East Africa Railway Project

Bettering Lives Through

Economic Development &
Ethical Leadership
Goals & Objectives

• Rehabilitate Tanzania railway and extend new railway to

Rwanda & Burundi
• Create a sustainable and profitable railway company
• Contribute to the economic health of participating nations
by bringing “Silicon Valley” to East Africa. Providing stock
options/equity to all employees of the railway.
• Provide attractive returns & liquidity event for investors
• Stimulate economic development & knowledge transfer
• Execute with high ethical standards & transparency
Background: Map of East Africa
Background: Map of East Africa
Other Regional Railway Initiatives
Background: Current Conditions
• Port of Dar es Salaam (Tanzania)
Major congestion. 22 day through-put time
 

 Poor operating procedures. Traffic not pre-cleared, transit & storage

process, payment system, and other inefficiencies
 Poor security of transit goods. High pilferage, damage, insurance

• Existing Tanzania narrow gauge railway

100 year old infrastructure. High track outages & maintenance
 

One meter gauge. Designed for passenger service and light tonnage
 

• Unsatisfactory Concession Agreements

 Port: TICTS (Hutchinson Group, China)
 Railway: RITES of India

Rwanda & Burundi

 
No current railway access
 
Hazards

• High political risks and difficult coordination with multiple

nations and related agencies.

• Vast majority of Tanzania’s public private partnerships

have failed (i.e. electric power, port concession, water,
airline)

• Widespread graft and corruption

• Public sector budget deficits & past loan defaults limit

new public sector lending
Opportunities

• Commerce drives development

 Railways can have a 24x economic multiplier effect
 Significantly increase regional export industries
 Increase GDP and income per capita in participating nations

• Infrastructure drives commerce

 Cost to move 1 ton of freight in E. Africa is 600%-800% of U.S.
 Economic growth in Rwanda and Burundi limited by poor roads, rail

and port in Tanzania and Kenya.

• Wealth creation opportunity for East African people

 Create a significant stock option pool for railway employees
 Bring ethical entrepreneurial culture to East Africa

• Model of ethical business conduct and leadership

Train and develop management and personnel
 
Opportunities: Humanitarian Imperative

Railways Can Have a 24X Economic Multiplier Effect

Completed Feasibility Studies

• TZ & BU Mining Surveys: Various

• Tanzania Ports Master Plan: World Bank/Royal Haskoning
• Kigali to Isaka new rail line: AfDB/DB Consult International
• Isaka to Dar es Salaam rehabilitation: USTDA/BNSF
US Trade Development Agency / BNSF Study

• Market and strategic justification

• Operational integration recommendations
• Infrastructure development recommendations
• Financial and economic justification
• Regulatory and institutional assessment
• Preliminary environmental impact assessment
• Identify U.S. supply sources
Study Findings: Investment Justification

U.S. Trade & Development Agency (USTDA) sponsored study

is now finished – positive findings
• Reviewed / forecasted Central Corridor tonnage and revenues
• Examined Great Lakes mining activities and related tonnages
• Examined traffic diversion & competition with Northern Corridor
• Reviewed / forecasted Port of Dar es Salaam facilities & capacity
• Updated proposed route and operating plan
• Reviewed Tanzania railway institutional framework
• Reviewed environmental impact study
• Reviewed developmental impact to countries
• Financial models & first cut results
Investment Hazards

• Commodity based economies

• Soft barriers to trade (cross border)
• Physical security of in-ground assets
• Regulatory framework (rate setting, EAC vs. country)
• Kenya Rail & Mombasa port response – Northern Corridor
• Imbalance of costs vs. revenues in Rwanda vs. Tanzania
 Big Picture Considerations

•  Regional EAC integration issues

•  Border transit issues (through bills of lading)
•  Integration of project components (Port, Facilities, Rail)
•  Incumbent concession (RITES) contract
•  Shutdown during rehabilitation
•  Imbalance in cost/revenue ratio of TZ vs. RW vs. BU
•  Contribution & role of TZ Government in PPP (Valuation)
•  Ability to provide foreign technical & managerial expertise

14
Project Components

•  Modernize / expand port of DSM – triple annual turnover

•  Rehabilitate port railway
•  Rehabilitate existing railway to standard gage – 970 km
•  Construct new Isaka-Kigali railway link – 460 km
•  Construct new railway spurs to
  Burundi – 180 km
  Democratic Republic of Congo?

15
Four Stage Investment Requirements

• $300 M Upgrades to Port of Dar es Salaam

Berths 13 & 14, Port Rail & ICD; excluding relocation costs
 

• $1.2 Bn Existing railway rehabilitation: DSM to Isaka

Rail infrastructure, power & telecoms, facilities, rolling stock & MOW equipment
 

• $2.5 Bn New railway construction: Isaka to Kigali

• Construction of Burundi spur into mining district
Institutional / Regulatory Framework
TRI-COUNTRY
REGULATORY
AGENCY

TANZANIA BURUNDI
RWANDA

TIC RAHCO SUMATRA TPA TRA

REGULATORY
FRAMEWORK

RAILWAY
COMPANY

17
 Railway Business Structure

•  Privately owned freight railway company

  Design-Build-Operate-Own-Finance
•  SUMATRA adopts US style regulatory controls
  Free market – service & pricing levels
  Revenue adequacy
  Presumption of fair competition
•  Integrated freight railway controls all in-ground & movable assets
•  RAHCO donates existing infrastructure assets
•  Long term land leases per TZ law
•  Negotiated trackage fees agreement
•  Negotiated “blue water” access agreement with port operator
•  Negotiated service agreement for intercity passenger rail

18
 Notional TZ Freight Rail Credit Structure
Vertically Integrated Railway

TZ Finance
Multi-Lateral
Ministry Political
Credit Agencies OPIC Risk Insurance
RAHCO Asset AfDB & IFC
Contribution &
Security Agmt.
Limited
Sovereign Equity
Security & Global & US
TIC Guaranty Subscription
Loan Trust Equity
Environmental Trust Investors
Agreements
& Safety Plans Agreements

Railway
Operating Master Security Receipt &
Plan Int’l Bank
License & Trust Disbursement
SUMATRA Escrow Acct

Design,
Engineering &
Construction
New EAC
Railway Co.
Project Railway
Development Ops
Development
& Mgmt Advisory
Consortium
Revenue Tonnage Revenue Tonnage Trackage Rights Motive Power & Port Container
Port Development Contracts & Assignment Haulage Fees
Ops & Mgmt
Advisory
Mining Shipping Pax & Pax Port
Cos. Other Railway Operator
Cos. Railways
Source of Funding

Source of Repayment 19
Financing for Initial Stage

• $340 million equity raise

US & Global equity for port & railway rehab financing
 

Offset by GoT & Private TZ equity, operating earnings, timing

 

• Senior lenders
African Development Fund (AfDF) &
 

International Finance Corp (IFC)

 

Overseas Private Investment Corp (OPIC)

 

• Repayment: Project revenues (freight tariffs, container fees, trackage fees)

• Security: Developmental bank participation, political risk insurance,
mortgage on rolling stock, support agreement with railway, concession
agreements with sovereigns, assignments of revenues (port & rail)
• Liquidity/Term: Targeted IPO in year 7
Advisory Team

Al Lunsford, Lunsford Group, Chief Executive Officer & Managing Director

Mr. Lunsford is Founder and CEO of Lunsford Group, a privately held investment holding company consisting of a series of
privately held independently owned entities in real estate, software, media, demographics, health care and the Internet.
The operation – augmented with consulting – has served such distinguished clients as Sears, Roebuck and Co., Apple
Computer, BuyDirect.com, TRW, Eastern College, Herman Miller, Joy Manufacturing, World Vision United States &
International, Malaysian Industrial Development Agency (MIDA) and the Brunei Investment Agency. He has led over $600
million in real estate and facility development projects in Kenya, Sudan and Zimbabwe during his time at World Vision
International.

Allan is leading the development of the 600-acre business park. It is a mixed-use project that will consist of 8.2 million
square feet of office, industrial, and hospitality product at an all-in cost of $2 billion.

Geoff Finch, Lunsford Group, CFO & Managing Director

Mr. Finch is CFO & Managing Director at the Lunsford Group. Previously, Geoff was Vice President & CFO of Lockheed
Martin Finance Corp. where he provided various finance solutions for Lockheed Martin's customers worldwide. He directed
budgets, forecasts, financial reporting, and renegotiated a $150 million structured credit facility while at LMFC. He also
served as VP of Finance for VentureStar, which was Lockheed Martin's $5 billion new business venture for a next generation
space transportation system. Geoff developed the business plan and presented it to NASA, industry executive committees,
outside investors and the LLC board. He served as the finance liaison with US Congressional offices and lobbyists on new
legislation to support venture and received USG security clearance for Top Secret.

Geoff is currently a member of the USTDA study team for the East African railway project and LG finance lead.
Advisory Team

Bernard Moon, Lunsford Group, Managing Director, Business Development

Previously, he was Co-founder and VP of Business Development at GoingOn Networks, a social media platform for
companies and organizations. He led the initial product development where BusinessWeek recognized the GoingOn
platform in their "Best of the Web" list for 2007.

Prior to this, Bernard was a Director at iRG, a leading boutique investment bank in Asia, where he focused on
Telecommunications-Media-Technology companies and served clients in various industries such as data centers, online
gaming, wireless and broadband services. Prior to iRG, Bernard was VP of Business Development & Marketing at HeyAnita
Korea, a leading voice portal and solutions provider, which was joint venture between Softbank and HeyAnita, Inc.
Bernard was responsible for establishing strategic and content partnerships and helping to build the company from its
conceptual stage to a 54-person operation. Additionally, he assisted in the closing of the company's two rounds of
financing totaling $14.5 million, which led to revenues of $14 million and profitability.

Dan Wooldridge, Lunsford Group, Managing Director, Strategy

Mr. Wooldridge is a Managing Director at Lunsford Group and brings a wealth of experience leadership development and
strategic consulting. Besides his involvement with Lunsford Group entities, outside companies call for his expertise in
leadership and strategy development.

Previously, Dan served as a senior consultant at FMI Corporation, the premiere management consulting firm in the global
construction industry. While at FMI, Dan was the Practice Leader overseeing the innovation and development of FMI’s core
practices in leadership, strategy, business development, and project execution. He served as a senior faculty member at
their acclaimed Leadership Institute. His client work involved management succession, assessing and developing leaders
and leadership teams, and creating organizational leader development programs. He developed the “Coaching to Develop
Exceptional Leaders program” and is involved extensively in executive coaching. He also developed joint leader
development programs with Harvard and West Point. He also has an extensive background in marketing, nationally and
internationally, as well as in the educational events and hospitality industries. He’s served in the non-profit sector
including leadership and board roles for The Navigators.
 Team Deal Experience

• $1 billion debt financing for • $5 billion space • $50 million debt financing • $23 million debt financing
Republic of Singapore transportation PPP venture for Republic of Niger for Republic of Peru
with NASA

• $7 million development of • $600 million development of • $100 million debt financing • $75 million debt financing
World Vision Int’l Africa HQ multi-site distribution (airport, for Kingdom of Thailand for Ethiopian Airlines
in Nairobi, Kenya logistics, & comms) in Sudan

• Advisor on $2 billion toll • $110 million financing • $600 million in multiple • $50 million export credit
road development for the lease for Air Lanka financings through Export- facility through EDC of
Transportation Corridor Import Bank of the United Canada
Agencies in California States
 Team Deal Experience

• $33 million equity financing • $14.5 million equity • $30 million debt financing • $1.2 billion debt & equity
for ViewPlus financing for HeyAnita Korea through Private Export financing for Asia Cellular
Funding Corporation Satellite Services (Indonesia)

• Multiple credits through • $100 million secured debt • $1 million VTS non- • $30 million discount facility
Export Credits Guarantee financing for LTU recourse project financing for Republic of Colombia
Dept of the UK (Germany) in Republic of Panama

• $3 million development of • $27 million development of • $30 million financing lease • $30 million debt financing
Zimbabwe headquarters South Korea headquarters for Continental Airlines for Eastern Airlines
 Team Deal Experience

• $30 million debt financing • Advisor on $3 million asset • $50 million subordinated • $256 million purchase &
for America West Airlines based debt financing facility debt financing for Gulf Air rehab of Beverly Hills Hotel
for Precision Aviation (Bahrain) for Brunei Industrial
Development Agency

• $140 million debt financing • $350 million debt financing • $17 million development of • $30 million development of
for Republic of Argentina for Air Portugal & Portugal Campus Crusade’s World assembly & distribution
maintenance facility Ministry of Finance HQ & Logistics Center facility in Toronto, CA

• Financial advisor for $7 • Financial advisor for multi- • $16 million development of • $300 million housing and
billion+ (KOSDAQ) Internet billion online gaming national processing center relocation villages program
company in South Korea company in South Korea (200,000 sq ft) in Indonesia
 Team Deal Experience

• $30 million development of • $32 million development of • $30 million development of • $100 million development
Navigators US HQ 3.8M sq ft distribution facility 3.8M sq ft distribution of HQ, airport, aviation
in Wilkes-Borough, PA center in Delano, CA logistics & training center

• $56 million development • $12 million development of • $7 million development of • $6 million construction &
of World Vision Int’l Costa Rica office facility World Vision Canada HQ in term financing for 100,000
Kampuchea Hospital new Toronto, CA (80,000 sq ft) sq ft classified research
construction facility facility in Aurora, CO

• $40 million operating lease

for U.S. Dept of Housing &
Urban Development
Board of Advisors

J. Brady Anderson, Former US Ambassador to Tanzania and USAID Administrator

J. Brady Anderson and his wife, Betty, lived and worked in Africa for eight years beginning in 1988. For five of those years
they conducted sociolinguistics research in indigenous African languages for the Summer Institute of Linguistics. Fluency in
Swahili was required for their language research in the villages and towns of Tanzania. They also worked in Nairobi, Kenya
and in Addis Ababa, Ethiopia where they assisted the Ethiopian Ministry of Education in the creation of a national bilingual
education program in seventeen languages.

In 1994 President Clinton appointed him to be the United States Ambassador to Tanzania, a three year diplomatic
assignment in Dar es Salaam. In 1998 the President appointed him to be the Administrator of the United States Agency for
International Development (USAID) in Washington. As the head of the U.S. foreign aid agency Ambassador Anderson
directed programs of crisis relief and long-term development in 80 countries. Ambassador Anderson’s priorities were
increasing emphasis on democracy-promotion with special concern in the Balkans; managing a deepening relationship with
Egypt, Jordan and the Palestinian Authority as a continuation of the Middle East Peace Process; placing growing resources
into the HIV-Aids pandemic in Africa; and seeking ways to achieve a more accurate understanding by the American public
of the costs, purposes and methods of the US foreign aid program. He was an advisor to the Secretary of State and to the
National Security Advisor on development and security policies in the developing world. He also served as Chairman of the
Board of the Overseas Private Investment Corporation, created by Congress to encourage US private investment in
developing countries.
Board of Advisors

Tom Lockard, Stone & Youngberg LLC, Managing Director, Public Finance
Tom Lockard joined Stone & Youngberg as an investment banker in 1984 and is a member of the firm's Board of
Directors. Stone & Youngberg is one of the oldest private financial institutions in the United States and is a leading
underwriter of public infrastructure debt. During his tenure with Stone & Youngberg, Mr. Lockard has successfully
structured more than 400 separate new issue municipal bond transactions representing over $4.5 billion of municipal
debt.

Mr. Lockard earned a Bachelor’s degree from Stanford University. Following Stanford, he completed a Coro Foundation
fellowship and spent two years working on immigrant and refugee assistance with the Foundation Task Force on Refugee
Affairs in San Francisco's Tenderloin neighborhood. Mr. Lockard earned an MA from Claremont Graduate University and
an MBA from the University of Pennsylvania's Wharton School.

Mr. Lockard has served as a trustee of the University of Pennsylvania, as a board member and treasurer of Coro Northern
California, and board member and treasurer of the ACLU of Northern California. He remains actively involved with local
and international philanthropic organizations. Currently he is the board treasurer for the Center for Investigative
Reporting, as well as a board member of the Salesian Boys' and Girls' Club in San Francisco and the Stanford University
Buck/Cardinal Club. Mr. Lockard and his wife actively support the Sainte Anne Clinic in Lome, Togo, which services over
24,000 general medical visits each year. Through Stanford University, he helped to establish an internship program for
undergraduates to work each summer in Africa.
Board of Advisors

William A. Mullins, Baker & Miller PLLC, Partner

William (“Bill”) A. Mullins is a Partner at Baker & Miller PLLC where his practice concentrates on all aspects of the
transportation industry, including railroad mergers, regulatory rulemakings, litigation, and legislative initiatives. He
represents clients in proceedings before the Surface Transportation Board (STB), the Department of Transportation (DOT),
the Department of Justice (DOJ), and various U.S. appellate and district courts.

Mr. Mullins was directed toward a career in transportation law via his first position out of law school when he served as
Chief Counsel and then as Chief of Staff to Commissioners at the predecessor agency to the STB, the Interstate Commerce
Commission (ICC). While at the ICC, he was responsible for providing legal analysis of railroad rate and service issues and
rail restructuring transactions (mergers, line sales, line construction, and line abandonments); trucking and shipping
company matters; and rates and services of pipelines not regulated by the Federal Energy Regulatory Commission. Prior to
joining Baker & Miller, Mr. Mullins was a Partner and the Transportation Practice Group Leader at Troutman Sanders, LLP.

Mr. Mullins representative engagements include serving as lead counsel in the “NAFTA Rail” transaction, which involved
placing a Class I U.S. railroad and the largest privately owned Mexican railroad under common control and management, a
transaction that had never before been proposed. The NAFTA transaction was approved and consummated in late 2004.
He was involved with the railroad privatization process in Mexico both inside and outside of the government. Other
representative engagements include representing a Class I railroad or large shippers in every railroad merger since 1993;
representing shippers and carriers in rail line construction proceedings; providing transportation advice and counsel on
several transactions undertaken by one of Wall Street’s largest private equity firms; representing public and private
entities in developing a process whereby the ownership and operations can be held by different entities thereby allowing
for development of both freight and passenger operations; advising city and county governments on the scope of federal
preemption over the transportation industry; and briefing corporate officers for Congressional meetings and preparing
testimony.
Board of Advisors

Mr. Mullins is a former Board Member of the Intermodal Transportation Institute at the University of Denver. His
professional affiliations include the Association of Transportation Law Professionals; the American Short Line and Regional
Railroad Association; the Colorado Bar Association; the District of Columbia Bar; and The Federalist Society. He has been a
panelist or featured speaker at various conferences sponsored by the TransportationﾊResearch Board, Transportation
Research Forum, and Escalation Consultants and has served as a guest lecturer on a panel at the Center for International
Legal Studies Conference in Salzburg, Austria. He has been selected by Rail Business/Rail Outlook as one of the “Industry
Experts” to provide an annual analysis of the rail industry and is often quoted by numerous magazines and periodicals,
including the Journal of Commerce, Traffic World, and Rail Business. He has written several articles.

Bill received his BA in General Studies Summa Cum Laude & Political Science Magna Cum Laude from the University of
Colorado with Phi Beta Kappa honors. He received his JD from the University Of Colorado School Of Law.

Ambassador John A. Simon, Center for Global Development, Visiting Fellow

John A. Simon is a Visiting Fellow at the Center for Global Development and a founder of Total Impact Advisors. He
recently left federal government service where he held a variety of posts, including serving most recently as the United
States Ambassador to the African Union and the Executive Vice President of the Overseas Private Investment Corporation
(OPIC). At OPIC, Ambassador Simon championed the Agency’s involvement in the social impact investment marketplace,
spearheading efforts to finance housing in Africa, small and medium businesses in Liberia, and a large scale renewable
power plant in Liberia. Ambassador Simon led the Agency’s effort to develop a series of social development funds for
Africa, which resulted in the creation of four private equity funds focused on achieving extraordinary social results as well
as strong financial performance.

Prior to his OPIC appointment, Ambassador Simon served as Special Assistant to the President and Senior Director for
Relief, Stabilization, and Development for the National Security Council (NSC) at the White House, the first to hold this
post. During his tenure at the NSC, Ambassador Simon oversaw the implementation of groundbreaking development
Board of Advisors

initiatives, including the Millennium Challenge Account, the President's Emergency Plan for AIDS Relief, the Multilateral
Debt Relief Initiative, and the President's Malaria Initiative. He was also responsible for the U.S. government response to
international humanitarian disasters, such as the 2005 South Asia Earthquake.

From 2002 to 2003, Ambassador Simon was Deputy Assistant Administrator at the United States Agency for International
Development, overseeing the agency’s development information and evaluation units. Earlier in his career, he served as
Director of Business Finance and Strategic Planning at Harvard Pilgrim Health Care and worked for the Commonwealth of
Massachusetts’ Executive Office for Administration and Finance in several capacities, including Deputy Director for
Research and Development. Ambassador Simon received his bachelor's degree from Princeton University and a master's
degree in public policy from Harvard University.

Robert F. Starzel, Holme Roberts & Owen LLP, Of Counsel

Bob Starzel is Of Counsel to the firm in the San Francisco office. He has handled hundreds of large and small transactions
in the course of his career, from asset and stock purchases to sales, leases, and service contracts, in all totaling billions of
dollars. He utilizes his business expertise in combination with the experience and skills of other lawyers at the firm to
offer deal facilitation services.

Over the last 30 years, Mr. Starzel has served as Vice President and Director of The Anschutz Corporation (1976-1988), Vice
Chairman of Rio Grande Industries (1994-1998), Vice Chairman of Southern Pacific Rail Corporation (1994-1996), Vice
Chairman of Southern Pacific Transportation Company (1988-1996), Senior Vice President of Union Pacific Corporation
(1997-2000), Senior Representative of the Chairman of Union Pacific Corporation (2000-2004), and Chairman of The San
Francisco Newspaper Company, which owns the San Francisco Examiner (2004-2005).
Board of Advisors

He has been a Director of Pacer International Inc. (NASDAQ:PACR) since 2006. Mr. Starzel serves as a Director of Nature's
Accent, Inc., a trustee of the Fort Mason Foundation, and Director of The Salvation Army in San Francisco. He served as a
Director of Pacific Energy GP Inc. (a General Partner of Pacific Energy Partners LP) since 2002. He also sat on the Board of
Directors of Regal Entertainment Group (NYSE: RGC), which is the largest theatre chain in the U.S., from 2002 to 2003.
He served as a Director of the California Chamber of Commerce (1991 to 2005), and as a Director of the Santa Fe Institute
(1997-2003).

Mr. Starzel started his legal career at HRO as a trial attorney from 1971-1975. He obtained his BS from Arizona State
University and JD from Harvard Law School.
Project Overview

Financing Operations Leadership

• Secure financial & • Advise management • Provide leadership

Objective operational mandate team and organizational
• Complete financing • Explore derivative development
• Finalize businesses (e.g. fiber • Additional pro bono
Management Team optic backbone, consulting related to
agrobiz) real estate,
operations, etc.

Team • Al Lunsford • Geoff Finch • Dan Wooldridge

• Geoff Finch • Bernard Moon • Bernard Moon
• Bernard Moon
Appendix: Cost-Benefit of AREMA v. UIC Standards

Greater productivity of railway system – purpose built

 

 Heavier axle loads (double-stack containers),

 Heavier couplings (fewer, longer trains, faster speed)
 New locomotives & rolling stock available

 Lower capital costs / broader industrial base (US vs. Europe)

 Higher revenue potential

 System longer life / lower maintenance

Significant yearly operating costs savings

 

Shorter payback period

 

Fully viable transition operations (narrow/standard gauge)

 
Appendix: Port of Dar es Salaam

The Port Of Dar Es Salaam & Railway Corridor

Railway
Access
Appendix: Existing Narrow Gauge Railway
Kigali & Possible Terminus