Kein Folientitel

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Dr. Reinhard Platzer CEO Dexia Kommunalkredit
Bank

Encouraging foreign appetitefor local investment
opportunities
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Who We are

• New bank established in March 2005 in order to
  concentrate and strengthenthe activities of
  Dexia and Kommunalkredit in CEE
• In the first 3 months new business of more than
  EUR 2 bln. in CEE
• Top Down approach ? first step focuses on central
  states, provinces, larger cities

• Long maturities for huge scale transactions?Polan
  d 50y-bond with a volume of EUR 300 mln. (2nd
  transaction in Europe, 1st transaction in CEE)
• Customized finance solutions e.g.
  Maastricht-neutral solutions
• ?later focus on alternative solutions

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The Owners
Dexia Crédit Local (Figures as of 31-12-2004)
Total assets EUR 206 bln. Return on Equity
18.6 Staff 3,204
Kommunalkredit Austria (Figures as of
31-05-2005) Total assets EUR 17.2 bln. Return
on Equity 19.4 Staff 245
Dexia Crédit Local 50.84
Kommunalkredit 49.16
Management of the Environmental and Water
Management Fund
Balance sheet total (31-12-2004) EUR 2,412
million
Long-term ratings
Moodys
Fitch Ratings
Kommunalkredit
AA-
Aa3
Kommunalkredit Covered Bond
Aaa
Dexia
AA
Aa2
Dexia Municipal Agency
AAA
Aaa
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Dexia-Kom The Company Structure
Dexia Crédit Local, Paris (F)
Kommunalkredit Austria AG, Vienna (A)
49.16
50.84
Dexia Kommunalkredit Bank AG, Vienna (A)
78.98
100
100
Dexia banka Slovensko a.s., Zilina (SK)
Dexia Kommunalkredit Polska sp. z o.o.,
Warsaw (PL)
Dexia Kommunalkredit Bulgaria EOOD Sofia (BG)
Dexia Kommunalkredit Romania S.R.L. (RO)
Hungary (2nd term2005)
Dexia Kommunalkredit Czech Republica.s.,
Prague (CZ)
In the course of incorporation
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Our Customers

• Municipalities, Regions, Sovereigns
• Publicly owned enterprises, utilities and
  suppliers to the public sector

• Health
• Infrastructure
• Social housing
• Public construction
• Education Culture

• Long-term infrastructure financing needs
  long-term capital(Golden-rule-financing
  duration up to 25 years and grace periods
  available)
• Structured products e.g. CHF-interest rate in
  EUR-currency
• Maastricht-neutral solutions

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The Market
Domicile of Dexia Kommunalkredit Bank
Countries in which Dexia-Kom has a subsidiary
Countries serviced by Dexia-Kom from Austria
15 countries with 136 mln. inhabitants
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CEECs the Market with theHighest Growth Rates
in Europe

Average growth p. a. over 2002-04
Average growth p. a. EU-15 1,3
Forecast 2005
Higher growth rates lead to increasing incomes
Source IFO, Eurostat, OECD, IMF, National
Statistical Offices, 2003 and 2004, EU Commission
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CEECs Increasing Incomes
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CEECs Improving Creditworthiness Moody's
sovereign ratings long term, foreign
currency(before November 12, 2002/current)
Baa1/A1
Baa2/A2
Ba1/A3
Baa1/A2
Baa1/A1
Baa3/A2
Aaa/Aaa
Baa1/A1
A3/Aa3
B3/Ba1
Baa3/Baa3
B2/Ba1
Last Upgrade Romania
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CEECs Limited Access to Long-Term Money
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CEECs High Investment requirements
New Member States (NMS) excl. CY, MT, incl. BG
and ROM
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Project Examples Behind the Figures Poland
Project Finance market 1998 - 2003

• Appr. USD 14 billion (EUR 11.7 bln.) , 40
  transactions

Current transactions in transportation

• Motorway A1 EUR 700 mln.
• Motorway A2 EUR 748 mln.
• Terminal II of Airport Warsaw EUR 294 mln.

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Project Examples Behind theFigures Slovakia
Energy

• Reconstruction of thermal power plants of
  Slovenske Elektrarne
• Privatisation of 6 district heating companies
  planned
• Smaller wind energy projects may come
• Geothermal project planned in Kosice

Transportation

• D1 Highway PPP project in north Slovakia (end of
  2005)
• Privatisation of Airports Bratislava and Kosice
  (3Q 2005)

Water

• Co-financing of EU-Funds supported projects

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Project Examples Behind theFigures Czech
Republic
Current situation

• PF has been driven by corporate sector
  investments in the past
• only few headline transactions, e.g.
• EUR 228 mln. ECK Generating co-generation plant
• EUR 297 mln. new terminal at Airport Prague
• public sector less active due to sufficent access
  to liquidity, capacity to raise debt and lack of
  understanding of project finance benefits
• potential projects
• Prague waste water, ring road, airport speed
  train, highway tolls
• State electronic toll road system
• PPP's favoured by the public sector but so far
  very limited activity despite proclaimed
  interest, new PPP law under preparation

Potential transactions
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Project Examples Behind theFigures Bulgaria
Romania
Bulgaria Current projects mostly in
transportation and energy

• Sofia Metro
• Total projected cost EUR 250 mln.

Romania Almost no PF market yet

• Mostly involvement of multilateral lenders (World
  Bank/IFC, EBRD, EIB).
• Priority projects in transportation, power,
  telecom, and environmental protection.
• City of Arad Urban transport financing
• Total project volume EUR 20 mln.

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In 2004 the GDP of the CEEC was approx. EUR 550
bln.

• To achieve EU-average investment needs of EUR 515
  mln approx. 5 of GDP per year (i. e. EUR 27.5
  bln.) have to be invested in a period over 20
  years
• Between 2000 and 2003 public investment in
  infrastructure in CEE was approx. 3.5 of GDP p.
  a. on average (i. e. EUR 19.25 bln.)
• To meet the EU-average approx. EUR 8 bln. per
  year are missing

Modern infrastructure is essential for future
development of CEEC

• Growing incomes lead to growing demand of public
  infrastructure
• Future growth demands high infrastructure
  standards

How to finance?
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EU-Support Mechanisms
EU-funds in CEEC 2007-2013 app. EUR 48 million
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Tight Budgets
Public funds are not able to meet investment
requirements
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Tight Budgets
Need for private capital
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Need for Private Investors

• Public funds will not meet investment
  requirements (Maastricht)
• EU funds are not sufficient and not agreed up to
  now
• EU funds have to be co-financed
• Slovakia annual tax revenues approx. EUR 5.5
  bln. vs EU-funds of EUR 1.8 bln.

• Public Private Partnerships
• Maastricht-neutral solutions

Private capital plays a key role in financing
infrastructure
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Offering Alternatives I Maastricht Neutrality
through Debt Restructuring
Restructuring Example City of Gdansk

• Initial situation
• City of Gdansk has matured liabilities to private
  property management companies due to delayed
  payments
• Interest payable on the amounts due is up to 13

Solution 1. City of Gdansk and property
management companies agreed on restructuring
liabilities 2. Kommunalkredit bought restructured
liabilities from property management companies
Transactions of this kind are also possible with
water or energy companies
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Offering Alternatives I Maastricht Neutrality
through Debt Restructuring

• Interest payments were reduced from 13 to 5.9
• Debts were reduced through the restructuring of
  liabilities
• Debts can be repaid over a period of seven years
• Reduction of the budget deficit

Improvement of financial indicators opens up the
possibility of making important investments and
obtaining EU funds
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Selected Transactions
1
VEOLIA Environment Term loan (Senior Lead
Manager)
Stadt Budapest Syn. term loan (Lead Arranger)
Autocesta Zagreb-Macelj Syn. project finance
(Lead Arr.)
Stadt Bratislava Term loan facility (Lender)
Kongresszentrum Prag Syndicated term loan
(Lender)
Stadt Danzig Restructuring (Lender)
Republic of Poland (debt rescheduling) EUR 1,000
mln.Thereof EUR 300 mln. new 50y-bond!
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Selected Transactions
2
Stadt Warschau Infrastructure loan (Investor)
Warschau Airport II Guarantee for EIB-loan
(Guarantor)
Zagrebacki Elektricni Tramvaj Term loan
facility (Arranger)
Hrvatska banka Term loan facility (Manager)
Zagrebacka banka Syndicated term loan (Manager)
Dopravní Podnik Hl. M. Prahy Long-term syn.
facility (Investor)
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Selected Transactions
3
Stadt Prag EURO MTN Programme (Dealer)
Prag Airport Terminal Syndicated guarantee
(Arranger)
Stadt Krakau Guarantee for EIB-loan (Guarantor)
Republik Ungarn Term loan facility (Participant)
ECK Generating Project financing (Co Arranger)
AB Lietuvos Energija Syndicated term loan
(Manager)
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Offering Alternatives IIThe Austrian Maastricht
Project Water and Environment
Initial situation No market producer in the
water management sector
By mandate of the Austrian Ministry of Finance,
Kommunalkredit implemented the ESA 95 rules in
the water management sector
European System of National Accounts 95

• A public producer can be classified as a market
  producer if
• it has decision-making autonomy in respect of its
  principal function
• it either keeps a complete set of accounts or
  would be able to compile a complete set of
  accounts if they were required
• more than 50 of production costs are covered by
  sales

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Offering Alternatives IIThe Austrian Maastricht
Project Water and Environment

• Long-term effects
• Concept of Market Producer was also implemented
  in other public services e. g. health care,
  waste management
• Annual decrease in Maastricht deficit EUR 500
  mln. or 0.2 of GDP
• Reduction of Maastricht debt approx. EUR 4.3 bln.
  or 1.9 of GDP in 2003
• Higher efficiency through better data basis ?
  benchmarking

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Offering Alternatives IIISale of loans

• Public Sector granting Loans to the Public Sector
• Left pocket to the right pocket strategy
• Since 1996 these loans have been sold by public
  tender

Environmental and Water Management Fund
Nominal value EUR 5,217 mln.
Proceeds EUR 3,472 mln.
Kommunalkredit EUR 1,107 mln.
Housing Loans in Austria
Nominal value EUR 5,735 mln.
Proceeds EUR 3,188 mln.
Kommunalkredit EUR 2,361 mln.
Annual reduction of Maastricht deficit approx.
EUR 200 mln.
Reduction of Maastricht debt by 3 of GDP
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Offering Alternatives IIIThe effects of the
Austrian Maastricht Project

• Long-term effects
• Annual decrease in Maastricht-deficit EUR 500
  mln.
• Reduction of Maastricht-debt app. EUR 3.6 bln. or
  2.0 of GDP
• Higher efficiency through a better data basis ?
  benchmarking
• The Sale of Loans of the Environmental Funds
  (long-term effects)
• Annual decrease in Maastricht-deficit EUR 100
  mln.
• Reduction of Maastricht-debt app. EUR 3.3 bln. or
  1.8 of GDP
• Liquidity for new infrastructure investments

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Successful Maastricht Examples Total effects in
Austria (II III)
On public debt
Maastricht Project 2 of GDP Sale of
Loans 3 of GDP Total 5 of
GDP
On annual public deficit
Maastricht Project 0.2 of GDP Sale of
Loans 0.1 of GDP Total 0.3
of GDP
Large volumes of public loans are available in
CEECs
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Offering Alternatives Structured Finance a
chance for new loans debt rescheduling
Chance for new loans

• Making use of favourable differences between
  interest-indicators
• Market-driven restructuring is possible at any
  time

Low interest rates lt 2.0 possible
Chance for debt rescheduling

• A beneficial possibility to restructure existing
  loans
• No cancellation of the contract with the house
  bank necessary
• No obligation for a tender procedure

Contribution to the reduction of the
Maastricht-deficit
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Offering Alternatives Maastricht Neutrality
through PPPs

• ? PPPs
• To reach Maastricht neutrality risks have to be
  transferred to the private sector
• EUROSTAT decision
• The private sector has to bear construction risk
  and
• demand or availability risk
• However, not all risks can be transferred to the
  private sector ? negative experience in cases of
  the public sector backing out completely? public
  sector should provide the strategic framework,
  but can also use its financing advantages (e.g.
  through guarantees) to bring costs down

PPPs as an opportunity to implement
infrastructure projects and to improve growth
and wealth in CEECs and Western Europe
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Conclusion
Dexia Kommunalkredit Bank
Modern infrastructure is a prerequisite of
sustainable growth
High infrastructure demand in CEE
Public funds are not sufficient to meet demand
Private capital is the only alternative to meet
infrastructure demand in CEE
Dexia-Kom is a strong partner in CEE
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• CONTACT LIST

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Contact ListDexia Kommunalkredit Bank
Phone
43-1-31 6 31-
Chief Executive Officer
Reinhard Platzer
100
Member of the Executive Board
Pascal Becker
300
Member of the Executive Board
Leopold Fischer
520
Member of the Executive Board
Claudia Schmied
200
Deputy Head of Financing
Wolfgang Viehauser
145
Fax
Dexia Kommunalkredit Bank, Tuerkenstrasse 9, 1092
Vienna
500
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www.dexia-kom.com