EY valuation services for infrastructure companies

EY has extensive experience in providing fi nancial, tax, legal and technical support for PPP projects to infrastructure companies. We ensure that our independent business valuation is accurate and based on our insight into the specifi c features of the infrastructure sector.Independent business valuation of infrastructure companies requires deep insight into all aspects of their operations. The valuation and fi nancial modeling in this case should consider not only market factors but also tariff regulations as well as key agreements signed by those companies with the state. Those agreements include but are not limited to concession agreements (Federal Law No. 115), PPP agreements (Federal Law No. 224), long-term investment agreements, long-term operator agreements and other life-cycle contracts. The terms and conditions of those agreements can decisively impact the cash fl ows of infrastructure companies or of their key projects.

Factors that we consider in valuing the business of infrastructure companies1. Features of long-term agreements to carry out PPP infrastructure projectsThe following factors play a key role in the valuation process: • The procedure for subsidizing the company’s business (e.g.,

in relation to payments made by the grantor), time period in which the subsidies are paid, the indexing procedure, fi nes and other factors that affect the mechanism for making payments under the projects

• Contractual requirements for the project fi nance structure to be met by the company

• Features of the tax regime that depend on the selected legal structure for the project

• Project risks offset by the government• The deadline for the infrastructure project• The specifi c risks of the project, e.g., the right of the public

partner to change parameters of the investment program and requirements for the operation of infrastructure facilities

• The procedure for terminating the project agreement

2. Features of tariff regulationIf the company’s tariffs are subject to regulation, we will analyze the tariff-setting mechanism (short-term or long-term model, RAB methods, indexation method, economically justifi able costs method, etc.), the way that investments are treated when the tariff is set, the way of determining the rate of return on investment, the accounting treatment of assets, liabilities, income and expenses, as well as accounting treatment of subsidies, smoothing of parameters, and other factors.

EY’s process for valuing the business of infrastructure companies

Collect information • Discuss the purpose of the

valuation with the client• Collect information about the

company, including texts of its long-term project agreements

• Determine the applicable valuation methods

Preliminary valuation output• Determine and verify the key

valuation drivers• Calculate the discount rate • Preliminary business valuation output

Financial modelBuild a fi nancial model in strict compliance with the terms and conditions of long-term agreements and tariff regulations to prepare long-term forecasts of the company’s operations

Valuation report• Issue a valuation report in

accordance with the requirements of Federal Valuation Standards or International Valuation Standards.

Maria Lafer Partner, Transaction Advisory ServicesTel.: +7 (495) 641 2944Maria.Lafer@ru.ey.com

Sergey LuzanDirector, Transaction Advisory ServicesTel.: +7 (495) 755 9700Sergey.Luzan@ru.ey.com

Contacts

Advantages of our approach to valuing the business of infrastructure companies

• In-depth understanding of the business of infrastructure companies EY was named best financial advisor in infrastructure development and PPP projects

in Russia at the ROSINFRA national infrastructure awards for 2014, 2015 and 2016. Our clients in the infrastructure sector include government bodies and establishments,

private investors and lenders, and international and national development agencies.

• Experienced team We have gained rich experience in valuing infrastructure projects.

Our valuation teams also include EY tax, legal and technical advisors.

• Confidentiality We serve our clients from the early stages of PPP transactions and keep strictly

confidential all the information available to us.

• Regular contact We closely interact with our clients to ensure the smooth exchange of information

and prompt reporting on valuation findings in accordance with Federal Valuation Standards (International Valuation Standards).

Valuation of a federal road operatorWe valued a company engaged in the modernization and operation of a section of a toll road in the Central and Southern Federal Districts.

Valuation of a company engaged in a PPP road project in the Moscow RegionWe valued a company engaged in the construction and operation of a toll road in the Moscow Region.

Valuation of a company engaged in a PPP road project in MoscowWe valued a company engaged in the construction and operation of a toll road in Moscow.

Valuation of a company engaged in the construction and operation of a tram line under a PPP project in a Russian regionWe valued a company engaged in the construction and operation of a tram line.

Valuation of waste burning plantsWe valued companies engaged in the construction and operation of waste burning plants.

Valuation of water treatment facilitiesWe valued a number of water supply and disposal companies.

Selected EY projects on the valuation of infrastructure companies

EY Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY works together with companies across the CIS and assists them in realizing their business goals. 4,500 professionals work at 20 CIS offices (in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Rostov-on-Don, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Bishkek, Baku, Kyiv, Tashkent, Tbilisi, Yerevan and Minsk).

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

ContactsAlmaty +7 (727) 258 5960

Astana +7 (7172) 58 0400

Atyrau +7 (7122) 55 2100

Baku +994 (12) 490 7020

Bishkek +996 (312) 623 096

Ekaterinburg +7 (343) 378 4900

Кazan +7 (843) 567 3333

Kyiv +380 (44) 490 3000

Krasnodar +7 (861) 210 1212

Minsk +375 (17) 240 4242

Moscow +7 (495) 755 9700

Novosibirsk +7 (383) 211 9007

Rostov-on-Don +7 (863) 261 8400

St. Petersburg +7 (812) 703 7800

Tashkent +998 (71) 140 6482

Tbilisi +995 (32) 215 8811

Togliatti +7 (8482) 99 9777

Vladivostok +7 (423) 265 8383

Yerevan +374 (10) 500 790

Yuzhno-Sakhalinsk +7 (4242) 49 9090

© 2018 Ernst & Young Valuation and Advisory Services LLC. All Rights Reserved.