Investment Opportunity

Terminal 2 Puerto Valparaiso

August 2010

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

The information included in this document was provided by or on behalf of Empresa Portuaria Valparaiso (EPV). BBVA Asesoras Financieras S.A. (BBVA) gives this information with illustrative purposes only and neither assumes responsibility nor guarantees its accuracy and integrity, nor undertakes any liability to complement the same with additional information that may be available.

The information included in this document has been prepared with the exclusive purpose of assisting potential investors in their own evaluation of the concession to exploit the Terminal 2 of Puerto Valparaiso. Thus, this document does not intend to include all the information that a potential investor may require. It is understood that every individual receiver of this information will carry out his or her own independent research and will make his or her own economic financial analysis of the opportunity. The information herein shall not, under any circumstance, be a substitute for the independent research and analysis performed by the respective receiver.

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

1. Introduction
Empresa Portuaria Valparaso (EPV) is a state owned Chilean company whose object is to manage, exploit, develop and maintain Puerto Valparaso, which is located in the central zone of Chile. During third quarter of 2010, EPV will carry out an international tendering process with the objective of selling the concession to construct, operate and maintain the Terminal 2 of Puerto Valparaso. BBVA Asesoras Financieras S.A. (BBVA) has been mandated by EPV to act as its financial advisor in this process. Exhibit 1-1: Chile Central Zone

Valparaso San Antonio

Illapel
Santiago

Valparaso San Antonio

Los Andes Santiago Rancagua San Fernando Curic Talca

Source: BBVA

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

2. Investment Considerations
2.1. Attractive economic environment
Chile, a country that is safe for investing Chile has one of the most stable economies of Latin America, with a strong development and growth potential of trade volumes. th Chile ranked in the 30 place of the Global Competitiveness Report 2009 - 2010 of the World Economic Forum, and continues to be the Latin American leader. The Chilean Government is seen as a solid institution, with transparency and openness levels higher than the average of the European Union. Chile, Mexico, Peru and Brazil are the only Latin American countries that have an investment grade rating. Chiles sovereign debt is rated as A+ by Standard & Poors.

Exhibit 2-1: EMBI index by country

2.000 1.800 1.600 1.400 1.200 1.000 800 600 400 200 -Ene-06 Ene-07 Ene-08 Ene-09 May-06 May-07 May-08 May-09 Ene-10 May-10 Chile Sep-05 Sep-06 Sep-07 Sep-08 Sep-09

bps

Brazil

Argentina

Peru

Mexico

Colombia

Source: Datastream

Chile has a solid legal framework (Decree Law 600 of 1975 or statute for Foreign Investment) that gives protection to foreign investment. The Chilean banking and financial markets are well developed, with a high rate of local savings through the pension system. Chile has opted for an open economy, competitive and free trade-oriented, disciplined in complying with international standards and with a trade policy compatible with a conservative macroeconomic policy. This has enabled the materialization of several Free Trade Agreements (United States, EU, South Korea and EFTA), which have fostered foreign trade.

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

V Region and Valparaiso: poles in development Puerto Valparaiso is located in the Central Zone of Chile, 110 km. away from Santiago, Chiles capital. The Central Zone covers regions V, VI, VII and Metropolitan and concentrates 61% of Chiles population and 64% of Chiles GDP. Over 90% of Chile's foreign trade is made through its ports and over 40% of the general 1 cargo mobilized in 2009 was through the ports in the V Region, Valparaiso and San Antonio. Attractive growth of general cargo transfer of the V Regions ports Between 2000 and 2009 Total General Cargo measured in tonnes, has had a compound annual growth rate (CAGR) of 5,9%, while the GDP shows a CAGR of 3,6%. It is expected that the trend of higher growth of cargo will continue over time Nonetheless, it is important to stand out the fact that the first half of 2010 has been significalty above the same period in 2009, showing a fast recovery of the transferred tonnes after not only a period of global economic crisis but also a local emergency as was the earthquake occurred in Chile last February.

Exhibit 2-2: General Cargo growth - V Region

250 Cumulative Growth (%) 200 150 100 50 -2000 2001 2002 2003 2004 2005 2006 2007 2008 GDP 2009 2010E

Total General Cargo

20.000 Cargo transfers (thousands of tons) 15.000 10.000 5.000 0 2000 2001 2002

CAGR 00-09: 5,9%

2003

2004

2005

2006

2007

2008

2009

2010E

Containerized Cargo
Source: EPV

Total General Cargo

Total General Cargo includes containerized and break-bulk cargo.

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

2.2.

Attractive situation of Puerto Valparaiso

Puerto Valparaiso: main container port of Chile

Puerto Valparaisos technology puts the port as the first port of Chile in the transfer of containerized cargo. During 2009 1.406.464 TEUs were transferred through the V Regions ports and Puerto Valparaso reached 677.432 TEUs, implying a market share of 48,2%. This figures represents 24,3% of total TEUs transferred nationwide. The high-tech equipment currently operating in the Puerto Valparaiso, has contributed significantly to increase the current capacity of handling containers.

Exhibit 2-3: General Cargo market share 2009 (TEU) National V Region
48% 24%

52% 76%

Puerto Valparaiso

Others

Puerto Valparaiso

Others

Source: EPV

Exhibit 2-4: Puerto Valparaiso: Breakdown of 2009 cargo transfer (Tonnes) General Cargo
1%3% 30% 40% 56% 1% 2% 67% 17% 14% 23% Imports Transit Exports Others Industrials Cellulose Chemicals Other Fruit Foods Other Copper Industrial

Imports

Exports
21%

25%

Source: EPV

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

Strong growth of containerized cargo transfer Puerto Valparaiso mobilized during 2009 a total of 8,0 million tonnes of which 7,0 million were containerized cargo, which accounted for a total of 677 thousand TEUs. Between 2000 and 2009 Total General Cargo has had a CAGR of 8,2% whilst containerized cargo had a CAGR of 12,0% and break-bulk cargo had a CAGR of -3,9%. As of 2000, the cargo mix was 35% break-bulk cargo and 65% containerized cargo, while as of 2009 the mix was 12% and 88% respectively. After the global economic crisis and the earthquake, Puerto Valparaiso has shown a strong recovery of containerized cargo transfers. During the first half of 2010, Puerto Valparaiso mobilized 23% over the same period in 2009, totalizing more than 4.532 thousand tonnes.

Exhibit 2-5: Puerto Valparaiso historical cargo transfer

12.000 Tonnes (thousands) 10.000 8.000 6.000 4.000 2.000 0 4.665 3.930 4.469 256 291 300 5.104 319 6.053 388 5.699 377 1.864 1.753 2005 2006 693,8 973 2009 2010E TEU 845 7.971 9.714 615 400 200 0 677 7.984 9.620 600 TEU (thousands) 10.899 800 947 952 1000

1.393 1.513 1.601 2000 2001 2002

1.725 2.041 2003 2004

1.275 1.372 2007 2008

Total general cargo

Break-bulk cargo

Cargo transfers (TEU)

120.000 100.000 80.000 60.000 40.000 20.000 -Jan 2008 Feb Mar 2009 Apr 2010 May Jun

Source: EPV

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

Safety and quality of Puerto Valparaiso Puerto Valparaiso was the first in South America to obtain the ISPS certification of port safety. The port authority is certified in Quality, Environmental Protection and Occupational Safety and Health. Port Concessions Puerto Valparaiso was one of the pioneers in the implementation of Law 19.542 which modernized the Chilean state-owned port sector. Modernization led to doubling the growth of cargo transferred. Currently, Puerto Valparaiso has four concessionaires in the port system and all its relations are excellent. Puerto Valparaisos concessionaires are: Terminal Pacifico Sur S.A. (operator of Terminal 1), Valparaiso Passenger Terminal S.A. (operator of Cruise Passenger Terminal Building), Zeal Sociedad Concesionaria S.A. (operator of Logistic Support Zone) and Plaza Valparaiso S.A. (operator of Waterfront Development Project). EPV: a long term strategic partner EPV has four concessionaires, whose concessions were awarded after transparent competitive bidding processes. EPV is committed to the strategic objectives of its concessionaires, working together with them and in constant coordination in pursuing new developments, in line with the growth of demand.

3. Concession Description
The current expansion period lived by the Chilean foreign trade has created a high demand for cargo transfer in Puerto Valparaiso, a phenomenon to which containerization in the shipping industry adds. In addition, it is estimated that in the long term, the maritime cargo in Valparaiso will register a CAGR of around 6% to 8% in cargo transfer. Puerto Valparaiso has the vital need to expand its capacity. In this sense, EPV will call to a public bidding process in the second half of 2010 for the concession of Terminal 2.

3.1.

Terminal 2 Concession main facts

EPV will grant to the Concessionaire an exclusive concession to develop, operate, maintain and exploit the Terminal 2, including the provision of storage service and the right to charge tariffs for services provided at the Terminal. The concession includes the construction of three new berths for post-Panamax ships and their corresponding yard areas. Equipment must be defined by concessionaire subject to meet minimum level of service. The total investment has been estimated in US$ 350 million, including infrastructure and equipment. This figure includes around US$ 100 million in equipment.

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

The project will begin with the construction of at least one berth, with their corresponding yard area, so as to add capacity without limiting the operation of existing berths. Then the development of infrastructure will continue with the development of other two berths and their yards, in one or two stages. The concession term shall be twenty (20) years and it is associated to construction of the two first berths (berths 1 and 2). There is an option to extend the term for additional ten (10) years in case of constructing an additional berth (berth 3). It is included a payment for residual value of the infrastructure of the three berths at the end of the concession. Minimum mandatory infrastructure development 1st Berth and its yard have to be operating by the 3 year of contract. th 2nd Berth and its yard have to be operating by the 10 year of contract. Additional infrastructure development 3rd Berth and its yard have to be operating by the 18 year of contract and an extension of the concession for an additional period of 10 years. Tariffs Basic Services: Tariffs for the use of infrastructure and cargo transfer will be freely set, as long as the weighted sum of the tariffs is less or equal to a Tariff Index Other services: The concessionaire will be free to set other services tariffs
th rd

The following figure highlights the tariff structure: Exhibit 3-1: Concessions economic arrangements
Tariff for cargo transfer Concessionaire Annual Rent

Tariff for use of infrastructure Terminal 2 Users

Tariff (US$) per meter of ship per hour Tariff (US$) per metric ton of cargo
Tariff for use of common assets

EPV

Source: BBVA

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

3.2.

Preliminary infrastructure designs

The figure below shows two configurations that have been preliminarily assessed using 3-D and mathematical surge Models. EPV also carried out geological and engineering studies to support these configurations. The concessionaire is free to carry out a different design. The business model will incorporate flexibilities to allow the concessionaire to add its future vision to further strengthen Puerto Valparaiso.

Exhibit 3-2: Terminal 2 Preliminary designs

Alternative A

Berths: 960 m New Yard: 14,3 hectares Total Yard: 21,3 hectares Alternative B

Berths: 930 m New Yard: 12,0 hectares Total Yard: 19,0 hectares
Source: EPV

Investment Opportunity: Terminal 2 - Puerto Valparaiso Concession

3.3.

Bidding process preliminary schedule

Event Selling of Terms of Reference Submission of Bids Bid Award

Preliminary dates August 4 to January 31 2011 March, 2011 April, 2011

th st

4. Contact List
For additional information regarding this transaction please contact the following persons of BBVA:
BBVA Chile Corporate and Investment Banking Pedro de Valdivia 100, 6th Floor Santiago, Chile Fax: (56-2) 679-2710 Telfono Alejandro Bertrand Managing Director Luis Felipe Irarrzaval Vice President Eduardo Grohnert Analyst Isidora Riutort Analyst Benjamn Labra Analyst (56-2) 679-2049 (56-2) 679-2871 (56-2) 679-2314 (56-2) 679-2152 (56-2) 679-1340 E-mail abertrand@bbva.cl lirarrazaval@bbva.cl egrohnert@bbva.cl mriutort@bbva.cl blabra@bbva.cl

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