East Africa Railway Project

Bettering Lives Through Economic Development & Ethical Leadership

Goals & Objectives

• Rehabilitate Tanzania railway and extend new railway to Rwanda & Burundi

• Create a sustainable and profitable railway company

• Contribute to the economic health of participating nations by bringing “Silicon Valley” to East Africa. Providing stock options/equity to all employees of the railway.

• Provide attractive returns & liquidity event for investors

• Stimulate economic development & knowledge transfer

• Execute with high ethical standards & transparency

Background: Map of East Africa

Background: Map of East Africa

Other Regional Railway Initiatives

Background: Current Conditions

• Port of Dar es Salaam (Tanzania)  Major congestion. 22 day through-put time

 Poor operating procedures. Traffic not pre-cleared, transit & storage process, payment system, and other inefficiencies  Poor security of transit goods. High pilferage, damage, insurance

• Existing Tanzania narrow gauge railway  100 year old infrastructure. High track outages & maintenance

 One meter gauge. Designed for passenger service and light tonnage

• Unsatisfactory Concession Agreements  Port: TICTS (Hutchinson Group, China)  Railway: RITES of India

 Rwanda & Burundi  No current railway access

Hazards

• High political risks and difficult coordination with multiple nations and related agencies.

• Vast majority of Tanzania’s public private partnerships have failed (i.e. electric power, port concession, water, airline)

• Widespread graft and corruption

• Public sector budget deficits & past loan defaults limit new public sector lending

Opportunities

• Commerce drives development  Railways can have a 24x economic multiplier effect  Significantly increase regional export industries  Increase GDP and income per capita in participating nations

• Infrastructure drives commerce  Cost to move 1 ton of freight in E. Africa is 600%-800% of U.S.  Economic growth in Rwanda and Burundi limited by poor roads, rail and port in Tanzania and Kenya.

• Wealth creation opportunity for East African people  Create a significant stock option pool for railway employees  Bring ethical entrepreneurial culture to East Africa

• Model of ethical business conduct and leadership  Train and develop management and personnel

Opportunities: Humanitarian Imperative

Railways Can Have a 24X Economic Multiplier Effect

Completed Feasibility Studies

• TZ & BU Mining Surveys: Various

• Tanzania Ports Master Plan: World Bank/Royal Haskoning

• Kigali to Isaka new rail line: AfDB/DB Consult International

• Isaka to Dar es Salaam rehabilitation: USTDA/BNSF

US Trade Development Agency / BNSF Study

• Market and strategic justification

• Operational integration recommendations

• Infrastructure development recommendations

• Financial and economic justification

• Regulatory and institutional assessment

• Preliminary environmental impact assessment

• Identify U.S. supply sources

Study Findings: Investment Justification

U.S. Trade & Development Agency (USTDA) sponsored study is now finished – positive findings • Reviewed / forecasted Central Corridor tonnage and revenues

• Examined Great Lakes mining activities and related tonnages

• Examined traffic diversion & competition with Northern Corridor

• Reviewed / forecasted Port of Dar es Salaam facilities & capacity

• Updated proposed route and operating plan

• Reviewed Tanzania railway institutional framework

• Reviewed environmental impact study

• Reviewed developmental impact to countries

• Financial models & first cut results

Investment Hazards

• Commodity based economies

• Soft barriers to trade (cross border)

• Physical security of in-ground assets

• Regulatory framework (rate setting, EAC vs. country)

• Kenya Rail & Mombasa port response – Northern Corridor

• Imbalance of costs vs. revenues in Rwanda vs. Tanzania

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Big Picture Considerations

• Regional EAC integration issues •  Border transit issues (through bills of lading) •  Integration of project components (Port, Facilities, Rail) •  Incumbent concession (RITES) contract •  Shutdown during rehabilitation •  Imbalance in cost/revenue ratio of TZ vs. RW vs. BU • Contribution & role of TZ Government in PPP (Valuation) •  Ability to provide foreign technical & managerial expertise

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Project Components

•  Modernize / expand port of DSM – triple annual turnover

•  Rehabilitate port railway

•  Rehabilitate existing railway to standard gage – 970 km

•  Construct new Isaka-Kigali railway link – 460 km

•  Construct new railway spurs to

  Burundi – 180 km

  Democratic Republic of Congo?

Four Stage Investment Requirements

• $300 M Upgrades to Port of Dar es Salaam

 Berths 13 & 14, Port Rail & ICD; excluding relocation costs

• $1.2 Bn Existing railway rehabilitation: DSM to Isaka

 Rail infrastructure, power & telecoms, facilities, rolling stock & MOW equipment

• $2.5 Bn New railway construction: Isaka to Kigali

• Construction of Burundi spur into mining district

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Institutional / Regulatory Framework

TANZANIA

TIC TPA TRA SUMATRA RAHCO

REGULATORY FRAMEWORK

RAILWAY COMPANY

RWANDA BURUNDI

TRI-COUNTRY REGULATORY

AGENCY

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Railway Business Structure

•  Privately owned freight railway company   Design-Build-Operate-Own-Finance

•  SUMATRA adopts US style regulatory controls   Free market – service & pricing levels   Revenue adequacy   Presumption of fair competition

•  Integrated freight railway controls all in-ground & movable assets •  RAHCO donates existing infrastructure assets •  Long term land leases per TZ law •  Negotiated trackage fees agreement •  Negotiated “blue water” access agreement with port operator •  Negotiated service agreement for intercity passenger rail

Environmental

Revenue Tonnage & Assignment

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Notional TZ Freight Rail Credit Structure Vertically Integrated Railway

Security & Loan Trust

Agreements

New EAC Railway Co.

Multi-Lateral Credit Agencies

AfDB & IFC

Mining

Cos.

Project

Development

Consortium

Railway Development Ops & Mgmt Advisory

Int’l Bank Receipt &

Disbursement Escrow Acct

Pax & Other

Railways

Limited Sovereign Guaranty

TZ Finance Ministry

Global & US Equity

Investors

Equity Subscription

Trust Agreements

Port Development Ops & Mgmt

Advisory Shipping

Cos.

SUMATRA

Port Operator

Political Risk Insurance OPIC

Design, Engineering & Construction

Asset Contribution & Security Agmt.

RAHCO

TIC

Pax Railway

Port Container Fees

Revenue Tonnage Contracts

Motive Power & Haulage

Source of Funding

Source of Repayment

Master Security & Trust

& Safety Plans

Plan

Trackage Rights

Railway Operating License

Financing for Initial Stage

• $340 million equity raise  US & Global equity for port & railway rehab financing

 Offset by GoT & Private TZ equity, operating earnings, timing

• Senior lenders  African Development Fund (AfDF) &

 International Finance Corp (IFC)  Overseas Private Investment Corp (OPIC)

• Repayment: Project revenues (freight tariffs, container fees, trackage fees)

• Security: Developmental bank participation, political risk insurance, mortgage on rolling stock, support agreement with railway, concession agreements with sovereigns, assignments of revenues (port & rail)

• Liquidity/Term: Targeted IPO in year 7

Advisory Team

Al Lunsford, Lunsford Group, Chief Executive Officer & Managing Director Mr. Lunsford is Founder and CEO of Lunsford Group, a privately held investment holding company consisting of a series of privately held independently owned entities in real estate, software, media, demographics, health care and the Internet. The operation – augmented with consulting – has served such distinguished clients as Sears, Roebuck and Co., Apple Computer, BuyDirect.com, TRW, Eastern College, Herman Miller, Joy Manufacturing, World Vision United States & International, Malaysian Industrial Development Agency (MIDA) and the Brunei Investment Agency. He has led over $600 million in real estate and facility development projects in Kenya, Sudan and Zimbabwe during his time at World Vision International.

Allan is leading the development of the 600-acre business park. It is a mixed-use project that will consist of 8.2 million square feet of office, industrial, and hospitality product at an all-in cost of $2 billion.

Geoff Finch, Lunsford Group, CFO & Managing Director Mr. Finch is CFO & Managing Director at the Lunsford Group. Previously, Geoff was Vice President & CFO of Lockheed Martin Finance Corp. where he provided various finance solutions for Lockheed Martin's customers worldwide. He directed budgets, forecasts, financial reporting, and renegotiated a $150 million structured credit facility while at LMFC. He also served as VP of Finance for VentureStar, which was Lockheed Martin's $5 billion new business venture for a next generation space transportation system. Geoff developed the business plan and presented it to NASA, industry executive committees, outside investors and the LLC board. He served as the finance liaison with US Congressional offices and lobbyists on new legislation to support venture and received USG security clearance for Top Secret.

Geoff is currently a member of the USTDA study team for the East African railway project and LG finance lead.

Advisory Team

Bernard Moon, Lunsford Group, Managing Director, Business Development Previously, he was Co-founder and VP of Business Development at GoingOn Networks, a social media platform for companies and organizations. He led the initial product development where BusinessWeek recognized the GoingOn platform in their "Best of the Web" list for 2007.

Prior to this, Bernard was a Director at iRG, a leading boutique investment bank in Asia, where he focused on Telecommunications-Media-Technology companies and served clients in various industries such as data centers, online gaming, wireless and broadband services. Prior to iRG, Bernard was VP of Business Development & Marketing at HeyAnita Korea, a leading voice portal and solutions provider, which was joint venture between Softbank and HeyAnita, Inc. Bernard was responsible for establishing strategic and content partnerships and helping to build the company from its conceptual stage to a 54-person operation. Additionally, he assisted in the closing of the company's two rounds of financing totaling $14.5 million, which led to revenues of $14 million and profitability.

Dan Wooldridge, Lunsford Group, Managing Director, Strategy Mr. Wooldridge is a Managing Director at Lunsford Group and brings a wealth of experience leadership development and strategic consulting. Besides his involvement with Lunsford Group entities, outside companies call for his expertise in leadership and strategy development.

Previously, Dan served as a senior consultant at FMI Corporation, the premiere management consulting firm in the global construction industry. While at FMI, Dan was the Practice Leader overseeing the innovation and development of FMI’s core practices in leadership, strategy, business development, and project execution. He served as a senior faculty member at their acclaimed Leadership Institute. His client work involved management succession, assessing and developing leaders and leadership teams, and creating organizational leader development programs. He developed the “Coaching to Develop Exceptional Leaders program” and is involved extensively in executive coaching. He also developed joint leader development programs with Harvard and West Point. He also has an extensive background in marketing, nationally and internationally, as well as in the educational events and hospitality industries. He’s served in the non-profit sector including leadership and board roles for The Navigators.

Team Deal Experience

• $1 billion debt financing for Republic of Singapore

• $5 billion space transportation PPP venture with NASA

• $50 million debt financing for Republic of Niger

• $23 million debt financing for Republic of Peru

• $7 million development of World Vision Int’l Africa HQ in Nairobi, Kenya

• $600 million development of multi-site distribution (airport, logistics, & comms) in Sudan

• $100 million debt financing for Kingdom of Thailand

• $75 million debt financing for Ethiopian Airlines

• Advisor on $2 billion toll road development for the Transportation Corridor Agencies in California

• $110 million financing lease for Air Lanka

• $600 million in multiple financings through Export- Import Bank of the United States

• $50 million export credit facility through EDC of Canada

Team Deal Experience

• $33 million equity financing for ViewPlus

• $14.5 million equity financing for HeyAnita Korea

• $30 million debt financing through Private Export Funding Corporation

• $1.2 billion debt & equity financing for Asia Cellular Satellite Services (Indonesia)

• Multiple credits through Export Credits Guarantee Dept of the UK

• $100 million secured debt financing for LTU (Germany)

• $1 million VTS non- recourse project financing in Republic of Panama

• $30 million discount facility for Republic of Colombia

• $30 million financing lease for Continental Airlines

• $30 million debt financing for Eastern Airlines

• $3 million development of Zimbabwe headquarters

• $27 million development of South Korea headquarters

Team Deal Experience

• $30 million debt financing for America West Airlines

• Advisor on $3 million asset based debt financing facility for Precision Aviation

• $50 million subordinated debt financing for Gulf Air (Bahrain)

• $256 million purchase & rehab of Beverly Hills Hotel for Brunei Industrial Development Agency

• $17 million development of Campus Crusade’s World HQ & Logistics Center

• $30 million development of assembly & distribution facility in Toronto, CA

• Financial advisor for $7 billion+ (KOSDAQ) Internet company in South Korea

• Financial advisor for multi- billion online gaming company in South Korea

• $140 million debt financing for Republic of Argentina maintenance facility

• $350 million debt financing for Air Portugal & Portugal Ministry of Finance

• $16 million development of national processing center (200,000 sq ft)

• $300 million housing and relocation villages program in Indonesia

Team Deal Experience

• $30 million development of Navigators US HQ

• $32 million development of 3.8M sq ft distribution facility in Wilkes-Borough, PA

• $30 million development of 3.8M sq ft distribution center in Delano, CA

• $100 million development of HQ, airport, aviation logistics & training center

• $7 million development of World Vision Canada HQ in Toronto, CA (80,000 sq ft)

• $56 million development of World Vision Int’l Kampuchea Hospital new construction facility

• $12 million development of Costa Rica office facility

• $6 million construction & term financing for 100,000 sq ft classified research facility in Aurora, CO

• $40 million operating lease for U.S. Dept of Housing & Urban Development

J. Brady Anderson, Former US Ambassador to Tanzania and USAID Administrator J. Brady Anderson and his wife, Betty, lived and worked in Africa for eight years beginning in 1988. For five of those years they conducted sociolinguistics research in indigenous African languages for the Summer Institute of Linguistics. Fluency in Swahili was required for their language research in the villages and towns of Tanzania. They also worked in Nairobi, Kenya and in Addis Ababa, Ethiopia where they assisted the Ethiopian Ministry of Education in the creation of a national bilingual education program in seventeen languages.

In 1994 President Clinton appointed him to be the United States Ambassador to Tanzania, a three year diplomatic assignment in Dar es Salaam. In 1998 the President appointed him to be the Administrator of the United States Agency for International Development (USAID) in Washington. As the head of the U.S. foreign aid agency Ambassador Anderson directed programs of crisis relief and long-term development in 80 countries. Ambassador Anderson’s priorities were increasing emphasis on democracy-promotion with special concern in the Balkans; managing a deepening relationship with Egypt, Jordan and the Palestinian Authority as a continuation of the Middle East Peace Process; placing growing resources into the HIV-Aids pandemic in Africa; and seeking ways to achieve a more accurate understanding by the American public of the costs, purposes and methods of the US foreign aid program. He was an advisor to the Secretary of State and to the National Security Advisor on development and security policies in the developing world. He also served as Chairman of the Board of the Overseas Private Investment Corporation, created by Congress to encourage US private investment in developing countries.

Board of Advisors

Tom Lockard, Stone & Youngberg LLC, Managing Director, Public Finance Tom Lockard joined Stone & Youngberg as an investment banker in 1984 and is a member of the firm's Board of Directors. Stone & Youngberg is one of the oldest private financial institutions in the United States and is a leading underwriter of public infrastructure debt. During his tenure with Stone & Youngberg, Mr. Lockard has successfully structured more than 400 separate new issue municipal bond transactions representing over $4.5 billion of municipal debt.

Mr. Lockard earned a Bachelor’s degree from Stanford University. Following Stanford, he completed a Coro Foundation fellowship and spent two years working on immigrant and refugee assistance with the Foundation Task Force on Refugee Affairs in San Francisco's Tenderloin neighborhood. Mr. Lockard earned an MA from Claremont Graduate University and an MBA from the University of Pennsylvania's Wharton School.

Mr. Lockard has served as a trustee of the University of Pennsylvania, as a board member and treasurer of Coro Northern California, and board member and treasurer of the ACLU of Northern California. He remains actively involved with local and international philanthropic organizations. Currently he is the board treasurer for the Center for Investigative Reporting, as well as a board member of the Salesian Boys' and Girls' Club in San Francisco and the Stanford University Buck/Cardinal Club. Mr. Lockard and his wife actively support the Sainte Anne Clinic in Lome, Togo, which services over 24,000 general medical visits each year. Through Stanford University, he helped to establish an internship program for undergraduates to work each summer in Africa.

Board of Advisors

William A. Mullins, Baker & Miller PLLC, Partner William (“Bill”) A. Mullins is a Partner at Baker & Miller PLLC where his practice concentrates on all aspects of the transportation industry, including railroad mergers, regulatory rulemakings, litigation, and legislative initiatives. He represents clients in proceedings before the Surface Transportation Board (STB), the Department of Transportation (DOT), the Department of Justice (DOJ), and various U.S. appellate and district courts.

Mr. Mullins was directed toward a career in transportation law via his first position out of law school when he served as Chief Counsel and then as Chief of Staff to Commissioners at the predecessor agency to the STB, the Interstate Commerce Commission (ICC). While at the ICC, he was responsible for providing legal analysis of railroad rate and service issues and rail restructuring transactions (mergers, line sales, line construction, and line abandonments); trucking and shipping company matters; and rates and services of pipelines not regulated by the Federal Energy Regulatory Commission. Prior to joining Baker & Miller, Mr. Mullins was a Partner and the Transportation Practice Group Leader at Troutman Sanders, LLP.

Mr. Mullins representative engagements include serving as lead counsel in the “NAFTA Rail” transaction, which involved placing a Class I U.S. railroad and the largest privately owned Mexican railroad under common control and management, a transaction that had never before been proposed. The NAFTA transaction was approved and consummated in late 2004. He was involved with the railroad privatization process in Mexico both inside and outside of the government. Other representative engagements include representing a Class I railroad or large shippers in every railroad merger since 1993; representing shippers and carriers in rail line construction proceedings; providing transportation advice and counsel on several transactions undertaken by one of Wall Street’s largest private equity firms; representing public and private entities in developing a process whereby the ownership and operations can be held by different entities thereby allowing for development of both freight and passenger operations; advising city and county governments on the scope of federal preemption over the transportation industry; and briefing corporate officers for Congressional meetings and preparing testimony.

Board of Advisors

Mr. Mullins is a former Board Member of the Intermodal Transportation Institute at the University of Denver. His professional affiliations include the Association of Transportation Law Professionals; the American Short Line and Regional Railroad Association; the Colorado Bar Association; the District of Columbia Bar; and The Federalist Society. He has been a panelist or featured speaker at various conferences sponsored by the TransportationﾊResearch Board, Transportation Research Forum, and Escalation Consultants and has served as a guest lecturer on a panel at the Center for International Legal Studies Conference in Salzburg, Austria. He has been selected by Rail Business/Rail Outlook as one of the “Industry Experts” to provide an annual analysis of the rail industry and is often quoted by numerous magazines and periodicals, including the Journal of Commerce, Traffic World, and Rail Business. He has written several articles.

Bill received his BA in General Studies Summa Cum Laude & Political Science Magna Cum Laude from the University of Colorado with Phi Beta Kappa honors. He received his JD from the University Of Colorado School Of Law.

Ambassador John A. Simon, Center for Global Development, Visiting Fellow John A. Simon is a Visiting Fellow at the Center for Global Development and a founder of Total Impact Advisors. He recently left federal government service where he held a variety of posts, including serving most recently as the United States Ambassador to the African Union and the Executive Vice President of the Overseas Private Investment Corporation (OPIC). At OPIC, Ambassador Simon championed the Agency’s involvement in the social impact investment marketplace, spearheading efforts to finance housing in Africa, small and medium businesses in Liberia, and a large scale renewable power plant in Liberia. Ambassador Simon led the Agency’s effort to develop a series of social development funds for Africa, which resulted in the creation of four private equity funds focused on achieving extraordinary social results as well as strong financial performance.

Prior to his OPIC appointment, Ambassador Simon served as Special Assistant to the President and Senior Director for Relief, Stabilization, and Development for the National Security Council (NSC) at the White House, the first to hold this post. During his tenure at the NSC, Ambassador Simon oversaw the implementation of groundbreaking development

Board of Advisors

initiatives, including the Millennium Challenge Account, the President's Emergency Plan for AIDS Relief, the Multilateral Debt Relief Initiative, and the President's Malaria Initiative. He was also responsible for the U.S. government response to international humanitarian disasters, such as the 2005 South Asia Earthquake.

From 2002 to 2003, Ambassador Simon was Deputy Assistant Administrator at the United States Agency for International Development, overseeing the agency’s development information and evaluation units. Earlier in his career, he served as Director of Business Finance and Strategic Planning at Harvard Pilgrim Health Care and worked for the Commonwealth of Massachusetts’ Executive Office for Administration and Finance in several capacities, including Deputy Director for Research and Development. Ambassador Simon received his bachelor's degree from Princeton University and a master's degree in public policy from Harvard University.

Robert F. Starzel, Holme Roberts & Owen LLP, Of Counsel Bob Starzel is Of Counsel to the firm in the San Francisco office. He has handled hundreds of large and small transactions in the course of his career, from asset and stock purchases to sales, leases, and service contracts, in all totaling billions of dollars. He utilizes his business expertise in combination with the experience and skills of other lawyers at the firm to offer deal facilitation services.

Over the last 30 years, Mr. Starzel has served as Vice President and Director of The Anschutz Corporation (1976-1988), Vice Chairman of Rio Grande Industries (1994-1998), Vice Chairman of Southern Pacific Rail Corporation (1994-1996), Vice Chairman of Southern Pacific Transportation Company (1988-1996), Senior Vice President of Union Pacific Corporation (1997-2000), Senior Representative of the Chairman of Union Pacific Corporation (2000-2004), and Chairman of The San Francisco Newspaper Company, which owns the San Francisco Examiner (2004-2005).

Board of Advisors

Board of Advisors

He has been a Director of Pacer International Inc. (NASDAQ:PACR) since 2006. Mr. Starzel serves as a Director of Nature's Accent, Inc., a trustee of the Fort Mason Foundation, and Director of The Salvation Army in San Francisco. He served as a Director of Pacific Energy GP Inc. (a General Partner of Pacific Energy Partners LP) since 2002. He also sat on the Board of Directors of Regal Entertainment Group (NYSE: RGC), which is the largest theatre chain in the U.S., from 2002 to 2003. He served as a Director of the California Chamber of Commerce (1991 to 2005), and as a Director of the Santa Fe Institute (1997-2003).

Mr. Starzel started his legal career at HRO as a trial attorney from 1971-1975. He obtained his BS from Arizona State University and JD from Harvard Law School.

Project Overview

Financing Operations Leadership

Objective

Team

• Secure financial & operational mandate

• Complete financing

• Finalize Management Team

• Advise management team

• Explore derivative businesses (e.g. fiber optic backbone, agrobiz)

• Provide leadership and organizational development

• Additional pro bono consulting related to real estate, operations, etc.

• Al Lunsford • Geoff Finch • Bernard Moon

• Geoff Finch • Bernard Moon

• Dan Wooldridge • Bernard Moon

Appendix: Cost-Benefit of AREMA v. UIC Standards

 Greater productivity of railway system – purpose built  Heavier axle loads (double-stack containers),  Heavier couplings (fewer, longer trains, faster speed)  New locomotives & rolling stock available  Lower capital costs / broader industrial base (US vs. Europe)  Higher revenue potential  System longer life / lower maintenance

 Significant yearly operating costs savings

 Shorter payback period

 Fully viable transition operations (narrow/standard gauge)

Appendix: Port of Dar es Salaam

The Port Of Dar Es Salaam & Railway Corridor

Railway Access

Appendix: Existing Narrow Gauge Railway

Kigali & Possible Terminus