MACQUARIE INFRASTRUCTURE AND REAL ASSETS

INFRASTRUCTURE UPDATEArthur Rakowski

MACQUARIE INFRASTRUCTUREAND REAL ASSETS

MIRA is a global infrastructure manager

31 Investment vehicles

400 executives globally

97 Businesses

22 Countries

$92 billion AUM

ROADS

+1.7 million vehicles per day

EMPLOYEES

+63,000 people employed

ELECTRICITY

+4.1 million households

WATER

+8.0 million households

AIRPORTS

+77 million passengers p.a.

GAS

+7.7 million households

COMMUNICATIONS

+120 million people

SUMMARY

— New asset class rapidly growing in popularity

— Global financial crisis had a significant impact on the sector

— Infrastructure largely delivered on its promise

— Markets returning to normality

Dealflow and opportunities are increasing

Debt markets are open

— Future is bright

LESSONS LEARNT

— Performance largely in line with expectations

— Not a homogeneous asset class

— Performance varied by sub-sectors

— Impact of capital structure

— Manager selection and diversification are important

RAB MODEL

— Inflation is directly added to the revenue allowance

— RCV also increases by inflation

Operating Expenditure

Tax, inflation, and incentives

Depreciation

Return on RCV

Revenue Allowance

RCV

CAPEX allowance

RCV decrease Depreciation

RCV x WACC

% of asset life

RCV increase

Typical RAB model

Regulated Asset Base model has provided investors with stable and predictable revenues and inflation protection

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Air Traffic

Oil Shocks(1974 -76)

Recession(1980 -82)

Recession + Gulf War(1990 -92)

9/11, SARS +Iraq War

(2001 -03)

PATRONAGE ASSETS: LONG-TERM GROWTH AT AIRPORTS

Clear long-term growth trend, short-term volatility

STRONG CORRELATION OF APRR TRUCK TRAFFIC WITH FRENCH MANUFACTURING

July 2007- June 2008=100

Manufacturing

Real Imports ex-oil

GDP'00

HGV Traffic

Recession

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ar05

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Index of 1 year moving average of HGV Traffic vs French Macro-Economic Indicators

Index of 1-year moving average of

traffic.

April ‘07-March ‘08=100.0

80.082.084.086.088.090.092.094.096.098.0

100.0102.0104.0106.0108.0110.0112.0114.0116.0118.0120.0122.0124.0126.0128.0130.0

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Rol

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Toll escalation, capacity improvements and construction affect traffic performance

TRAFFIC GROWTH

RecessionFrench Road

UK Road

US Road

Index of 1-year moving average of nominal revenue.

April ‘07-March ‘08=100.0

TOLL REVENUE GROWTH

80.082.084.086.088.090.092.094.096.098.0

100.0102.0104.0106.0108.0110.0112.0114.0116.0118.0120.0122.0124.0126.0128.0130.0

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Recession

Toll revenue has continued to grow throughout the past 3 yearsFrench Road

UK Road

US Road

COST OF CAR TRAVEL FRANCE

Although price per litre of fuel is rising, the cost of car travel relative to incomes has fallen over time

Hours of work at average per capita income to buy fuel for travelling 100km1

1. The calculation also takes into account in-country retail fuel prices, car fuel efficiency over time and incomes over time.

0.80

1.00

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2.20

1980

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EUROPEAN AIR TRAFFIC

11

Underlying traffic growth has been robust since the recovery began in late ‘09

Global recession Recovery + Growth

Eurozoneemerges from

recession(Q3 2009)

Airspace closures due to volcanic ash

cloud(Apr 2010)

Airspace closures due to harsh winter

(Dec 2010 - Jan 2011)

MENA and Japan events

(Q1 2011)

Average growth of largest 25 airports in Europe (source: Anna Aero)

(20%)

(15%)

(10%)

(5%)

-%

5%

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30%

Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11

Gro

wth

on

pcp

AIRCRAFT FUEL EFFICIENCY

Continuous improvement in fleet efficiency mitigated impact of higher oil prices

Source: IATA

Additional sources of funding have been opened up to infrastructure businesses over the past 18 months

− Global bond volumes remain high

− Bond markets have become an essential source of funding for many corporates

− Investors searching for yield have been increasingly willing to look down the credit spectrum

− High yield bond market has returned

− Spreads between credit ratings have narrowed

− Loan Market conditions improving

− Return of competition amongst banks for market share and strength of bond market is driving prices down

− Banks who left the market in the crisis are returning

− However, quantum raised is still smaller than pre crisis

Loan Market Update Bond Market Update

INFRASTRUCTURE DEBT

Some amortisation or cash sweep requiredBulletRepayment structure

Medium to large ‘club’ of banks with smaller hold positions

Small group of underwriters with syndication to follow

Bank group

Higher equity contribution requiredLenders less restrictive, 80-90% range common with equity bridges for residual

Gearing

Vanilla swaps, swaps longer than debt tenor have break rights

Structured swaps including accretion, swaps longer tenor than debt

Swaps

Previous features non-existent, introduction of market disruption clauses

Borrower friendly including equity cures, no MAC clauses

TermsFrequently requiredOptional with few being ratedRatings

5-7 years7+ yearsTenor for mature deals

L+75 – 150 bpsPre-Financial Crisis

L + 200 – 300 bps Pricing rangePost-Financial Crisis

BANK MARKET: THEN AND NOW

BOND MARKET

— Historically low bond yields

— Credit margins tightening

— High yield bond market returned

— All in cost of funding near historical lows

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Government Bond Yields

Corporate bond volumes

Spreads to Gilts

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DEALFLOW

— EU competition legislation

— Unbundling of energy markets

— Renewable energy targets

— Distressed selling by corporates

— Strategics distracted

— Fiscal austerity

— Stressed government balance sheets

A wide range of European infrastructure dealflow drivers producing significant investment opportunities

CONCLUSION

— The benefits of investing in core infrastructure assets have been proven during the global economic downturn

— A number of lessons have been learnt by investors

Infrastructure is not a homogenous sector

Capital structure matters

Diversification and manager selection are important

— The future looks bright

Dealflow is increasing – driven by a number of fundamental drivers

Debt capital markets are open for infrastructure

Allocations are growing