang Beaumont Saldanha Bay TampaNagoya Tubarao Huntington Paradip Milford HavenShenzhen Marseilles Constantza Jeddah OdessaSouth Louisiana Newcastle Mobile Tees LeghornHouston Kobe Hampton Roads Manila ParanaguaAntwerp Amsterdam Ports St. Petersburg Alexandria PaulsboroUlsan Osaka Valencia Taranto TarragonaChiba Tanjung Pelepas Plaquemines Gothenburg ValdezPort Hedland Sepetiba Dunkirk Tampa Texas CityPort Kelang Richards Bay Madras Jubail LiverpoolRizhao Hay Point Jawaharlal Nehru Tanjung Priok SavannahYingkou Novorossisk Los Angeles Zeebrugge BrisbaneKaohsiung Tokyo Genoa Mormugao LubeckInchon Santos Calcutta Durban PascagoulaYokohama Le Havre Izmit Duluth-Superior Angra dos Reis

Deal

Lead development

Focused market engagement

Market intelligenceand scanning

1-5

10-20

50-100

1,000-5,000

Step 1Focus among the many




How can we help you……relevant scope (2)

Each constituent have different needs as concerns the deal pyramid. Some look for solutions all the way from market intelligence to closing actual deals, others only up to and including engagement of the relevant authorities and potential partners.

APPENDIXJust a few of the many opportunities

Market development……port expansion and new ports potential

Bio Fuel

Cruise

Dry Port Oil Storage

In-Port Industries

BulkLogistic Zone

Free Zone

Port Property

Intermodal Hub

Energy Hub

Trade Hub

Port zones are natural growth engines for the economy. The potential to develop and expand to generate economic growth and trade for most ports far exceeds their current footprint.

This includes the development of trade hubs, free zones, industry zones and other concepts.

For investors this gives potential to invest in some of the most valuable industry property and port infrastructure.

Market development……acquisition potentialAmong the big acquisition opportunities are the portfolios of many shipping lines that are expected to face a difficult period and port owners - some of which are looking to do a.o. PPP type deals that essentially are asset sales.

Many single asset owners also sit with acquisition opportunities, some with full ownership of a terminal or a port and some with majority or minority holdings in specific assets.

…just a few examples…

Target Transaction value Acquiring partyPortek portfolio $146mn MitsuiTin Can Container Terminal (Zim lines 47.5% share)

$154mn China Merchants

Malta Freeport (CMA CGM's 50% share) $285mn Yildirim GroupDPW Australia portfolio (75% share) $1.5bn Citi Infrastructure InvestorsChennai International Terminals (Sical's 27% sare)

Not reported PSA International

ACS Dragados Spanish port portfolio €720mn JP Morgan led consortiumYantian International Container Terminals (APM Terminals' 9.7% share)

$520mn Cosco Pacific

Poti Sea Port (80% share) Not reported APM TerminalsSantos - BTP (50% from MSC) Not reported APM Terminals

Market development……collaboration potential (1)

MATCHING Over the course of a port infrastructure project the nature of the investment changes from stage to stage. Investors (as well as operators and developers) all have different preferences, some are more suitable for green-field whereas others look for mature facilities. Likewise each constituent brings its own set of strengths and skills to the table that amongst others can allow the undertaking of larger projects.

SYNGERGIZING (1 + 1 = 3)Ultimately this is all about finding synergies between parties with different skills and needs to accelerate development that may not otherwise have been possible or less attractive.

Greenfield$1bn

Port Group

Oil Operator

Container Operator

Bulk Operator

Investment Fund

Development

•Private Equity

•Construction Company

Growth •Investment Fund

•Operator

Maturity •Pension

Fund


TERMINAL OPERATORSAPM TerminalsOiltankingICTSIVopak

PORT OWNERSPort of RotterdamShanghai International Port GroupAbu Dhabi Terminal CompanySantos Port Group

CARGO OWNERSShipping linesMining and mineral companiesEnergy companiesIndustrial Zones

The port industry has thousands of different operators and port owners that are ready to collaborate for different types of projects at different stages of the project in different geographies.

Likewise on the side of the parties actually owning cargo there are many that either have a need to get better market access on the sea side or have existing facilities that they wish to outsource.


INVESTMENT FUNDS AND PRIVATE EQUITYMacquarie Infrastructure GroupBrookfield Infrastructure PartnersJP Morgan Infrastructure FundCiti Capital Advisors

SOVEREIGN FUNDSAbu Dhabi Investment AuthorityChina Investment CorporationGovernment of Singapore Investment CorporationMalaysia Mining Corporation

PENSION AND INSURANCE FUNDSPing An (2nd biggest Chinese insurance fund)Ontario Teachers Pension FundATP (biggest Danish fund)APG (biggest Dutch fund, 3rd biggest globally)

The global investment fund sector manages more than $100 trillion. Many want to “get real” (assets) and “go direct” (ownership) - they want real assets with real purpose. Owners or developers of port assets are in an ideal position to tap into that.

Many of the major funds prefer getting in after the development and optimization of a given port asset and want substantial deal size - often $100+ million.

DEVELOPERS OPERATORSINVESTORS

Free ZoneMarine Infra.Construction

ContainerOil & LiquidDry Bulk

CONSORTIUM

Pension FundPrivate EquitySovereign Fund

CARGO OWNERS

Shipping linesIndustrialsFabrication

PORT PARTNERS

AsiaLatin AmericaMiddle East

IMMEDIATE COVERAGE FOR INVESTORSFor those with an interest to enter, expand or invest in a specific region (e.g. China) and covering all the key markets within months.

REAL ENGAGEMENTOur on the ground network directly engages the local decision makers

COMPLEMENTARYA group of leading firms with complementary skills and objectives enabling a strong proposition towards ports.

SYNERGISTIC AND NO RISKNo heavy regional setup or local office before you start running

The PI ConsortiumA new model for investors, developers and operators


APPENDIXThe deal pyramid step by step

The PI Deal Pyramid……an overview

Deal

Develop

Engage

Focus

$1bn

10-20

50-100

1,000-5,000

Purpose Target PropositionStep 0Create the foundation

Step 1Market intelligence and scanning




Step 0……defining purpose

Purpose

What is the purpose? Why are you looking for an acquisition, developments or partnerships?

Step 0……identifying the target

Purpose Target

What specifically is relevant for you to target, who to partner with or what to develop?

Step 0……creating the proposition

Purpose Target Proposition

With the target in mind what is your proposition to them? Why should someone welcome your investment, collaborate or partner with you?

Step 1……focus

Deal

Develop

Expose and Engage

Focus

1,000-5,000


This is about getting your market intelligence and scanning in place. It is about getting the right targets in sight. Without it you are going to be wasting valuable time and resources while others cut deals.

Step 2……engagement

Deal

Develop

Engage

Focus

1,000-5,000


50-100

This is about creating true engagement – it is not about desk research it is about on the ground direct contact with the real decision makers and getting your proposition out there in the right form.

Step 3……development

Deal

Develop

Engage

Focus

1,000-5,000


50-100

10-20

This is about fast-tracking and developing real leads, creating substantial opportunities and creating real leverage to close the deal.

Step 4……deal

Deal

Develop

Engage

Focus

1,000-5,000


50-100

10-20

$1bnGoal! Now use all the great efforts you did in step 0 to 3 to make many more!

APPENDIXAbout Port Investor

InduStreams was founded in 2011 with a mission to create a more transparent, connected and informed infrastructure market place.

We launched Port-Investor.com in July 2011, a specific sector pilot with focus on port investing and the global port industry.

Current state of affairs

200+ port groups and 1,000+ executives and decision makers in the network and increasing China Port Investor and other regions are being launched Specific concepts in development with select investors and port groups

The Vision

Connecting all substantial port markets (5,000+ globally) with investors (1,000+ globally) Creating a transparent and informed market place driven by industry leaders and experts Unleashing the potential inherent in this sector by creating thousands of new investment

opportunities (we expect investment potential to exceed $1 trillion)

Want to know more or simply engage……contact us on:

[email protected]

http://www.port-investor.com/


Yangtze Investment Opportunities

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