Visit to Project Allenby/Connaught by Bondholders 15 March 2011 - - PowerPoint PPT Presentation

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Visit to Project Allenby/Connaught by Bondholders 15 March 2011

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Programme

Q & A session and lunch 13:15 - 14:00 Close/Return to Farnborough 14:00 Walking Tour of St Omer Barracks 12:15 - 13:15 Project briefing & presentation 10:45 - 12:15 Arrive at Wellington House, Aldershot 10:30

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Strategic Importance to MoD

• The Project covers approximately 35% of Army UK Based Trained

Manpower (20% of total manpower)

• Salisbury Plain is the principle All Arms Manoeuvre Training Area in

UK

• The Project delivers two key objectives of the 1998 Strategic

Defence Review:

• Improving working and living accommodation
• Identified as a major factor in morale, effectiveness, recruiting and retention
• Providing accommodation for Units returning from Germany

and reorganising within UK

• 2nd Royal Tank Regiment in July 2007, a key deliverable which was met on time
• 5 major units moving onto Salisbury Plain (2,500 soldiers)

Source: MOD

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• New Defence-wide organisation from April 2011
• Will include this contract, but detailed arrangements still to be determined
• Means contract will no longer be answerable to Land Forces
• Our joint intent is to ensure that well established working procedures are

maintained

• Detail of SDSR and its impact on the Project being considered

2010 Strategic Defence & Security Review

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Shared Purpose and Vision

Purpose

Together, MoD and Aspire will manage and deliver a modern, flexible living and working environment for soldiers in the Aldershot and Salisbury Plain area that will support military fighting power, enhance Army recruitment and retention and provide long-term value for the MoD and for Aspire

Vision

We will improve the quality of life

• f soldiers by delivering best

in class service

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History

• January 2002

Formed Aspire Joint Venture

• 2002-2003

Bidding

• July 2003

Selected as Preferred Bidder

• January 2004

Pre-Contract Activities Letter – mobilised

• April 2006

Financial Close

• July 2006

Service Commencement

• July 2007

2RTR delivered

• 2014

Funding availability period

• 2014

Construction complete

• 2016

Benchmarking/market testing

• 2041

End of contract

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What is the Contract?

A 35 year contract to provide a service

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Project Locations

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• £8Bn [£11.9Bn] 35 year PFI contract with Aspire Defence.
• Construction Value £1.5Bn, Steady State Unitary Payment £240M pa
• Provides living & working accommodation to 18,700 military personnel, with

total dependency more that 21,000

• Originally 10 year, now 8 year construction phase. 375 new buildings and a

further 192 refurbished. 457 buildings demolished

• Previously 50+ support contracts. Aspire Defence Services

manage/operate service provision – 50% self delivered 50% sub- contracted

• Local Help Desks, available 24/7 365 days a year

Key Facts

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Organisation and Structures

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Contractual Framework

The Authority

Works Subcontract

Services( Sodexho ) Transport Management ( Lex ) Other Sub

• Works

Sub-subcontracts

Lifecycle Hard FMSoft FM

Utilities Infrastructure Service Subcontract Utilities Capital Upgrade Subcontract

Thames Water/EDF Energy MUJV

KBR

50% 50%

KBR Mowlem

50% 50% 12.5% 37.5% 100%

(ADSL)

MoD

Project Contract Services Subcontract

Living Services (Sodexo) Transport Management (Babcock Land) Corus

Major FM Sub-subcontracts

Lifecycle Hard FMSoft FM

Aspire Defence Services

Lifecycle Hard FM Utilities

MUJV (Veolia/UKPNS (Integrated Services & Works Utility)

KBR Carillion

50%

KBR Carillion Aspire Defence Finance

Aspire Defence Holdings

100%

(ADSL)

Soft FM

Aspire Defence Capital Works

Other Sub-subcontractors

Lenders

Collateral Deed

HSBC Infrastructure

5%

Carillion Innisfree KBR

45%

Hard FM/some Soft FM Accommodation

Aspire Defence Limited

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ADL ADCW ADS

Working Relationships

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Aspire Defence Capital Works

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Construction Overview

• £1.5bn, 8 year construction programme
• Construction of:-
• large number low/medium rise
• not technically complex
• but geographically spread accommodation
• Management of Transition Programme key

low risk

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Three Pricing Categories

• Firm, Fixed and Competed:
• Firm – £481m
• Fixed – uplifted for inflation/change in law – £296m
• Competed – subject to benchmarking or competition in

the market with agreed multiplier – £670m

• Appropriate allocation of risk over 8 year construction

period (2006 - 2014)

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Demolished, 457 Refurbished/ Altered, 192 New Build, 375

Capital Works – number of units, by building type

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Capital Works - building space by type and use

Dining 13% Technical 21% Other 5% Living 61%

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Pre-Construction Progress to 31 January 2011

Scheme Design Reports

Remaining, 2 Completed, 512

Planning Consents

Required, 4 Granted, 366

Full Design

Assets to complete, 12 Assets Complete, 502

Procurement

Procured, 435 Remaining , 79

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Construction Progress to 31 January 2011

20 40 60 80 100 120 140 160 180 Assets T i d w

• r

t h B u l f

• r

d P e r h a m D

• w

n L a r k h i l l W a r m i n s t e r A l d e r s h

• t

Remaining In Progress

Construction

In Progress 61 Remaining 106 AIS, 347

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Construction Summary

• Construction not complex
• Lessons learned/continuous improvement
• Appropriate pricing risk – Firm, Fixed and

Competed

• Shorter programme
• On programme
• 65% complete

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Aspire Defence Services

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Hard and Soft FM Services

• £4.2bn over 35 years
• Management and administration
• Assets facilities maintenance
• Living accommodation services
• Transport services
• Stores services
• Office services
• Welfare services
• Support to security

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Management & Administration Supply, Transport and Equipment Support Services Living Accommodation Services Office Services Welfare Services Support to Security Services Assets and Facilities Performance Monitoring QA Admin Helpdesk MIS HS&E HR Reporting Data Management Visitor Management Weapons & Ammunition Management Stores Fuel & Lubricants Laundry & Dry Cleaning Tailoring Shoe Repairs Travel Booking Fleet Management Logistics Vehicle Servicing Domestic Services Parking Space Management Mess Management Military Catering Bar Services Function Services Mailroom Archiving Admin and Clerical Typing PA Services Media Services Model Making Reprographics Leisure Services Civilian Catering Security Passes Reception Vetting Maintenance: M&E Building Fabric Grounds Ducting Civil Eng Furniture Fixtures & Fittings Estate Management Pest Control Utilities Maintenance & Management Cleaning Waste Management Window Cleaning

Services

Black – Self delivered Red – MUJV Green – Sodexo Blue – Babcock

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Direct Delivery/Sub-Contract Revenue – averages over years 1- 10 at Financial Close prices

ADSL, £54m MUJV, £13m VT Land, £9m Sodexo, £28m

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Service Delivery

• High customer satisfaction
• 24/7 Help Desks successful
• 100% of Retained Estate now in availability regime
• 4 year transitional period has now ended
• Minimal performance/availability deductions
• 0.06% of revenue since FC
• Changes in ownership in supply chain but no material impact
• IiP accreditation (top 3%)

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Lifecycle

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Lifecycle

• ProjCo budgetary risk, except for utilities
• Pre FC surveys and due diligence
• Cyril Sweet pricing model:-
• Gross Floor Area
• Cost /m2
• Age of building
• E C Harris opinion as to adequacy

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New & Refurbished Buildings Retained Buildings FF&E External Areas Catering Equipment Total £613 million Real 2004

Lifecycle

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Lifecycle

• Post FC
• Retained Estate (circa ⅓ of total)
• Extensive surveys
• 69 assets
• 16 space types
• Detailed pricing :-
• Individual quantities
• Cost per element
• Remaining life of each component
• Extrapolated
• Reconfirms adequacy of Retained Estate estimate

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Lifecycle

200 400 600 800 1,000 1,200 1,400 2 6 2 8 2 1 2 1 2 2 1 4 2 1 6 2 1 8 2 2 2 2 2 2 2 4 2 2 6 2 2 8 2 3 2 3 2 2 3 4 2 3 6 2 3 8 2 4 year £M nominal Estimate Actual

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Lifecycle – early years

20 40 60 80 100 120 140 2 6 2 7 2 8 2 9 2 1 2 1 1 2 1 2 2 1 3 2 1 4 2 1 5 2 1 6 year £M nominal Estimate Actual

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Financial

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Issuance Structure

The 2006 issuance for the financing of the project consisted of two fixed rate, wrapped, amortising Sterling debt tranches:-

8.5 years until amortisation commences Grace Period 34 years (1 year tail on the Project Agreement) Legal Maturity 25 years Weighted Average Life S&P: BBB Moody’s: Baa2 Underlying Rating Fixed Rate Sterling Type £ 1,463 million (plus additional £305 million of Variation Bonds) sold as:

• Series A (Ambac): £ 731 million
• Series B (MBIA): £ 731 million

Total Issuance

Debt Security Package

• Fixed and floating charges
• Security over project

accounts and contracts

• Assignment of insurance

policies

• Step-in rights

Debt Issuance

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Bond Outstanding Principal and Amortisation Profile

The outstanding principal and the amortisation profile for the combined Series A and Series B bonds over time is shown below on an annual basis. Series A and Series B are repaid pro-rata

Outstanding Principal Amortisation Profiles

20 40 60 80 100 120 140 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 £ million 200 400 600 800 1,000 1,200 1,400 1,600 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 £ million

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Uses of Funds (First 8 years) £m Sources of Funds (First 8 years) £m % External Funding

3,670 Total 278 Cash/Reserves 920 Hard & Soft Facilities Mgmt 593 72 133 129 52 Financing Fees and Interest Lifecycle Overheads, insurance and tax Direct funded Change Loan Stock Interest 1,493 Capital Expenditure

• 243

129 Additional Authority Funding Direct funded Change 100% 3,670 Total

• 173

Interest Income

• 1,542

Operating Revenues 7.6% 120 Shareholder Financing 92.4% 1,463 Fixed Rate Guaranteed Bonds

Source: Sept 2010 Operating Financial model

Sources and Anticipated Uses of Funds – first 8 years

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Main cash out-flows over project life

50 100 150 200 250 300 350 400 450 500 550 600 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Year ending December 31 £m Nominal Operating Costs Lifecycle Costs Corporation Tax Senior Debt Interest and Fees Senior Debt Repayment Payment to Authority Capital Expenditure

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Senior Debt Cover Ratios

• FC Base case ADSCR min 1.32 (2014) average 1.39, BLCR min 1.46
• Current forecast ADSCR min 1.32 (2031) average 1.36, BLCR min 1.45
• Distribution lock-ups at ADSCR <1.12, BLCR <1.15

Semi-annual Senior Coverage Ratios

1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 1.80 1.90 2.00 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 Apr 06 Model ADSCR Apr 06 Model BLCR Lock Up Point Sep 10 Model ADSCR Sep 10 Model BLCR

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Credit Crisis

• Credit crisis impacted the Project:
• Primary Arrangements – GICs and Authorised Investments
• 6 significant GIC deposits at FC, balances reduce monthly
• Protective provisions called up; series of novations then collateralisations
• 5 of 6 exposures now fully repaid
• Final GIC is fully collateralised with gilts
• Secondary Arrangements – LCs
• LC issuer downgraded
• Alternative arrangements in place

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GICs

200 400 600 800 1,000 1,200 A p r

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1 £m

now

collateralisations novations

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Summary

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Project Summary

• Effective robust contract structure
• Successful service delivery from the start continues
• Construction programme delivering; 65% complete
• Effective management of changing requirements
• Strong partnering relationships

Cautionary Statement This presentation may contain indications of future developments and other forward looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the sector of the economy within which the company

• perates. These and other factors could adversely affect the Project companies’ results and prospects. Forward looking statements involve risks,

uncertainties and assumptions They relate to events and/or depend on circumstances in the future which could cause the results and outcomes to differ materially from those currently anticipated. No obligation is assumed to update any forward looking statements, whether as a result of new information, future events or otherwise.

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St Omer Barracks

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Time lapse

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Visit to Project Allenby/Connaught by Bond Holders 15 March 2011