Slide 1: Balfour Beatty Capital PPP Seminar
Balfour Beatty ge! co oe Evy MEY Fis le Sea _A ts Balfour Beatty Capital PPP Seminar 29 June 2006
Slide 2: Current Trading
Current Trading Balfour Beatty
Slide 3: Metronet
Metronet Balfour Beatty
Slide 4: BB PFI portfolio / Group market value
BB PFI portfolio / Group market value =m 1,800) other 1,600) PFI Value 1,400 - 1,200 - 1,000 + 800 - 600 - 400 + 200 - 0 A B Sayeed Balfour Beatty
Slide 5: Euro Contractor concession value / market cap
Euro Contractor Concession value / market cap Value Euro billion 20 5 CJ Other 15 4 L) Concessions ‘ Mlases.___ Vinci Ferrovial Eiffage Hochtief Balfour Beatty I Acciona AMEC Bilfinger Berger Sacyr- Vallehermoso Balfour Beatty
Slide 6: Balfour Beatty
Balfour Beatty Capital Balfour Beatty
Slide 7: Ian Rylatt
Balfour Beatty Capital lan Rylatt Balfour Beatty Capital
Slide 8: Where are we today?
Where are we today? ¢ A market leading investor in UK PFI/PPP Balfour Beatty Capital
Slide 9: Balfour Beatty credentials
Balfour Beatty credentials In * March 1996. duly 1336 October 1996 March 1998. December 2002 August 1998 chronological =e os s Connect M1-Al Limited Connect ASD Limited Connect 30/36 Limited Consort Healtheare Consort Healthoare Powerlink/PADCo order (Durham) Ld (Gs Royal entry HIGHWAYS | | Waaee HI
Slide 10: Where are we today?
Where are we today? e A market leading investor in UK PFI/PPP ¢ Established presence in key sectors Balfour Beatty Capital
Slide 11: Transform schools, Consort healthcare, Connect roads
Trans/orm schools Gonsort healthcare Connect roads Infrastructure projects
Slide 12: Where are we today?
Where are we today? e A market leading investor in UK PFI/PPP ¢ Established presence in key sectors ¢ Large and growing team of dedicated professionals Balfour Beatty Capital
Slide 13: Operations
operations
Slide 14: Where are we today?
Where are we today? e A market leading investor in UK PFI/PPP ¢ Established presence in key sectors ¢ Large and growing team of dedicated of snaustry professionals ¢ Enviable operational experience across large multi discipline projects Balfour Beatty Capital
Slide 15: Transform schools, Consort healthcare, Connect roads
Transjorm schools Gonsort healthcare Connect roads Infrastructure projects 2s)
Slide 16: Where are we today?
Where are we today? e A market leading investor in UK PFI/PPP ¢ Established presence in key sectors ¢ Large and growing team of dedicated professionals ¢ Enviable operational experience across large multi discipline projects e Balance sheet strength to be a long term investor Balfour Beatty Capital
Slide 17: PFI generation and usage of cash 2000-2010
PFI generation and usage of cash 2000-2010 £m 40 @ Cash Out @ Cash In 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Balfour Beatty Capital
Slide 18: Our success factors
Our success factors ¢ FOCUS « People and skills ¢ Innovation ¢ Complexity e Group capability e Long term partner
Slide 19: Consort Healthcare
Consort Healthcare Mark Holden Balfour Beatty Capital
Slide 20: Consort healthcare
Consort healthcare
Slide 21: Balfour Beatty's Hospital Projects
Balfour Beatty's : Hospital Projects 1;
Slide 22: Hospital Projects: Edinburgh Royal Infirmary
Balfour Beatty's Hospital Projects ; Edinburgh Royal Infirmary Balfour Beatty
Slide 23: Edinburgh
Edinburgh Completed on time on budget Fully operational since 2002 872 beds Hard and soft services Performing on budget health! Balfour Beatty Capital
Slide 24: Hospital Projects: University Hospital of North Durham
Balfour Beatty's Hospital Projects ; . University Hospital of North Durham @
Slide 25: North Durham University Hospital
North Durham University Hospital e Completed on time and on budget ¢ Operational five years ¢ 477 Beds e Hard and soft services ¢ Performing on budget Capital
Slide 26: Hospital Projects: Queens Park Hospital Blackburn
Balfour Beatty's Hospital Projects ; . @ Queens Park Hospital Blackburn
Slide 27: Queens Park Hospital Blackburn
Queens Park Hospital Blackburn Construction complete: e Ontime e On budget e Opening July 2006 e Service delivery commenced e Hard services only Capital
Slide 28: Hospital Projects: University Hospital Birmingham
Balfour Beatty's of Hospital Projects ; University Hospital Birmingham @ Balfour Beatty
Slide 29: University Hospital Birmingham
University Hospital Birmingham ¢ Financial close achieved June 2006 e Major acute hospital - 1213 beds e Mental health facilities - 140 beds Balfour Beatty apital
Slide 30: Hospital Projects: University College London Hospital
Balfour Beatty's of Hospital Projects ; ‘Balfour — University College London Hospital London @ sige '
Slide 31: University College London Hospital
University College London Hospital e Phase 1 - Completed on time on budget ¢ Phase 1 - Occupied and in operation ¢ Hard and soft services e Phase 2 in construction
Slide 32: Balfour Beatty's Hospital Projects
Balfour Beatty's Hospital Projects ; Balfour Beatty
Slide 33: Northern Batch Hospitals
Northern Batch Hospitals Salford and Tameside ¢ Significant re-design since preferred bidder e Department of Health review, investigation complete report awaited ¢ Progressing to financial close 2007 it y Panes |e RUDRA A!
Slide 34: Hospital Projects: Pinderfields and Pontefract
Balfour Beatty's Hospital Projects ; @ Pinderfields and Pontefract Balfour Beatty
Slide 35: Pinderfields and Pontefract
Pinderfields and Pontefract e Financial Close expected end 2006 ¢ Department of health review complete e Hard and Soft Services
Slide 36: Consort Health Team
Consort Health Team ¢ 36 strong e NHS and health experienced professionals e Focused on service delivery e National coverage Balfour Beatty Capital
Slide 37: Why have we been Successful
Why have we been Successful Bids: e Understanding the client needs e Achieving a design that works and delivers Operation: e Full time presence on site e Responding to change e Flexibility e Financially robust (including life cycle costs} Balfour Beatty Capital
Slide 38: Future hospital bids
Future hospital bids e Currently bidding Fife hospital e Opportunities in Northern Ireland Project Value fm Est. QJEU date Enniskillen Acute 229 June 2006 Ulster Redvelopment, Belfast 230 July 2006 Omagh Local 130 Oct 2006 AVH Children and Maternity, Belfast 340 Dee 2006 Antrim Batch 250 2007 Craiga
Slide 39: Future hospital bids
Future hospital bids Project Value £m Est. OJEU date Blackpool Primary Gare 25-48 Mar 2006 Hillingdon 248 03 2006 Southmead Hospital (North Bristal/South Gloucs} 337 Q3 2006 Royal National Orthopaedic Hospital, Stanmore 144 03 2008 Edinburgh Mental Health 80 03 2006 Aintree Elective Centre, Liverpoo
Slide 40: Taking the business forward
Taking the business forward lan Rylatt Balfour Beatty Capital
Slide 41: How are we going to take the business forward?
How are we going to take the business forward? ¢ Significant opportunity to grow — UK PFI/PPP Balfour Beatty Capital
Slide 42: Opportunities going forward
Opportunities going forward Identified opportunities fbn 29 hospitals 6.5 16 schools 3.8 12 roads 5.3 2 infrastructure projects 0.7 Total 16.3 Secondary market opportunities Balfour Beatty Capital
Slide 43: UK market trends
UK market trends Significant deal flow but changing mix: Health - Reassessment of viable scheme size - New opportunities in Northern Ireland schools - Traditional PF| being replaced by BSF - Broad diversity of schemes Roads - Fewer, but larger projects - Street lighting Infrastructure - Non PFI inve
Slide 44: How are we going to take the business forward?
How are we going to take the business forward? ¢ Significant opportunity to grow — UK PFI/PPP — Overseas PFI/PPP Balfour Beatty Capital
Slide 45: Key PPP Options — Rankings
Key PPP Options — Rankings Roads 4 Rail/Light Rail 4 MK Bridges Water/Wastewater Infrastructure O \__ Street Lighting ( Accommodation Education Healthcare +-®@ Cy n / : {} e Prisons Leisure Accommodation Airports Others Germany | Scandinavia Italy Ranking 1 2 3 = Austria CEE Spain Select 4 5 6 Portu
Slide 46: Overseas
Overseas ¢ Germany — Increasing political support for PFI/PPP — Office opened in Munich — Identifying local partners ¢ Hong Kong/Singapore — Emerging PFI/PPP market — Initial bidding activity in Singapore — Establishment of Gammon Capital Balfour Beatty Capital
Slide 47: How are we going to take the business forward?
How are we going to take the business forward? ¢ Significant opportunity to grow — UK PFI/PPP — Qverseas PFI/PPP — Infrastructure investment Balfour Beatty Capital
Slide 48: Non PFI infrastructure investment
Non PFI infrastructure investment An attractive investment class ¢ Roads ¢ Railways e Tunnels e Airports ¢ Bridges e Utilities e Ability to leverage off our existing skills ¢ Selective approach Balfour Beatty Capital
Slide 49: Non PFI infrastructure investment
Non PFI infrastructure investment An attractive investment class ¢ Essential to economic and social activity e Monpolistic or quasi monopolistic characteristics ¢ Substitution is difficult e Ability to leverage off our existing skills ¢ Selective approach Balfour Beatty Capital
Slide 50: How are we going to take the business forward?
How are we going to take the business forward? ¢ Significant opportunity to grow — UK PFI/PPP — Overseas PFI/PPP — Infrastructure investment Expand the investment base of the business Balfour Beatty Capital Balfour Beatty Capital
Slide 51: Summary
Summary e UK PFI will remain an important activity ¢ Opportunitistic investments in the secondary market ¢ Supplemented by overseas PFI/PPP investments in overseas markets ¢ Non PFI is a potential area for growth where the broader Balfour Beatty Group skills are relevant Balfour Beatty Capital
Slide 52: The US Market and Balfour Beatty
The US Market and Balfour Beatty Terence Black Balfour Beatty Capital
Slide 53: Balfour Beatty in the USA
Balfour Beatty in the USA Balfour Beatty has been working in the USA since the 1980s and has three US based businesses: Balfour Beatty Construction, Inc. Balfour Beatty Rail, Inc. Heery International Balfour Beatty Capital has been able to use the presence of these established businesses to make an
Slide 54: Heery Overview
Heery Overview Heery International ¢ Full-Service architecture, interior design, engineering construction management, facility management, and program management firm « Recognized for the excellence of their services and on-time performance ¢ Markets include corporate, education, government, healthc
Slide 55: BBRI Overview
BBRI Overview Balfour Beatty Rail, Inc. Industry leading rail infrastructure service provider Track and signal system installation through maintenance of right-of-way and equipment Experience on rail systems including restoration work at the World Trade Center PATH facility and extensive work for CS
Slide 56: BBCI Overview
BBCI Overview Balfour Beatty Construction, Inc. « A heavy highway, bridge and civil works construction contractor ¢ Over $500 million average yearly revenue ¢ Over 30 active projects and nearly $.3 billion in new contracts awarded in 2005 ¢ Backlog approaching $1 billion ¢ Employs over 1,300 people
Slide 57: Public Private Partnership Market in the USA
Public Private Partnership Market in the USA * PPP developing for some time. Recent rapid growth * PPP expansion because — reluctance to raise taxes — increasing public sector deficits — growing investment gap PPP in the US very broadly defined Transport lead followed by government buildings, educat
Slide 58: The US Market — PPP or P3 Activity
The US Market — PPP or P3 Activity a . Washington Oregon Hevada Calitomia Arizona fi Most active PPP programs B Some PPP legislation in place Bf Currently no PPP legislation Montana North Dakota South Dakota ih be? Massachusetts Wyoming al ode Island Pennsylvania Fr Jersey WinoisIndiana Sho 7 \ Dela
Slide 59: PPP Transportation Projects in US
PPP Transportation Projects in US * Focus on transport — particularly toll roads High profile deals — $1.85 billion — Chicago Skyway — $3.85 billion — Indiana Toll Road Toll road concessions — operate existing roads — operate and expand existing roads — build and operate new toll roads Texas has lar
Slide 60: Fundamentals of the Texas Roads Market
Fundamentals of the Texas Roads Market TEXAS DEPARTMENT OF TRANSPORTATION The Texas transportation system has not kept pace with the needs of a rapidly increasing population. Over the past 25 years in Texas .. Over the next 25 years in Texas... + Our population increased 57%. * Our population will i
Slide 61: BBCI Texas Highways Division
BBCI Texas Highways Division * Set up in 1995 * Experienced management team ¢ 40+ road projects — worth $1.8 billion over 10 years * Consistently profitable * SH 130 — the first large design build PPP was recently visited by Governor Rick Perry ¢ A-strong knowledge base for the launch of Balfour Bea
Slide 62: SH 130 — progress towards PPP in Texas
SH 130 — progress towards PPP in Texas One of the largest highway projects in the history of the US; Austin, Texas 15-year contract valued at $1 billion A joint venture between Balfour Beatty Construction Inc., Fluor Corporation and T.J. Lambrecht Co More than 90 miles of roadway, bridges and ancill
Slide 63: Balfour Beatty Capital in the US
Balfour Beatty Capital in the US * Based in Atlanta — co-located with the headquarters of BBCI and Heery * Team of five professionals, a strong mix of US and UK experience from both the private and public sectors * Already working with Key partners in the development, construction and financial comm
Slide 64: Current US PPP Projects
Balfour Beatty Capital Current US PPP Projects ¢ Under active pursuit — $H161 — a green field toll road in Dallas Fort Worth, Texas — Oakland Airport Connector — a “people mover” link between Oakland Airport and the BART system * Identified prospect — The Louisiana State University Medical Center in
Slide 65: SH161 Toll Road in Dallas Fort Worth
SH161 Toll Road in Dallas Fort Worth ai id. _ GRAYSON ut2es} ; [ (75) 4 ConnecTexas Planned toll way to connect Texas SH183 near the Dallas-Fort Worth International Airport with Interstate 20 in Grand Prairie Construction cost estimated at $525 million taRhant f ! A concession of up to 70 years with
Slide 66: Oakland Airport Connector
Oakland Airport Connector bin AiRail BP a Collcourn Station Mme ‘ . Transfer * Connecting the San Francisco Bay Area Rapid Transit (BART) system to the Oakland International Airport (OIA) using an Automated Guideway Transit (AGT) system ¢ Construction cost estimated at $325 million * Aconcession of
Slide 67: Louisiana State University — Medical Center
Louisiana State University — Medical Center EXPERIENCE EDUCATION AT ITS BEST! * Louisiana State University (LSU) System looking for parties interested in developing a complete and fully operational university-based academic health science center in Baton Rouge, Louisiana ¢ Balfour Beatty Capital has
Slide 68: Balfour Beatty Capital in the US — Future Direction
Balfour Beatty Capital in the US — Future Direction ¢ Immediate focus will be on SH161 and Oakland Airport Connector * The US PPP market is evolving rapidly providing opportunities beyond the transportation sector * Significant opportunity for Balfour Beatty Capital as a PPP developer in green field
Slide 69: PFI Portfolio Valuation
Balfour Beatty PFI Portfolio Valuation Anthony Rabin
Slide 70: Why have we done a Director's Valuation?
Why have we done a Director’s Valuation? -PFl now a significant part of the group's business . Historic cost accounting not useful in assessing value - IFRS hinders that process
Slide 71: Our portfolio
Our portfolio Other 2 projects £95m Connect 6 projects Metronet £6im £70m Transform 5 projects £30m Consort 7 projects £112m Total equity committed £282. 5m Balfour Beatty Total cash injected|£150m Other 2 projects Connect £8m 6 projects Metronet £56m £27m Consort 7 projects £112m
Slide 72: Valuation Methods Available
Valuation Methods Available | Multiples approach (ie multiples of invested equity)
Slide 73: Multiples
Multiples £m ERI* | Connect*t M77* | A50/A30* “Net Investment” 2.4 1.6 23 (0.7) Sales Proceeds 32.0 1a 3.0 10.5 Sale Proceeds/N| 13x 8x 1.3x Wy *31.4% “15% Balfour Beatty
Slide 74: Valuation Methods Available
Valuation Methods Available ‘Value’ shown in accounts (based on historical cost) | Multiples approach (ie multiples of invested equity)
Slide 75: DCF Options
DCF Options * Single discount rate incorrect - inflows subject to project risk - outflows virtually certain - no reflection of phasing risk * Composite approach used - different discount rates over project life * Post tax basis in shareholders’ hands Balfour Beatty
Slide 76: Discount Rates
Discount Rates - “Risk free” long term gilt rate used as a base (5%) » /% added to reflect risk during construction phase; Range: 3% added to reflect risk 80%% : 5 if during operations phase FORM Base discount rate (reflecting risk free rate) - Weighted average ou discount rate of 8.2% Balfour Beatt
Slide 77: Metronet and Powerlink valuation treatment
+ Metronet — not sufficiently advanced to be able to be viewed in the same light as other projects * Powerlink — potential recapitalisation and restructuring around increased power demand
Slide 78: Portfolio valuation December 2005
Portfolio valuation December 2005 _ Connect Value by phase £289m PB Construction Metronet £7m £6m £70m Value by brand|£289m £243m Balfour Beatty
Slide 79: Valuation sensitivity to discount rate
310,000 + 290,0004 DI 270,000 4 250,000 T T 1 -1% Base 1%
Slide 80: Valuation profile over time
T 2016 T 2026 T 2036 2046
Slide 81: Open Market Value
Slide 82: Rates of Return
Slide 83: Possible Market Value
Slide 84: Balfour Beatty growth 2006 and beyond