HOCHTIEF is geared to sustainable, profitable growth. A key part in this growth strategy is played by our intensive and continuously expanding activities in the concessions and operation module. This module includes the airports, roads and social infrastructure segments and further public-private partnership (PPP) projects.

Recognizing the growing importance of the concessions business to HOCHTIEF, we created a new HOCHTIEF Concessions division together with a company of the same name, HOCHTIEF Concessions GmbH, in spring 2008. In early November 2009, the company reincorporated as a German stock corporation (Aktiengesellschaft). HOCHTIEF Concessions, the parent company of HOCHTIEF AirPort and HOCHTIEF PPP Solutions, considers itself to be one of the world's leading industrial infrastructure investors.

The new structure allows closer cooperation and the reaping of synergies in market development, business planning, special operator responsibilities as well as other technical areas–making us a strong partner for our clients.

HOCHTIEF AirPort

HOCHTIEF became established in this dynamic market as early as the mid-1990s with the award in Athens of the world's first BOOT concession for an airport, secured among other things by virtue of our airport construction expertise. We have since added interests in Budapest, Düsseldorf, Hamburg, Sydney and Tirana airports. This portfolio of attractive airports with strong prospects for the future makes us one of the world's largest private and independent airport investors and managers. HOCHTIEF AirPort only enters into long-term arrangements with the goal of improving an airport's operating efficiency and passenger comfort. Total passenger numbers served across our airport portfolio swelled to some 90 million in fiscal 2008.

We continually build on our airport expertise, creating substantial added value for the airports operated by HOCHTIEF. As an investor, we aim to develop our airport holdings into profitable transportation and commerce hubs that are ready for the challenges of the future. Our many years' experience in operating and managing airports of various sizes along with our financing expertise and potential are key elements in meeting this goal. The airports in the HOCHTIEF portfolio are also integrated into a close network, yielding synergies and fostering direct exchange of experience.

Thanks to strong performance in the first six months of the year, worldwide passenger numbers remained almost unchanged in 2008. At HOCHTIEF's airport holdings, these numbers even increased by 1.5 percent. However, the weakening economy also caused growth to slow in this segment. Nevertheless, airports continue to be a dependable long-term choice for institutional investors seeking strong returns with relatively little volatility.

With a view to the planned expansion of the airports portfolio, HOCHTIEF AirPort formed HOCHTIEF AirPort Capital (HTAC) in 2005. Around one-third of the shares in Athens, Düsseldorf and Hamburg airports and about half of the shares in Sydney Airport were sold in this connection to our investment partners Hastings Fund Management, Caisse de dépôt et placement du Québec and KfW IPEXBank. HOCHTIEF AirPort is interested in joining forces with these and possibly other investment partners in future to field consortia with the financial strength to master further privatization projects.

HOCHTIEF helps its investment partners clear high barriers to entry and earns transaction and management fees from them for its services. In addition, HOCHTIEF and its investment partners generate income from dividends, interest on shareholder loans, and any gains on disposals of ownership stakes.

HOCHTIEF AirPort met a commitment in 2008 to sell to HOCHTIEF AirPort Capital 1.36 percent of the Sydney Airport shares it had taken over the previous year from the Spanish construction company Ferrovial. HOCHTIEF AirPort now holds 6.8 percent of Sydney Airport and HOCHTIEF AirPort Capital 6.5 percent.

HOCHTIEF PPP Solutions

HOCHTIEF PPP Solutions serves the concessions market covering toll roads/transportation and public buildings/social infrastructure as well as the renewable energy segment. The company supplemented its existing European and South American activities in 2008 by also expanding into North America. We aim to take a slice of the rapidly growing US infrastructure business together with our American subsidiaries Turner and Flatiron. HOCHTIEF PPP Solutions' end-to-end portfolio of capabilities comprising design, financing, construction and operation allows it to provide services along the full project life cycle while optimizing project cash flows. This shrinks the necessary capital and operating outlay, at the same time enabling projects to be completed faster and more cost-effectively. As with the airport holdings, our PPP projects generate income from dividends, interest from shareholder loans as well as transaction and management fees, plus any gains on market placement or disposals of ownership stakes.

HOCHTIEF PPP Solutions' portfolio of toll road contracts comprises eight projects with a total investment volume in excess of EUR 5 billion. In all, the company is responsible for nearly 800 kilometers of toll road. Some 600 kilometers are accounted for by just two Greek PPP road projects – Maliakos-Kleidi and Elefsina-Patras-Tsakona – on which HOCHTIEF reached financial close in 2008. This also brought the concession contract for the two projects into effect. Construction, operation and toll charging promptly started as a result. The 365-kilometer Elefsina-Patras-Tsakona link is one of Europe's biggest contemporary infrastructure projects.

At the end of fiscal 2008, a further indirect 3.75 percent stake in the Vespucio Norte Express (VNE) project in Chile was sold to investor M.M. Warburg & Co. for a purchase price of EUR 25.3 million. HOCHTIEF PPP Solutions has now reduced its interest in the VNE toll highway in two stages from 45.45 percent to 29.2 percent. The sale formed part of our active management of the concessions portfolio and reaffirmed our portfolio valuation.

In the buildings segment, HOCHTIEF PPP Solutions was responsible at the 2008 balance sheet date for 15 projects with a total of 89 schools serving over 60,000 students in Germany, the UK and Ireland. The company's portfolio also includes Gladbeck city hall and Munich's Fürst Wrede barracks. The latter is the German government's first security-related PPP building project. HOCHTIEF PPP Solutions reached financial close on the project in March 2008. Together with its British team, the company is bidding for contracts under the UK Building Schools for the Future investment program and is making headway in the fastgrowing Greek PPP building market, where it is already involved in several bids for education, administration and security infrastructure projects.

In the renewable energy segment, HOCHTIEF PPP Solutions successfully finished drilling work in 2008 on its first geothermal power plant at Dürrnhaar in Bavaria. With the participation of a drilling team from HOCHTIEF Construction, the first phase of drilling was completed for a second plant in nearby Kirchstockach. These are the first two power plants in a series that the company and its partners are building in the southern German part of the Molasse basin.

Leighton Holdings Limited

Another HOCHTIEF subsidiary engaged in the segment toll roads / transport infrastructure is Leighton Holdings Limited in Australia and Southeast Asia. Leighton is also worldwide market leader in contract mining and a long-standing partner of many mining companies.

Portfolio valuation

We value the assets of HOCHTIEF AirPort and HOCHTIEF PPP Solutions using the discounted cash flow (DCF) method.

In DCF-based valuation, we determine the cash flow between project companies and HOCHTIEF – capital paid in and withdrawn, dividends, interest and fees – and discount the future cash flows by applying a risk-adjusted discount rate.

Only projects that have reached financial close are included in the valuation.

For airport holdings, HOCHTIEF applies a discount rate of 13 percent. The placement price obtained on establishment of the investment partnership in 2005 showed this to be in line with market rates.

For PPP projects, we apply a risk-adjusted discount rate determined with reference to secondary market transactions. The basic risk-free interest rate is supplemented with market-based mark-ups according to project type and completion stage. We apply a weighted discount rate of 12.3 percent for our PPP portfolio as of December 31, 2008. As projects move toward completion, risk and hence the mark-up drops and the value of HOCHTIEF's assets rises.

Project selection is subject to strict return-on-investment targets that are normally above the applied discount rates. Proceeds from sales of equity stakes further boost our internal rate of return.

The net present value (NPV) established by HOCHTIEF Concessions was calculated as of June 30, 2009 on the basis of various future-looking assumptions, among others with regard to the operative and financial development of individual subsidiaries/associates as well as with regard to the applied discounting rates. In the event these assumptions change or do not materialize, this may lead to a deviation – possibly even on a significant scale – of the actual value from the value shown here.

Discounting method for PPP projects

The net present value of HOCHTIEF's airport portfolio as of the 2008 balance sheet date was EUR 1,245.6 million. This corresponds to a loss in value of 6.9 percent compared to the previous year. This is partly due to the resale of 1.36 percent of the shares in Sydney Airport to HOCHTIEF AirPort Capital, and partly to changes wrought by the global financial crisis and the related fall in growth expectations for air travel.

The net present value of HOCHTIEF's PPP projects as of December 31, 2008 was EUR 224.4 million, up EUR 18.5 million on the prior year. Most of the increment is accounted for by growth in the value of the portfolio, progress and project development and improvement in operating cash flows at project level.

The reduction in the size of the portfolio on disposal of the 3.75 percent stake in the Vespucio Norte Express toll highway in Chile was slightly more than made up for by the gain on the award in 2008 of the Maliakos- Kleidi and Elefsina-Patras-Tsakona highway projects in Greece.

The total value of the concessions portfolio amounts to EUR 1,470 million. The future discounted cash flows exceed HOCHTIEF's EUR 820 million investment by EUR 650 million.

In view of its rapidly growing market potential internationally, the concessions business will continue to offer substantial opportunities for HOCHTIEF.

Portfolio value of concessions projects in the HOCHTIEF Concessions division

Status: Financial close (EUR million)	Total capital required	Capital provided by Dec. 31, 2008	NPV of expected cash flows at Dec. 31, 2008	NPV at Dec. 31, 2007	Difference due to portfolio growth	Difference value growth
HOCHTIEF AirPort	720.0	720.0	1,245.6	1,337.8	(41,7)	(50,5)
HOCHTIEF PPP Solutions	240.4	100.0	224.4	205.9	(5,0)	23.5
Total	960.4	820.0	1,470.0	1,543.7	(46,7)	(27,0)