YANGZE PORTSINVESTMENT OPPORTUNITIES

IN ONE OF CHINA’S BIGGESTS GROWTH ENGINES

Port Investor - February 2012By InduStreams

The Yangtze River – An overview

The Yangtze runs through 10 provinces covering a region with a population of 430 million that contributes about 25% of China’s GDP

In 2010 more than 1.3 billion tonnes of cargo and 7.3 million TEU (containers) were transported on the Yangtze

The combination of continuous improvement in capacity (depth and navigability), focus on developing the Western regions and improving the environment create strong fundamentals for continued growth in Yangtze area

The Yangtze river stretches about 6,300km from Tibet to Shanghai of which 2,600km is navigable

The lower reach covers the section between Nanjing and Shanghai, it is the main river transportation channel of the Yangtze River Delta (YRD), which is one of the most developed regions in China.

YRD include the provinces of Jiangsu, Zhejiang and Shanghai. With 130 million people it contributes 22% of GDP and 28% of export/import of China and is expected to remain the key manufacturing and export/import center of the country.

Throughput in this section is about 70% of total Yangtze throughput in terms of cargo weight.

Ocean going vessels ships can reach Nanjing but cannot go beyond due to bridges after Nanjing.

New developments continue to take place throughout the YRD and in particular on the north bank.

The Lower Reach

NanjingNantong

Taizhou

Yangzhou

TaicangChangshuZhangjiagang

JiangyinChangzhou

Zhenjiang

Taica

ng

Nantong

Changsh

u

Zhan

gjiag

ang

Jiangy

in

Taizh

ou

Changzh

ou

Zhen

jiang

Yangzh

ou

Nanjin

g0

40

80

120

160

Throughput (million tonnes in 2009)

Lower reach ports:Shanghai - Nanjing

The middle reach covers the section between Nanjing and Yichang city, and the economies and provinces of Anhui, Jiangxi, Hunan and Hubei.

The hinterland provinces have a population of total 223 million, contributing about 13% of national GDP.

Throughput in this section is about 25% of total Yangtze throughput In terms of cargo weight.

The middle provinces are gaining weight in national industry output and consumption. Transportation via Yangtze has been considered as key factor of development by all provinces in this section.

Depth varies from 3m to 9m in this section allowing for vessel size of 3,000 to 5,000 tonnes or 100-300 TEU for container shipping.

New developments are seen in many of ports in this section and particularly in Wuhan.

The Middle ReachWuhu

Tongling

Maanshan

Anqing

Jiujiang

Wuhan

Wuhan

Yueyang

Jingzhou

Yichang

Middle reach ports: Wuhan - Nanjing

Middle reach ports: Yichang - Wuhan

Maansh

anW

uhu

Tongli

ng

Anqing

Jiujia

ng

Yuey

ang

Wuhan

Jingzh

ou

Yichan

g0

40

80

Throughput (million tonnes)

The Upper ReachWanzhou

FulingChongqing

LuzhouYibin

The upper reach covers the section between Yichang and Yibin.

Chongqing is the main port in the area but the hinterland economy stretches far into among others the Sichuan province.

A population of 110 million live in the area with an associated economy of (GDP) $328 billion or about 6% of national GDP.

Throughput in this section is about 5% of total Yangtze throughput In terms of cargo weight.

Rapid volume growth has been seen in this area particularly in Chongqing.

The “Go West” policy and the improvement of navigation condition caused by the Three Gorges Dam have are playing a big role in that.

Vessels from Chongqing port can be as big as 350 TEU or 5,000 tonnes. All vessels have to pass the Dam to reach lower section of Yangtze.

New development are seen in many of ports in this section and particularly in Chongqing.

Chongqing Luzhou Yibin0

102030405060708090

100

Throughput (million tonnes)

Note: Chongqing data include Fuling and Wanzhou

Upper reach ports:Yichang - Yibin

Infrastructure investment funds looking for investments with growth potential or acquisitions

Pension and insurance funds with allocation for infrastructure in Asia or China that have potential to provide stable cash flows

Private equity funds looking for small to medium sized investments with high potential upsides

Seed investors looking to place early capital for potential sell off at later stage (e.g. to a consortium)

Container, bulk, oil and other operators with interest to develop and cooperate with local port groups and governments

Developers and contractors with ability to take on large marine infrastructure investments

Who might this be relevant for?

EXAMPLE 1 – PORT WIDE PARTNERSHIP

Investment model(an example)

This purely an illustrative slide for a JV formed with a local Port Group or Government. Most agreements are made on a negotiated basis in China and therefore most models are possible. Many port areas have substantial options for further logistics developments on the landside.

Land+ Equity

Resources+ Equity

PortGroup Investor

Joint Venture

NewPort

LogisticArea

X% X%

China Consortium and how to participate

We have cooperation with global as well as local Chinese operators, funds, developers, port groups and many others.

As development and collaboration opportunities emerge we involve clients that we have formalized cooperation with and (if relevant) parties that may benefit our existing client network for specific developments or acquisitions.

China Consortium is already in motion in several locations. If you would like to be part of it please contact us at contact@port-investor.com and we would be glad to discuss your needs and relevant scope for the Chinese infrastructure market. For more information about developing markets with Port Investor please go to:

www.port-investor.com/marketdevelopment

APPENDIXChina Consortium by Port Investor

Massive container, dry bulk, oil and liquids markets - representing an immense share of world throughput

New segments such as bio fuel and others in rapid development

Limited competition - many ports with one controlling port group

Strong interest with local governments to attract “multinationals”

Negotiated deals are the norm (vs open tender) Less competition for developments More deal flexibility

11 Of the worlds

20 biggest portsand 50+ large

“secondary” ports

>25% Of world container

throughput

>60% Of world ironore demand

CHINA IN THE WORLD TODAY(a few key numbers on the Chinese economy and its Port Sector)

1.3Billion people

10Trillion USD

PPP adjusted GDP

>400 Mill. tons

of crude oil demand + target to further

increase oil supply reserves

But tapping into this potential requires a significantly different approach than most take - it requires a new model that engages local stakeholders in a positive way. For investors just bringing money the window of opportunity may well have passed in China.

10%Consistent growth last 30 years – may overtake the US by

2030

Opportunities in the Chinese Port Sector

Deal

Leaddevelopment

Focusedmarket engagement

Market scanning and intelligence

1 - 5

10 - 50

100 - 500

1,000 – 5,000

Many believe they can avoid building the pyramid – it’s an illusion, the deals you get access to are only as good as your pipeline.

The deal pyramid illustrates a few key rules of the marketplace:

a) The quality of the output is determined by the input – poor market scanning and market intelligence leads to poor leads

b) The most valuable deal leads are created pro-actively through focused market engagement

c) Each deal lead requires a strong contact and engagement base to develop into an actual investment

d) Only a few of the potential market targets will end up as deals - without a substantial pipeline no investments or deals

Typical challenges in securing investments

Deal

Leaddevelopment

Focusedmarket engagement

Market scanning and intelligence No or little market intelligence

available through desk research

Local presence required for any real insight – several sources

often required for verification

Multitude of local stakeholders including local government and port entities – wide engagement often req.

Any real engagement requires local relations and a real proposition to both

government and port

Actual leads eventuate from close dialogue and relation development – often very unstructured

Once into a stage of exploration of cooperation there is often presumed

exclusivity for a period

With the blessing of local partners and government, deals can be cut quickly

Many Chinese constituents like building on partnerships – one deal can lead to a

larger number of leads and deals

Challenges in the Chinese Port Sector

WHAT A group of operators, investors, and

developers many of which have world leading technology, experience and funding capability

Not a consortium in the traditional sense – there is no forced collaboration just collaboration opportunities in the many markets and sectors

WHY Combined leverage makes it possible to

create much more clout in the local markets

Complementary skill-sets from major port infrastructure fields that will allow synergies as each seek to develop in the market

We have been active in the Chinese port market for nearly a decade – the market and its constituents are well suited to engage with this form of “consortium”

The purpose of China Consortium

DEVELOPERS OPERATORSINVESTORS

Free ZoneMarine Infra.Construction

ContainerOil & LiquidDry Bulk

CONSORTIUM

Pension FundPrivate EquitySovereign Fund

CARGO OWNERS

Shipping linesPort industriesEnergy and resources

PORT PARTNERS

AsiaLatin AmericaMiddle East

APPENDIXChoosing your scope

All constituents have different needs as concerns the target locations and the type of investments. These are just a small handful of examples.

Greenfield Brownfield

Acquisition

Container

Bulk

Oil & Liquid

Logistic Zone

Free Zone

Majority

Minority

Financial investor

Developer

Operator$10+ million

$100+ million

$1+ billion

Seed investor

How can we help you……relevant scope (1)

Singapore Dampier Corpus Christi London SouthamptonShanghai Hamburg Gladstone Bergen WilhelmshavenRotterdam New York Primorsk Taichung CalaisTianjin Nantong Bremen Bombay BaltimoreNingbo Vancouver Long Beach Barcelona Forth PortsGuangzhou Yantai Corpus Christ Sao Sebastiao BilbaoQingdao Nanjing Algeciras Lake Charles PittsburghHong Kong Kitakyushu Pohang Trieste YanbuQinhuangdao Tangshan New Orleans Texas City KarachiDalian Itaqui Grimsby Baton Rouge New MangaloreBusan lianyungang Beaumont Saldanha Bay TampaNagoya Tubarao Huntington Paradip Milford HavenShenzhen Marseilles Constantza Jeddah OdessaSouth Louisiana Newcastle Mobile Tees LeghornHouston Kobe Hampton Roads Manila ParanaguaAntwerp Amsterdam Ports St. Petersburg Alexandria PaulsboroUlsan Osaka Valencia Taranto TarragonaChiba Tanjung Pelepas Plaquemines Gothenburg ValdezPort Hedland Sepetiba Dunkirk Tampa Texas CityPort Kelang Richards Bay Madras Jubail LiverpoolRizhao Hay Point Jawaharlal Nehru Tanjung Priok SavannahYingkou Novorossisk Los Angeles Zeebrugge BrisbaneKaohsiung Tokyo Genoa Mormugao LubeckInchon Santos Calcutta Durban PascagoulaYokohama Le Havre Izmit Duluth-Superior Angra dos Reis

Deal

Lead development

Focused market engagement

Market intelligenceand scanning

1-5

10-20

50-100

1,000-5,000

Step 1Focus among the many

Step 2Engage the most relevant

Step 3Deal development

Step 4Closing the deal

How can we help you……relevant scope (2)

Each constituent have different needs as concerns the deal pyramid. Some look for solutions all the way from market intelligence to closing actual deals, others only up to and including engagement of the relevant authorities and potential partners.

APPENDIXAbout Port Investor

InduStreams was founded in 2011 with a mission to create a more transparent, connected and informed infrastructure market place.

We launched Port-Investor.com in July 2011, a specific sector pilot with focus on port investing and the global port industry.

Current state of affairs

200+ port groups and 1,000+ executives and decision makers in the network and increasing China Port Investor and other regions are being launched Specific concepts in development with select investors and port groups

The Vision

Connecting all substantial port markets (5,000+ globally) with investors (1,000+ globally) Creating a transparent and informed market place driven by industry leaders and experts Unleashing the potential inherent in this sector by creating thousands of new investment

opportunities (we expect investment potential to exceed $1 trillion)

Want to know more or simply engage……contact us on:

contact@port-investor.com