Vito gamberale - role of private financing to push the development of transportation infrastructures forward in italy

Vito Gamberale
Role of private financing to push the
development of transportation infrastructures
forward in Italy
Italy and Europe ─ Policies to stay in the network
Milan, March 1, 2013
Vito Gamberale

Vito Gamberale
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TABLE OF CONTENTS
– Evolution of the Italian infrastructure system Pg. 3
– Lack of public funding and privatisations Pg. 6
– An anti-infrastructure attitude Pg. 9
– Deficiencies and boundaries of the Italian infrastructure system Pg. 10
– Highways Pg. 12
– Ports Pg. 14
– Airports Pg. 16
– Focus on the Lombardy Region Pg. 20
– Possible evolution for the financing of infrastructure Pg. 29
– A modern finance example: the role of F2i Pg. 33
– Production chains examples Pg. 41
– Conclusions Pg. 45

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Evolution of the Italian infrastructure system

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Overall, and particularly when it comes to infrastructures, post-war Italy
was «in the network» until the mid-70’s, thanks to its great tradition of
building big productions.
– Italy was the first country in the world to have a highway («Autostrada dei Laghi»,1924).
– In 1970 the extension of the Italian highway network (3,913 km)1
was second only to the German
highway system (4,461 km)1
.
– During the 60’s Italy ranked among the «leading countries» in nuclear power production (third
biggest installed power in the world – 640 mw – after the USA and the UK).
– Italy was among the first countries to develop hydroelectric plants on a large scale; in 1960 these
plants had already achieved the current installed capacity (about 20 gw) and covered almost
100% of the national power demand.
– During the 80’s Italy was the first country, together with France, to launch the project of a high
speed railway network (Rome-Florence).
Until the 80’s Italy had an adequate infrastructure system. The high cash
flow from the existing infrastructures contributed to the development of
new productions.
1
Data from: Eurostat.

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– Infrastructures in Italy have mainly been supported by public financing,
by institutions, as well as public national (IRI, ENI, ENEL, etc.) and local
(airports, local utilities, etc.) bodies.
– It worked well until the government could no longer support
development through the national debt.
– The main obstacles to the creation of new infrastructures in Italy arose
in the mid-70’s, which are still ongoing today.
These obstacles were basically caused by two factors:
1) first of all, a set of new attitudes against infrastructure were born from
pseudo-environmentalist beliefs, which contributed heavily to burden and,
in some cases, to block the decision-making process
2) secondly, the lack of public financing (worsened by the recent global
crisis), which had always been a driving force behind the development of
new big productions, added to the obstacles.
After 20 years, the opinion on infrastructures in Italy went from being
perceived as a development opportunity to an environmental threat.

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At the beginning of the 90’s, Italy was involved in important processes
that forced the country to radically change its economic policy choices:
–the Economic decline: Italy’s GDP constantly ranks below the European average
–the First Republic’s economic crisis
–the adoption of the Euro, accounting for the need to drastically reduce deficit, debt and inflation with
very strict financial actions
–the European Community urged a reduction of the public commitment in the member states’
economies (Commissioner Van Miert will take advantage of Italy’s particular weakness to «push» the
country a great deal).
The following governments were forced to cut public expenditure and
«cash in».
Italy could no longer maintain its role of investor for building and
managing public works, and consequently began entering a phase of
«big privatisations».
Lack of public funding and privatisations

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Privatisations are usually seen negatively. Contrary to popular belief, they often
had positive effects, even if they are different, based on the applied strategies.
7
1. Initially, all suffering manufacturing companies were privatised. Such privatisations
were usually achieved by selling to private entities operating in the same business
sector, which ensured a successful result of the privatisation itself (e.g. Nuovo
Pignone in 1994 and ILVA in 1995).
2. The second step was to extend privatisation to companies operating in the service
and infrastructure sectors, which earned the greatest proceeds. These
privatisations were accomplished through:
a) Quotation of part of the assets at the stock exchange, with very successful results
for the government (ENI since 1994, ENEL since 1999), but not always for the
investors (ENEL).
Former public bodies became (and still are) real efficient «public companies» able to
compete at an international level.
b) Direct sales to private entities, often on a «family-like» basis (Telecom, 1997;
Autostrade, 1999; ADR, 2000), and with disappointing or contradicting results (in
particular for TLC companies).
This model generated a «hit and run» attitude, risking the ownership of foreign entities
of strategic Italian assets (together with their cash flows), which would locally be
managed from a financial point of view only.

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– for infrastructures/service, it is better to favour stock exchange
quotations (such as ENI or ENEL) or share ownerships of «public
companies» (such as F2i, see ultra)
– set lock-up bonds (for at least 5-7 years)
– always introduce the concept of «earn-out» to favour the public
vendor in case of re-selling the company within 5-10 years
– set up bindings to prevent selling the company to buyers who would
place an exceeding acquisition debt on the company itself.
A couple of rules taught by the privatisation of the infrastructure
sector:

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The difficulties in creating new productions in Italy aren’t just due to a lack of
assets, but also a lack of authorisation processes.
Since the mid-70’s, infrastructure came to a halt following some thoughtless political
actions (in 1975, Law 492 prevented the construction of new toll highways; a referendum
against nuclear power; etc.), which led to discontinuing the development of new
productions:
− an overall lacking of strategic synergy (productions were often driven by local interest and
were not included in the national plan)
− an extreme fragmentation of the authorisation process (VIA, service conference, fire brigades,
ENAC, air force, superintendence of architecture and landscape, regions, municipalities, etc.)
− an environmental policy with a «fundamentalist», unscientific approach
− excessive burden from local authorities – often following a «NIMBY» logic – in the
decision- making process with «permanent tables» (inherited from 1968)
− territorial «compensation» requirements altering the financial plans
− frequent appeals to regional administrative courts and to the Council of State, which
accounts for slowing down the process
− continuous and repeated violation of concession rights and inadequate rates.
An anti-infrastructure attitude
The exaggerated «democratisation» of the decision-making process and
the indiscriminate appeals to judicial authorities lengthen the approval
process indefinitely and prevent the creation of new productions.

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Deficiencies and boundaries of the
Italian infrastructure system

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– The anti-infrastructure attitude and the lack of public financing
consequently created a phase of extreme shortage of new big
productions and a lack of maintenance for the existing
infrastructure.
– This attitude’s negative effects were amplified by the parochial
approach in managing the existing infrastructure.
– All of the above accounted for:
– an «infrastructure gap» between Italy and other European
countries, which widened over the last 10 years
– an overall ownership fragmentation of the assets, often held by
small local bodies with a very low presence of big players of
national standing.
Deficiencies and boundaries of the Italian infrastructure system
This gap is also visible in some of the main transportation infrastructures.

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Highways
Data from: Eurostat.
In the highway sector, for example, the extension of the Italian network hasn’t
basically changed since the late 70’s, unlike that of in other main European
countries.
12,819 km
14,262 km
11,392 km
6,668 km
3,913 km
4,461 km
1,542 km1,585 km
Highway network evolution in the main European countries from 1970 to 201 (km)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1970 1975 1980 1985 1990 1995 2000 2005 2010
Germany Spain France Italy

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Therefore, it should not come as a surprise that the network extension,
compared to population, lies much below the European average
European highway network – Density per inhabitant
(km per million inhabitants)
Average = 181 km/mil inhabitants
Data from: CIA The World Factbook 2011.
This shows that Italy needs to develop over 4,000 km of new highways to
match the European average, which would imply a cost ranging between
80 and 180 bil€1
!
Highways
1
Average cost: between 20 mil €/km (European benchmark) and 45 mil €/km (average costs for the EXPO highways).
111
212
184
251
0
50
100
150
200
250
300
Italy Germany France Spain

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Ports
Among the countries of continental Europe, Italy is the first to use maritime
transportation of merchandise, and has a very large number of commercial
ports (24). Nonetheless, the Genoa port is the only one to appear in the «top
ten» list of commercial ports (still, in the second to last position)...
Transported merchandise through main European ports
(thousands of tons)
Data from: Assoporti and InforMare 2011
Average
434,551
187,151
132,216
92,887 88,073 82,200 80,585
67,561 50,393 48,796
0
100,000
200,000
300,000
400,000
500,000
Rotterdam
Anversa
Hamburg
Amsterdam
Marseille
Algeciras
Bremen
LeHavre
Genoa
London

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Ports
…and only one port (Gioia Tauro) is included in the «top ten» container port
list: Transported merchandise through main European container ports
(thousands of container units)
Data from: Assoporti and Livorno Port 2011
Average
11,877
9,014
8,664
5,915
4,327
3,174
2,305 2,215 2,207 2,034
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Rotterdam
Hamburg
Anversta
Brema
Valencia
Algeciras
GioiaTauro
LeHavre
Zeebrugge
Barcelona
The Italian ports are administered by a mainly public and parochial
management approach, with no network strategy, which often leads to
the overall inefficiency of the structures.

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Airports
Italy is the first European country
for airport density on the
territory1
…
Regional/national airport density (n. of
airports/100,000 km2
- 2011)
1
Airports with over 100,000 passengers/year
Average number of passengers per airport – in
millions
(airports with over 100,000 passengers/year - 2011))
Source: Assaeroporti and the main airport associations
of the represented European countries.
...these airports, however, are usually
small compared to those of major
European countries…
4.50
9.01
3.54
6.18
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11
6
8
7
0
2
4
6
8
10
12

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Airports
…the gap widens if we consider the average traffic in the biggest airports
(>1 mil passengers/year):
Average number of passengers per airport –
in millions (airports with over 100,000
passengers/year - 2011)
Source: Assaeroporti and the
main airport associations of the
represented European countries
The uncoordinated fragmentation of this sector, often due to ownership by
local public bodies, prevents the development of a strategy and leads to a
lack of investment resources. Unlike the other big European airports (Madrid,
Paris, Frankfurt), which underwent significant renovation and expansion in recent
years, there have been no relevant works in this sector in Italy.
6.26
10.89
9.01
8.30
0.00
2.00
4.00
6.00
8.00
10.00
12.00

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The plan has seemingly recognised the major difficulties of this sector
and has identified the correct solutions for the rationalisation and
efficiency improvement of the structures in their gradual privatisation.
18
Airports – National Plan for Airport Development
– The government finally recognised this obstacle and developed a National
Plan for Airport Development, which was 25 years overdue (still not
converted into law yet).
– The Plan’s objective is to «promote a sustainable development of this
sector by identifying the necessary actions to rationalise the ground and air
services, and concentrating the investments on priority infrastructure works
while increasing the system’s overall competitiveness».
– The Plan’s key elements are:
– airport classification based on their national relevance (see following
slide), and prevention of the creation of new airports
– identification of priority infrastructure works in the existing airports
– economic recovery of the management and gradual privatisation
– incentive for the «airport networks» managed by a single player, in
order to optimise organisation and costs.

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F2i holds (direct and indirect) shares in seven main airports identified by
the governmental National Plan for Airport Development and is currently
evaluating the acquisition of further assets:
Ongoing tender
Small (indirect)
share
(Indirect) relative
majority share
= Airports with a direct presence of F2i
= Airports with an indirect presence of F2i
Open
discussions
Pitching
The F2i airports transport 53.7
mil/passengers, which is 36.6% of the
total national traffic.
19
Airports – National Plan for Airport Development
Other airports
Traffic over 1,000,000
Traffic over 500,000 with
specific territorial
characteristics
Territorial continuity
Other
airports
Rimini: strongly increasing traffic trend
Salerno: used to delocate traffic from the Naples airport

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Focus on the Lombardy Region

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Lombardy is the most populated (over 9.5 mil inhabitants, 16% of the total population),
and richest region in Italy and has the highest concentration of highway networks
compared to population and the GDP, making the region a critical area on the territory:
Italian highway
network
compared to
population
(km per million
inhabitants)
Italian average = 111 km per million inhabitants
Italian average = 4.2 km per bil € GDP
Italian highway
network
compared to
GDP (km per
billion € GDP)
76 km/mil inh.
with the EXPO
highways
2,3 km/bil €
GDP with the
EXPO highways
The Lombardy Region is a typical example showing how difficult it is to create
new infrastructures in Italy.
888
262 232 203 183 170 147 128 128 113 113 110 107 80 77 74 65 58 49
0
0
100
200
300
400
500
600
700
800
900
1000
Lom
bardy
Tuscany
Piedm
ont
Lom
bardy
Tuscany
Piedm
ont
26,6
12,1
8,8 8,7
7,4
6,3 6,0 5,8 5,7
4,5 4,5 4,0 4,0 4,0 3,6 2,7 2,7 2,7 1,7
0,0
0,0
5,0
10,0
15,0
20,0
25,0
30,0

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Focus on the Lombardy region
In order to reduce this gap, a few projects have been in a development stage in
recent years to expand the highway network in Lombardy with the construction of
three new highways, which today are known as the «EXPO 2015 highways».
9,422 mil €1
– The Pedemontana Lombarda road (87 km + 70 km normal roads): 5,000 mil €
– The Bre-Be-Mi road (62 km): 2,420 mil €
– The Milan external east ring road (33 km): 2,002 mi l€
Existing
highways
Highways in
development
Existing Italian highways and highways in
development
EXPO
highways
1
Data from: Osservatorio Territoriale Infrastrutture Nordovest – January 2013.

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The main sponsor for the EXPO highway is Milano-Serravalle Tangenziali SpA,
a very small company in comparison to European operators…
The Milano-Serravalle is a company of mainly
public assets, controlled by the Province of
Milan through ASAM:
ASAM 52.9%
Milan municipality 18.6%
Gavio Group 13.6%
Other public partners 14.9%
Source: balance 2011
…however, it is committed with significant shares (about one-third) in the
construction of new highways.
Data indicated
in mil €
Network (km) Revenues EBITDA % Profit % PFN NFP/EBITDA
MI - Serr. 185 211 101 48% 17 8% 227 2.25x
Atlantia 5,079 3,976 2,385 60% 840 21% 8,970 3.76x
Abertis 3,772 3,915 2,454 63% 775 20% 13,882 5.66x
Brisa 1,305 670 459 69% (82) -12% 3,517 7.66x
APRR 2,244 2,181 1,399 64% 395 18% 6,202 4.43x

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The aggregate financial plan for all 3 projects1
The efforts are seemingly
exaggerated compared
to the economic
«potential» of both
entities.
24
Almost
50
public and
private
partners!
Could become 2,100
mil €, since the banks
financing
Pedemontana have
requested an equity
increase of up to 1 bil €
from the partners.
1
Modified data from: Osservatorio Territoriale Infrastrutture Nordovest – January 2013.
Investments mil € % Coverage mil € %
Construction 7,370 78%Equities 1,850 20%
Other costs 2,052 22% Public financing 1,250 13%
Banks 6,322 67%
Total investments 9,422 100%Total coverage 9,422 100%
Investors % mil €
Milano-Serravalle 34% 637EBITDA '11: 101 mil €
Autostrade per l'Italia 5% 89EBITDA '11: 2,385 mil €
Other highways 8% 139
Intesa SanPaolo Group 22% 399
Builders 20% 376
Other 11% 210
TOTAL 100% 1,850 Of which about 510 (28%) already committed

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Although the Milano-Serravalle financial structure seems to be solid today
(see previous slides), the efforts still needed to create these three projects
works are considerable:
–Milano-Serravalle has already given out about 160 mil € for both EXPO projects, with
480 mil € more to be committed (which could rise to 650 mil € in case the banks require
more equities for Pedemontana), which is 4.8 times its EBITDA1
and 1.3 times the current
net assets2
(366 mil €), and should therefore double. The majority of its partners, however,
are public and may encounter obstacles when raising funds.
–Although the company accepted a PFN/EBITDA ratio equal to that of Atlantia (3.8 times), it
should raise a debt of 160 mil € more, and collect at least 320 mil € from the partners (which
are still considered high amounts for public entities).
–It wasn’t surprising that the the Milano-Serravalle shareholders’ meeting, held at the end
of December 2012, had rejected the capital increase request from the executive board
because of the partners’ rejection.
The main sponsor’s limited dimensions and the high number of minor
shareholders account for the permanent obstacles preventing the progress
of the project construction (e.g. the settling of financing is still shaky for all
three projects, and only Bre-Be-MI is arriving to a final completion).
25
1
6.5 times in case of further increase of Pedemontata equity.
2
1.8 times in case of further increase of Pedemontata equity.

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− M6 Toll (43 km), is a toll bypass for the overcrowded M6 (160,000 vehicles/day
compared to the estimated 72,000) in the Birmingham area.
− The production was achieved thanks to the project financing through private
entities (25% Highway Group, 75% Macquarie Group), who acquired the M6 Toll
concession for the following 53 years.
Characteristics
− 1989: birth of project
− 1992: concession assigned
− 1997: project approval
− 2000: start of construction work
− Opening to traffic: 2003 (3 months in
advance) – average: about 14
km/year
History
Timespan: 6 years after project
approval
− Total cost was about 880 mil € (about 20 mil €/km).
− The project financing was characterised by a financial leverage of about 80% (debt
ratio ≈4:1).
− This was made possible thanks to two promoters (one of which was Italian), and to an
innovative toll regulation that grants the concessionary company complete freedom in
setting the tolls.
Costs/
Financing
The M6 toll highway in Great Britain is an example of how solid partners can succeed in
creating a big project according to a planned budget and timeline.

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– Italy’s main highway projects are, on the contrary, largely delayed.
– The heterogeneity of partners and the cost increase – which ranges from 8 to over
100% during the approval process (usually due to compensations, variables and
higher expropriation costs) – are the main causes behind the delays on the set
timelines.
– The cost per km is at least 3 times higher than the European benchmark (M6 Toll –
UK).
Due to cost and time increase, the projects have not initiated because the
financial sources could no longer deal with such increased expenses.
It should not come as a surprise that no project financing has been completed
on the due date!
Highway km Concept Construction
kick-off
Construction
completion* (b)
Timing
(b)-(a)
Cost
increase
Cost
per km
(mil €)
Project
financing
status
M6 Toll (UK) 43 1989 1997 2000 2003 6 880 880 +0.0% 20.5 Completed
Pedemontana
Lombarda
157 1950 2006 2010 2016 10 4,560 5,000 +9.6% 31.8 To be
completed
Bre-Be-Mi 62 1996 2001 2009 2013 12 1,174 2,420 +106.1% 39.0 Completed
TEM 33 2003 2005 2012 2015 10 1,578 2,002 +26.9% 60.7 To be
completed
*If currently estimated timelines are met.
Preliminary
project
approval (a)
Initial
costs
(mil €)
Final
costs
(mil €)

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Focus on the Lombardy region
To speed up the construction of new projects, guarantee its creation
according to the scheduled timing, and allow for the completion of the
project financing, it would be necessary to centralise costs and
responsibilities in the hands of a single big private partner!
– In recent years, the main public partners have tried many times to privatise Milano-
Serravalle, but all their attempts to date have been unsuccessful:
2011 2012 2013
June
1st announcement
of competition –
Municipality
18.6% at 170 mi €
(5.08 €/sh)
Deserted
October
2nd announcement
of competition –
Municipality
18.6% at 145 mil €
(4.33 €/sh)
Deserted
November
3rd announcement of
competition –
Municipality
(together with SEA)
18.6% at 145 mil €
(4.33 €/sh)
Deserted by Mi-Serr
October
1st joint
announcement of
competition –
Municipality/Province/
other public partners
82% at 650 mil €
(4.45 €/sh)
Deserted
January
2nd joint announcement of
competition –
Municipality/Province/other
public partners
82% at 650 mil €
(4.45 €/sh)
Ongoing
– A price beyond measure, uncertainty on the financial commitments for highways and for
the EXPO and (as was the case of the first announcements), the substantial lack of
governance allowed to buyers, accounted for the operations’ failure.
– In addition, in 2012, the company – as well as other Italian concessionary companies –
registered a 6.3% traffic decrease!
These announcements for competition were actually attempts by the
public bodies to cleanse their own cash difficulties with private funds,
without taking into considerations the appropriate conditions to attract
committed and trustworthy assets.

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Possible evolution for the financing of infrastructures

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New infrastructures need to be financed by existing infrastructures!
– Indeed, infrastructures generate significant profits (EBITDA margin ≥50%),
which can, and must, finance development.
Obviously, in order to be able to finance new projects, the existing
infrastructures need to have considerable dimensions and should not be
fragmented.
– My self-evident answer to this question is:
As we just discussed, the lack of public funding and the anti-
infrastructure attitude are developing a series of hurdles that slow down
development of new projects.
Who, then, can finance infrastructure nowadays?

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In order to meet these goals, a modern financing approach is necessary, a new
«institutional capitalism»! Institutional investors (banks, foundations, pension
funds, etc.) need to finance the creation of big sector «public companies»,
«national champions» capable of promoting an efficient management and the
development of infrastructure assets. 31
– In the infrastructure sector, Italy should push homogeneous aggregations
forward to create «national champions» in the different sectors!
– Only big and specialised players (following the Atlantia and Gavio model in the
transportation sector, as well as ENI, ENEL, etc.) can generate enough cash
flows to create new investments.
– To date the concepts of «aggregation» and «industry» are missing in the
individual sectors.
– It is necessary for each player to specialise in a single industry to allow an
efficient management of quality.
Despite the presence of a couple of major players (e.g. Atlantia Group and
Gavio Group in the transportation sector), most of the assets are still
partitioned (and also characterised by a local management approach)
and cannot therefore create «the system».

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– For this evolution to happen, it is also necessary for the role of the public sector to
be stated more clearly. Today the public sector can no longer finance infrastructures
and, therefore, cannot own them.
– The government should switch from acting as a financier and manager to
become a regulating body, working through authorities to ensure the following:
– impartial strategic consultancy, inspired by national interest, instead of parochial
attitudes
– the rationalisation and specialisation of the players operating within different
sectors
– clear and stable regulations
– strict decision-making timelines and coordination of the different bodies involved
in the authorisation processes
– an environmental policy based on scientific data
– adequate and fairly-profitable rates
– surveillance on private operators to make sure they accomplish their
commitments as per the investments and quality of their services to the end
users.
The public sector has to leave the management and operational control to
private entities to maximise the efficiency and valorisation of the company .

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A modern finance example: the role of F2i

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– The lack of public financing, which prevents the creation of new
infrastructures and the efficient management of the existing ones, can
only be balanced today with private financing.
– The key topics brought out through this analysis include:
o the role of infrastructures in Italy’s post-WWII development
o the fragmentation of infrastructures, the frequent public ownership
and the need for the privatisation of some key sectors
o a lack of public financing
o the possibility to create «national champions» specialised in the
various infrastructure sectors following the model of big Italian and
foreign players.
…we therefore came up with the idea of F2i, a private yet institutional
fund that can aggregate the existing infrastructures in industries
using funds from this asset management to allow for their
development.

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– Thanks to a fundraising of 1,852 mil €, F2i is the biggest fund operating in
Italy and counts among the biggest country infrastructure funds worldwide.
– Recently, F2i has performed the first closing of a second fund, which
already raised 575 mil € (final target: 1,200 mil €).
– F2i was created as a private, yet institutional tool by high standing
sponsors, who contributed to the establishment of the Fund’s solid
reputation:
 the government, through CDP
 major Italian banks (Unicredit, Intesa SanPaolo)
 an important international bank (Merrill Lynch – BoA)
 the networks of former banking foundations and private welfare
funds
 life insurance companies and pension funds.

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 Following its mission and the institutional nature of its investors, F2i
aims for long-term participation with an industrial understanding.
(FONDO I)
Fundraising by «limited partners» is already
under way for further closing.
F2i investors (per category)
Categories (Fund I) N. Invest. Subscribed
amount
% on the
Fund
Banks 7 593 M€ 32.02%
Welfare funds 13 487 M€ 26.30%
Foundations 26 439 M€ 23.70%
Insurances 4 175 M€ 9.45%
Public financial institutions (CDP) 1 150 M€ 8.10%
Management SGR / Sponsors 1 8 M€ 0.43%
Total 52 1,852 M€ 100.00%
Categories (Fund II) - First closing N. Invest. Subscribed
amount
% on the
Fund
Banks 2 200 M€ 34.78%
Welfare funds 2 90 M€ 15,65%
Foundations 6 185 M€ 32.17%
Public financial institutions (CDP) 1 100 M€ 17.39%
Total 11 575 M€ 100,00%

Vito Gamberale
37
1
1
For SAGAT all commitments until 2014 are
considered (share acquisition by other
private partners)
F2i has created seven industries now reunited in a structured group, committing
over 2,150 mil € (90% of total fundraising).
1
Agreements in development
75% 85.1%
100%
100%
100% 40%
49,0%
100%
60.0%
100% 70%
67.7%
44.3%
87.7%
100.0%
53.8%
85.0%
15.9%
100%
49.8%
26.3%
2,099.7 97.5%
31.7 1.5%
21.9 1.0%
2,153.3
88.7%
HIGHWAYS
237.5 11.0%
242.5 11.3%
53.5 2.5%
AirportsTLCRenewables
748.2 34.7%
Water
Environ
ment
Infracis
Alerion CP
Committed
Fund 1+2
F2i
Reti Italia
ERG
2iGas
G6
F2i Rete Idrica
Italiana
Mediterranea
delle Acque
436.5 20.3%
Gas
SAGAT
Iren Ambiente
F2i
Ambiente
TRM
HFV
F2i
Aeroporti
GESAC
SEA
Saster Net
Metroweb
Italia
Metroweb
Brescia
Metrobit
252.0 11.7%
129.5 6.0%F2i Energie
Rinnovabili
Dismissals
Fund management costs
TOTAL COMMITTED
% of raised funds

Vito Gamberale
38
− In the timelapse of a few years, F2i offered a new business model for
infrastructures in Italy, creating a structured group of companies
and company industries, each representing a benchmark in their
respective sector.
− The companies where F2i holds the majority of shares or plays an
important role in their administration, registered in 20121
:
o aggregated turnover: 1,690 mil €
o EBITDA: 738 mil € (EBITDA margin: 44%)
o employees: 8,370
o investments: 427 mil € (58% EBITDA)
1
Aggregated closing data 2012. Referred to: ERG, 2i Gas, G6 Rete, Alerion CleanPower (estimanted on 2012 3rd
quarter data), HFV, Mediterranea delle Acque, GESAC, SEA, Metroweb, SasterNet and SAGAT.
In 2012, F2i subsidiaries have invested almost 60% of their EBITDA.

Vito Gamberale
39
Thanks to F2i, important assets managed by foreign companies have
returned, together with their cash flows, under Italian control:
− E.On Rete Gas
− Gesac
− G6 Rete
− Metroweb

Vito Gamberale
40
F2i was created as a private, yet institutional investment tool to aggregate
existing infrastructures in production chains in order to guarantee
subsidiaries with:
– operational effectiveness
– a balanced financial management, avoiding that companies become
poorer through exaggerated debts and extraordinary high dividends
– a focus on development, reinvesting a great part of the cash
flows generated by strengthening managed networks and assets.
In a time of very poor public financing, the infrastructure gap – both
quantitative and technological – needs to be filled with the modern
finance model proposed by F2i: using resources from an efficient
management of existing infrastructures to finance the development of
new plants and works.

Vito Gamberale
A production chain example
41
− At the end of 2010, F2i accessed the airport sector acquiring 70% of Gesac,
the company managing the Naples Airport, Capodichino, thanks to a
concession expiring in 2043.
− Gesac was founded in 1980 through the input of the Naples Municipality and
Province and by Alitalia. In 1997, following the privatisation process, public
bodies sold a participation of 70% to the UK BAA Group (later purchased by
the Spanish Ferrovial Group).
− In recent years, the company promoted a significant investment plan to
develop the airport infrastructures (over 190 mil € of cumulative Capex
between 1998 and 2009, compared to net cumulative gains of 47.6 mil €),
partly financed with public funds (63 mil €) and partly self-financed.
− In the timespan of 2009-2012, about 65 mil € investments were
accomplished.
− In 2011, Gesac managed a passenger traffic of 5.8 mil/passengers, and
employed over 320 people.
AIRPORTS
The airport industry is a perfect example of how F2i works to
aggregate infrastructure assets.

Vito Gamberale
42
AIRPORTS
− At the end of 2011, F2i purchased 29.75% of SEA shares from the Milan
Municipality; SEA manages the airport network of Milan (Linate and Malpensa
airports) since 1948. The current 40-year agreement has been undersigned
alongside ENAC in 2001.
− SEA and the group companies provide all the related activities and services,
such as airplane landings and take-offs, airport security, the activities related to
passengers and the handling of merchandise, as well as commercial services
− Milan’s airport network is located in one of the most important areas of
economic development in Europe (Lombardy’s GDP exceeds the national
GDP by 20%) and represents a bridge between the Mediterranean region and
continental Europe.
− In 2011 Milan’s airport network registered 28.4 million passengers, 310,00 air
flights and over 470,000 t of merchandise.
− Turnover is about 580 mil € (net profit 54 mil €); over 5,000 people employed.
− Development plans include investments of about 600 mil € by 2015
(capacity increase, and a third runway at the Malpensa Airport, enlargement of
the Cargo area, etc.).

Vito Gamberale
43
AIRPORTS
− At the end of 2012, F2i acquired, together with the Turin Municipality, 28% of
SAGAT, the company that manages Turin’s Sandro Pertini airport since 1956.
F2i has also acquired another share of this company (22.8%) from Sintonia
(Benetton Group) becoming thus the leading shareholder of SAGAT. Further
acquisitions are planned by private partners within 2014, for a total share of
67.7%.
− SAGAT will manage Turin’s airport until 2035.
− Turin’s airport is located in one of the richest Italian regions (Piedmont) –
ranking fifth for GDP (about 124 bil €, 8% of the total national GDP), fourth for
exports (10% of the total national exports), sixth for number of inhabitants and
second for area.
− Piedmont’s strong business and tourist vocation and its low
passengers/province inhabitants ratio (1.6 times vs. 2.4 times on national
average) provide the airport with a solid development potential.
− In 2012 the airport registered a total traffic of 3.5 mil passengers (average
annual growth 2000-2012: +1.9%).
− Its turnover reaches 64 mil € (net profit 3.6 mil €) with margin levels that
represent a benchmark for the country (EBITDA/passenger 4.2 € vs. 2.4
national average). The airport employs almost 410 people.
− SAGAT is also involved in the airports of Florence (33.4%) and Bologna
(7.21%).

Vito Gamberale
44
− F2i made its entrance in the airport industry with a specific know-how and a
track record with a growth perspective:
o thanks to Gesac, F2i «brought back» the considerable cash flows produced
by the company to Italy and equipped them for growth and development
o thanks to SEA and SAGAT, F2i recognised the needs of local bodies to sell
Italy’s strategic assets to reduce their debt and, again, prevent them from
going under foreign control.
− In 2012 these two companies handled 37 mil passengers, over 25% of the
total national number (53.7 mil passengers and 36.6% with companies
participating indirectly ).
− The long-term objective is to promote business and infrastructure
development, rationalisation and achievement of high profitability levels,
with benefits for satellite activities and the socio-economic system.
− F2i pursues an investment strategy that aims to create a new airport
network: therefore, a concept of «national network» instead of
«runway-focused» system, which would favour aggregation, the
closing of unemployed airports, and a recognisable, modern airport
format of quality.
AIRPORTS

Vito Gamberale
Conclusions
46
− Infrastructures, transportation in particular, have driven Italy’s
development for decades.
− The anti-infrastructure attitude and the following decision-making
paralysis that hit Italy in the last decades, worsened by the public
finance crisis, leading to Italy’s decline, especially when compared with
major European countries.
− The ownership evolution (from public to private), which started in the
90’s with the first privatisation changes, has not been completed, and is
causing market fragmentation as well as, in some cases, management
inefficiency.
− These deficiencies have limited and brutally blocked the development of
infrastructure at times, blocking the whole national economy as a result.
− Today, Italy has much work to do to catch up: it is necessary to close the
gap within the infrastructures, which represent the connective tissue of
any modern economy.

Vito Gamberale
Conclusions
47
− To function properly, these infrastructures have to be created and
managed as networks. They have to develop and be coordinated
rationally: their management should succeed on a «country system»
basis, replacing the «parochial types of management» and financial
speculation.
− Government and the private sector need to explain their respective
trade-off:
− the government, which can no longer support the infrastructure
development, needs to ensure strict timelines and profitable rates
and, through authorities, oversee and regulate a correct market
functioning, while leaving operational control to the private sector
− the private sector needs to adopt a long-term overview on
infrastructures, and bring «new resources» to prevent the burdening
of target entities with excessive debts, while committing to a
significant reinvestment of profits
− In Italy, as in other big countries, it is necessary to concentrate and
centralise such sectors, to create few «national champions» able to
ensure adequate investments, efficiency and transparency in
managing the assets.

Vito Gamberale
This achievement led F2i to launch a new Fund (already operational and
committed for almost 60% of the fundraising at first closing), that will allow
its work to progress further. 48
– The Fund has basically exhausted its dotation before the first deadline
of the investment period.
– This happend even though F2i operated with extreme caution in order
to avoid hasty operations in a time of great uncertainty and a progressively
worsening global crisis.
Conclusions
F2i is a clear example of this model in Italy. A true «public company»
that could start an infrastructure network system (able to interact with
each other to push Italy forward) by optimising its management and
controlling its development.
− In order to achieve this result, it is necessary to establish an
«institutional capitalism model», which could access the necessary
resources to develop the networks (applying, if necessary, innovative
tools such as «project financing» and «project bonds»), which could
finance the growth of big public sector companies and guarantee their
management independence.

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