INVESTMENT OPPORTUNITIES IN CHINA-RUSSIA-EUROPE ROUTE 2018

Presentation to UNECE PPP Conference Geneva, May 2018

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INFRAKAP HAS LAUNCHED THE EURASIAN INFRASTRUCTURE VALUE FUND FOR SOPHISTICATED INVESTORS TO TAP INTO LUCRATIVE INVESTMENT OPPORTUNITIES IN RUSSIAN NATIONAL AND REGIONAL INFRASTRUCTURE PROJECTS WITH TOTAL TARGET SIZE OF RUR 20 BILLION (USD 350 MILLION)

● Purpose of the Fund is to invest in the national and regional infrastructure projects, companies and ventures along the area of Western China-Kazakhstan-Russia-Europe international transportation route being developed under Intergovernmental Agreement between China, Kazakhstan and Russia in 2009:

● Regions adjacent to the international transportation route from Europe to Western

China (EWC) ● Core infrastructure with focus on roads, district heating and healthcare ● Blending private equity, project finance and venture capital investments in the selected

infrastructure industries to enhance portfolio returns ● Priority given to early private equity investments into infrastructure operators to access

HR, expertise and pipeline

PROPOSITION

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EWC – THE TRANSCONTINENTAL AUTOMOTIVE ROUTE DEVELOPED UNDER THE AGREEMENT BETWEEN CHINA, KAZAKHSTAN AND RUSSIA SIGNED IN 2009 – REMAINS AMONG TOP-2 RUSSIA-CHINA PRIORITIES DECLARED AT MAY 2017 OBOR SUMMIT

Moscow

TRACECA

One Belt One Road

ST Petersbourg

TRACECA II

Sea

Bottlenecks

EWC (auto)

Built rail

Planned rail completed

construction

project preparation

Year of completion 2018 Source: Avtodor

GLOBAL CONTEXT OF THE REGIONAL FOCUS

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RUSSIAN INFRASTRUCTURE GROWTH IS IN LINE WITH KEY GLOBAL INFRASTRUCTURE INITIATIVES IN THE MAJOR MARKETS

Trump’ USD 1T infrastructure plan

Russia USD 300B infrastructure growth plan for 2018-2025

Japan USD 100B infrastructure

export support plan

China USD 200B OBOR plan for Asia

Juncker’ EUR 315B infrastructure plan

RUSSIAN INFRASTRUCTURE MARKET SIZE

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RUSSIA INFRASTRUCTURE INVESTMENT RISK IS COMPARABLE TO OTHER NON-OECD COUNTRIES AND IT IS CONCENTRATED IN DEVELOPMENT PHASE

Source: Moody’s, Central Bank of Russia, National Agency for Financial Research, InfraKAP analysis

KEY PERCEIVED INFRASTRUCTURE INVESTMENT RISKS RANKED BY RUSSIAN INSTITUTIONAL INVESTORS, % of surveyed:

Project finance loans Infrastructure PPPs

● Regional/municipal political risk ● Construction completion risk ● Complexity of infrastructure analysis ● Long contracting procedures ● Long term demand risk ● Design risk ● Tariff regulation risk ● Public performance risk ● Service quality risk ● Construction cost management risk ● Operation cost management risk ● Limited offer of investment

opportunities ● Quality of contractors and operators

88% 71% 65% 65% 65% 65% 65% 59% 59% 59% 59% 59% 47%

Default (BII) 10-year frequency rate, non-OECD countries, 2014

INFRASTRUCTURE-RELATED INDUSTRIES

Transport and telecom

infrastructure and services

Construction

Utilities

Current share of loss making commercial bank loans, Russia, May 2017 (% of the loans to an industry)

RISKS OF INVESTING RUSSIAN INFRASTRUCTURE

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PRIVATE CAPITAL PENETRATED ALL MAJOR RUSSIA INFRASTRUCTURE SECTORS. INFRASRTUCTURE INVESTMENT MARKET IN 2017-19 OFFERS MULTIPLE EARLY STAGE INVESTMENT OPPORTUNITIES INCLUDING EWC ROUTE

Transfer of municipal water and district heating utilities to concessions “en masse»

Launch of concessions to build Moscow to Orenbourg sections of Europe to China route and respective regional approaches

Increase in data center capacity for reserve and security storage

Building infrastructure for telemedicine

Concession projects to build logistic and storage facilities of the Ministry of Defense (USD 1B investment)

Regional and municipal concessions to build and maintain their road network, develop LRT/trams etc.

Completion of construction on Moscow-St-Petersburg highway (concessions)

Pilot green tarif based incinerator projects in Moscow region and Tatarstan (USD10B program)

Tenders to select regional waste management operators (all regions by 2018)

Pilot concessions to build regional waste management infrastructure (up to USD500M accumulated investment)

Federal concession to build nationwide collection system of heavy truck road usage levy (USD300M investment)

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PPP/concessions/private development of hospitals, policlinics, and entry level healthcare infrastructure

Leasing of municipal water and district heating (over 30M people served)

Private healthcare operators

Pilot federal and regional concessions and PPPs

Emergence of private airport operators/ completion of PPPs for major regional airports

Completion of privatization and corporatization of power generation and transmission

Restructuring and asset optimization of heat and electricity generating companies

Pilot concession for distribution network

Completion of corporatization and spin offs in railways

Concessions for sections of high speed train network Pilot railway concession

PPP/concessions for schools, kindergartens, elderly houses

Mature private telecom sector

EWC route

Source: IKAP Analysis

INFRASTRUCTURE SPECIFIC INVESTMENT POLICY

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REGIONAL FOCUS

Regions of the Fund possible investments do not contain international waterways and disputed areas. Neither they are ruled by de facto governments, nor are they placed under the United Nations Security Council measures

1. St-Petersburg and Leningrad region 2. Novgorod region 3. Tver region 4. Moscow and Moscow region 5. Vladimir region 6. Nizh Novgorod region 7. Rep of Chuvashia 8. Rep of Tatarstan 9. Rep of Bashkortostan 10. Orenburg region

12. Yaroslavl region 13. Ivanovo region 14. Kostroma region 15. Rep of Mary El 16. Samara region 17. Ryazan region 18. Ulianovsk region 19. Rep of Udmurtia 20. Rep of Mordovia

11. Vologda region

21. Kirov region 22. Chelyabinsk region 23. Sverdlovsk region 24. Perm region 25. Saratov region

THE FUND WILL INVEST MAINLY IN RUSSIAN REGIONS DIRECTLY ADJACENT TO EWC ROUTE. IT MAY CONSIDER OTHER REGIONS IN THE VICINITY, ALSO KAZAKHSTAN AND KIRGYZSTAN

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EWC–ADJACENT REGIONS CONTRIBUTE MORE THAN 70% TO THE RUSSIA GDP

Source: Russian Federal State Statistics Service, Avtodor

Macroeconomic statistics on key regions adjacent to EWC route

Nizhn. Novgorod reg.

Bashkotostan

GDP 2030, RUR T, % of the total in EWC area

Population 2013, 2020, 2030 гг., M people

Chelyabinsk Reg.

Other Regions

Orenbourg Reg.

Nizh Novgorod Reg.

Samara Reg.

Bashkortostan

Tatarstan

St.Petersburg and Leningrad Reg.

Moscow and Moscow reg.

6,53,2

12,7 8,5%

8,2

6,87,4

хх хх хх GDP CAGR, % хх

St-Petersburg and Leningrad reg.

2,91,60,9

7,0%

3,23,33,3

Tatarstan

5,22,7

1,5

7,4% 4,14,0

3,8

49,9 26,0

14,2

7,7% 22,0

20,4 19,0

Moscow and Moscow reg.

4,32,21,3

7,5% 4,14,14,1

3,11,71,0

6,7% 3,23,23,2

2,21,20,7

6,8%

Samara reg.

хх хх хх Regional GDP 2013, 2020, 2030 гг.,

RUR T

Orenbourg reg.

1,92,02,0

Chelyabinsk reg.

2,31,30,9

3,62 3,56

3,49

5,7%

2,3 (2%)

12,1 (13%)

2,2 (2%)

2,9 (3%)

3,1 (3%)

4,3 (5%)

5,2 (6%)

12,7 (13%)

49,9 (53%)

MARKET DOMINANCE OF THE REGIONS IN FOCUS

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● These industries generate wide range of projects at the federal and/or regional and/or municipal level as well as private projects. Investment portfolio of the fund could be balanced by terms of regulation.

● Each of the industry in focus has completed major regulatory reforms aimed to increase private investment:

● Disbundling and deregulation of the energy market, operating wholesale electricity market, power capacity sale agreements, possibility of private ownership and concessions in district heating

● Introduction of availability payment concession and capital grants for federal and regional toll roads

● Opening up healthcare infrastructure to private sector through private development or PPP/concession with services covered by public healthcare insurance fund

● These industries have already demonstrated experience of private sector participation. They

are open for entry and growth

● Good mix of greenfield and brownfield provides space for efficiency gains, management and technical innovations

● Project driven non correlated non traded assets

INFRASTRUCTURE FOCUS

THE FUND WILL INVEST IN DISTRICT HEATING, TOLL ROADS AND HEALTHCARE INFRASTRUCTURE

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THE FUND WILL FOCUS ON INFRASTRUCTURE PROJECTS, COMPANIES AND INFRASTRUCTURE INNOVATIONS IN THE SELECTED INDUSTRIES

INFRASTRUCTURE ASSETS (PROJECT DRIVEN DEVELOPMENT)

INFRASTRUCTURE OPERATORS AND CONSTRUCTION COMPANIES (PRIVATE EQUITY TARGETS)

INFRASTRUCTURE SERVICE PROVIDERS (VENTURE DRIVEN DEVELOPMENT)

● Highways, bridges, parkings ● Airports ● Ports ● Rail, high speed trains ● LRT, tramways ● Water and waste water network ● District heating network ● Power generation ● Electricity transmission and

distribution ● Hospitals and polyclinics ● Lab and diagnostic networks ● Fiber optics, towers ● Data centers ● Tourism attractions and hotels

● Telecom operators and companies

● Energy companies ● Utility operators ● Airport operators ● Healthcare operators ● Transport construction

companies ● Metering and billing operators ● Energy service companies ● Parking operators ● Water technology companies

● Urban mobility (taxi integrators, traffic management, delivery, etc.)

● Healthcare and well being (P4, etc.)

● Media projects ● Infrastructure financial services

(leasing, monoline insurance, risk management facilities, related fintech companies)

ELIGIBLE INVESTMENT TARGETS

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PPRIVATE EQUITY STYLE INVESTMENTS INTO OPERATORS WILL ENHANCE CAPACITY TO ACCESS MARKET OPPORTUNITIES AND CREATE VALUE, FORMING PLATFORMS FOR FURTHER INVESTMENTS

DIRECT INVESTMENTS VENTURE INVESTMENTS PROJECT INVESTMENTS

• Instant access to a current pipeline of projects • Access to human resources and technical

knowhow • Value driven restructuring to reflect long term

value of the existing project portfolio

• Value creation achieved through fast growing businesses

• Project finance approach • Value creation through

financial leverage, managing construction risks and growing sales

INVESTMENT PRIORITIES

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THE FUND PROPOSITION MEETS SPECIFIC REQUIREMENTS OF NEW INTERNATIONAL DEVELOPMENT BANKS ON FINANCING PURPOSE It supports major cross-border transportation project with clear development effects

for Asia

MIX OF PRIVATE AND SOVEREIGN RISK

Investments in the Fund are on non-sovereign basis. However, the Fund infrastructure projects are preferably to be structured as availability payment concession with sovereign and sub-sovereign entities

PROFESSIONAL AND INDEPENDENT

Investing via the Fund will represent a unique equity investment opportunity carried out by the local team of professionals with international experience, totally private and independent

LEVERAGE FOR PRIVATE CAPITAL

Participation in projects through the Fund will provide clear leverage to engage local capital markets for infrastructure finance, providing private sector and regulator with additional global expertise, assurance and implied risk reduction

EXPECTED RETURNS

Expected IRR of the Fund is within target range of global infrastructure funds

BUSINESS GROWTH

Investment in the Fund will expand investor’s equity and loan investments sourcing pipeline

FIT FOR INTERNATIONAL DEVELOPMENT BANKS