11 September 2009 The Manager The Manager Companies Section - - PDF document

Lend Lease Corporation Limited Telephone +612 9236 6111 ABN 32 000 226 228 Facsimile +612 9252 2192 Level 4, 30 The Bond www.lendlease.com 30 Hickson Road Millers Point NSW 2000 Australia

11 September 2009 The Manager Companies Section Australian Securities Limited The Manager Companies Section New Zealand Exchange Limited Pages: Seventeen (17) pages Dear Sir Lend Lease Investor Presentation on Public Private Partnerships Please find attached a presentation given to investors on public private partnerships. Yours faithfully Sally Cameron Group Executive Investor Relations

Mark Menhinnitt Head of PPP

Public Private Partnerships Investor Presentation

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PPP Model & Rationale PPPs & Fit with LLC Strategy Market Observations Market Attractiveness Key Strategic Actions Canada & Capella Capital

Agenda

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“Public Private Partnerships are partnerships between the public sector and the private sector for the purposes of designing, planning, financing, constructing and/or operating projects which would be regarded traditionally as falling within the remit of the public sector.”

PPP Model & Rationale

Development & Project Management Development & Project Management Construction Construction Asset / Fund Management Asset / Fund Management Operations, Maintenance & Lifecycle Operations, Maintenance & Lifecycle Origination Origination

The PPP value chain

Advisory Fees Equity Returns Equity Uplift Equity underwrite fees Success Fees / Bid Cost Multipliers.

• Dev. Fees

PM Fees Const. Margins Const. Savings AM Fees IM Fees FM Margins Lifecycle Savings

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Two Distinct Market Sectors & Sub Segments:

Economic Infrastructure markets (with/without patronage risk) e.g. :

• Roads & Bridges
• Transport
• Ports
• Segments within Utilities & Municipal Services

Social Infrastructure (availability payment - no/limited patronage risk) e.g. :

• Health
• Housing
• Education
• Justice
• Segments within Utilities & Municipal Services

Our focus is predominantly Social Infrastructure where there is an “availability payment” model.

PPP Model & Rationale

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PPP Model & Rationale

Development and D&C Agreements

Government

Project Agreement License/Ground Lease

AM & FM Operations Agreements Finance Agreements & Funding Equity Subscriptions Project Company (SPV)

Simplified Deal Structure

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Why are Governments attracted to the PPP model?

Government can accurately measure the “Total Cost of Ownership” warranted by the private sector Integration of Design/Construction/Operations/Maintenance/Life-cycle costs into quarterly payments Far greater governance, transparency and discipline of government spend Record of on-time delivery vs patchy performance by public agencies Competitive process drives innovation and continuous improvement No commitment required unless PPP model delivers value improvements

PPP Model & Rationale

= value for money and vastly improved accountability

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Public Private Partnerships are awarded based on the ability to add value over and above what the government can achieve themselves. Successful PPP players: Deliver value via integration across

Product Development Detail design and construction Asset operations, facilities and lifecycle management Project Financing and Transaction Management

Foster long term partnerships with Government entities Innovate and continuously improve product and process

PPPs & Fit with LLC Strategy

Lend Lease is well positioned in the PPP market with strong credentials as a partner, owner, manager, developer, financier and deliverer.

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Market Observations & Issues

Observation Opportunity/Impact

New capital adequacy ratios will limit availability of and pricing of project equity. Will limit quantum of equity capital available from banks, requiring more equity participants for large projects Provides Lend Lease with more opportunity to move into the project equity and

• rigination space.

Major private sector losses on Toll Roads and Tunnels Governments have shifted to availability models for critical economic infrastructure. Lend Lease’s focus is projects with availability payment models. Equity and debt capital markets disruptions - disappearance of mono-line credit enhancers. Bank finance is currently the principle source of debt capital. Re-Fi risk and bank aggregation limits are an issue. PPP bonds are sought after assets by pension & life insurance funds. Bond financing is expected to return over time – market still exists in Canada. Limited capacity, tenor and cost of bank debt impacting underwriting of PPP’s at bid stage Limited bank debt capacity per project is impacting major projects. Higher debt spreads and Re-Fi risk reducing PPP value for money to Government. Governments moving to co-lender, capital infusion and/or loan guarantee models Fewer organisations active in the

• rigination space

Opportunity for Lend Lease to strengthen UK position and establish origination platforms in Australia and Canada. Governments looking for long term partnerships with stable managers and owners 3

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Market Attractiveness

Strategy / Competitive Advantage Template

Criteria UK MHPI (Actus) Australia Canada Scale Sectors

• x

High Barriers to Entry

• Ability to secure market franchise & leverage

follow on business

• x

x

Ability to leverage capability into other sectors

• Ability to integrate/participate in full value chain
• Scale Projects
• Deep & Visible Pipeline
• Ability to create differentiated proposition
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Market Attractiveness

Financial Template

Criteria (incl. fee/margin streams) UK MHPI (Actus) Australia Canada Moderate Peak Capital Requirements

• N/A
• Closing costs exposure post award
• x
• Financial return for service provided or risk taken
• Return on project equity (& equity risk)
• BU overhead required/recoverability

x

• Velocity of capital

x

• Bid costs exposure pre-award

x

x

• Cash positive & earnings accretive within 1 year
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Key Strategic Actions

UK Status

Secure partnerships with preferred local authorities with large scale education, housing & utility needs Lancashire and Birmingham secured. Expect to bid 2-3 major programs per year, subject to government funding. Increase velocity of project equity & rationalise bid costs Underway - business model being revised to speed up capital recycling and improve bidding efficiencies. Lift returns from origination, development and construction Upfront success fees for development and project origination included in project returns, in addition to equity yield and equity uplift. Establish PPP Infrastructure Fund/Equity Partnerships Underway.

Actus (USA)

Win key remaining housing projects and deliver well against existing backlog Progressing but relatively slow due to the impact of the GFC. Continue to leverage opportunities from existing installations including barracks

• Continuing. Fort Hood Single Soldiers development – conversion of existing

small FH inventory to SS + build new FH units. Convert subsequent phases of Army lodging & set up for Navy lodging program Phase 1A of Army lodging closed August 2009. Follow on phases including elements of future groups now being developed. Navy lodging to follow. Continue to develop DoD utility privatisation program including renewable energy Under development. Pursuing government incentives for renewable energy projects on military installations.

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Key Strategic Actions

Canada Status

Establish Canadian PPP origination and management platform

• Underway. Sponsor JV in place for first project to pass local experience criteria.

Bulk of capability exists within current LL Americas platform. Bid 2-3 PPPs in FY10, leveraging Actus & Global capabilities

• Underway. Bid underway for Alberta Schools II (C$300M). Bid team being

formed for next target project in Ontario. Implement D&C strategy

• Underway. Leverage LL role as sponsor to create PPP D&C business (similar

to Actus approach). Initial D&C JV being formed to pursue Healthcare market. Develop FM strategy & implement Currently working with Tier 1 FM providers. Strategy under review

Australia

Establish PPP origination and management platform – close & incubate JV deal

• Complete. Capella Capital partnership established.

Close first PPP equity transaction in FY10 Complete – SA school project closed in July 2009. LLC provided Financial Advisory services and holds 50% equity position. Bid 2-3 major PPPs as originator & secure 1 preferred

• position. Secure equity positions on BLL PPP projects.
• Underway. Equity positions secured on 2 major hospital projects where BLL is

undertaking D&C role. Establish PPP Infrastructure Fund or Equity Partnerships to act as long term equity holder. Equity Fund/Partner strategy under development.

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60+ PPP Transactions Closed to Date, Valued at ~ $15B; half in healthcare sector. 10-12 Projects - CAD$3B+ / Year over Next Five Years; two thirds of future pipeline in healthcare ; majority large scale replacement hospitals in Ontario 12 Projects Currently in Procurement Phase; Healthcare-Ontario/BC; Courts-Ontario; Education-BC/Alberta; Office / Accommodation – Federal 28 Projects Identified for Future Procurement in Ontario; 17 Healthcare, 8 Justice, 3 Child & Youth

Canada - Market Attractiveness

A Strong Sustainable Pipeline in Social Infrastructure PPP projects

Source: Published Province Information; CC PPP published information; Interviews with Provincial/Federal Agencies – Partnerships BC, Infrastructure Ontario, Treasury Board of Alberta, Public Works & Government Services Canada; Chart excludes Transport PPP, Quebec & smaller Canadian provinces.

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Canada - Market Attractiveness

Visible Pipeline of Projects

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Capella Capital

A Partnership With Lend Lease

Business Scope

• Financial advisory and project origination services for projects in Australia in the health, education,

justice, housing, roads, transport, defence and utilities/municipal services sectors

• The procurement of Project Equity participations for LLC on projects in which the Partnership is

acting as project sponsor or financial advisor

• The management of LLC Project Equity participations on PPP projects in Australia in which LLC

has an equity participation role

• Infrastructure advisory services to external third parties clients
• Asset management services to Project Companies set up as part of Projects originated by the

Business.

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Capella Capital

A Partnership With Lend Lease

Business Rationale

• Capella provides LLC a low cost, low risk entry into the PPP and infrastructure origination market.
• Preference is to support the Lend Lease integrated model where possible – maximises control of the deal

and aggregate returns to the Lend Lease Group and Capella Capital.

• However, for the business to achieve necessary scale, Capella will need to operate in geographies and

sectors where Lend Lease does not currently have an operational presence.

• Earnings streams are such that Capella will be able to make a scale contribution on a stand alone basis.
• Capella is a fee based business and relatively low risk. Bid cost management is the key risk.
• As project sponsor Capella can provide other Lend Lease group companies (Construction, Development,

Ventures) access to markets and deals that are not readily accessible.

• Project equity investments will be made and controlled directly via Lend Lease Infrastructure Investments,

however Capella will be fully aligned to the performance of equity via risk/reward mechanisms

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