November 22 nd 2006 Bank Austria Creditanstalt AG

Christian Unger

Director Corporate & Project Finance CEE

Project Finance in Central & Eastern Europe: a Commercial Lender's View

Contents

1 2 3 4 5

BA-CA – Member of UniCredit Group The Project Finance Market in CEE/ General Overview Sector Snapshots and Case Studies – Transport/Infrastructure – – – Energy Processing Industries Telecommunications International Market Perception Co-ordinates November 22 nd 2006 Bank Austria Creditanstalt AG

Section 1 BA-CA – Member of UniCredit Group

November 22 nd 2006 Bank Austria Creditanstalt AG

UniCredit Group

The new truly European bank is present …



in 20 countries



where 140,000 employees



serve more than 28 million customers



via 7,000 offices

November 22 nd 2006 Bank Austria Creditanstalt AG

The new banking group in CEE in detail

(all banks at 100%, as at December 2005)

             

Banks

BankPekao KFS / Kocbank Yapi Kredi Zagrebacka Banka Bulbank Zivnostenska Banka Unibanka Unicredit Zagrebacka Unicredit Romania Koc Netherland Yapi Kredi Netherland Yapi Moskow Kocbank Azerbaijan PekaoUkraine

Total assets* ( € m)

14,528 6,887 14,037 8,358 1,860 1,527 1,266 672 324 591 534 74 27 9

Total 48,919 UniCredit HVB /BA-CA UniCredit + HVB/BA-CA Banks Total assets* ( € m)

      IMB HVB Bank Latvia HVB Bank Ukraine HVB Bank Lithuania HVB Bank Tallin Branch HVB Greece Branch 2,654 303 147 435 n/a n/a

Total 3,539

* Sum of countries may differ from Total because of netting off of consolidated item (e.g. Pekao Ukraine is consolidated within Pekao Group; Unicredit Zagrebacka consolidated within Zagrebacka Banka) and minor companies. All figures at 100% November 22 nd 2006 Bank Austria Creditanstalt AG              

Banks Total assets* ( € m)

Bank BPH HVB Bank Hungary HVB Bank CzechRepublic 13,200 3,839 4,689 2,807 HVB Splitskabanka Banca Tiriac HVB Bank Biochim HVB Bank Slovakia 625 1,000 1,683 1,057 HVB Bank Romania BA-CA Slovenia HebrosBank Eksimbanka HVB Central Profit Banka HVB Bank Serbia+Montenegro Macedonia (Rep.Office) 1,251 314 156 379 194 n/a

Total 31,194

The new UniCredit Group is the undisputed number 1 in CEE

(data as at December 2005 (1) ) UniCredit+ HVB+BA-CA

(100% of all banks, including Yapi) OTP (4)

Net Profit ( € mln) (2)

557 576 (3)

1,163

Erste SocGen KBC RZB Intesa Citigroup 418 408 319 264 242 176

( Revenues € mln)

1,715 1,420 1,126 1,660 n.a.

1,110 826 (5)

4,982 ( Assets € bln)

16.9

18.0

(3) 33.3

19.7

34.8

24.7

16.4

14.8

83.7

No of branches

786 875 814 498 237 (3) 1,245 722 1,017

2,864

Source: UCI-FBD Economic Research; numbers calculated using average exchange rate except for Unicredit 1. 100% of total assets and profit after tax for controlled companies (stake > 50%) and share owned for non controlled companies; 100% of branches and employees 2. After tax, before minority interest 3. Including proforma recently acquired Novabanka 4. Including OTP’s subsidiaries 5. Data on total revenues refer to contribution to Intesa’s consolidated results November 22 nd 2006 Bank Austria Creditanstalt AG

Section 2 The Project Finance Market in CEE

November 22 nd 2006 Bank Austria Creditanstalt AG

Regional Project Finance Activity 2000 - 2005

250 200 150 100 50 Africa Eastern Europe & FSU Latin America & Caribbean Australia and Pacific South East Asia North America Middle East Western Europe 2000 2001 2002

Source: Project Finance Magazine (Euromoney)

2003 2004 2005 Global Project Finance volume reached USD 175bn in 2005 The Middle East continued to gain importance for Project Finance with a volume of USD 40.8bn and outpaced Eastern Europe & FSU November 22 nd 2006 Bank Austria Creditanstalt AG

Project Finance Transactions in CEE, Russia & CIS in 2005

CEE

Maritza East M6 Narodnej Dialnicnej Advent BTC HTCC M5 Muveszetek Csepeli GTC DCT Gdansk Petrotel Ploiesti refinery Miskolc Thermal Power Telemobil Airport Hotel Prague Kobanya Heat & Power Palhalma Biogas

Source: PFI, BA-CA Country

Bulgaria Hungary Slovakia Bulgaria Hungary Hungary Hungary Hungary Poland Poland Romania Hungary Romania Czech Republic Hungary Hungary

Sector

Power Infrastructure Infrastructure Telecom Telecom Infrastructure Infrastructure Power Infrastructure Infrastructure Oil & Gas Power Telecom Infrastructure Power Oil & Gas

Volume (USD m)

968 509 493 371 219 194 190 172 170 117 82 60 40 30 17 13

USD 3.6bn

NE

Azerbaijan International Oil TAV Havalimanlari Kupol Gold & Silver NYK-Sovcomflot LNG Eregli Iron & Steel Turk Telekom Privatisation Siberian-Urals Alum Koiz Power Varvarinskoye Uralkali Russneft Kreg Windfarm Azertrans

Country

Azerbaijan Turkey Russia Russia Turkey Turkey Russia Turkey Kazakhstan Russia Russia Lithuania Azerbaijan

Sector

Oil & Gas Infrastructure Mining Infrastructure Steel Telecom Aluminium Power Mining Chemicals Oil & Gas Power Oil & Gas

Volume (USD m)

750 715 400 320 300 200 150 131 75 65 63 40 30

USD 3.2bn

Project Finance volume in CEE&NE amounted to USD 6.8bn in 2005 This represents only a minor fraction of the project finance loan volume in EMEA and globally (7.3% and 4.9% respectively) November 22 nd 2006 Bank Austria Creditanstalt AG

Project Finance Transactions in CEE, Russia & CIS in 2005 (ctd.)

Mining 7% Aluminium 2% Steel 4% Chemicals 1% Telecom 12% Infrastructure 40% Oil & Gas 14%

Source: PFI, BA-CA

Power 20% Poland 4% Romania 2% Slovakia 7% Azerbaijan 11% Other 2% Hungary 20% Russia 15% Turkey 20% Bulgaria 19% Infrastructure and Energy were the most important sectors in 2005 Hungary, Bulgaria, Turkey and Russia accounted for almost ¾ of the volume November 22 nd 2006 Bank Austria Creditanstalt AG

Rules of the Game for Project Finance in CEE

Minimum size for international transactions is an overall project volume of approx. EUR 50m Financially strong and experienced sponsors required Local currency loans no longer restricted by legislation, however liquidity for longer tenors still limited in some countries Legal documentation mostly based on English law, security documents based on local law Well prepared projects run better chance of attracting commercial financing (feasibility study, business plan) Key issues for financing are risk / reward ratios, Basel II etc.

Proper enforcement of requirements under “Equator Principles“ (environmental & social impact analysis) November 22 nd 2006 Bank Austria Creditanstalt AG

Section 3 Sector Snapshots and Case Studies - Transport/ Infrastructure

November 22 nd 2006 Bank Austria Creditanstalt AG

Huge investment needs

Quality of a nation’s infrastructure is a key determinant of its ability to grow and to attract FDI Due to historical underinvestment the quality of CEE infrastructure, especially transportation infrastructure is often poor Huge investment needs, however limitations on increasing public sector debt due to relatively low GDP per capita, IMF, OECD and EU Stability Pact Should provide for a solid basis for increased use of private sector finance and PPPs for infrastructure projects in the region November 22 nd 2006 Bank Austria Creditanstalt AG

Closed project financed road transactions in CSEE Project name

A2 Motorway Project A 4 Motorway Project Istrian Motorway – Bina Istra Zagreb to Macelj Toll Motorway M6 Toll Motorway M5 Motorway Refinancing and Extension

Country

Poland Poland Croatia Croatia Hungary Hungary

PF Volume/Year

EUR 235 m / 2001 EUR 100 m / 2005 EUR 272 m / 2003 EUR 312 m / 2004 EUR 425 m / 2005 EUR 900 m / 2005

November 22 nd 2006 Bank Austria Creditanstalt AG

The inglorious past

Launch of concession programs in the absence of suitable legislation Uncertainties as to complex and time-consuming expropriation, permit and consent procedures Lack of sufficiently empowered decision-making bodies/political instability Full demand (traffic) risk transfer to the private sector (M1/M15) High level of development costs due to lack of standardized procedures Easy access to pre-accession funds and EIB/EBRD funding - no need to explore private financing options November 22 nd 2006 Bank Austria Creditanstalt AG

Lessons learned

Establishment of PPP task forces to ensure standardization of planning and implementation procedures on the national level Importance of external advisors to government authorities Focus on smaller pilot projects Introduction of a more favorable legal environment (“PPP-laws”) Shift away from the full transfer of demand/traffic risks to the private sector Focus on availability based revenue/payments mechanisms focusing on availability-, performance- and security linked criteria November 22 nd 2006 Bank Austria Creditanstalt AG

Infrastructure sector focus

– Transport infrastructure Most attractive sector due to large volume deals and promising pipeline Utilities / Water / Waste – Focus on water and waste treatment projects on municipal level – Smaller project volumes – Local financing components – Strong IFI involvement, especially from EBRD Social infrastructure (schools, hospitals, prisons) – Minor activities due to lack of political will and/or suitable legal environment – Preparatory activities in Hungary and Czech Republic – School / Accommodation PPP- projects on muni-level, e.g. in Croatia, Estonia November 22 nd 2006 Bank Austria Creditanstalt AG

Transport infrastructure sub-sectors

Seaports – Growth in containerised traffic stimulates investments in container terminal facilities – Medium - sized projects – In the context of privatisation – Regional focus: Poland, Russia, Baltics, Turkey, Bulgaria, Romania, Ukraine Airports – Capital airports terminal extension financing - mainly corporate, large volume deals, investment grade borrowers, strong EIB involvement ( e.g. Prague Airport, Warsaw Airport) – Most prominent project finance type, concession-based transactions have been closed in Turkey (Istanbul, Ankara, Dalaman) – Upcoming privatisations offer potential for BOT-type, concession based project finance transactions (e.g. Bourgas-Varna, Zagreb, Belgrade) November 22 nd 2006 Bank Austria Creditanstalt AG

Transport infrastructure sub-sectors (ctd.)

Railway infrastructure – National railway companies: financing based on direct or implicit state guarantee – “Local flavour” (legal environment, politics) limits potential for international syndications – Privatisation of cargo business, impacts of liberalisation – No PPP-type railway infrastructure projects (e.g. high-speed railways, metro expansion) realised yet, although often discussed over years (e.g. Prague Airport railway link) Road / Motorway projects – Trend towards traffic risk assumption by the public sector (PFI-type availability based revenue schemes – – – M 5 and M 6 Hungary) Availability fees provide for predictable stable revenue and cash flow streams – – Perception of greater political risks in SEE -countries should allow for negotiating a lender friendly risk allocation as compared to mature Western European markets (e.g. permitting, change in law and especially compensation on concession termination regime) Concession periods of 20 to 30 years result in need for long debt maturities of 15 to 20 years + Deal Pipeline: D1 Motorway - SK, A2 2 nd phase – Poland, D3 Motorway - CZ, Horgos-Pozega Motorway – Serbia; preparatory activities: Russia, Bulgaria, B&H November 22 nd 2006 Bank Austria Creditanstalt AG

Project Finance / PPP-Facility for the Zagreb – Macelj Motorway in Croatia

 

28 year concession for design, construction, operation, maintenance and financing of a 60 km toll motorway from Zagreb to the Slovenian border at Macelj Project economics benefit from strong commitment of the Republic of Croatia

 Financed as PPP on a limited-recourse project finance basis with EUR 60 m equity and EUR 312 m bank debt  Debt financing was structured to benefit to the maximum from risk coverage available from the Federal Republic of Germany and involves 4 separate facilities

Borrower: Sponsor: Loan Amount: Type + Term:

Autocesta Zagreb Macelj d.o.o., Croatia Strabag (Walter Bau), Republic of Croatia (non-recourse) EUR 312 m EUR 100 m Hermes Facility (tenor 15 years) EUR 100 m GKA Facility ( tenor 17 years) EUR 100 m Long-term Commercial facility (tenor 16 years) EUR 12 m Dual-Currency Working Capital Facility (tenor 16 years) Project finance type security package , Hermes + GKA risk cover

Security: Mandated



Lead Arrangers: Participants: BA-CA

, HVB, KfW, HSH Banca Opi, Calyon, Depfa, Dexia, Erste Bank, Fortis, KBC, Natexis, NordLB, OeVAG, Zagrebacka Banka November 22 nd 2006 Bank Austria Creditanstalt AG

Contractual Overview

STRABAG Concession Agreement Republic of Croatia (RoC) 51 % 49 % Fed. Rep. of Germany Traffic Shortfall Agreement Hermes Cover Bank Debt GKA Cover Bank Consortium Construction Contract Pyhrn Motorway GmbH Operation & Maintenance Agreement Trans-Ceste doo Egis November 22 nd 2006 Bank Austria Creditanstalt AG

Section 3 Sector Snapshots and Case Studies - Energy

November 22 nd 2006 Bank Austria Creditanstalt AG

Obstacles & Opportunities

Obstacles Many existing operations unprofitable and inefficient Tariff governance and legislation not always transparent Long payback periods Cross subsidies with other energy sources Insufficient project preparation Opportunities Power sector still attractive for many financial institutions Significant rehabilitation and new generation needs Environmental policies - Renewable Energy Innovative financing structures involving multisourcing (ECAs, CO2 certificates, hedging instruments etc.) November 22 nd 2006 Bank Austria Creditanstalt AG

Project Finance for the construction and operation of a Windpark Farm in Sibenik, Croatia



BA-CA as Sole Mandated Arranger and Agent for the first Project financed Wind-Farm in Croatia

    Construction of new 11.2 MW wind power capacity using Enercon E48 Location on Dalmatian Coast and developed by German Sponsors Power purchase agreement with national power company

Borrower: Loan Amount: Term: Security: Sole Mandated Arranger: Co-Arranger and Security Agent: Advisors (to banks): Vjetoelektrana Trtar-Krtlin d.o.o.,

Tranche 1: EUR 10m Tranche 2: EUR 3m Tranche 1: 14 years Tranche 2: 9 months Share and account pledges, Assigment of all project contracts, LOC by sponsors

Bank Austria Creditanstalt AG

Zagrebacka banka, Zagreb (BACA-group) Josip Madirazza (attorney at law)

,

Energetski Institut Hrvoje Pozar (technical advisor) November 22 nd 2006 Bank Austria Creditanstalt AG

Section 3 Sector Snapshots and Case Studies – Processing Industries

November 22 nd 2006 Bank Austria Creditanstalt AG

Opportunities for Project Finance

Wood based industries (Pulp, Paper, Wood Processing): Sponsors trying to benefit from cost advantages (labour, energy) in a highly competitive market with pressure on margins International players looking for (more) favourable and secured supply of wood as major raw material Proximity to growing emerging markets Large volume expansion & green-field projects to be expected Metals & Mining: Growing demand for metals Shortage of certain raw materials for the metals industry (e.g. alumina, coking coal, etc.) CIS countries as major resource base for various raw materials (further) large volume expansion and green-field projects in the metals & mining industry (e.g. bauxite/alumina, coking coal, gold, etc.) will come up in the near future; November 22 nd 2006 Bank Austria Creditanstalt AG

Project Finance Facility for the construction and commissioning of a paper mill and connected pulp mill in the Czech Republic

 

Largest project financing in the paper industry in CEE in 2005 BA-CA as Mandated Lead Arranger and Security Agent of the subject project financing

   The paper mill will produce uncoated publication paper, for both Czech and international printing and publishing houses Total investment will be EUR 450m

Borrower: Sponsor: Loan Amount: Term: Security: Joint Mandated Lead Arrangers: Security Agent: Participants: Advisors (to banks):

Labe Papir s.r.o., Czech Republic Myllykoski Corporation, Finland EUR 275 m 13 years, repayment cash-flow based (incl. cash sweep mechanism) Pledge on all project assets, credit and cost overrun guarantee provided by the Sponsor until project completion

Bank Austria Creditanstalt AG

(’BA-CA’), Nordea Bank Finland Plc

BA-CA

HSH Nordbank AG, Den Danske, NordLB-Group, IKB, LBBW, WGZ, Handelsbank Hengeler Mueller (legal), Jaakko Pöyry (feasibility study) November 22 nd 2006 Bank Austria Creditanstalt AG

Section 3 Sector Snapshots and Case Studies - Telecommunications

November 22 nd 2006 Bank Austria Creditanstalt AG

Sector Focus / Business Opportunities

Sector Focus Liberalisation of markets, increasing competition, decreasing prices Mobile penetration rate in CEE/CIS increased substantially in 2005 and reached 65% on average Highest growth rates in Russia, Ukraine and CIS Further growth mainly through broadband services (both in fixed line and wireless sectors) Business Opportunities Mainly non recourse financing for rollout of broadband networks based on new technologies (WiMax etc.) November 22 nd 2006 Bank Austria Creditanstalt AG

Project Finance Facility for Telemobil S.A.



As first project financing to a CDMA operator in Europe the transaction can be considered as a mile-stone transaction in the Telecom sector

   Telemobil, operating under the brand name „Zapp“ is Romania‘s youngest mobile operator and the first telecom company in the world using a digital wireless network based on CDMA2000 technology in the 450 MHz band In April 2004 BA CA and RZB have been mandated to arrange a 5½ year USD 40m Senior Project Finance Facility which has been structured as a club deal

Borrower: Sponsor: Loan Amount: Term:

Telemobil S.A. (Romania), operating under the brand name „Zapp“ Qualcomm and Omnia Holdings LTD USD 40m Senior Project Finance Facility, thereof: - USD 35m Term Loan Facility and - USD 5m Revolving Working Capital Facility 5 ½ years

Security:

PF-type incl. assignment of selected receivables, account pledges etc.

Role of BACA: Other Banks: Advisors (to banks): Bank Austria Creditanstalt AG „Mandated Lead Arranger“

and

„Co-ordinator“

„Mandated Lead Arrangers“ „Facility Agent“ „Security Agent“ Bank Austria Creditanstalt AG Raiffeisen Bank S.A.

Bank Austria Creditanstalt AG HVB Bank Romania S.A.

Clifford Chance and Badea Associati (legal), Arthur DLittle (market/business plan) November 22 nd 2006 Bank Austria Creditanstalt AG

Summary / Outlook

Project Finance stays a central product in order to provide an integrated solution to the needs of clients Project Finance volume in CEE, Russia & CIS is a small percentage of Project Finance/Structured Finance volume in EMEA and worldwide Project Finance in the region will continue to play an important role in selected sectors While many companies have evolved beyond the Project Finance-stage, Project Finance tools, sector knowledge and structuring expertise remain important for structured financings of all kinds in the region Project/Structured Financings are here to stay for years before the industries in the region mature and stabilise to see the financing mix shift more towards straight corporate lending in the long run November 22 nd 2006 Bank Austria Creditanstalt AG

Section 4 BA-CA International Market Perception

November 22 nd 2006 Bank Austria Creditanstalt AG

Recognised by the market

Best Project Finance House in CEE

July 2005

Best Loan House in CEE

July 2005

Best Project Finance Bank in CEE

November 2005

Best Project Finance House

December 2005

November 22 nd 2006 Bank Austria Creditanstalt AG

International Market Perception CEE – Project Finance League Table 2005 Number 1 in terms of volume Rank Group 1

2 3 4 5 6 7 8 9 10

BA-CA (member of UniCredit Group)

Calyon ING BNP Paribas KBC NIB Capital MKB WestLB DZ Bank KfW, Commerzbank, BayernLB

Central Eastern Europe & Baltic States, excl. Russia Data Source: Project Finance International - Thomson Financial

November 22 nd 2006 Bank Austria Creditanstalt AG

International Market Perception (ctd.)

Top Mandated Arrangers of Syndicated Facilities 01/01/2005 to 31/12/2005 Eastern Europe (# of deals) Rank 1

2 3 4 5 6 7 8 9 10

Group BA-CA / HVB Group*

RZB ING Group Citigroup Commerzbank ABN AMRO Calyon Standard Bank BayernLB Mitsubishi UFJ

# of deals Market Share 55

49 47 46 32 30

4.75%

2.69% 4.89% 9.91% 1.91% 9.11% 30 29 27 27 3.50% 1.62% 3.29% 2.17%

Source: LPC, January 2006

2001 2002 2003 2004 BA-CA/HVB Group

Deutsche Bank ING Group JP Morgan DrKW

BA-CA/HVB Group

Citigroup

BA-CA/HVB Group BA-CA/HVB Group

BNP Paribas Citigroup KBC Group WestLB Citigroup Bayer. LB KBC RZB EBRD Mizuho FG SG ABN AMRO Citigroup Deutsche Bank BNP Paribas WestLB ING Group WestLB ABN Amro SG ING KBC Deutsche Bank RZB BayernLB Sumitomo Mitsui RZB HSBC Banking Group BNP Paribas ING Group Mizuho Financial Group

* thereof 40 Mandates granted to BA-CA BA-CA is an excellent brand name in loan syndication in CEE and through strong relationship with domestic CEE and international banks ensuring a solid basis for successful placement of transactions.

November 22 nd 2006 Bank Austria Creditanstalt AG

Section 5 Co-ordinates

November 22 nd 2006 Bank Austria Creditanstalt AG

Contacts for further information

Martin Handrich

Managing Director Head of Corporate & Project Finance CEE P.O. Box 35, A-1011 Vienna Member of A- 1010 Vienna Schottengasse 6 Phone +43 (0) 5 05 05-42860 Mobile +43(0) 664/515 45 04 Fax +43 (0) 5 05 05-44209 [email protected]

Wilfried Senft

Deputy Managing Director Head of Debt Structuring Corporate & Project Finance CEE P.O. Box 35, A-1011 Vienna Member of

Christian Unger

Director Corporate & Project Finance CEE P.O. Box 35, A-1011 Vienna A- 1010 Vienna Schottengasse 6 Phone +43 (0) 5 05 05-42865 Mobile +43(0) 664/812 2239 Fax +43 (0) 5 05 05-44209 [email protected]

Member of A- 1010 Vienna Schottengasse 6 Phone +43 (0) 5 05 05-44213 Mobile +43(0) 664/266 32 56 Fax +43 (0) 5 05 05-44209 [email protected]

November 22 nd 2006 Bank Austria Creditanstalt AG

Disclaimer

The information in this publication is based on carefully selected sources believed to be reliable but we do not make any representation as to its accuracy or completeness. Any opinions herein reflect our judgement at this date and are subject to change without notice. Any investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Any reports provided herein are provided for general information purposes only and cannot substitute the obtaining of independent financial advice. Private investors should obtain the advice of their banker/broker about any investments concerned prior to making them. Nothing in this publication is intended to create contractual obligations on the UniCredit Markets & Investment Banking Division ("UMIB Division") composed of (the respective divisions of) Bayerische Hypo- und Vereinsbank AG, Munich, Bank Austria Creditanstalt AG, Vienna and UniCredit Banca Mobiliare S.p.A., Milan and certain of their subsidiaries.

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The information contained in any report provided herein may include forward-looking statements within the meaning of US federal securities laws that are subject to risks and uncertainties. Factors that could cause a company's actual results and financial condition to differ from its expectations include, without limitation: political uncertainty, changes in e conomic conditions that adversely affect the level of demand for the company‘s products or services, changes in foreign exchange markets, changes in international and domestic financial markets, competitive environments and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement.

UniCredit Markets & Investment Banking Division

Bayerische Hypo- und Vereinsbank AG, Munich; UniCredit Banca Mobiliare S.p.A., Milan; Bank Austria Creditanstalt AG, Vienna; CA IB Corporate Finance GmbH; CA IB International Markets AG

November 22 nd 2006 Bank Austria Creditanstalt AG