ORIGINAL. Public Private Transportation Proposal USR 460. Richmond PROPOSER. September 14, 2006 TEAM MEMBERS

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1 PROPOSER 7700 Chevy Chase Dr, Building I - Suite 500-C Austin, TX Mr. F. Jeff Hetzer Program Manager Innovative Project Delivery Division Virginia Department of Transportation 1221 E. Broad Street, Fourth Floor Reception Desk, Innovative Project Delivery Division Richmond, VA Public Private Transportation Proposal USR 460 Richmond September 14, 2006 Norfolk ORIGINAL TEAM MEMBERS T&R ANALYSIS TECHNICAL DESIGN AND BUILD

2 Response to Solicitation for Proposals US Route 460 Corridor Improvements Project CINTRA Concesiones de Infraestructuras de Transporte, S.A. Table of Contents Submittal Letter EXECUTIVE SUMMARY Certification Regarding Debarment Confidentiality Documentation Disclosure Agreement/Certification Form PROPOSAL TAB 1: QUALIFICATIONS AND EXPERIENCE TAB 2: PROJECT CHARACTERISTICS TAB 3: PROJECT FINANCING TAB 4: PUBLIC SUPPORT TAB 5: PROJECT BENEFIT/COMPATIBILITY APPENDIX RELEVANT EXPERIENCE SAFETY RECORDS RATINGS FINANCIAL STATEMENTS ADDITIONAL MATERIALS SEPTEMBER 14, 2006

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4 Response to Solicitation for Proposals US Route 460 Corridor Improvements Project CINTRA Concesiones de Infraestructuras de Transporte, S.A. Executive Summary CINTRA, Concesiones de Infraestructuras de Transporte S.A (Cintra) is pleased to present to the Virginia Department of Transportation (VDOT) its preliminary vision for the development of the US Route 460 Toll Road Project. This Conceptual Proposal has been developed to meet the following goals sought by VDOT: Address roadway deficiencies Improve safety Accommodate increasing freight shipments Reduce Travel Delay Provide adequate hurricane evacuation capability Improve military strategic connectivity Meet legislative mandates that identified the roadway as a high priority corridor Meet local economic development plans In this ambitious planning effort, Cintra uses innovative financial techniques to assure that development of the US Route 460 Toll Road Project will ensure the best value for the Commonwealth of Virginia. The lead organization of this team and only equity owner is Cintra Concesiones de Infraestructuras de Transporte S.A. Cintra will make its equity contributions through Cintra US Corp a wholly owned subsidiary company organized under Delaware law, to serve as the top-tier entity through which Cintra conducts business in the United States. The Concessionaire Company (provisionally named Cintra-460 Virginia LP ) formed by Cintra US Corp and likely future US Equity Members, will ultimately enter into the Comprehensive Agreement (CA) with VDOT. Cintra has arranged a consortium (the Consortium) with Ferrovial Agroman, S.A., in which Cintra is the major equity member and Ferrovial Agroman is the nominated general contractor. The Consortium also includes technical engineering and traffic and revenue (T&R) advising services from Earth Tech and Maunsell respectively. This first class team has the proven track record and expertise to provide a feasible, practical, financially sound and sustainable project to VDOT, the Commonwealth of Virginia, and its taxpayers and motorists. Cintra Concesiones de Infraestructuras de Transporte, S.A., is headquartered in Madrid, Spain, and listed on Madrid s Stock Exchange. It has subsidiaries in three continents, including a branch office for the development of US operations in Austin, Texas. It is one of the world s largest private-sector developers of transport infrastructure, with committed equity investments of more than $2 billion, and currently managing 19 toll highways (more than 1,000 miles) in Spain, Portugal, Ireland, Chile, Canada (407 ETR) and the US (Chicago Skyway and Indiana Toll Road). Cintra has vast experience leading and managing multidisciplinary teams. In March 2005, Cintra Zachry LP, a company led and under 85% control by Cintra, signed a Comprehensive Development Agreement (CDA) with the Texas Department of Transportation and became its strategic partner in the development of the TTC-35 High Priority Trans Texas Corridor. Recently Cintra has been awarded with the Segments 5&6 of the SH-130 in Texas. The unique management approach that Cintra brings to this project is based in a clear distribution of roles and responsibilities that takes full advantage of the capabilities of each member of the team. This approach has been proved in many successful projects across the world as specified in the attached references. SEPTEMBER 14, 2006 PAGE 1 OF 5

5 Response to Solicitation for Proposals US Route 460 Corridor Improvements Project CINTRA Concesiones de Infraestructuras de Transporte, S.A. As previously mentioned, Cintra shall incorporate a specific legal and organizational structure in the US, the Concessionaire, that shall ultimately execute a CA with VDOT in case of award. The primary role of the Concession Company will be to secure the financing of the project through the means of equity, to be injected by the shareholders, and debt, to be funded by either commercial banks or alternative sources. The Concessionaire will enter into a fixed price, fixed term design & build agreement with Ferrovial Agroman or a Design and Build Joint Venture (DBJV) in which Ferrovial Agroman will be involved. Thus, under this standard business model the contractual responsibilities related to design and construction will be directly passed from the Concessionaire to Ferrovial Agroman, or the DBJV (if applicable), under a lump sum, back-to-back or mirror contract. However the concessionaire company will be the only responsible party before VDOT. Ferrovial Agroman will also be responsible to meet required design and construction standards. The Concessionaire will bear the responsibility to operate and maintain the facility and preserve the asset. In addition, the Concessionaire expects to perform routine inspections and reporting to the Grantor in order to ensure conformance with maintenance performance requirements and standards. As part of the operation, the Concessionaire expects to collect tolls corresponding to the Project. Roles and Responsibilities The Concession Company will hold all the liabilities derived from this project. The rest of team members will act as subcontractors of the Concession Company therefore only liable in front of such Company. In this particular project, the Proposal approach is directed towards maximizing the value to be drawn from the Project and the benefits to be perceived by VDOT, the Commonwealth of Virginia, and its taxpayers and motorists. Cintra s approach is to propose a BASE CASE and two additional alternatives, the BASE OPTIMIZED and the ENHANCED CASES. The three different scenarios that intend to: Expeditiously solve transportation needs of the area Comply with environmental procedures and approvals Satisfy and, when permissible, exceed technical requirements Eliminate or reduce the need for public funding The proposed cases are described as follows: SEPTEMBER 14, 2006 PAGE 2 OF 5

6 Response to Solicitation for Proposals US Route 460 Corridor Improvements Project CINTRA Concesiones de Infraestructuras de Transporte, S.A. BASE CASE This case proposes the construction of the entire facility based on Corridor Build Alternative 1 (CBA 1), as described in the US Route 460 Location Study, with minor design modifications. These modifications arise from a review of the Concept Interchanges provided by VDOT and consist of improvements to the safety and functionality of the major interchanges with I-295 and US 58. The Base Case also proposes the implementation of a mixed toll system allowing both manual and electronic toll collection and a complete Intelligent Transportation System. The Base Case is to be completed during a 3-year construction schedule after a Concession Agreement is produced and ROW is acquired. Based on the current preliminary assumptions in terms of construction cost, revenues and financial structure and considering a Concession Term of 50 years, the financial analysis of this alternative shows that this project is not self-performing, therefore the Developer will require state funding to an amount of $174.5 million for this Base Case solution. In this case it is assumed that disbursements from this source will be made Pro-Rata according to the Construction Schedule. In addition to the above mentioned state funding, a Federal Government s TIFIA Loan for an amount equal to $450 million is also requested. BASE OPTIMIZED CASE This case proposes the construction of the entire facility based on CBA 1 with minor design modifications (same modification as those presented as part of the Base Case). However, at several of the very low volume crossroads (e.g., State 625, 602, 620, and 616) consideration could be given to delaying or deferring completion of the interchanges until justified by traffic growth. The Base Optimized Case also proposes the implementation of a mixed toll system allowing both manual and electronic toll collection and a complete Intelligent Transportation System. The Base Optimized Case is to be completed during a 3-year construction schedule after a Concession Agreement is produced and ROW is acquired. In terms of the financial model we have considered a 99 years Concession Term for this case. We believe that an increase in the Concession Term will enhance the robustness of the Project to overcome downturns in the economy, thus allowing the proposers to be more aggressive with their offers. Based on the above mentioned changes from the Base Case we have been able to reduce the initial subsidy needed by the Project from $174.5 M down to $16.5 M. In addition to the state subsidy, a Federal Government s TIFIA loan for an amount equal to $441 million is also necessary. ENHANCED CASE The Proposer considers the Enhanced Case as a premium alternative to the Commonwealth of Virginia and its motorists from both the Technical and Financial perspectives. The Enhanced Case proposes to improve both the US Route 460 and I-64 Corridors. Cintra proposes to develop the US Route 460 Project as stated in previous sections. In addition, Cintra proposes construction of capital improvements, operation and maintenance and collection of tolls corresponding to long-distance trips, along I-64 from approximately milepost (MP) 200, the I-295 interchange, to approximately MP264, the I-64 and I-664 interchange. SEPTEMBER 14, 2006 PAGE 3 OF 5

7 Response to Solicitation for Proposals US Route 460 Corridor Improvements Project CINTRA Concesiones de Infraestructuras de Transporte, S.A. The Enhanced Case upgrades for the US Route 460 the previously defined Base Cases by proposing innovative solutions regarding interchanges that would substantially improve the traffic patterns of the area by 1) maintaining the functionality described by the Concept Interchanges, related to CBA 1, and 2) adding direct connectors for major movements. As part of the Capital Improvements related to the I-64, the Enhanced Case proposes to widen, within the existing median, the existing lane configuration section from approximately MP200, the I-295 interchange, to approximately MP254 where a lane configuration section begins. The toll scheme proposed as part of the I-64 Corridor, from MP200 to MP264, consists of an open toll system with one single mainlane toll plaza to charge the northbound and southbound long distance trips, mainly trucks, while letting the commuter trips between Williamsburg and Norfolk and the rest of Hampton Roads area free of charge. As part of this alternative, the Concessionaire would fully operate and maintain the US Route 460 Project and the I-64 from MP200 to MP264. This approach will mean a direct saving for VDOT of the budgeted expenses dedicated to operate and maintain this road, thus releasing those funds to be applied in other stretches of the network. The main advantage of this combined solution is that the two roads could be operated in the most efficient way to make the best profit of the two projects. A coordinated operation of the facilities could lead to consider a broad picture of the corridor with two alternative roads and allow the Concessionaire to implement measures, such as variable tolling, that could divert traffic from one road to the other if necessary for the benefit of the whole corridor. With this solution VDOT shall also take advantage of the fact that the Concessionaire Company can operate and maintain both facilities and exploit any synergies that may arise. The Base Case and the Base Case Optimized solutions analysis have proved that the US Route 460 Toll Road is a Project that cannot be sustained entirely by its users without any public money. We understand that there is no public funding available for this project at the moment, therefore the development of this Toll Road could be delayed until public funds are transferred from other projects. This scenario shows clear drawbacks. Cintra understands the strategic need of this project and has developed an alternative that would lead to an early development of the Project, an increased capacity along the roads that link Norfolk and the Hamptons with Richmond and a way for VDOT to capitalize its existing assets obtaining funds that can be invested in other projects. Under the current assumptions, described in section 3.2 apart from the full construction of the proposed new US Route 460 Toll Road with improvements in its interchanges and the completion of a third lane along the I-64 VDOT, could obtain a significant upfront payment from the Concessionaire. The only public funds to be used in this Enhanced Case consist in a subordinated Federal Government s TIFIA loan for an amount equal to $638.5 million. The analysis of the three cases has been made considering a tariff for Light Vehicles consistent with the range set in the Toll Feasibility Study for the USR-460 and a tariff for Heavy Vehicles five times higher. Same tariffs and escalation formula have been considered for the USR-460 and the I-64 projects. Cintra s innovative technical approach described above is enhanced by a highly developed financial structure that uses all the latest sources of financing in order to increase the value of this project to VDOT. In this particular case four different financial structures have been studied: Tax Exempt Bonds, a Bridge Facility plus a SEPTEMBER 14, 2006 PAGE 4 OF 5

8 Response to Solicitation for Proposals US Route 460 Corridor Improvements Project CINTRA Concesiones de Infraestructuras de Transporte, S.A. Bond issuance, a Mini Perm Loan and the finally chosen one, a Long Term Bank Facility in addition to a TIFIA loan. This structure usually has a maturity between 22 and 25 years, and often includes grace periods of principal, and sometimes, of interest. This type of structure allows the company to sculpt the debt profile, improving financial ratios, and also simplifying the documentation process. At the same time it reduces the risk of refinancing the project, therefore is suitable to be used in conjunction with TIFIA funding. We believe this basic approach offers several potential benefits; streamline project development, accelerating completion; protect VDOT s interests, minimizing its liabilities by transferring finance, traffic, design and construction and operation risks to the private sector; maximize private sector commitment to the project through the investment of substantial private equity by the private sponsors; provide for the redistribution of state and federal transportation funding to other important non-revenue projects; provides a more flexible capital structure that better addresses start-up toll road risks and accommodates the type of long-term concession agreement envisioned by VDOT and the private sponsors. The results of the financial model for the cases analyzed are based in preliminary estimation of the costs and the revenues of the project therefore cannot be considered as a commitment from Cintra towards VDOT. A committing offer would come as a result of the detailed proposal phase and would require a deeper analysis of the project and the approval from our investment committee. The preliminary cost estimations for the three CASES studied are (in real 2006 dollars): BASE CASE BASE OPTIMIZED ENHANCED CASE CASE Roadway Construction $480,000,000 $474,000,000 $487,860,000 Bridges & Structures $250,000,000 $250,000,000 $275,290,000 Utility Relocations $55,000,000 $55,000,000 $56,000,000 Toll Facilities $50,000,000 $36,500,000 $50,000,000 Road Widening $0 $0 $253,625,000 Design $66,800,000 $65,240,000 $89,822,000 Misc. & Contingencies $98,200,000 $98,260,000 $99,900,000 Total Design &Construction $1,000,000,000 $979,000,000 $1,312,500,000 ITS & TCS $18,092,000 $13,029,000 $31,591,000 ROW Acquisition $33,056,000 $33,056,000 $33,056,000 TOTAL COST $1,051,148,000 $1,025,085,000 $1,377,147,000 Based on all the above, Cintra believes that this is a feasible project and intends, if selected by VDOT, to enter into an interim or Comprehensive Agreement with VDOT for the Project in accordance with the terms of the Solicitation for Proposals US Route 460 Corridor Improvements Project through the Public-Private Transportation Act, addendum #3 of August 15, 2006 and the two sets of questions and answers dated March 31, 2006 and August 28, 2006, respectively. In any case the offer represented by this Conceptual Proposal will remain in full force and effect until such time as VDOT and the selected Offeror shall sign a Comprehensive Agreement. SEPTEMBER 14, 2006 PAGE 5 OF 5

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16 Response to Solicitation for Proposals US Route 460 Corridor Improvements Project CINTRA Concesiones de Infraestructuras de Transporte, S.A. Confidentiality Statement Cintra Concesiones de Infraestructuras de Transportes S.A communicates to the Virginia Departrment of Transportation (VDOT) that there is no confidential information requested other than the following documents: SEPTEMBER 14, 2006

17 3. Project Financing (Conceptual Financing Plan) 3.1. Project Cost Estimate Not confidential Submit plan for development, financing and operation of the project showing the anticipated schedule on which funds will be required; and proposed sources and uses for such funds. Include a list and discussion of assumptions underlying all major elements of the plan The following section contains sensitive assumptions made by the Proposer. The information contained under this section results from Proposer negotiations with financial institutions. This information is property of the Proposer. Disclosure of this information may result in unfair advantage given to other proposer during later stages of the USR 460 Project procurement process Financial Development Plan Some information considered as confidential Discussion of assumptions underlying all major elements of the plan. Indicate the team member(s) responsible for securing financing for the project and any experience said member(s) have with similar financing mechanisms to those proposed and with similar transportation projects The following sections contain sensitive assumptions made by the Proposer. The information contained under these section results from strategy decisions and assumptions made by the Proposer. Disclosure of this information may result in unfair advantage given to other proposer during later stages of the USR 460 Project procurement process Main Assumptions Some information considered as confidential. Not confidential Responsible for securing financing and experience 3.4. Identify the proposed risk factors and methods for dealing with these factors Not confidential Proposed Total Life-Cycle Cost-Specifying Methodology and Assumptions Preliminary Cost of the Project Not confidential Description of the Proposed and Construction Methods Not confidential. SEPTEMBER 14, 2006

18 Not confidential. Not confidential Overview of the Design Concepts Preliminary Schedule of the proposed timing of construction and maintenance activities Preliminary calculation of the costs This section contains sensitive assumptions made by the Proposer. These estimates and schedules were prepared by resources owned by the Proposer, therefore, this information is property of the Proposer. Disclosure of this information may result in unfair advantage given to other proposer during later stages of the USR 460 Project procurement process Identify any local, state or federal resources Not confidential Provide: financial statement of the firm/consortia and each major partner Not confidential Toll System The following sections contain sensitive assumptions made by the Proposer. The information provided as part of this section was prepared by the Proposer s T&R advisor Maunsell. As a result, the material becomes property of the Proposer. It the Proposer s understanding that disclosure of the contents of this section would result in unfair advantage given to other proposer during later stages of the USR 460 Project procurement process Toll Collection Method Traffic and Revenue Forecasts Operational Rampup 3.9. If revenues from development opportunities ancillary to the USR460 Project are to be proposed, describe the nature of the development, its relation to the transportation facility, the coordination anticipated with the local communities and the estimated revenue used to support the project. Not confidential Describe the nature of any proposed private, quasi-private or public-private entity which may be proposed to issue debt, if applicable, to support the project Not confidential. SEPTEMBER 14, 2006

19 3.11. Describe any cost savings to be realized by the Commonwealth during the lifecycle of the project and the methodology by which said savings were calculated Not confidential. SEPTEMBER 14, 2006

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