Post on 27-Mar-2018
transcript
Infrastructure Outreach Final Report
October 15, 2012
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CalPERS Infrastructure Outreach Effort
Final Report
October 15, 2012
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Contents
Executive Summary ....................................................................................................................................... 3
Section 1: Introduction ................................................................................................................................. 5
Section 2: General Findings from the Roundtable Discussions .................................................................... 8
Section 3: Summary of the Infrastructure Roundtable Discussions ........................................................... 14
Section 4: Additional Outreach and Discussions ........................................................................................ 18
Section 5: Development of Investment Opportunities...............................................................................20
Conclusion ................................................................................................................................................. ..22
Section 6: Attachments
Attachment 1: Agenda Item 7c September 12, 2011, Infrastructure Investment in California
Attachment 2: Agenda Item 7 October 17, 2011, Outreach Plan
Attachment 3: Term Sheets
Attachment 4: Infrastructure Strategic Plan Summary
Attachment 5: Infrastructure Fact Sheet
Attachment 6: California Infrastructure Investment Overview, Meketa Investment Group
Attachment 7: Infrastructure Roundtable Agendas
Attachment 8: Participant List
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Executive Summary
On September 12, 2011, the Investment Committee of the California Public Employees’ Retirement System (“CalPERS”) Board of Administration (“Investment Committee”) earmarked up to $800 million for investment in California infrastructure over a three-year time period. The primary goal of this initiative is to make investments in essential infrastructure assets that meet the risk-return objectives of CalPERS Infrastructure Program (“the Program”), while also potentially benefiting local economic development and essential community services across the state. The Investment Committee instructed staff to develop a plan for outreach to state and local governments to explore the role CalPERS and other pension systems can play in facilitating infrastructure investment in California (“the Outreach Effort”).
The Outreach Effort consisted of CalPERS sponsorship of four Infrastructure Roundtables (the “Roundtables”) between March and May 2012, as well as other industry networking and information sharing initiatives. The Roundtables held at various locations across the state and were aimed to: (1) educate attendees as to the vast infrastructure needs of the State and the associated challenges and opportunities for potential pension investment in these projects; (2) inform the public regarding CalPERS infrastructure investment strategic objectives and policies; and (3) provide valuable opportunities for networking between investment staff and state, regional, and local government officials responsible for infrastructure planning, development, and financing.
The key takeaways from the Roundtable discussions include:
• There is a vast unmet need for investment in California infrastructure, including projects in transportation, water, and energy sectors. Available funding sources, including tax-exempt bonds and other state and federal programs, are not expected to be sufficient to meet the investment required to maintain existing infrastructure and to finance new development.
• Due to its large-size economy, positive demographic trends, high-quality public agencies, and recent supportive legislation, California is considered to be an attractive destination for infrastructure investment.
• There are numerous challenges to pension system investment in California infrastructure, including the availability of lower-cost, tax-exempt financing, a lack of projects which are suitable for public pension funds and other institutional investors, the absence of necessary statutory authorities in some cases, and complex regulatory processes.
• CalPERS may be an attractive partner for California public agencies, due to common interests and objectives with fellow public agencies, and due to the Program’s focus on high quality long-term, direct investments.
• Modifications to policy and legislation regarding project procurement and approvals may enhance funding and investment opportunities.
While suitable opportunities for pension investment are fairly limited at the present time, CalPERS Infrastructure Program staff is now actively engaged in developing specific in-state opportunities for investment.
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This report, which represents the final step in the Outreach Effort, includes: a summary of discussions and findings from the four Infrastructure Roundtables; a report on investment staff’s involvement with various state and nationwide collaborative efforts; and information on staff’s efforts to develop potential investment opportunities.
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Section 1: Introduction
CalPERS, headquartered in Sacramento, California provides retirement and health benefits to more than 1.6 million public employees, retirees and their families, and more than 3,000 employers. CalPERS is led by a 13-member Board of Administration (“the Board”) consisting of member-elected, appointed, and ex-officio members. CalPERS has a fiduciary duty set forth in the California Constitution, requiring the Board and staff to work at all times in the best interests of its 1.6 million members. For every dollar paid in CalPERS pensions, 66 cents comes from investment earnings. It is therefore vital that the Total Fund (“the Fund”) achieve appropriate risk adjusted returns from its investment strategies and the Investment Office be responsible for managing CalPERS investment assets which approximate $241 billion.
In 2007, CalPERS established an Infrastructure Program in the Inflation Linked asset class of the Investment Office . In July 2011, the Program was transferred, along with the Real Estate and Forestland Programs, to the newly-formed Real Assets asset class, and assigned a target allocation of 2% of the Fund. Shortly thereafter, the Investment Committee approved the Infrastructure Strategic Plan and the Infrastructure Program Investment Policy.
The Infrastructure Strategic Plan emphasizes the Program’s pursuit of low-risk or defensive investments, mainly in North America. The Strategic Plan also highlights the direct investment method, as a planned approach for providing control over capital deployment, direct influence on governance matters, and cost-effective investment. The direct investment approach in conjunction with other modes of investment is expected to enhance the Program’s competitiveness and its investment returns. As of June 30, 2012, the Program has made $1.09 billion in commitments to seven investments in the domestic U.S. and globally.
The Program has a unique strategic role within the Fund, with the objective of providing:
• Steady Returns and Cash Yields – regulated and long-term-contracted revenues and returns ensure steady investment returns and cash yields;
• Defensive Growth – the essential and protected/non-competitive nature of infrastructure assets insulates returns against demand (growth) risks;
• Inflation Protection – direct and indirect inflation-linkages serve to preserve asset values over time; and
• Diversification Benefits – private infrastructure investment is expected to demonstrate low correlation to fixed income and listed equities.
The Program’s benchmark is the U.S. Consumer Price Index plus 4% per annum, calculated on a monthly basis and applied over relevant time periods.
In June 2011, CalPERS engaged Meketa Investment Group, Inc. (“Meketa”), the Board's consultant for Infrastructure, to prepare a report on conditions for pension investment in California infrastructure. Meketa’s report was presented to the Investment Committee on September 12, 2011. At that meeting, the Investment Committee announced its decision to earmark up to $800 million for investment in
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California infrastructure, and instructed staff to develop a plan for outreach to state and local governments to explore the role CalPERS and other pension systems can play in facilitating infrastructure investment in California (Attachment 1).
In October 2011, the Investment Committee approved staff’s proposed Outreach Effort (Attachment 2), which included a coordination and policy process and an investment pipeline enhancement process. Meketa assisted with the development of the Outreach Effort and drafting this Final Report. CalPERS outreach initiatives included (a) four widely-attended infrastructure roundtable meetings, (b) collaborative initiatives with various state and national agencies, and (c) one-on-one investment discussions between Infrastructure Program staff and representatives from various California public agencies.
The first of these initiatives involved organized, public roundtable discussions with a variety of constituents and industry participants at various locations within the state. The Roundtables provided forums to facilitate open discussion on the opportunities for, and impediments to, pension system investment in infrastructure within California. More specifically, the Roundtables facilitated:
• Opportunities for experts to share information regarding project development and priorities, and their perspectives on opportunities and challenges regarding financing and investment in infrastructure;
• Access for stakeholders to information about CalPERS Infrastructure Program and investment initiatives;
• Identification of potential policy changes that could make infrastructure investments by pension systems more viable; and
• Opportunities for CalPERS to explore how it might best contribute to improve investment conditions, and increase the potential for infrastructure investment by pension systems.
The Roundtable discussions generated numerous findings related to State infrastructure investment needs, limitations on current funding sources, and impediments to pension investment due to market, legal, and project-specific considerations. A summary of the general findings from the Roundtable discussions is included in Section 2 of this report. A summary of the Roundtable discussions can be found in Section 3 of this report.
The Outreach Effort also entailed dialogue and collaboration with various stakeholder groups across the nation to exchange perspectives on, and ideas for sharing and advancing knowledge regarding infrastructure opportunities, policies, and stakeholder priorities. A summary of these initiatives is provided in Section 4 of this report.
Additionally, the Outreach Effort entailed several one-on-one investment discussions between Infrastructure Program staff and representatives of individual public sector agencies to discuss potential investment opportunities for CalPERS, including existing assets and projects in development. A description and summary of the results of these efforts is provided in Section 5.
The Outreach Effort is only one component of CalPERS infrastructure investment activities in California. The Program currently has $94 million invested in California infrastructure projects through its portfolio
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of commingled fund investments. CalPERS also invests in California infrastructure through other asset classes. Private Equity has more than $220 million invested in infrastructure in California. CalPERS Private Equity Fund Managers invest in privately held companies that own infrastructure assets including power generation (hydro, natural gas, wind, and solar) and transportation. Fixed Income has invested $100 million in credit enhancement for General Obligations in California. Of that, half is for California general obligation bonds which could fund a variety of projects that would include, but are not limited to, water, transportation, school construction, hospital construction, or other such voter-approved capital projects. The remaining credit enhancement is for California general obligation bonds specifically for public school construction.
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Section 2: General Findings from the Roundtable Discussions
Presentations and discussion by participants at each of the four Roundtables generated a number of findings related to both opportunities and challenges of pension system investment in California infrastructure. Roundtable participants also helped to identify potential changes to policy and legislation that may enhance funding and investment opportunities.
Current funding sources are insufficient to meet California’s infrastructure investment requirements
All infrastructure sectors have significant investment requirements related to the operations, maintenance, expansion, and replacement of existing facilities and the development of new projects. Limited public-sector funding may represent an opportunity for investment by CalPERS and other state pension systems.
In the current low-interest rate environment, public agencies with high credit ratings and healthy budgets can still finance their infrastructure projects through tax-exempt bonds. However, if stress on public agency budgets continues to escalate, issuing such bonds may become more difficult. It was also noted that federal deficit reduction proposals may lead to the eventual elimination of the tax-exemption bond benefit.
As the risk of not obtaining traditional financing for state and local government projects grows, public agencies may need to evaluate alternative funding sources for infrastructure projects. Private institutional investment is considered to be a potential alternative. However, there are challenges associated with alternative finance for infrastructure procurement; “political champions” are needed for projects to be successful. These champions are needed to identify and support viable investable projects for which pension system investment or other alternative funding sources could be used.
Roundtable participants acknowledged that, due to the scale of the funding needs, CalPERS and other state pension systems could only provide a small part of the solution, and it was suggested that a broader systematic approach to financing California’s infrastructure requirements would be beneficial. Examples of systematic approaches used in Canada and Australia were referenced; however, it was stressed that any approach would need to take into consideration California’s unique political, economic, demographic, and geographic conditions.
California is an attractive destination for investment
During Roundtable discussions, participants emphasized that California is considered to be an attractive destination for infrastructure investment. In addition to the funding needs summarized in the previous section, reasons cited for the appeal of California to infrastructure investors include the large-size economy, positive demographic trends, high-quality public agencies, strong regulation, and the existence of legislation enabling Public Private Partnerships (“P3”).
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California’s P3 law is considered to be an important tool for California transportation investment. Passed in 2009, the law allows regional transportation agencies and the California Department of Transportation (“Caltrans”) to enter into an unlimited number of P3s and deletes the restrictions on the number and type of projects that may be undertaken. In addition to risk sharing and possible savings over the lifecycle of a project, the structure of P3s allow public agencies to shift rehabilitation costs to the future, to make more funds available for present-day needs. Other Roundtable findings related to the P3 law include:
• California’s P3 law will sunset in 2017. It was recommended that public agencies work with the State Legislature to extend the term for which P3s are authorized.
• California's P3 law required the establishment of the Public Infrastructure Advisory Commission (“PIAC”), to identify transportation project opportunities for P3s and advise Caltrans and regional transportation agencies regarding infrastructure partnership suitability and best practices. Participants considered PIAC to be a sensible model that could be enhanced to be a more effective resource, with the renewal of the P3 law. For example, PIAC could have a dedicated funding source, and the scope of the mandate could be expanded.
• Current education and training in alternative project delivery at public agencies is limited. Participants referenced relatively inexpensive education options, including online training programs. It was noted that in the energy sector, public utilities have funded a program to provide assistance to developers of renewable energy generation.
• California does not have a standard template to assess the “return on investment” achieved by different modes of project funding and delivery. However, it was cautioned that California should not simply adopt a template from another state or country, because it may not be appropriate for California’s unique conditions.
• Participants also recommended the adoption of legislation to streamline the California Transportation Commission process embedded in the P3 law.
In addition to the P3 law, which is focused on transportation projects, California Government Code 5956 allows governmental agencies to enter into P3 arrangements to build, increase, upgrade, or operate many types of fee-producing infrastructure projects, including those related to water supply, treatment, and distribution, energy or power production, waste treatment, and other projects.
CalPERS is an attractive partner for public agencies Roundtable participants noted many of the competitive advantages that CalPERS has over other investors, including:
• A dedicated infrastructure program and resources focused on direct investment; • Alignment of interest with the public sector, due to its status as a government agency and long-
term investment approach; • California’s highly rated public agencies and high-quality infrastructure assets are a good fit with
the CalPERS Infrastructure Program’s strategic focus on lower-risk investments; and • CalPERS may acquire equity interests in public projects without adversely impacting the tax-
exempt issuing status of the sponsoring public agency or its project vehicle.
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There are several challenges to pension fund investment in California infrastructure
Despite the recognition of the need for additional sources of investment, several impediments to infrastructure investment were discussed:
1) Use of tax-exempt bonds
The primary impediment to equity investment by pensions, across all public infrastructure sectors, is the strong access to the tax-exempt bond market enjoyed by many government agencies. The availability of tax-exempt bonds raises issues related to the comparative cost of capital of pension systems and how such capital can be used in projects funded with tax-exempt bonds.
In the current environment, with tax-exempt bond interest rates near historic lows, public agencies have access to funding at lower rates than the targeted rates of return of CalPERS and other equity investors, which are typically above 8%. Therefore, tax-exempt bonds are the lowest cost option and represent the majority of funding. For example, in the water sector, over 75% of funding for state and local water and wastewater projects consists of revenue and general obligation bonds. Larger municipal agencies and the State Water Project are highly rated (AA and higher) and have had consistently strong access to the tax-exempt market and very low borrowing rates. For high-rated agencies, such as the Department of Water Resources, and the Los Angeles Department of Water and Power (the largest public utility in the country), it was estimated that the true cost of interest on long-term, fixed rate tax-exempt bonds in the current market is 3%.
Institutional investors such as public pension systems cannot compete with tax-exempt financing on a simple cost basis (e.g., barring consideration of risks retained by the public agencies). In general, the Internal Revenue Code restricts the use of equity capital in projects that are funded using tax-exempt bonds. Proceeds from Private Activity Bonds, which are municipal securities that may be used by private entities, are one possible exception, yet their use is also subject to certain conditions and limitations.
Participants also discussed other factors related to the use of tax-exempt bonds, such as the bias in the U.S. towards the public ownership and financing of infrastructure, and tensions created by incorporating private equity into the capital structure of public infrastructure projects. There was discussion around the possibility of creating a “Public-Public Partnership” structure between state pension systems and public agencies that might address some of these concerns. It was noted U.S. public pension systems might be perceived as better-aligned and more-appropriate partners for public agencies than other private sector investors.
While larger agencies may not need alternative funding sources, smaller agencies may have more limited access to low-cost tax exempt debt or have a specific interest in transferring risks that cannot be efficiently borne by a public agency, such as project delivery or technology risks. Examples of projects in which the public might seek to transfer risk to the private sector include desalination, water treatment, and sustainability initiatives.
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2) Investment Fit
A second challenge is the fit of certain projects within the framework of investment policy guidelines and strategic objectives of institutional investors, including CalPERS. For example, in the transportation sector, it was estimated that of the 2,000 state and local transportation projects identified per year, 60% require less than $5 million in funding. The majority of projects would be too small for consideration of direct investment by larger institutions with significant allocations to infrastructure.
For primary-market investments, staff discussed concerns related to the length and cost of the public auction processes used to procure investment in infrastructure. The public auction process can be both time-consuming and costly for bidders, and may require a level of “capital at risk” that is too high for a pension fund to assume. Therefore, staff expressed a preference for bilateral negotiation with public agencies about potential investment opportunities in lieu of engaging in a public bidding processes. It would be beneficial to clarify if public agencies may engage in bilateral negotiation with U.S. public pension funds, or whether it is strictly necessary for public agencies to procure investment for infrastructure exclusively through the public bidding processes.
In addition to potential uncertainty around public sector procurement processes, P3 projects typically require long and uncertain development and construction periods, which introduce additional risk to investors. P3 projects may also take several years before reaching stabilized operations allowing for cash distributions to investors.
It was noted that there are models of successful risk sharing between the private and public sector, in which private equity served as “risk capital,” while pension systems could provide “take out capital” for operational lower-risk assets. Participants suggested that certain projects in a construction phase could be suitable for pension system investment so long as key risks have been identified and mitigated.
Investment staff discussed potential limitations on investment in projects where key contractual terms, such as those between concession partners in design-build contracts, have already been negotiated. Early participation in such negotiations could allow CalPERS to ensure that its interests are represented in the final structure, and to strengthen its alignment with other consortium partners.
Concerns about investment fit were also raised in the discussion of investment in energy efficiency projects. It is uncertain as to whether such assets can be suitably structured for investment by institutional infrastructure investors. There was also the opinion that such projects might be more suitable for tax-exempt bond financing, rather than pension system capital.
CalPERS state agency status, which affords it certain advantages as an institutional investor, also presents certain limitations to its ability to participate in investment in California. For example, pursuant to provisions of the Internal Revenue Code, CalPERS would risk losing its tax-exempt status in an investment if it were it to participate in a “prohibited transaction,” where a transaction includes the acquisition of more than 25% of a debt obligation of a CalPERS member agency. Such a rule substantially limits opportunity for in-state investment by CalPERS.
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Finally, concerns were expressed related to potential conflicts of interest and reputational risk for CalPERS, or any state pension system, as a potential direct shareholder of a public infrastructure asset in California. For example, certain investment-related decisions may result in outcomes that are unpopular, such as decisions to raise tolls on toll roads. Faced with such conflicts CalPERS may be more comfortable – in its return-seeking role – with investing in industry-facing infrastructure (e.g., energy and power, or ports and rail assets) than with investing in assets patronized and directly relied upon by the general public such as transportation and water assets.
3) Regulation
The Energy Roundtable discussed impediments to investment related to the permitting and development of power and transmission facilities in California. It was noted, for example, that in the renewable energy sector, constraints on the development of new transmission facilities are an obstacle to new development and investment. Several presentations referenced case studies of projects that took several years before receiving final approvals and licensing. Comparisons were drawn to conditions in other states where lengthy permitting processes are not an issue. Permitting challenges have resulted in high rates of project mortality. Lengthy and uncertain approval processes discourage investors who may have substantial capital at risk during the process.
There was broad discussion of the sources of permitting challenges and project delays from industry participants:
• The complexity of development in California, due to population, logistics, geographic factors, and policy, can require conservation measures and multiple permits from numerous agencies. There was consensus that the development of new facilities in other states was subject to less complex permitting requirements. This was considered relevant because investment capital is likely to seek the least risky investment opportunities.
• Compliance with California’s environmental protection laws, such as the California Environmental Quality Act (CEQA), requires that project developers and investors undertake significant mitigation efforts which, in some cases, have increased project costs, delays, and uncertainty of success. Roundtable participants suggested that thoughtful and appropriate streamlining of the CEQA process could increase the investor appetite for investment in California infrastructure.
4) Other Challenges
Other challenges to pension system investment in energy infrastructure were also discussed, including the following:
• Within the current energy infrastructure industry regulatory framework, developers and investors are typically not incentivized to take on the risks associated with implementation of new technology. A risk sharing framework between regulators and developers could incentivize investment in new technology.
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• There is no centralized exchange for public authorities to circulate information on energy infrastructure projects requiring investment to potential investors. Increased information flow on infrastructure financing needs may serve to facilitate investment.2
• For projects in the renewables sector, there is limited need for equity that is not tied to tax credits. Developers already have a backlog of tax credits that need to be monetized and are looking to sell assets that allow the use of tax credits. Therefore, there is less need for investment by tax-exempt institutions which are unable to take advantage of these credits such as public pension systems.
• It is expected that tax incentives for renewables development, such as Production Tax Credits, will expire at the end of the year and will dampen developer and investor interest in the sector.
• Participants also noted inconsistencies in the Federal tax treatment of renewables projects that affect project economics. For example, property taxes are levied in full for wind projects while solar projects qualify for property tax exemptions.
Recommended changes to policy and legislation may enhance funding and investment opportunities
Several recommendations for facilitating investment in California infrastructure by pension systems were identified through the Roundtable discussions. Some of the key recommendations for potential follow up by stakeholders and other interested parties include:
1) Develop more-flexible and robust procurement methods for in-state agencies. It was recommended that alternative models of infrastructure procurement that have been utilized in other countries and states be evaluated for their suitability in California.
2) Streamline California environmental approval requirements. Compliance with CEQA was cited as an impediment to the development of infrastructure projects in California. Roundtable participants acknowledged California’s unique environmental resources and the importance of having regulation in place to protect the environment. However, project developers are discouraged by the complexity, indeterminacy, time delays and high costs associated with the approvals process. It is recommended that possible methods for streamlining CEQA and other permitting and approvals processes for critical infrastructure projects be evaluated.
3) Renew existing legislation enabling P3’s in California and consider expanding its mandate. This P3 law is set to sunset on January 1, 2017. It was recommended that the law’s sunset provision be extended. It was also recommended that substantive support be given for the PIAC or a similar body to assist the state with its development of standards and best practices for public infrastructure procurement.
2 See Section 4 for information regarding the development of the West Coast Infrastructure Exchange, which is intended to address this issue.
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Section 3: Summary of the Infrastructure Roundtable Discussions
Four Infrastructure Roundtables were held as part of the Outreach Effort. Investment Office staff worked with CalPERS External Affairs and Meketa to develop the agendas and identify participants for each of the Roundtables. Attendees included State, regional, and local government elected officials and staff, investment professionals and practitioners, CalPERS Board members and staff, academics, and labor representatives.
At each session, staff provided an overview of CalPERS Infrastructure Program, including the strategic role of infrastructure within CalPERS total fund and examples of recent investment activity. Staff also provided Infrastructure Program Term Sheets (Attachment 3); the Strategic Plan Summary (Attachment 4); An Infrastructure Fact Sheet (Attachment 5); and the California Infrastructure Investment Overview report by Meketa (Attachment 6). Likewise, at each session representatives from the State Treasurer’s Office presented on the State’s perspective on financing needs and resources, such as bonding capacity for different sectors. The agendas for each of the Roundtables may be found in Attachment 7 of this report, and a complete list of participants may be found in Attachment 8.
Roundtable #1: Overcoming Impediments to Pension Fund Investments in Infrastructure
The first Roundtable was held at CalPERS headquarters in Sacramento on March 5, 2012, and was moderated by David Altshuler of Meketa. Approximately 50 people were in attendance, including representatives from across CalPERS (the Board of Administration, Executive Office, and Investment Office staff), public agencies, industry experts, and labor unions.
The agenda was designed to lay the groundwork for the subsequent Roundtables through a discussion of key considerations for pension system investment in infrastructure. Topics covered during this session included the suitability of infrastructure projects for investment, balancing interests of public and private stakeholders, current sources of infrastructure financing, pension system investment objectives and considerations, and the priorities and limitations of government agencies in procuring infrastructure funding.
Roundtable #2: Transportation
The second Roundtable, on Transportation, was held in San Francisco on April 5, 2012. It was moderated by Richard G. Little, the Director of the Keston Institute for Public Finance and Infrastructure at the University of Southern California. Approximately 55 people were in attendance.
In California, there is legislation in place to enable third-party investment in transportation, as well as a track record of private-sector involvement in transportation investment. Therefore, the discussion focused on specific transportation investment needs from the state and agency perspective, completed transactions, and future projects that could potentially be considered for pension investment. Representatives from Caltrans, San Francisco County Transportation Authority, Orange County Transportation Authority, Los Angeles Metropolitan Transportation Authority, San Diego Association of Governments, and the Metropolitan Transportation Commission/Bay Area Toll Authority, led discussions
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on the current funding sources and needs at their respective agencies. The Roundtable also included presentations on legal considerations related to investment by public pensions in public infrastructure, and the legal and statutory frameworks for enabling P3s in California.
According to roundtable participants, sources of funding for transportation infrastructure in the current environment are diminishing. For example gas tax receipts, the primary source of state transportation funding, are down significantly and this shortfall is expected to contribute to an estimated $200 billion funding gap over the next decade. For the preservation of the current transportation system and expanding and managing the state’s transportation network over time, it is understood that Caltrans has only less than half its actual funding needs. State resources, including debt capacity will not be able to meet all of California’s transportation funding needs.
While the needs are significant, many aspects of transportation project development present challenges for pension investment, including long development times, a complex entitlement process, litigation risk, uncertainty of completion, and a limited track record of private investment participation.
Roundtable #3: Water
The third Roundtable, on Water, was held in Los Angeles on April 23, 2012 and was moderated by Tony Oliveira, a former CalPERS Board Member and currently a Professor at the University of California, Merced. Approximately 43 people were in attendance.
The discussion at the Water Roundtable was oriented towards mutual education between State and local agencies and CalPERS staff on funding needs and investment objectives. Representatives from the Department of Water Resources, Association of California Water Agencies, Metropolitan Water District of Southern California, Los Angeles Department of Water and Power, East Bay Municipal Utility District, and the Kings River Conservation District led discussions on water investment needs, including ongoing operations, maintenance, and upgrading of existing facilities, and the development of large-scale projects such as the Delta Conveyance Project. In addition, legal and finance experts presented on tax-exempt bond financing and potential structures to enable the use of private capital.
Historically, private investment in water infrastructure has been very limited, due primarily to the strong access to the tax-exempt debt market enjoyed among water agencies. However, according to estimates from the State Treasurer’s Office, State resources including debt capacity will not be sufficient to meet all statewide water needs. According to State Treasurer’s Office estimates, $186 billion in state water infrastructure investment is required over the next decade. Most investment needs are focused on improving the reliability of the current system rather than on population growth, as much of California’s critical water infrastructure is over 70 years old. It was noted that while the larger water agencies are highly rated and have strong access to the tax-exempt bond market, new borrowing will require that agencies raise rates to water contractors (users) in order to meet debt service obligations. Rate increases for users have historically been difficult to implement.
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The following water infrastructure projects were discussed at the Roundtable:
• Repair, replacement, and rehabilitation projects focusing on upgrading aging infrastructure, supply diversification, and loss mitigation;
• Improving the reliability of the State’s water resources; • Water and wastewater treatment – both capacity building and to improve compliance with
regulation; • Water conservation, recycling and reclamation efforts projects; • Developing local water supplies to manage potential rate increases, increase cost
effectiveness, and buffer volatility in the supply from the State Water Project; and major projects, such as the Bay Delta Conveyance, that will require significant capital investment (estimates are between $17 and $20 billion) over decades.
For many of these projects, such as revenue-generating projects or large-scale projects with long lead times, there may be potential to structure opportunities for pension investment, to the extent that tax-exempt bond or federal funding for these projects is unavailable or insufficient.
Roundtable #4: Energy
The fourth Roundtable, on Energy, was held in San Diego on May 24, 2012, and was also moderated by Mr. Oliveira. Approximately 54 people were in attendance.
Since most energy facilities are already privately owned and operated, the agenda for the Energy Roundtable consisted of a series of presentations by private sector developers and sponsors of conventional and renewable generation and transmission projects in the U.S. regarding their experiences in California. Representatives from the California Energy Commission, the State’s primary energy policy, planning, and licensing agency, led a discussion on the state energy perspective, and two of California’s public utilities (San Diego Gas & Electric and Southern California Edison) led discussions on energy priorities and current projects within California. In addition, several private companies with significant experience developing energy facilities in California led discussions, which focused on many of the appealing fundamentals of the California energy market, and on some of the regulatory and environmental challenges facing new development in the state.
The pipeline of energy infrastructure projects in California is estimated to be between $50 and $100 billion and is driven by the following developments and trends:
• Forecasted demand growth continues to increase, driven by demographic trends; • The California Renewable Energy Resources Act (Senate Bill X 1-2) increased the state
Renewable Portfolio Standard (RPS), which requires California utilities to source 33% of power from renewable sources by 2020. This requires the development of, and investment in, renewable energy generation and transmission facilities. Solar power generation capacity is expected to grow by 900 megawatts between 2012 and 2016; and
• The need for both reliable and continuous base load generation sources, including natural gas, and new transmission facilities is expected to grow to accommodate the increasing use of intermittent renewable energy sources in the state’s power mix.
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There is much opportunity for institutional investors including pension funds to finance energy investment needs within the state. Highly-rated electric utilities typically enter into long-term power purchase agreements with both renewable energy and natural gas generation facilities which provide project investors with revenue certainty and reduced risks associated with project development and asset utilization.
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Section 4: Additional Outreach and Discussions
In addition to the four Roundtable events described above, CalPERS staff met with other representatives, agencies, and organizations to inform them of CalPERS interest in infrastructure investment, and to learn about these stakeholders’ perspectives on, and experiences regarding infrastructure investment, within California and across the nation.
California Outreach
Staff held conversations specifically focused on investment in California infrastructure with staff from the Governor’s and Legislative Offices. Staff presented Infrastructure Program information to the California Council of Governments; held a special meeting with Chambers of Commerce from across the state; and convened a special workshop at the Port of Long Beach regarding port-related investment opportunities. Staff met with state, regional, and local public agency officials and staff to discuss potential opportunities for pension system investment and their infrastructure needs.
Staff also participated in the creation of the new West Coast Infrastructure Exchange (the “Exchange”). As originally envisioned the Exchange will become an organization focused on ongoing efforts to build a nimble, new vehicle to promote financing of 21st century infrastructure investments along the West Coast and facilitate partnerships with infrastructure innovators in other regions. Once formally launched, the Exchange will serve as a non-profit regional network offering a range of value-added services that support regional-scale infrastructure investment and alignment among key stakeholders in California, Oregon and Washington. It is envisioned that the Exchange will be a center of expertise and a gateway to national and international investors for eligible infrastructure projects. While the Exchange will connect interested investors with potential investments, the vast bulk of deal-development efforts will happen at the state level, given each state’s unique differences in agency and statutory structure, the nature of project management and the role of local jurisdictions.
California leadership in the Exchange has been provided by the California State Treasurer’s Office and CalPERS. CalPERS staff’s role has been to provide information related to the institutional investor’s perspective on infrastructure investment. In its start-up phase, the Exchange is operating with a three-state interim management team, with fiscal sponsorship by the Oregon State Treasury.
The draft mission statement is as follows: The Exchange seeks to address the infrastructure gap and help achieve regional policy objectives including competitiveness, job creation, and climate change policy. We do this by:
• identifying value strategies to leverage public dollars, enable project sponsors, and increase measurable impact,
• creating and advancing new mechanisms for project finance and effective delivery, • sharing and developing best practices, • connecting investors to opportunities and collaborative data, • helping identify, understand and mitigate risk; and • strengthening public sector capacity and expertise.
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National Outreach In addition to California outreach, staff held discussions with interested individuals and organizations regarding pension system investment in infrastructure across the country. These discussions included federal agency staff from the Environmental Protection Agency and Department of Treasury; and state treasurer’s offices across the country. Staff met with professional and stakeholder organizations including the Urban Land Institute, the Clinton Global Initiative, the Center for American Progress, American Federation of Labor and Congress of Industrial Organizations, American Federation of Teachers, and the Service Employees International Union. From these conversations staff has a better understanding of the interest and importance that stakeholder organizations place on the ancillary benefits that may result from pension system investment in infrastructure. Specifically, stakeholder groups articulated the need for strong economic growth to power investment returns for public pension systems, and the ability of pension systems to contribute to economic growth through investment strategies that result in job creation.
Attachment 1, Page 20 of 97
Section 5: Development of Investment Opportunities
CalPERS Infrastructure Outreach initiative has served as an effective program for development of contacts between CalPERS staff and key public sector staff responsible for infrastructure projects. Aside from conducting the aforementioned CalPERS Roundtables, and other public discussions which provided unique and valuable opportunities for staff and interested parties to network and share information, CalPERS Infrastructure Program staff conducted numerous one-on-one meetings with public sector bodies throughout the state.
Investment Office staff met with representatives of individual public sector bodies to discuss potential investment opportunities for CalPERS, including existing assets and projects in development. At these meetings, staff provided details as to the Infrastructure Program investment objectives and criteria, suggested projects and potential investment structures that it is interested in exploring with the public bodies, and emphasized potential advantages for these public bodies in working with CalPERS.
Through its outreach efforts, staff has sought to identify and develop investment opportunities in the following infrastructure sectors: transportation, ports, water, and energy and power. The results to date from early investigations and dialogue with key players in each of these sectors are as follows:
• Transportation Staff has developed a pipeline of transportation-related investment “prospects” and staff will continue to discuss with the relevant public agencies as the agencies work though the projects’ planning phases. These prospects include agency projects requiring substantial capital investment aimed at improving transportation efficiency and/or expanding capacity. Staff is also interested in exploring the potential for investment participation in certain brownfield assets held by public agencies.
• Ports Staff gained new insights regarding opportunities and risks associated with potential partnering with terminal operators and port authorities. Generally speaking, staff considers most ports-related opportunities to be at the higher-risk end of the infrastructure risk-return continuum. Port assets tend to be sensitive to economic activity and to competition from rival goods delivery routes and have a high degree of dependency on downstream goods-movement systems and facilities. Although no prospects are presently identified, CalPERS staff will continue to dialogue with entities involved in California’s ports sector.
• Water Given the public water agencies’ generally strong financial credit ratings and their ready and abundant access to tax-exempt financing, opportunities for CalPERS to invest directly in the agencies’ projects are few. However, there may be opportunities for CalPERS to provide credit support to municipal issuers through its credit enhancement program. Staff believes that opportunities for CalPERS Infrastructure Program are most likely to arise outside of the major public agencies, in connection with independent standalone projects in areas such as wastewater treatment, recycling, and water desalination.
Attachment 1, Page 21 of 97
• Energy & Power California’s energy and power sector has an active investment market with a variety of opportunities for private institutional investment. Staff has considered several opportunities and has participated in competitive processes to acquire power-related assets. Staff expects to continue to see opportunities as it has ongoing dialogue with various entities in the sector, including investor-owned utilities, independent power producers, and other institutional investors.
An important factor potentially limiting opportunities for investment by CalPERS Infrastructure Program in public infrastructure is the availability of low-cost, subsidized financing (e.g., grant funding; Transportation and Infrastructure Finance and Innovation Act (“TIFIA”) funding; tax exempt debt issuance). Nonetheless, staff believes that public sector agencies may be interested in considering alternatives in addition to subsidized sources of financing as the agencies’ infrastructure renewal and expansion needs increase, and their ability to access traditional subsidized financing sources becomes increasingly strained. Additionally, staff believes that over time the agencies may re-examine their estimates of the real lifecycle risks and costs of owning certain types of infrastructure investments and may seek to share these risks with investment partners such as public pension funds.
CalPERS Infrastructure staff has presented public sector agencies with its perspective on the benefits of partnering with CalPERS. Such benefits include: CalPERS can provide a competitive source of long-term capital, in addition to subsidized capital sources; the ability of CalPERS to have financial participation without adversely affecting agencies’ ability to access tax exempt financing; and the common interests and objectives that CalPERS and the agencies share as state public bodies.
In cases where public sector agencies have indicated potential interest in considering alternative financing sources, staff has encouraged the public agencies to consider working on a bilateral basis with CalPERS, including conducting discussions in the early stages of project financial planning. Staff’s strong preference is to work bilaterally toward agreements rather than to participate in costly and uncertain competitive bid auction processes.
Overall, CalPERS staff is making progress with developing in-state infrastructure opportunities for investment. As noted above, staff is actively pursuing transactions in the energy and power sector. In other areas, in particular the transportation sector, staff expects prospective opportunities to materialize gradually as the public sponsors address project planning and approval requirements.
Attachment 1, Page 22 of 97
Conclusion
CalPERS Infrastructure Outreach Effort established introductions and a continuing dialogue between staff and leaders throughout state and local government on the potential for pension system investment in infrastructure. The Outreach Effort was successful in large measure due to the commitment of the participants in preparing for and attending the Roundtables. CalPERS is very grateful to the many people who attended and contributed to the Outreach Effort.
The Roundtables provided a forum to raise issues and lay the groundwork for potential collaboration in the future. In Summary, key opportunities identified for pension system investment include:
• Vast unmet needs for investment in California infrastructure, for which available funding sources are not expected to be sufficient;
• California’s strong fundamentals, which make it an attractive destination for infrastructure investment; and
• CalPERS and other pension systems are attractive potential partners for California public agencies.
Roundtable participants identified current challenges to pension systems infrastructure investment in California, including:
• The availability of lower-cost, tax-exempt financing for many infrastructure projects; • The lack of a good fit between certain infrastructure projects and the framework of investment
policies and strategic objectives of institutional investors; and • Issues related to project development including complex regulations and other timelines.
While suitable opportunities for pension investment are still fairly limited at the present time, CalPERS Infrastructure Program staff is now actively engaged in developing specific in-state opportunities for investment.
Several recommendations regarding policy and legislative changes to facilitate investment in California infrastructure by pension systems were identified at the Roundtables. Some of the key recommendations for potential follow up by stakeholders and other interested parties include initiatives to:
• Develop more-flexible procurement methods for in-state agencies; • Streamline California environmental approval requirements; and • Renew existing legislation enabling Public Private Partnerships in California and consider
expanding its mandate.
Policy and legislative developments that provide greater flexibility in procurement and financing alternatives could help to generate opportunities for investment from public pensions and other institutional sources. In the meantime, CalPERS Infrastructure staff will continue to engage with public sector agencies to discuss the potential for partnering in new and existing projects.
Attachment 1, Page 23 of 97
California Public Employees’ Retirement System Investment Office P.O. Box 2749 Sacramento, CA 95812-2749 TTY: (877) 249-7442 (916) 795-3400 phone www.calpers.ca.gov
Agenda Item 7c September 12, 2011
TO: MEMBERS OF THE INVESTMENT COMMITTEE
I. SUBJECT: Infrastructure Investment in California II. PROGRAM: Infrastructure III. RECOMMENDATION: Information IV. ANALYSIS:
At the presentation of staff’s Infrastructure Strategic Plan (strategy) to the Investment Committee (Committee) in April 2011, Committee members indicated an interest in the subject of investment in infrastructure in California and accordingly, investment opportunities for CalPERS. To provide the Committee with information and an opportunity to discuss this subject, staff requested that the Board’s Infrastructure Consultant, Meketa Investment Group (Meketa), prepare a report on California infrastructure investment. Meketa’s presentation is provided as Attachment 1. Meketa’s report provides an assessment of the state of the infrastructure investment environment within California, noting the growing need for institutional investment to support public infrastructure, pointing out several conditions that have hindered such investment to date, and offering preliminary thoughts as to approaches that are needed and avenues that may be available to stimulate increased interest from institutional investors, including CalPERS. Given the sizable capital needs of California’s state and local governments to support essential public infrastructure, governments will need to expand institutional funding sources beyond the tax exempt bond market, and attract substantial and sustained interest from broader and deeper pools of institutional capital. Under the current government structure in the State of California, the process for identifying assets suitable for private sector partnering is complex and lengthy, with decision-making fragmented amongst various state agencies, authorities and local governments. In order to create a sustainable and efficient structure to meet California's long-term infrastructure funding needs, State government, working with expert advisors, should undertake the following initiatives: (1) establish clear objectives and policies around public infrastructure financing. Key
Attachment 1, Page 24 of 97
Members of the Investment Committee September 12, 2011 Page 2 of 3
policies would address, among other things, issues such as revenue sources and approaches to partnering with private capital; (2) conduct a comprehensive, state-wide review of infrastructure needs; and (3) develop a streamlined and efficient process for identifying and reviewing assets across state and local agencies and sectors that have realizable value, or are otherwise suitable for procurement through partnerships with the private sector. Where appropriate, CalPERS should participate in these efforts. Irrespective of current or future forms of the government’s policy and framework, CalPERS has put in place the necessary foundation for the Infrastructure Program (Program) to initiate, review and invest in California-based infrastructure opportunities. Staff believes that in the near term, the vast majority of attractive, investible opportunities will continue to emanate from privately held and publicly listed investor-owned companies and organizations. Investment types which fall into this category and which are representative of the Program’s current investment pipeline include power generation facilities, energy pipelines and storage, electric transmission, and utilities (energy and water). Investment opportunities are reviewed by staff in the context of the Program’s capital allocation, investment policy and strategy. The current target allocation is 2.0% of the Total Fund (three-year target of c. $5.0 billion). Within the allocation, Infrastructure policy targets U.S. investment of 40% to 80% (c. $2.0 to $4.0 billion). Based on the policy, the Infrastructure strategy is a blueprint for investment execution, focusing on risk analysis and suitable portfolio construction. Pursuant to this, staff recommends an investment allocation for California of up to 20% of the U.S. portion of the Program. This would serve to provide a significant focus on California whilst maintaining geographic diversification in the portfolio and mitigating undue geographic concentration risk. The following table outlines the Program’s targeted and maximum investment amounts based on the current allocation, policy and strategy:
Staff is keen to explore with public sector agencies, districts and authorities across the U.S., and particularly within California, opportunities which meet the Program’s investment requirements. These requirements are outlined in
Infrastructure Portfolio: 3-Year Time Horizon
($ millions) Portfolio Target Portfolio Maximum
U.S. 3,000 4,000
*California 600 800
**No. of CA Transactions 2-4 2-5
* CA at 20% of U.S. portfolio target and maximum
** Assumes average transaction size of $150 - 300 million, consistent with Strategic Plan
Attachment 1, Page 25 of 97
Attachment 1, Page 26 of 97
California Public Employees’ Retirement System Investment Office P.O. Box 2749 Sacramento, CA 95812-2749 TTY: (877) 249-7442 (916) 795-3400 phone www.calpers.ca.gov
Agenda Item 7 October 17, 2011
TO: MEMBERS OF THE INVESTMENT COMMITTEE I. SUBJECT: Infrastructure Investment in California – State and
Local Government Outreach Plan II. PROGRAM: Real Assets - Infrastructure Program III. RECOMMENDATION: Information – Update regarding Outreach Effort for
California Infrastructure Investment IV. ANALYSIS:
In April 2011, the Investment Committee approved the Infrastructure Program strategy for approximately $5 billion of investment capital. On September 12, 2011, the Investment Committee directed staff, among other things, to: Target investment of up to $800 million in California infrastructure over a
three year period; and
Develop a plan for outreach to state and local governments to explore what role CalPERS and other U.S. pension systems can play to facilitate infrastructure investment in California.
Staff was requested to return to the Committee in October with its outreach plan including identification of staff and resource needs. This Agenda Item provides staff’s plan to outreach to state and local government entities regarding investment in California infrastructure (the “Outreach Effort”). The Outreach Effort is designed to address two overarching objectives of the Committee’s Motion:
1) Coordination and Policy Process. Conduct a broad array of discussions to
increase the potential for investment in California infrastructure by CalPERS and other pension systems with whom CalPERS may partner; and
Attachment 1, Page 27 of 97
Members of the Investment Committee October 17, 2011 Page 2 of 6
2) Investment Pipeline Process. Enhance the current infrastructure investment pipeline and execute investments in California-based infrastructure businesses and projects.
Approach to Outreach The Coordination and Policy Process will entail: a) multi-party, roundtable workshop meetings and open engagement on pertinent policy and legislative initiatives. This process will: Provide opportunities for stakeholders to share information regarding project
delivery and service goals, and perspectives on opportunities and challenges;
Provide stakeholders with information about CalPERS investment programs and initiatives;
Identify policy changes that could make infrastructure investments by pension
plans more viable; and
Provide opportunities to explore how CalPERS may best contribute to improve the conditions, and increase the potential for infrastructure investment by pension funds.
The Investment Pipeline Process will be one-on-one, private meetings to explore potential opportunities for investment by CalPERS. The one-on-one meetings between CalPERS Infrastructure investment staff and key State and local agencies will serve to:
Increase mutual awareness between CalPERS and government agencies of
mandates, goals, initiatives and projects;
Strengthen the investment staff’s network of contacts for California infrastructure investment; and
Potentially stimulate development of a pipeline of suitable opportunities for
investment.
Implementation and Reporting
Staff proposes to undertake the following activities in connection with its Outreach Effort:
Attachment 1, Page 28 of 97
Members of the Investment Committee October 17, 2011 Page 3 of 6
1. Coordination and Policy Process: Real Assets staff in collaboration with External Affairs staff will: a) Within six months, organize and lead two to four roundtable workshops on California Infrastructure, involving representatives from a selection of major public sector agencies, pension systems, and advisors with expertise on public infrastructure policy, financing and procurement;
b) Document and report to the Investment Committee key findings and recommendations arising from the workshops;
c) Openly engage with key stakeholders and market participants to discuss public policy and legislative initiatives pertinent to infrastructure investment in California; and
2. Investment Pipeline Process: Infrastructure Program staff will:
a) Within six months, engage in one-on-one meetings with at least one dozen key State and local government agencies to explore opportunities for investment;
b) Provide to the Investment Committee a confidential report regarding potential investment opportunities arising from the one-on-one meetings; and
c) Pursue suitable opportunities for investment on an ongoing basis.
In addition to the aforementioned outreach activities, earlier this month staff participated in two important industry events: 1) the roundtable workshop, California Infrastructure – A Path to Economic Recovery and Jobs, held by the California Foundation on the Environment and the Economy on October 10-11, 2011; and 2) the USDA Investment Roundtable to discuss infrastructure investment in rural America, held by the United States Department of Agriculture in New York on October 6, 2011. Staff anticipates that there will be abundant opportunities for dialogue with public sector officials and pension investors regarding domestic infrastructure investment. Staff welcomes such opportunities for dialogue, but nonetheless will be judicious as it pertains to expenditures of time, effort and cost.
Staff Resource Requirements The Infrastructure Program is presently staffed below levels prescribed within the Infrastructure Strategic Pan (April 2011), which did not incorporate consideration
Attachment 1, Page 29 of 97
Members of the Investment Committee October 17, 2011 Page 4 of 6
of any demands related to the Outreach Effort. Staff intended to request the additional resources identified in the Infrastructure Strategic Plan for the 12/13 budget year. In light of the increased emphasis on investment in California infrastructure, staff now plans to accelerate this resource request. Staff will request two planned investment staff positions plus one administrative position for the Infrastructure team through the CalPERS mid-year budget approval process.
Aside from Infrastructure Program resources, the Chief Investment Officer has given direction for recruitment of a Senior Portfolio Manager dedicated to providing broad leadership and coordination for key cross-asset-class initiatives, including California investment. Laurie Weir, Portfolio Manager, Real Assets has been asked to fulfill this role on an interim basis. This position can be funded from within the existing Investment Office budget. Staff intends to request through CalPERS mid-year budget process the approval of: One additional Investment Officer III position to report to the SPM. This
position will be focused generally on California related investments and initiatives across the total fund; and will focus specifically on work associated with the Coordination and Policy Process related to investment in California infrastructure.
CONCLUSION Staff proposes a dual-track Outreach Effort which involves, a), multi-party roundtable workshops and open engagement to explore potential roles for CalPERS and other pension systems in facilitating infrastructure investment in California, and b), one-on-one investment meetings focused on exploring investment opportunities with key State and local agencies. To support staff’s immediate efforts and its ongoing efforts to maintain an intensive focus on investment in California, while continuing to support the broader management and growth requirements of the Infrastructure Program, staff will pursue approval for accelerated recruitment of Infrastructure staff resources and one additional resource to support the Coordination and Policy Process effort.
Attachment 1, Page 30 of 97
Members of the Investment Committee October 17, 2011 Page 5 of 6
V. RISKS:
There are no risks associated with this information item.
VI. STRATEGIC PLAN: This item supports the following strategic goals:
Goal VIII: Manage the risk and volatility of assets and liabilities to ensure sufficient funds are available, first to pay benefits and second, to minimize and stabilize contributions.
Goal IX: Achieve long-term, sustainable risk adjusted returns. VII. RESULTS/COSTS:
Costs associated with this initiative are anticipated to be roughly $80,000 to mainly cover staff travel costs and costs associated with hosted roundtable events, plus approximately $140,000 of personnel cost (including benefits) for an additional resource to support the Coordination and Policy Process efforts. The estimate excludes expenses related to additional Infrastructure investment staff resources, because these costs were part of the Infrastructure strategic plan and would have been incurred regardless of this initiative.
Attachment 1, Page 31 of 97
Attachment 1, Page 32 of 97
DEBT TERM SHEET
Target Investments:
Defensive assets or Defensive Plus assets as described in CalPERS Infrastructure Strategic Plan. Essential assets with monopoly characteristics under proven regulation or with acceptable long term contractual regimes.
Asset Types:
Roads, bridges, tunnels, rail, airports, ports, natural-gas fired power generation, renewable power generation, electric transmission, energy midstream (pipelines, oil & gas storage, LNG), electric and gas utilities, water pipelines, water and waste water utilities, desalination facilities, essential communications systems and social infrastructure.
Eligible Investments:
Stable, long-lived, cash generating assets with high levels of execution certainty, consisting of:
• Availability-based Public-to-Private Partnerships (“P3”) (subject to revenue and cash flow certainty under commercially acceptable appropriations schemes and suitable financial strength of procuring authority);
• Brownfield Toll/User-Fee based P3 (subject to acceptable volume history and forecast; acceptable toll/user fee regime);
• Contracted electric transmission, power generation, energy midstream, water and waste (subject to acceptable contract terms and counterparty credit quality);
• Regulated utilities: electric, gas, integrated, water, waste water, communications/cable (subject to acceptable regulatory regimes)
Greenfield Assets: No development/entitlement risk (all key permits, approvals,
required contracts, easements etc. are in place). Minimal construction risk, mitigations consisting of, but not limited to, acceptable Engineering Procurement Construction and/or Design Build Agreements with market based liability caps, liquidated damages, bonding and liquidity/security enhancement.
Operating Agreements:
Where applicable, acceptable long-term Operations & Maintenance Agreements from suitable parties with market based terms including termination provisions, liquidated damages etc.
Debt Structures: Taxable senior secured floating rate loans or notes or subordinated floating rate loans or notes.
Reference Index: Monthly/quarterly U.S. CPI or U.S. LIBOR.
Attachment 1, Page 33 of 97
Floors; OID: Reference Index floors and original issue discount where applicable.
Spread: Minimum 4.00% over U.S. CPI or equivalent over U.S. LIBOR. To be determined on a transaction by transaction basis.
Tenor: 5-20 years, subject to market terms at the time of issuance.
Amortization: Partially amortizing subject to market terms, contract tenors and required covenants.
Covenants: Market based and consisting of but not limited to minimum debt service coverage ratios, maximum debt to capital ratios, maximum debt-to-ebitda ratios etc.
Required Security: Senior secured - pledge of all assets, revenues and/or contracts as applicable. Subordinated - to be determined investment to investment.
CalPERS Target Investment Size:
$150 - $300 million per transaction.
CalPERS Maximum Investment:
CalPERS maximum investment to be determined transaction by transaction depending on total size of offering, number of syndicate members, legislative restrictions (if any) and Internal Revenue Code (IRC) restrictions including applicable portions of IRC section 503 (IRC section which outlines transactions prohibited for tax exempt entities and governmental plans).
Credit Quality: BB/Ba2 or higher credit rating from one or more of the major credit rating agencies.
Due Diligence: Commercial due diligence consisting of legal, technical/engineering, environmental, pricing, volume, regulation, financial (including detailed financial models), tax, accounting, insurance, forecast market conditions etc.
Attachment 1, Page 34 of 97
EQUITY TERM SHEET
Target Investments:
Defensive or Defensive Plus assets as described in CalPERS Infrastructure Strategic Plan. Essential assets with monopoly characteristics under proven regulation or with acceptable long term contractual regimes.
Asset Types:
Roads, bridges, tunnels, rail, airports, ports, natural-gas fired power generation, renewable power generation, electric transmission, energy midstream (pipelines, oil & gas storage, LNG), electric and gas utilities, water pipelines, water and waste water utilities, desalination facilities, essential communications systems and social infrastructure.
Eligible Investments:
Stable, long-lived, cash generating assets with high levels of execution certainty, consisting of:
• Availability-based Public-to-Private Partnerships (“P3”) (subject to revenue and cash flow certainty under commercially acceptable appropriations schemes and suitable financial strength of procuring authority);
• Brownfield Toll/User-Fee based P3 (subject to acceptable volume history and forecast; acceptable toll/user fee regime);
• Contracted electric transmission, power generation, energy midstream, water and waste (subject to acceptable contract terms and counterparty credit quality);
• Regulated utilities: electric, gas, integrated, water, waste water, communications/cable (subject to acceptable regulatory regimes)
Greenfield Assets: No development/entitlement risk (all key permits, approvals,
required contracts, easements etc are in place). Minimal construction risk, mitigations consisting of, but not limited to, acceptable Engineering Procurement Construction and/or Design Build Agreements with market based liability caps, liquidated damages, bonding and liquidity/security enhancement.
Operating Agreements:
Where applicable, acceptable long-term Operations & Maintenance Agreements from suitable parties with market based terms including termination provisions, liquidated damages etc.
Investment Structures:
Direct investments in the form of preferred or common equity through commercial structures and legal forms (LLCs, C Corps, other).
Leverage: Debt in the capital structure required to have a minimum BBB- or Baa3 credit rating from one or more acceptable, major credit rating
Attachment 1, Page 35 of 97
agencies. All leverage to be non-recourse to CalPERS.
Cash Yield: Targeted average annual cash yields dependent upon nature of the investment. Strong preference for investments with higher cash yields and those which provide cash dividends in all stages of the investment.
Net Real Equity Return Requirements:
Common Equity Minimum 4.0 – 8.0% in US Dollars. Return requirements adjusted for risk, tenor, and subject to acceptable inflation protection and/or linkage. Preferred Equity To be determined on investment by investment basis.
CalPERS Target Investment Size:
$150 - $300 million per transaction.
Partners: CalPERS’ partners to consist of experienced and reputable firms/enterprises of significant financial size and strength with like-minded goals and objectives with respect to the asset/investment.
Ownership & Governance:
CalPERS seeks to make investments which provide significant minority investment stakes and significant shareholder rights. Governance and shareholder terms TBD with respect to each investment and consistent with the size of CalPERS’ stake and the nature of the investment/asset.
Exit Rights: No restrictions on CalPERS exit.
Due Diligence: Commercial due diligence consisting of legal, technical/engineering, environmental, pricing, volume, regulation, financial (including detailed financial models), tax, accounting, insurance, forecast market conditions etc.
Attachment 1, Page 36 of 97
Infra
stru
ctur
e S
trate
gic
Pla
n Su
mmar
y
Rand
all M
ullan
, Sen
ior P
ortfo
lio M
anag
er
Infra
struc
ture &
For
estla
nd G
roup
Septe
mber
201
1
Attachment 1, Page 37 of 97
Infra
struc
ture
Stra
tegic
Plan
Sum
mary
Inves
tmen
t Plan
High
lights
•
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ram
targe
t size
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alPER
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otal F
und (
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•
Low-
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ocus
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hed
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gram
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sted i
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fensiv
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ic: 4
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sted i
n the
US
•
Inves
tmen
t app
roac
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phas
izes:
-
Long
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holds
; -
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tmen
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prefe
renc
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inimu
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50 m
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; -
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use d
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electi
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-
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ifican
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akes
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t with
stro
ng, r
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d like
-mind
ed pa
rtner
s.
Attachment 1, Page 38 of 97
Infra
struc
ture
Stra
tegic
Plan
Sum
mary
Stra
tegic
Role
of Inf
rastr
uctur
e •
The P
rogr
am’s
Stra
tegi
c Rol
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defin
ed th
roug
h Ca
lPER
S’ A
sset
Alloc
ation
Rev
iew pr
oces
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was
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mine
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t Infra
struc
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nves
tmen
ts ca
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strate
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: -
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sh Y
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-
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nsive
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esse
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and
prote
cted/n
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ature
of in
frastr
uctur
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sets
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tes re
turns
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st pr
ice, d
eman
d and
gr
owth
risks
; -
Infla
tion
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nefit
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struc
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ticipa
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corre
lation
to fix
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incom
e and
listed
equit
ies.
Pr
ogra
m Be
nchm
ark:
Ro
lling 5
-year
U.S
. CPI
+ 40
0 bps
Attachment 1, Page 39 of 97
Infra
struc
ture
Stra
tegic
Plan
Sum
mary
Inves
tmen
t Scre
ening
•
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ch fo
r high
-qua
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uitab
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et R
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egul
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•
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tion
attri
bute
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rtner
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tain
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ourc
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rsue
Attachment 1, Page 40 of 97
Infra
struc
ture
Stra
tegic
Plan
Sum
mary
Asse
t-leve
l Risk
/Retu
rn
•Th
e Pro
gram
’s as
set-le
vel ri
sk-re
turn f
rame
work
is tai
lored
arou
nd th
e uniq
ue, in
here
nt de
fensiv
e qu
alitie
s of e
ssen
tial in
frastr
uctur
e. •
Base
d on d
etaile
d ana
lysis
of idi
osyn
cratic
retur
n an
d risk
facto
rs, op
portu
nities
are c
lassif
ied
withi
n an a
sset-
level
risk/r
eturn
spec
trum
with
the fo
llowi
ng th
ree c
atego
ries:
‘Def
ensiv
e’
- dow
nside
-pro
tected
or r
esilie
nt / lo
w ris
k ‘D
efen
sive P
lus’
- d
owns
ide-p
rotec
ted o
r res
ilient
/ mod
erate
risk
‘Ext
ende
d’
- less
prote
ction
or re
silien
cy / h
igher
risk
Quali
ties o
f ‘De
fens
ive’ In
frast
ruct
ure
•
Esse
ntial
asse
ts an
d ser
vices
•
GDP-
resil
ient /
dema
nd-in
elasti
c / pr
icing
certa
inty
•
Minim
al co
mpeti
tion /
stro
ng en
try ba
rrier
s / m
onop
olisti
c or
lon
g-ter
m-co
ntrac
ted bu
sines
ses
•St
able
reve
nues
and r
eturn
s / ra
te-re
gulat
ed, o
r long
-term
-co
ntrac
ted re
venu
es
•Lo
w op
erati
ng ris
k / al
lowed
cost
reco
very
•Inf
lation
linka
ges /
prote
ction
•St
rong
cred
it qua
lity of
f-tak
ers o
r pay
ers
•Ca
sh-g
ener
ative
busin
esse
s •
Long
-lived
tang
ible a
ssets
•
Low
obso
lesce
nce r
isk
•Lo
w / n
o dev
elopm
ent ri
sk
•Lo
w / n
o cur
renc
y risk
Attachment 1, Page 41 of 97
Infra
struc
ture
Stra
tegic
Plan
Sum
mary
Risk
/Retu
rn F
rame
work
•Th
e risk
/retur
n fra
mewo
rk inc
orpo
rates
pertin
ent a
sset-
level
risk a
nd re
turn f
actor
s for
Infra
struc
ture
inves
tmen
ts
DEF
ENSI
VED
EFEN
SIVE
PL
US
EXTE
ND
ED
Investment Risks / Return Drivers
Low
R
egul
ated
reve
nues
/ear
ning
sor
long
term
, hig
h qu
ality
con
trac
ts
Pred
icta
ble
timin
g an
d am
ount
. O
ften
an a
dditi
on to
rate
bas
eun
der u
tility
regu
latio
n Pr
edic
tabl
e/st
able
ass
et v
alue
dr
iven
by
rate
-bas
e or
long
-term
co
ntra
cted
cas
h flo
ws
Hig
h de
gree
of
long
term
infla
tion
prot
ectio
n
Hig
hly
pred
icta
ble
dem
and/
very
low
vol
ume/
user
risk
.H
igh
inel
astic
ity
(45
–90
%)
Inve
stm
ent G
rade
Low
-M
oder
ate
Le
ss c
erta
in p
rice
regu
latio
n an
d/or
addi
tiona
l con
trac
t ris
k
Pred
icta
ble
timin
g an
d am
ount
.O
ften
an a
dditi
on to
rate
bas
eun
der u
tility
regu
latio
n.
Sam
e as
Def
ensi
ve
with
low
-to-m
oder
ate
relia
nce
on te
rmin
al v
alue
(“TV
”)
Mod
erat
e-to
-hig
h de
gree
of
long
term
infla
tion
prot
ectio
n
Mod
erat
e-to
-hig
hly
pred
icta
ble
Dem
and/
low
vol
ume
or u
ser r
isk
Mod
erat
e in
elas
ticity
(30
–75
%)
BB
or b
ette
r
Mod
erat
e -H
igh
Ass
ets/
busi
ness
es s
ubje
ct to
hig
her
degr
ees
of p
rice
com
petit
ion
Tim
ing
and
amou
nt c
an b
e le
sspr
edic
tabl
e du
e to
exp
osur
e to
com
petit
ion
or n
eed
to g
row
. A
sset
val
ue le
ss p
redi
ctab
le/s
tabl
edu
e to
less
cer
tain
cas
h flo
ws
&gr
eate
r rel
ianc
e on
gro
wth
& T
V
Pric
e an
d de
man
d ris
ks
resu
lt in
low
er lo
ng te
rmin
flatio
n pr
otec
tion
Low
dem
and
pred
icta
bilit
y/hi
ghvo
lum
e or
use
r ris
kH
ighe
r lev
el o
f ela
stic
ity
(0 –
40%
) B
B o
r bet
ter
Prov
en e
ngin
eerin
g/te
chno
logy
; Lo
w c
onst
ruct
ion
risk
Prov
en e
ngin
eerin
g/te
chno
logy
;Lo
w c
onst
ruct
ion
risk
May
invo
lve
less
pro
ven
engi
neer
ing/
tech
nolo
gy a
nd/o
r m
oder
ate
cons
truc
tion
risk
Low
Hig
hR
isk/
Ret
urn/
Gro
wth
Part
ners
/Alig
nmen
t/Gov
erna
nce
Cur
renc
y/FX
, Reg
ulat
ory,
Leg
al, P
oliti
cal
Pric
e R
isk
Cap
ital
Expe
nditu
re
Ass
etVa
lue
Infla
tion
Effic
ient
Deb
t Lev
els/
Cre
dit Q
ualit
y
Dem
and/
Volu
me
Ris
k
Engi
neer
ing
&
Con
stru
ctio
n
Rev
enue
Cos
ts
Bal
ance
Shee
t
Oth
er &
Non
-Fi
nanc
ial
Ope
ratin
g C
osts
Pr
edic
tabl
e am
ount
s of
ten
with
re
gula
tory
pas
s-th
roug
h or
lo
ng-te
rm c
ontr
acts
Pred
icta
ble
amou
nts
ofte
n w
ithre
gula
tory
pas
s-th
roug
h or
long
-term
con
trac
ts
Can
be
less
pre
dict
able
due
to la
ck o
f reg
ulat
ory
pass
-th
roug
h or
abi
lity
to c
ontr
act
Valu
atio
n
DEF
ENSI
VED
EFEN
SIVE
PL
US
EXTE
ND
ED
Investment Risks / Return Drivers
Low
R
egul
ated
reve
nues
/ear
ning
sor
long
term
, hig
h qu
ality
con
trac
ts
Pred
icta
ble
timin
g an
d am
ount
. O
ften
an a
dditi
on to
rate
bas
eun
der u
tility
regu
latio
n Pr
edic
tabl
e/st
able
ass
et v
alue
dr
iven
by
rate
-bas
e or
long
-term
co
ntra
cted
cas
h flo
ws
Hig
h de
gree
of
long
term
infla
tion
prot
ectio
n
Hig
hly
pred
icta
ble
dem
and/
very
low
vol
ume/
user
risk
.H
igh
inel
astic
ity
(45
–90
%)
Inve
stm
ent G
rade
Low
-M
oder
ate
Le
ss c
erta
in p
rice
regu
latio
n an
d/or
addi
tiona
l con
trac
t ris
k
Pred
icta
ble
timin
g an
d am
ount
.O
ften
an a
dditi
on to
rate
bas
eun
der u
tility
regu
latio
n.
Sam
e as
Def
ensi
ve
with
low
-to-m
oder
ate
relia
nce
on te
rmin
al v
alue
(“TV
”)
Mod
erat
e-to
-hig
h de
gree
of
long
term
infla
tion
prot
ectio
n
Mod
erat
e-to
-hig
hly
pred
icta
ble
Dem
and/
low
vol
ume
or u
ser r
isk
Mod
erat
e in
elas
ticity
(30
–75
%)
BB
or b
ette
r
Mod
erat
e -H
igh
Ass
ets/
busi
ness
es s
ubje
ct to
hig
her
degr
ees
of p
rice
com
petit
ion
Tim
ing
and
amou
nt c
an b
e le
sspr
edic
tabl
e du
e to
exp
osur
e to
com
petit
ion
or n
eed
to g
row
. A
sset
val
ue le
ss p
redi
ctab
le/s
tabl
edu
e to
less
cer
tain
cas
h flo
ws
&gr
eate
r rel
ianc
e on
gro
wth
& T
V
Pric
e an
d de
man
d ris
ks
resu
lt in
low
er lo
ng te
rmin
flatio
n pr
otec
tion
Low
dem
and
pred
icta
bilit
y/hi
ghvo
lum
e or
use
r ris
kH
ighe
r lev
el o
f ela
stic
ity
(0 –
40%
) B
B o
r bet
ter
Prov
en e
ngin
eerin
g/te
chno
logy
; Lo
w c
onst
ruct
ion
risk
Prov
en e
ngin
eerin
g/te
chno
logy
;Lo
w c
onst
ruct
ion
risk
May
invo
lve
less
pro
ven
engi
neer
ing/
tech
nolo
gy a
nd/o
r m
oder
ate
cons
truc
tion
risk
Low
Hig
hR
isk/
Ret
urn/
Gro
wth
Part
ners
/Alig
nmen
t/Gov
erna
nce
Cur
renc
y/FX
, Reg
ulat
ory,
Leg
al, P
oliti
cal
Pric
e R
isk
Cap
ital
Expe
nditu
re
Ass
etVa
lue
Infla
tion
Effic
ient
Deb
t Lev
els/
Cre
dit Q
ualit
y
Dem
and/
Volu
me
Ris
k
Engi
neer
ing
&
Con
stru
ctio
n
Rev
enue
Cos
ts
Bal
ance
Shee
t
Oth
er &
Non
-Fi
nanc
ial
Ope
ratin
g C
osts
Pr
edic
tabl
e am
ount
s of
ten
with
re
gula
tory
pas
s-th
roug
h or
lo
ng-te
rm c
ontr
acts
Pred
icta
ble
amou
nts
ofte
n w
ithre
gula
tory
pas
s-th
roug
h or
long
-term
con
trac
ts
Can
be
less
pre
dict
able
due
to la
ck o
f reg
ulat
ory
pass
-th
roug
h or
abi
lity
to c
ontr
act
Valu
atio
n
Attachment 1, Page 42 of 97
Infra
struc
ture
Stra
tegic
Plan
Sum
mary
Portf
olio D
esign
Par
amete
rs Po
rtfo
lio A
lloca
tion
Inve
stm
ent R
isk/
Type
R
ange
Ta
rget
Min
imum
Rea
l Ret
urn
Targ
ets
Def
ensi
ve
25%
- 75
%
50%
4.
0% -
5.0%
Def
ensi
ve P
lus
25%
- 65
%
45%
5.
0% -
8.0%
Exte
nded
0%
- 10
%
5%
8.0%
+
List
ed (S
ub-A
lloca
tion)
0%
- 10
%
5%
4.0%
- 8.
0%
Geo
grap
hic
Allo
catio
n
Loca
tion
Ran
ge
Targ
et
USA
40
% -
80%
60
%
Dev
elop
ed O
ECD
(ex
US)
20
% –
50%
35
%
Less
Dev
elop
ed M
arke
ts
0% -
10%
5%
Leve
rage
Portf
olio
Ave
rage
≤
65%
Dis
cret
e Eq
uity
Inve
stm
ent
Whe
re >
50%
→ m
inim
um c
redi
t qua
lity
of B
BB- o
r eq
uiva
lent
Deb
t Sec
uriti
es
≥ BB
or e
quiv
alen
t
Cur
renc
y &
Inte
rest
Rat
e R
isk
Hed
ging
of f
orei
gn e
xcha
nge
and
inte
rest
rate
risk
whe
re a
pplic
able
Attachment 1, Page 43 of 97
FACT SHEET
CalPERS Infrastructure Program
In 2007 CalPERS initiated an infrastructure investment pilot program designed to invest in projects and businesses involved in key infrastructure sectors including the transportation, water, communications, and energy and power sectors. In 2011 CalPERS established a new Investment Policy, capital allocation, and Strategic Plan for its Infrastructure Program. Additionally, consistent with the new framework for the Program CalPERS Board approved targeting up to $800 million for investments in California infrastructure over three years. ROLE OF INFRASTRUCTURE INVESTMENTS
Designed to invest to capitalize on the inherent defensive nature of essential infrastructure assets, CalPERS Infrastructure Program has a unique, strategic role within CalPERS total fund. That role is to provide steady returns and cash yields, inflation protection, and investment diversification for the total fund. CURRENT CALPERS INFRASTRUCTURE PROGRAM AT-A-GLANCE
(AS AT 6/30/2012)
Commitments: $1.09 billion
Net Asset Value (NAV): $1 billion
NAV - U.S. Investments (ex. CA): $395 million
NAV - CA Investments: $94 million in state
Investment Return: 19 percent IRR (since inception as of 3/31/2012)
PROGRAM INVESTMENT FOCUS
The Program invests in both public and private infrastructure involving roads, bridges, tunnels, rail, seaports, airports, power generation, power transmission, oil and gas pipelines and storage, electric and gas utilities, and water and wastewater facilities.
Attachment 1, Page 44 of 97
PROGRAM INVESTMENT TARGETS
Total Program Size: • Targeted to increase to 2 percent of CalPERS total fund, equating to approximately $5 billion
Individual Investment Size: • $150 million or greater investment from CalPERS
Geographic Focus: • US Target Range: 40-80 percent (up to c. $4 billion)
• California Target: 20 percent of US (up to c. $800 million)
Risk-Return Profile: • “Defensive” Infrastructure – 50% target - Minimal competition; reliable revenues; low operating risk;
moderate inflation protection; cash generating; and minimal downside risk
• “Defensive Plus” Infrastructure – 45% target
- Significant defensive qualities, although with a greater degree of risk associated with factors such as competition, user patronage, regulation, contracts, construction, capital expenditure, growth and terminal value
• “Extended” Infrastructure – 5% target
- Infrastructure businesses subject to significant risk associated with some of the following elements: competition; merchant business; growth; construction; development; technology; operating costs; pricing; capital expenditure; terminal value; commodity prices; legal/political/regulatory regime; and currency
Attachment 1, Page 45 of 97
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st 2
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C
ALIF
ORN
IA IN
FRAS
TRU
CTU
RE IN
VEST
MEN
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IEW
Attachment 1, Page 46 of 97
Mek
eta
Inve
stm
ent G
roup
Exec
utiv
e Su
mm
ary
1
This
docu
men
tpr
ovid
esan
over
view
and
prel
imin
ary
asse
ssm
ent
ofop
portu
nitie
sfo
rin
vest
men
tby
publ
icpe
nsio
nfu
nds
inC
alifo
rnia
infra
stru
ctur
e.In
the
first
sect
ion,
we
revi
ewth
ecu
rren
tIn
vest
men
tPo
licy
and
stra
tegi
cob
ject
ives
ofC
alPE
RS’
Infra
stru
ctur
ePr
ogra
m,
whi
chse
tfo
rthth
eris
k,re
turn
,an
ddi
vers
ifica
tion
crite
riath
atgu
ide
the
Prog
ram
’sin
vest
men
tac
tivity
.A
lthou
ghth
ese
guid
elin
esar
esp
ecifi
cto
Cal
PERS
,th
eysh
are
man
ycr
iteria
and
obje
ctiv
esw
ithin
frast
ruct
ure
inve
stm
entp
rogr
ams
atot
herp
ublic
pens
ion
fund
s.Fo
llow
ing
abr
ief
back
grou
ndof
infra
stru
ctur
ein
vest
men
tin
Cal
iforn
ia,
the
next
sect
ions
cons
ider
the
curr
ent
limita
tions
toin
vest
men
tin
publ
ican
dpr
ivat
ein
frast
ruct
ure.
The
final
sect
ion
sugg
ests
aven
ues
that
may
beex
plor
edan
dpu
rsue
din
orde
rto
gene
rate
oppo
rtuni
ties
for
incr
ease
dpa
rtner
ship
betw
een
Cal
PERS
and
Cal
iforn
ia’s
publ
icag
enci
esin
infra
stru
ctur
ein
vest
men
t.
Attachment 1, Page 47 of 97
Mek
eta
Inve
stm
ent G
roup
Exec
utiv
e Su
mm
ary
2
Our
prel
imin
ary
conc
lusio
nsar
eas
follo
ws:
•Pu
blic
owne
rshi
pan
dop
erat
ions
ofin
frast
ruct
ure
and
the
relia
nce
onpu
blic
finan
cing
sour
ces
fori
nfra
stru
ctur
ede
velo
pmen
t,ha
vere
stric
ted
inve
stm
entp
artic
ipat
ion
inpu
blic
infra
stru
ctur
eby
third
-par
tyin
stitu
tiona
linv
esto
rs,i
nclu
ding
publ
icpe
nsio
nfu
nds.
•O
ppor
tuni
ties
toin
vest
inpr
ivat
ein
frast
ruct
ure,
onth
eot
her
hand
,ar
ere
lativ
ely
abun
dant
,as
ther
ear
efe
wer
impe
dim
ents
toin
vest
men
t.Ye
tce
rtain
regu
lato
ryco
nditi
ons
have
limite
dth
esc
ale
ofsu
chin
vest
men
tto
date
.
•C
alifo
rnia
has
been
ale
ader
indr
aftin
gle
gisla
tion
topr
omot
epr
ivat
epa
rtic
ipat
ion
inin
frast
ruct
ure
inve
stm
ent.
How
ever
,in
orde
rto
attra
ctin
stitu
tiona
linv
estm
ent,
stat
ean
dlo
calg
over
nmen
tsm
ust
beab
leto
crea
tein
vest
ible
oppo
rtuni
ties
and
cred
ible
/relia
ble
trans
actio
npr
oces
ses.
•To
the
exte
ntth
atgo
vern
men
tal
entit
ies
are
prep
ared
for
dial
ogue
arou
ndsp
ecifi
cin
vest
ible
oppo
rtun
ities
ther
eis
pote
ntia
lfor
coop
erat
ion
betw
een
publ
icpe
nsio
nfu
nds,
stat
eag
enci
es,a
ndlo
calg
over
nmen
tsto
inve
stin
Cal
iforn
iain
frast
ruct
ure.
This
docu
men
tis
anin
itial
atte
mpt
atid
entif
ying
the
curr
ent
chal
leng
esto
inve
stin
gin
Cal
iforn
iain
frast
ruct
ure,
and
aven
ues
for
expl
orin
gpo
ssib
lepa
rtner
ship
betw
een
publ
icpe
nsio
nfu
nds
and
gove
rnm
ent
agen
cies
onin
frast
ruct
ure
inve
stm
ent.
Itis
hope
dth
atth
isov
ervi
eww
illhe
lpim
prov
eth
eef
fect
iven
ess
ofan
ydi
alog
uebe
twee
npu
blic
pens
ion
fund
san
dst
ate
and
loca
lgov
ernm
ents
rega
rdin
gar
easo
fpot
entia
lpar
tner
ship
.
Attachment 1, Page 48 of 97
Mek
eta
Inve
stm
ent G
roup
3
Tabl
e of
Con
tent
s
Intr
oduc
tion
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..1
Infr
astr
uctu
re In
vest
men
t Pro
gram
Hig
hlig
hts.
......
......
......
......
......
......
......
..2
Back
grou
nd: I
nfra
stru
ctur
e In
vest
men
t in
Cal
iforn
ia...
......
......
......
......
......
..3
Cha
lleng
es to
Pen
sion
Fun
d In
vest
men
t in
Publ
ic In
fras
truc
ture
......
......
....4
Priv
ate
Infr
astr
uctu
re In
vest
men
t Opt
ions
......
......
......
......
......
......
......
......
...5
Pote
ntia
l Opp
ortu
nitie
s...
......
......
......
......
......
......
......
......
......
......
......
......
.....
6
Appe
ndic
es
Con
clus
ion
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
....7
Cas
e St
udie
s....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
....8
Refe
renc
es...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.9
Attachment 1, Page 49 of 97
Intr
oduc
tion
Attachment 1, Page 50 of 97
Mek
eta
Inve
stm
ent G
roup
Intr
oduc
tion
Intr
oduc
tion
Ove
rthe
past
year
,the
two
larg
estp
ublic
pens
ion
fund
sin
Cal
iforn
ia,C
alPE
RSan
dC
alST
RS,
have
eith
eran
noun
ced
new
allo
catio
nsto
infra
stru
ctur
e,or
incr
ease
dex
istin
gon
es.
Toge
ther
,the
sem
ulti-
billi
ondo
llar
com
mitm
ents
toin
frast
ruct
ure
signa
lare
cogn
ition
ofth
est
rate
gic
role
that
infra
stru
ctur
ein
vest
men
tsca
npl
ayin
ape
nsio
npo
rtfol
io.
Thes
eco
mm
itmen
tsto
the
infra
stru
ctur
eas
set
clas
sco
me
ata
time
whe
nC
alifo
rnia
’sfis
cal
chal
leng
esha
vele
ftlo
cal,
regi
onal
,an
dst
ate
agen
cies
with
few
erre
sour
ces
avai
labl
eto
finan
ceth
eon
goin
gm
aint
enan
cean
dop
erat
ion
ofex
istin
gin
frast
ruct
ure
and
the
cons
truct
ion
ofne
wfa
cilit
ies.
Whi
lem
any
publ
icpe
nsio
nfu
nds,
incl
udin
gC
alPE
RS,h
ave
anin
tere
stin
mak
ing
good
inve
stm
ents
inC
alifo
rnia
infra
stru
ctur
e,th
ere
are
still
seve
ralb
arrie
rsto
such
inve
stm
ent.
The
purp
ose
ofth
isdo
cum
enti
sto
prov
ide
anov
ervi
ewof
the
curr
entc
halle
nges
tope
nsio
nfu
ndin
vest
men
tin
Cal
iforn
iain
frast
ruct
ure
with
inth
eco
ntex
tof
inst
itutio
nal
inve
stm
ent
polic
ies
and
stra
tegi
cob
ject
ives
.W
eal
soid
entif
yav
enue
sth
atm
aybe
expl
ored
inor
der
toin
crea
seop
portu
nitie
sfo
rpa
rtner
ship
betw
een
pens
ion
fund
san
dth
epu
blic
sect
or.
The
App
endi
xco
ntai
nsca
sest
udie
sof
rece
nttra
nsac
tions
that
illus
trate
both
som
eof
the
oppo
rtuni
ties
for
infra
stru
ctur
ein
vest
men
tin
Cal
iforn
ia,
asw
ell
asre
leva
ntin
vest
men
tco
nsid
erat
ions
.
5
Attachment 1, Page 51 of 97
Infr
astr
uctu
re In
vest
men
t Pr
ogra
m H
ighl
ight
s
Attachment 1, Page 52 of 97
Mek
eta
Inve
stm
ent G
roup
Infr
astr
uctu
re In
vest
men
t Pro
gram
Hig
hlig
hts
7
Ther
eis
aw
ide
risk
and
retu
rnsp
ectru
mfo
rin
frast
ruct
ure
inve
stm
ents
,ra
ngin
gfro
mlo
w-r
isk,
low
-vol
atili
tyas
sets
,to
mor
eop
portu
nist
icin
vest
men
tsth
atfa
cegr
eate
rm
arke
t,de
velo
pmen
t,po
litic
al,l
egal
,oro
ther
risks
.
Asth
eyre
late
topo
tent
iali
nves
tmen
tin
Cal
iforn
iain
frast
ruct
ure,
the
key
cons
ider
atio
nsfo
rC
alPE
RSIn
frast
ruct
ure
Prog
ram
incl
ude:
∙Ap
prop
riat
eri
sk/r
etur
n-
The
Cal
PERS
Infra
stru
ctur
ePr
ogra
mta
rget
sde
fens
ive
inve
stm
ents
with
the
follo
win
gch
arac
teris
tics:
–St
able
reve
nues
and
retu
rns;
rate
-reg
ulat
edor
long
-term
cont
ract
ed
–Lo
wde
velo
pmen
tand
oper
atin
gris
k
–C
ash-
gene
rativ
e;ty
pica
llyes
tabl
ished
,ope
ratio
nala
sset
s
–M
inim
aldo
wns
ide
risk
∙Al
ignm
entw
ithSp
onso
rsan
dPa
rtne
rs–
This
incl
udes
appr
opria
teris
ksh
arin
g,st
rong
gove
rnan
ce,f
inan
cial
stre
ngth
,and
shar
edob
ject
ives
.
∙Tr
ansa
ctib
ility
–Es
tabl
ished
and
effic
ient
bidd
ing
and
proc
urem
ent
proc
esse
sw
itha
high
likel
ihoo
dof
trans
actio
nco
mpl
etio
n,ar
ecr
itica
lfor
publ
icpe
nsio
npr
ogra
ms
that
mus
tm
anag
eth
ede
ploy
men
tof
time
and
limite
dre
sour
ces
inth
epu
rsui
tof
inve
stm
ento
ppor
tuni
ties.
Attachment 1, Page 53 of 97
Back
grou
nd:
Infr
astr
uctu
re In
vest
men
t in
Cal
iforn
ia
Attachment 1, Page 54 of 97
Mek
eta
Inve
stm
ent G
roup
Back
grou
nd:
Infr
astr
uctu
re In
vest
men
t in
Cal
iforn
ia
∙Th
ede
man
dfo
rin
frast
ruct
ure
inve
stm
ent
issig
nific
ant,
yets
tudi
esut
ilize
diffe
rent
defin
ition
sof
infra
stru
ctur
ean
ddi
ffere
ntm
etho
dsfo
rca
lcul
atin
gin
frast
ruct
ure
need
s.
–M
any
defin
ition
sin
clud
epr
ojec
tsw
hich
may
notb
e“i
nves
tible
”(e
.g.,
publ
icho
usin
g)
–Es
timat
esm
ayno
tin
clud
eon
goin
gm
aint
enan
cean
dop
erat
ing
cost
s
–Es
timat
esm
ayno
tta
kein
toac
coun
tbo
thC
alifo
rnia
’sre
cent
unde
rinve
stm
ent
inits
infra
stru
ctur
e,an
dex
pect
edpo
pula
tion
grow
th:
20
10:
37m
illio
n
20
20:
42to
48m
illio
n
9
Sour
ces:
Cal
iforn
ia D
epar
tmen
t of F
inan
ce (2
003)
; Pub
lic P
olic
y In
stitu
te o
f Cal
iforn
ia (2
011)
Esti
mat
ed S
ize
of C
alifo
rnia
Inv
estm
ent
Req
uire
men
t
Cap
ital
Req
uire
d ($
bill
ion)
Pe
riod
(y
ears
) So
urce
424
– 53
0 10
B
ay A
rea
Cou
ncil
Econ
omic
Inst
itute
(201
0)
500
20
Littl
e H
oove
r Com
mis
sion
(201
0)
111.
3 10
C
alifo
rnia
Dep
artm
ent o
f Fin
ance
(200
8)
Infr
astr
uctu
re S
ecto
rs
Tran
spor
tatio
n Ro
ads,
Brid
ges,
Tun
nels,
Mas
s Tr
ansit
,
Park
ing,
Airp
orts
, Sea
ports
, and
Rai
l
Ener
gy
Oil,
Nat
ural
Gas
,
Liqu
id P
ipel
ines
and
Sto
rage
Gas
Dist
ribut
ion
Pow
er
Tran
smiss
ion
Dist
ribut
ion
Gen
erat
ion
(incl
udin
g Re
new
able
s)
Wat
er
Wat
er S
tora
ge, T
rans
porta
tion,
Dist
ribut
ion,
Trea
tmen
t, W
aste
wat
er C
olle
ctio
n, a
nd P
roce
ssin
g
Was
te
Was
te C
olle
ctio
n, T
rans
porta
tion,
Land
fills,
and
Pro
cess
ing
Com
mun
icat
ions
To
wer
s and
Net
wor
ks
Soci
al
Build
ing
Faci
litie
s
(H
ealth
, Edu
catio
n, Ju
stic
e, a
nd M
ilita
ry)
Qua
ntify
ing
the
Cal
iforn
ia In
fras
truc
ture
Gap
Attachment 1, Page 55 of 97
Mek
eta
Inve
stm
ent G
roup
Back
grou
nd:
Infr
astr
uctu
re In
vest
men
t in
Cal
iforn
ia
10
Cap
ital S
pend
ing
2009
Stat
e G
O B
onds
16%
Oth
er84
%
Stat
e G
O B
onds
Oth
er
Stat
e G
O B
onds
57%
Oth
er43
%
Stat
e G
O B
onds
Oth
er
Sour
ce: L
ittle
Hoo
ver C
omm
issio
n (2
010)
; Pub
lic P
olic
y In
stitu
te o
f Cal
iforn
ia (2
009)
Cap
ital S
pend
ing
1978
Cal
iforn
iare
lies
onnu
mer
ous
publ
icso
urce
sto
finan
ceits
infra
stru
ctur
e,pr
imar
ilybo
nds
(Gen
eral
Obl
igat
ion
(“G
O”)
and
Reve
nue
Bond
s).
Itis
estim
ated
that
the
stat
e’s
relia
nce
onbo
nds
for
capi
tal
spen
ding
has
incr
ease
dsig
nific
antly
over
the
past
30ye
ars.
Exam
ple:
GO
Bond
Issu
ance
Attachment 1, Page 56 of 97
Mek
eta
Inve
stm
ent G
roup
Back
grou
nd:
Infr
astr
uctu
re In
vest
men
t in
Cal
iforn
ia
Oth
erpu
blic
sour
ces
used
tofin
ance
infr
astr
uctu
rein
Cal
iforn
iain
clud
e:
∙St
ate
Gen
eral
Fund
∙Sp
ecia
lFun
ds(m
ainl
yfo
rtra
nspo
rtatio
n)
∙Fe
dera
lHig
hway
Trus
tFun
d
∙D
evel
opm
entI
mpa
ctFe
es
∙G
asol
ine
Tax
Use
rfe
e-ba
sed
finan
ce
∙To
lling
hasb
een
used
ona
limite
dnu
mbe
rofr
oads
–SR
91Ex
pres
s
–SR
125
–SR
241
–I-1
5Ex
pres
s
∙M
ostu
tiliti
esch
arge
user
fees
–El
ectri
city
and
Gas
–W
ater
–W
aste
11
Attachment 1, Page 57 of 97
Mek
eta
Inve
stm
ent G
roup
Back
grou
nd:
Infr
astr
uctu
re In
vest
men
t in
Cal
iforn
ia
Bond
ing
has
been
the
pref
erre
dm
echa
nism
for
finan
cing
infr
astr
uctu
re,
for
seve
ral
reas
ons
12
Sour
ce:
Publ
ic P
olic
y In
stitu
te o
f Cal
iforn
ia
Bene
fits
of th
e U
se o
f Bon
d Fi
nanc
ing
for
Infr
astr
uctu
re
Com
men
t
App
rova
l Pro
cess
St
ate
GO
Bo
nds
requ
ire
only
a
maj
ority
ap
prov
al
by
vote
rs
(Bon
ds is
sued
by
loca
l aut
horit
ies
requ
ire s
uper
maj
ority
).
Suita
bilit
y fo
r Lar
ge C
apita
l Pro
ject
s Lo
ng-t
erm
bo
rrow
ing
enab
les
publ
ic
agen
cies
to
fin
ance
la
rge
capi
tal p
roje
cts
that
wou
ld n
ot b
e po
ssib
le to
pay
for u
p fro
nt.
And
, sin
ce
infra
stru
ctur
e pr
ojec
ts
are
desig
ned
to
serv
e m
ultip
le
gene
ratio
ns, i
t mak
es s
ense
that
the
debt
obl
igat
ions
are
pai
d do
wn
over
long
er p
erio
ds.
Tax
Adv
anta
ge
Due
to
th
eir
tax-
exem
pt
stat
us,
bond
s m
ay
be
econ
omic
ally
ad
vant
ageo
us c
ompa
red
to ta
xabl
e fu
ndin
g so
urce
s.
Suita
bilit
y fo
r Pro
ject
s w
ithou
t Rev
enue
s Si
nce
inte
rest
an
d pr
inci
pal
are
paid
fro
m
the
Gen
eral
Fu
nd,
GO
Bon
ds
may
be
us
ed
to
fund
pr
ojec
ts
that
do
no
t ha
ve
a de
dica
ted
reve
nue
stre
am.
Attachment 1, Page 58 of 97
Mek
eta
Inve
stm
ent G
roup
Back
grou
nd:
Infr
astr
uctu
re In
vest
men
t in
Cal
iforn
ia
Des
pite
the
bene
fits
ofbo
nds,
the
use
ofbo
rrow
ing
tofin
ance
infr
astr
uctu
real
soha
slim
itatio
ns
13
Lim
itatio
ns o
n th
e U
se o
f Bon
d Fi
nanc
ing
for
Infr
astr
uctu
re
Com
men
t
Deb
t Bur
den
GO
bon
d iss
uanc
e ha
s in
crea
sed
debt
ser
vice
pai
d by
the
Gen
eral
Fun
d, a
t a ti
me
whe
n st
ate
reve
nue
colle
ctio
ns h
ave
been
im
pact
ed b
y th
e re
cess
ion
and
hous
ing
mar
ket
colla
pse.
Bo
rrow
ing
for
infra
stru
ctur
e ha
s al
so i
mpa
cted
Cal
iforn
ia’s
cre
dit
ratin
g, a
nd
limits
fut
ure
use
of G
ener
al F
und
reso
urce
s.
And
, th
e de
bt s
ervi
ce o
blig
atio
ns o
f th
e G
ener
al F
und
are
typi
cally
dec
oupl
ed fr
om th
e co
st o
f del
iver
y of
the
serv
ice.
Rest
rictio
ns
Mos
t ta
x-ex
empt
bon
ds i
mpo
se r
estr
ictio
ns o
n th
e pa
rtici
patio
n of
non
-gov
ernm
ent
parti
es (“
bad
use”
).
Lim
ited
Use
of P
roce
eds
Tax
exem
ptio
ns a
dd t
o th
e af
ford
abili
ty o
f bo
ndin
g, y
et b
onds
typ
ical
ly d
o no
t in
clud
e th
e co
sts
of o
ngoi
ng m
aint
enan
ce a
nd u
pkee
p, w
hich
, ov
er t
he li
fe o
f th
e as
set,
ofte
n ex
ceed
up
front
con
stru
ctio
n co
sts.
Th
e C
alifo
rnia
Dep
artm
ent
of T
rans
porta
tion
estim
ates
$6
billi
on in
ann
ual m
aint
enan
ce c
osts
for t
he s
tate
’s h
ighw
ay s
yste
m, d
espi
te a
bu
dget
of $
1.5
billi
on.
Tax
Disa
dvan
tage
Ta
x ex
empt
ions
may
lim
it th
e co
mpe
titiv
enes
s of
the
priv
ate
sect
or.
The
Nat
iona
l Re
sear
ch C
ounc
il es
timat
ed a
n ef
fect
ive
inte
rest
rat
e pr
emiu
m o
f 20
to
40 p
erce
nt
rela
tive
to p
ublic
ly d
ebt.
Ade
quac
y of
Rev
enue
Str
eam
s Fo
r re
venu
e bo
nds,
the
sou
rce
of r
even
ues
agai
nst
whi
ch c
laim
s ar
e m
ade
may
, ov
er
time,
ei
ther
be
in
suffi
cien
t to
co
ver
cost
s or
ta
ke
away
fro
m
othe
r us
es
(e.g
., m
aint
enan
ce).
So
urce
: Litt
le H
oove
r Com
miss
ion
(201
0); K
esto
n In
stitu
te (2
006)
Attachment 1, Page 59 of 97
Cha
lleng
es to
Pen
sion
Fun
d In
vest
men
t in
Pub
lic In
fras
truc
ture
Attachment 1, Page 60 of 97
Mek
eta
Inve
stm
ent G
roup
Cha
lleng
es to
Pen
sion
Fun
d In
vest
men
t in
Pub
lic In
fras
truc
ture
Whi
leC
alifo
rnia
isin
need
ofal
tern
ativ
eso
urce
sof
finan
cing
tom
eet
itspu
blic
infra
stru
ctur
ene
eds,
curr
ently
ther
ear
enu
mer
ous
chal
leng
esto
priv
ate
inst
itutio
nal
inve
stm
ent.
InC
alifo
rnia
,an
din
othe
rst
ates
,the
maj
ority
ofin
frast
ruct
ure
asse
tsar
epu
blic
lyow
ned,
oper
ated
,and
/or
mai
ntai
ned,
whi
chm
aylim
itth
esu
itabi
lity
ofth
ird-p
arty
inst
itutio
nali
nves
tmen
t.
Key
Cha
lleng
es:
1.Re
stric
tions
onpu
blic
finan
cing
sour
ces
2.La
ckof
dedi
cate
dre
venu
est
ream
s
3.U
ncer
tain
tyar
ound
the
publ
icpr
ocur
emen
tpro
cess
4.O
ther
cons
ider
atio
ns
15
Sect
ors
Ow
ners
hip
Port
s Pu
blic
ly o
wne
d an
d op
erat
ed
Airp
orts
Pu
blic
ly o
wne
d an
d op
erat
ed
Road
s Pu
blic
ly o
wne
d
Priv
ate:
A
B 68
0 (1
989)
, per
mitt
ing
up to
4 p
rivat
e to
ll ro
ad p
roje
cts
SB X
2 4
(200
9), p
erm
ittin
g an
unl
imite
d nu
mbe
r of P
PPs
thro
ugh
2017
Ener
gy
Publ
icly
Ow
ned
Util
ities
In
vest
or O
wne
d U
tiliti
es (R
egul
ated
)
Wat
er
Publ
icly
Ow
ned
Util
ities
In
vest
or O
wne
d U
tiliti
es (R
egul
ated
)
Attachment 1, Page 61 of 97
Mek
eta
Inve
stm
ent G
roup
Cha
lleng
es to
Pen
sion
Fun
d In
vest
men
t in
Pub
lic In
fras
truc
ture
1.Fi
nanc
ing
sour
ces
may
impo
sere
stric
tions
onin
vest
men
t–
Asno
ted
inth
epr
evio
usse
ctio
n,pu
blic
finan
cing
sour
ces,
such
asta
x-ex
empt
bond
san
dfe
dera
lgra
nts,
have
rest
ricte
dth
eus
eof
third
-par
tyin
vest
men
t.
∙Ex
ampl
e:A
irpor
ts-
As
publ
icly
-ow
ned
asse
ts,
airp
orts
utili
zedi
ffere
ntso
urce
sfo
rfin
anci
ngop
erat
ions
,m
aint
enan
ce,a
ndim
prov
emen
ts
–Ta
x-Ex
empt
Bond
s
–A
irpor
tIm
prov
emen
tPro
gram
(“A
IP”)
Fund
s–
Fede
ralG
rant
s
–Pa
ssen
gerF
acili
tyC
harg
es(“
PFC
”)
–A
irlin
ein
vest
men
t
∙A
cces
sto
certa
inso
urce
sof
fund
ing
crea
tes
rest
rictio
nson
priv
ate
inve
stm
ent
–Ta
x-Ex
empt
Bond
s:A
“Bad
Use
”pr
ovisi
onap
plie
sto
tax-
exem
ptbo
nds.
–A
irpor
tIm
prov
emen
tPr
ogra
m:
Acc
ordi
ngto
the
Reas
onFo
unda
tion,
“The
Fede
ral
Airp
ort
Impr
ovem
ent
Prog
ram
impo
ses
econ
omic
regu
latio
non
U.S
.ai
rpor
tsin
exch
ange
for
annu
algr
ant
fund
ing.
Thos
ere
gula
tions
prec
lude
airp
ortp
rivat
izat
ion,
beca
use
they
requ
ireal
l“ai
rpor
trev
enue
s”-
incl
udin
gpr
ocee
dsfro
ma
leas
eor
sale
-to
bere
inve
sted
inth
eai
rpor
t(o
rai
rpor
tsy
stem
)th
atge
nera
tes
them
.Th
atm
eans
aci
ty,
coun
tyor
stat
eth
atw
ishes
tole
ase
orse
llits
airp
ort
wou
ldre
ceiv
eze
rofin
anci
albe
nefit
sfro
mso
doin
g.Th
ere
gula
tions
also
proh
ibit
any
airp
ort
oper
ator
(incl
udin
gan
inve
stor
-ow
ned
airp
ort
com
pany
)fro
mta
king
any
prof
itsof
fthe
airp
ort,
whi
chm
eans
such
aco
mpa
nyw
ould
have
noin
cent
ive
toac
quire
aU
.S.a
irpor
t.”
16
Sour
ce:
Jaco
bs C
onsu
ltanc
y (2
007)
; Rea
son
Foun
datio
n (2
011)
Attachment 1, Page 62 of 97
Mek
eta
Inve
stm
ent G
roup
Cha
lleng
es to
Pen
sion
Fun
d In
vest
men
t in
Pub
lic In
fras
truc
ture
The
Fede
ralA
viat
ion
Adm
inist
ratio
n(“
FAA”
)Rea
utho
rizat
ion
Act
(199
6)cr
eate
dth
eAi
rpor
tPr
ivat
izat
ion
Pilo
tPr
ogra
m,
whi
chau
thor
izes
the
use
ofPu
blic
Priv
ate
Partn
ersh
ips
for
upto
five
airp
orts
.Ke
yco
nditi
onso
fthe
prog
ram
incl
ude:
∙A
“rat
eof
retu
rn”
tobe
asse
ssed
asan
ince
ntiv
efo
rpriv
ate
inve
stor
s
∙Ap
prov
alby
the
FAA
and
65%
ofai
rline
sse
rvic
ing
the
airp
ortr
equi
red
forp
rivat
izat
ion
Des
pite
auth
oriz
atio
n,no
U.S
.airp
orts
have
been
priv
atiz
edun
dert
hePi
lotP
rogr
am
∙In
2009
,the
City
ofC
hica
gofa
iled
topr
ivat
ize
Mid
way
Airp
ort
∙In
2010
,an
appl
icat
ion
topr
ivat
ize
Luis
Mun
ozM
arin
Inte
rnat
iona
lAirp
ort
(San
Juan
,Pu
erto
Rico
)re
ceiv
edpr
elim
inar
yFA
Aap
prov
al;
this
may
beth
efir
stai
rpor
tto
bepr
ivat
ized
unde
rth
ePi
lot
Prog
ram
17
Attachment 1, Page 63 of 97
Mek
eta
Inve
stm
ent G
roup
Cha
lleng
es to
Pen
sion
Fun
d In
vest
men
t in
Pub
lic In
fras
truc
ture
2.M
any
infra
stru
ctur
ese
ctor
sla
ckde
dica
ted
sour
ces
ofre
venu
e–
Typi
cally
,in
frast
ruct
ure
faci
litie
sla
ckin
ga
dedi
cate
dre
venu
est
ream
(e.g
.,us
erfe
es)t
opa
ya
retu
rnto
inve
stor
sw
ould
notb
esu
itabl
efo
rpr
ivat
ein
vest
men
t,su
chas
K-12
scho
ols,
priso
ns,
polic
est
atio
ns,
and
freew
ays.
Ince
rtain
case
s,pu
blic
agen
cies
have
reco
gniz
edth
eco
stof
cons
truct
ing,
oper
atin
g,an
dm
aint
aini
ngin
frast
ruct
ure
asse
ts,
and
have
iden
tifie
dpu
blic
orpr
ivat
efin
anci
ngso
urce
sto
supp
ort
the
life-
cycl
eco
sts
ofan
infra
stru
ctur
epr
ojec
t.
18
Sour
ce
Com
men
t Ex
ampl
e
Toll
Cal
iforn
ia b
egan
util
izin
g to
lls i
n 19
89,
with
the
pas
sage
of
Ass
embl
y Bi
ll 68
0 (“
AB
680”
), w
hich
gra
nted
the
Cal
iforn
ia
Dep
artm
ent
of T
rans
port
atio
n (“
Cal
Tran
s”)
legi
slativ
e au
thor
ity
to c
ontra
ct w
ith t
he p
rivat
e se
ctor
to
deve
lop,
bui
ld,
oper
ate,
an
d m
aint
ain
up t
o fo
ur r
oads
. T
wo
tolle
d fa
cilit
ies
wer
e au
thor
ized
und
er A
B 68
0.
SR 9
1 Ex
pres
s La
nes
(199
5)
SR 1
25 T
oll R
oad
(200
3)
Ava
ilabi
lity
Paym
ent
App
ropr
iatio
ns o
f pu
blic
fun
ds t
o pa
y th
e pr
ivat
e se
ctor
in
exch
ange
fo
r m
akin
g an
as
set
“ava
ilabl
e”
to
the
publ
ic
(“A
vaila
bilit
y Pa
ymen
ts”)
.
In
cont
rast
to
to
lls,
avai
labi
lity
paym
ents
do
no
t re
pres
ent
a ne
w
sour
ce
of
fund
ing
for
infra
stru
ctur
e, b
ut r
athe
r ar
e a
mea
ns f
or t
he p
ublic
sec
tor
to
pay
the
priv
ate
sect
or fo
r the
cos
t of d
evel
opm
ent,
cons
truct
ion,
op
erat
ions
, and
mai
nten
ance
of a
n as
set o
ver a
long
per
iod.
Long
Bea
ch C
ourt
hous
e Re
deve
lopm
ent P
roje
ct (2
010)
-
(Aut
horiz
ed u
nder
Sen
ate
Bill
77)
Pres
idio
Par
kway
(201
0) -
(Aut
horiz
ed u
nder
Sen
ate
Bill
2X 4
)
Attachment 1, Page 64 of 97
Mek
eta
Inve
stm
ent G
roup
Cha
lleng
es to
Pen
sion
Fun
d In
vest
men
t in
Pub
lic In
fras
truc
ture
Des
pite
early
atte
mpt
sati
nfra
stru
ctur
epr
ivat
izat
ion
inC
alifo
rnia
,the
track
reco
rdha
sbe
enlim
ited.
∙Ev
enif
ther
eis
apo
ssib
ility
ofcr
eatin
ga
reve
nue
stre
amto
pay
for
the
deve
lopm
ent,
mai
nten
ance
,an
dop
erat
ion
ofan
infra
stru
ctur
eas
set,
such
asus
erfe
es,p
oliti
calw
illis
requ
ired
todo
so.
∙W
ithfe
wex
cept
ions
,leg
islat
ive
initi
ativ
esha
vebe
enfo
cuse
dpr
imar
ilyon
road
trans
port.
∙To
lling
arra
ngem
ents
,whi
chw
ere
used
inea
rlier
road
proj
ects
,req
uire
dpr
ivat
ein
vest
ors
toas
sum
etra
ffic
risk.
The
bank
rupt
cyof
SR12
5is
one
exam
ple
ofth
eris
ksas
soci
ated
with
traffi
cvo
lum
es.
∙Av
aila
bilit
ypa
ymen
tstru
ctur
esin
sula
tein
vest
ors
from
traffi
cris
k,ye
tthe
yty
pica
llyre
quire
the
annu
alap
prop
riatio
nof
publ
icfu
nds
byst
ate
agen
cies
.Th
eap
prop
riatio
nof
publ
icfu
nds
topa
ypr
ivat
ede
velo
pers
and
oper
ator
sfo
rmul
tiple
deca
des
isst
illre
lativ
ely
unco
mm
onin
the
U.S
.
∙Pr
actic
ally
all
proj
ects
appr
oved
unde
rva
rious
Cal
iforn
iale
gisla
tion
toen
able
PPPs
are
gree
nfie
ldpr
ojec
ts,
requ
iring
inve
stor
sto
assu
me
deve
lopm
ent
and
cons
truct
ion
risk,
and
are
not
cash
gene
rativ
eun
tilre
achi
ngan
oper
atio
nals
tage
.
19
Attachment 1, Page 65 of 97
Mek
eta
Inve
stm
ent G
roup
Cha
lleng
es to
Pen
sion
Fun
d In
vest
men
t in
Pub
lic In
fras
truc
ture
3.U
ncer
tain
tyar
ound
the
proc
urem
ent
proc
ess
–To
enga
gew
ithth
epr
ivat
ese
ctor
,th
epu
blic
sect
orm
ust
man
age
atra
nspa
rent
,effi
cien
t,an
dco
nsist
ent
proc
ess
for
offe
ring
cont
ract
sor
conc
essio
ns.
Inot
her
coun
tries
with
succ
essf
ulPP
Ppr
ogra
ms,
cent
ers
ofex
celle
nce
have
been
esta
blish
edto
prov
ide
info
rmat
ion,
guid
elin
es,a
ndad
viso
rysu
ppor
ton
PPPs
topu
blic
and
priv
ate
sect
ors.
InC
alifo
rnia
,the
Publ
icIn
frast
ruct
ure
Advi
sory
Com
miss
ion
(“PI
AC”)
,au
thor
ized
bySe
nate
Bill
X24,
was
crea
ted
toas
sists
tate
and
loca
ltra
nspo
rtatio
nag
enci
esin
the
eval
uatio
nof
PPPs
.To
date
,PIA
C’s
man
date
isst
illlim
ited
and
publ
ic-s
ecto
rpr
oces
ses
gene
rally
have
notf
ollo
wed
ast
anda
rdiz
edpr
oces
s.
∙M
any
proj
ects
had
very
long
deve
lopm
entt
imes
–Pl
ans
tom
ake
impr
ovem
ents
toD
oyle
Driv
ebe
gan
inth
e19
70s;
the
Envi
ronm
enta
lAss
essm
entw
asin
itiat
edin
2000
and
certi
fied
in20
08.T
hepr
ojec
trea
ched
finan
cial
clos
ein
2010
.
–Th
ene
wse
gmen
tof
SR12
5w
asad
opte
dby
Cal
trans
in20
00,a
ndth
efin
alen
viro
nmen
talp
erm
itsw
ere
rece
ived
in20
01.T
hero
adop
ened
in20
07.
∙O
ther
publ
icpr
oces
ses
faile
dto
adva
nce
beyo
ndin
itial
RFIs
tage
–In
Nov
embe
r20
08,
the
City
ofLo
sA
ngel
esbe
gan
disc
ussio
nson
priv
atiz
ing
park
ing
gara
ges,
follo
win
gth
epr
ivat
izat
ion
ofpa
rkin
gm
eter
sby
the
City
ofC
hica
go.
The
City
ofLo
sA
ngel
esiss
ued
anRF
Qin
Febr
uary
2010
for
apo
ssib
leco
nces
sion
ofpu
blic
ly-o
wne
dpa
rkin
gga
rage
s.Th
eci
tyan
ticip
ated
shor
t-lis
ting
bidd
ers
inm
id-M
arch
2010
,rel
easin
gth
ebi
ddo
cum
ents
inM
ay20
10an
dcl
osin
gth
eco
nces
sion
inJu
ly20
10.N
ofu
rther
step
sha
vebe
enta
ken.
–Lo
sA
ngel
esW
orld
Airp
orts
(“LA
WA
”)so
licite
dEx
pres
sions
ofIn
tere
stfo
ra
long
-ter
mco
nces
sion
tom
anag
ean
dop
erat
eO
ntar
ioA
irpor
t,w
itha
due
date
ofFe
brua
ry28
,201
1.N
ofu
rthe
rst
eps
have
been
anno
unce
d.
20
Attachment 1, Page 66 of 97
Mek
eta
Inve
stm
ent G
roup
Cha
lleng
es to
Pen
sion
Fun
d In
vest
men
t in
Pub
lic In
fras
truc
ture
4.O
ther
cons
ider
atio
ns
∙D
ecisi
onm
akin
gin
Cal
iforn
iais
dece
ntra
lized
.Th
ere
isno
cent
raliz
ed,s
yste
mat
icfra
mew
ork
for
stat
e,re
gion
al,
orlo
cal
agen
cies
,le
gisla
tive
bodi
es,
orot
her
auth
oriti
esto
offe
rlo
ng-t
erm
oper
atin
gco
nces
sions
and
cont
ract
sw
ithpr
ivat
epa
rties
tom
anag
ean
dop
erat
epu
blic
infra
stru
ctur
e.
∙M
ostr
ecen
tPPP
sha
vesig
nific
antc
onst
ruct
ion
com
pone
nts.
Gre
enfie
ldpr
ojec
tsar
ene
cess
ary,
yet
they
expo
sein
vest
ors
tode
velo
pmen
trisk
,and
they
are
nots
truct
ured
topr
ovid
eca
shyi
eld
until
the
proj
ects
are
inop
erat
ion.
∙G
reen
field
PPP
stru
ctur
esty
pica
llyco
nsist
mor
eof
debt
that
equi
ty;
min
imal
equi
tyre
quire
men
tsm
ayno
tbe
suita
ble
forl
arge
rinv
estm
entp
rogr
ams.
21
Pres
idio
Par
kway
C
apita
l Str
uctu
re
($ m
illio
ns)
Lo
ng B
each
Cou
rtho
use
Cap
ital S
truc
ture
($
mill
ions
)
Equi
ty
45
Eq
uity
49
Priv
ate
Act
ivity
Bon
ds
150
Ba
nk D
ebt
442
TIFI
A 15
0
Attachment 1, Page 67 of 97
Priv
ate
Infr
astr
uctu
re
Inve
stm
ent O
ptio
ns
Attachment 1, Page 68 of 97
Mek
eta
Inve
stm
ent G
roup
Priv
ate
Infr
astr
uctu
re In
vest
men
t Opt
ions
Man
yof
the
curr
entc
halle
nges
toin
vest
men
tin
publ
icin
frast
ruct
ure
dono
tapp
lyto
infra
stru
ctur
eas
sets
inpr
ivat
eow
ners
hip.
InC
alifo
rnia
,priv
atel
yow
ned
and
oper
ated
infra
stru
ctur
eco
nsist
spr
imar
ilyof
asse
tsin
the
ener
gy,
wat
er,
and
com
mun
icat
ions
sect
ors.
Asw
ithpu
blic
infra
stru
ctur
e,pr
ivat
ein
frast
ruct
ure
asse
tspr
ovid
ees
sent
ials
ervi
ces
toco
mm
uniti
esan
dbu
sines
ses.
23
Sect
ors
Ow
ners
hip
Elec
tric
Util
ities
Pu
blic
: M
unic
ipal
Ow
ned
Util
ities
Pr
ivat
e:
Inve
stor
Ow
ned
Util
ities
(Reg
ulat
ed)
Gen
erat
ion
Priv
ate
Tran
smiss
ion
Priv
ate
Wat
er U
tiliti
es
Publ
ic:
Mun
icip
al O
wne
d U
tiliti
es
Priv
ate:
In
vest
or O
wne
d U
tiliti
es (R
egul
ated
)
Com
mun
icat
ions
Pr
ivat
e
Attachment 1, Page 69 of 97
Mek
eta
Inve
stm
ent G
roup
Priv
ate
Infr
astr
uctu
re In
vest
men
t Opt
ions
Ther
ear
ese
vera
lkey
diffe
renc
esbe
twee
npu
blic
and
priv
atel
yow
ned
infra
stru
ctur
e
24
Area
s Pu
blic
Pr
ivat
e
Proc
urem
ent
Pu
blic
pro
cess
Pr
ivat
e pr
oces
s
Reve
nue
Sour
ces
Tolli
ng, u
tiliz
atio
n-ba
sed,
ava
ilabi
lity
Regu
late
d; lo
ng-t
erm
con
tract
s
Dev
elop
men
t PP
Ps in
trod
uce
deve
lopm
ent a
nd c
onst
ruct
ion
risk
Priv
ate
infra
stru
ctur
e m
ay
cons
ist
of
brow
nfie
ld a
sset
s or
new
dev
elop
men
t
Fina
ncin
g
Ofte
n ut
ilize
pub
lic-s
ecto
r fin
anci
ng
Use
of p
rivat
e ca
pita
l
Equi
ty R
equi
rem
ents
Li
mite
d eq
uity
requ
irem
ents
for m
any
PPPs
D
eal
sizes
va
ry
but
ofte
n re
quire
su
bsta
ntia
l equ
ity
Ther
e ar
e ty
pica
lly m
ore
brow
nfie
ld o
ppor
tuni
ties
in th
e pr
ivat
e in
frast
ruct
ure
spac
eEx
ampl
e: C
alifo
rnia
ele
ctric
dist
ribut
ion
and
gene
ratio
n as
set s
ale
(201
1)
∙Se
ller:
NV
Ener
gy
∙Bu
yer:
Libe
rty
Ener
gy-C
alifo
rnia
Paci
ficEl
ectri
cC
ompa
ny
∙Pr
oces
s:C
omm
erci
al
∙Ra
tiona
le:
NV
Ener
gysa
idit
was
selli
ngits
Cal
iforn
iaas
sets
inor
der
toco
ncen
trat
eon
itsbu
sines
sin
the
Stat
eof
Nev
ada,
whe
reit
serv
esap
prox
imat
ely
97pe
rcen
tofa
llel
ectri
ccu
stom
ersi
nth
est
ate.
Attachment 1, Page 70 of 97
Mek
eta
Inve
stm
ent G
roup
Priv
ate
Infr
astr
uctu
re In
vest
men
t Opt
ions
Stat
ein
itiat
ives
have
crea
ted
oppo
rtuni
ties
forp
rivat
ein
frast
ruct
ure
inve
stm
enti
nC
alifo
rnia
.
Rene
wab
lePo
rtfol
ioSt
anda
rd(“
RPS”
)-C
alifo
rnia
has
one
ofth
em
osta
mbi
tious
RPS
inth
eco
untry
.Sta
teut
ilitie
sar
ere
quire
dto
proc
ure
elec
trici
tyfro
map
prov
edre
new
able
sour
ces.
Inco
ntra
stto
publ
icin
frast
ruct
ure
sect
ors,
inve
stor
sen
ter
into
long
-term
Pow
erPu
rcha
seA
gree
men
ts(“
PPA
s”)
with
elec
tric
utili
ties,
whi
chty
pica
llypr
ovid
ea
fixed
pric
efo
rth
ege
nera
tion
and
trans
miss
ion
ofre
new
able
ener
gy.
25
Dea
dlin
e
Elec
tric
ity fr
om
Rene
wab
le S
ourc
es
(%)
Util
ity
Cur
rent
Use
of
Rene
wab
les
(%
)
2013
20
Paci
fic G
as &
Ele
ctric
17
.7
2016
25
Sout
hern
Cal
iforn
ia E
diso
n 19
.4
2020
33
San
Die
go G
as &
Ele
ctric
11
.9
Attachment 1, Page 71 of 97
Mek
eta
Inve
stm
ent G
roup
Priv
ate
Infr
astr
uctu
re In
vest
men
t Opt
ions
Des
pite
seve
ral
inve
stor
-frie
ndly
feat
ures
ofth
eRP
Spr
ogra
m,
ther
ear
est
illch
alle
nges
toin
vest
men
tin
Cal
iforn
ia.
26
Cha
lleng
es
Com
men
t
Cal
iforn
ia E
nviro
nmen
tal Q
ualit
y Ac
t (“C
EQA
”)
CEQ
A is
a s
tate
law
requ
iring
sta
te a
nd lo
cal a
genc
ies
to id
entif
y an
d re
duce
, if
feas
ible
, the
sig
nific
ant,
nega
tive
envi
ronm
enta
l im
pact
s of
land
use
dec
ision
s.
Inab
ility
to re
ceiv
e C
EQA
app
rova
ls ha
s le
d to
the
dela
y of
man
y in
frast
ruct
ure
proj
ects
. I
n pa
rticu
lar,
an E
nviro
nmen
tal
Impa
ct R
epor
t (E
IR)
from
CEQ
A re
quire
s th
at a
ll sig
nific
ant
impa
cts
be m
itiga
ted
or o
ver-
ridde
n.
It ha
s be
en
reco
mm
ende
d th
at
an
exce
ptio
ns
proc
ess
is cr
eate
d to
en
able
en
ergy
in
vest
men
t. T
here
hav
e al
so b
een
char
ges
that
cer
tain
int
eres
t gr
oups
hav
e ex
erte
d in
fluen
ce o
ver t
he a
ppro
vals
proc
ess.
Dev
elop
men
t Risk
s In
add
ition
to h
urdl
es re
late
d to
CEQ
A, C
alifo
rnia
has
oth
er e
nviro
nmen
tal a
nd
deve
lopm
ent c
halle
nges
.
Cal
iforn
ia I
ndep
ende
nt S
yste
m O
pera
tor
(“IS
O”)
– C
alifo
rnia
ISO
req
uire
s sp
onso
rs to
mak
e up
fron
t fin
anci
al c
omm
itmen
ts in
ord
er to
rese
rve
a sp
ace
in
the
inte
rcon
nect
ion
queu
e. A
s a
resu
lt, m
any
proj
ects
hav
e be
en su
spen
ded
or
term
inat
ed d
ue to
up
front
cos
t req
uire
men
ts a
nd d
elay
s.
Pow
er P
urch
ase
Agr
eem
ent (
"PPA
") N
egot
iatio
n -
Exec
uted
PPA
s ar
e ne
cess
ary
to o
btai
n ap
prov
al a
nd fi
nanc
ing
for
ener
gy p
roje
cts.
How
ever
, the
pro
cess
of
nego
tiatin
g PP
As
has
been
impa
cted
by
ongo
ing
regu
lato
ry a
nd p
olic
y ch
ange
s,
whi
ch h
as m
ade
it di
fficu
lt fo
r dev
elop
ers t
o pl
an a
nd b
udge
t pro
ject
s.
Sour
ce:
Man
att,
Phel
ps, &
Phi
llips
(201
1)
Attachment 1, Page 72 of 97
Mek
eta
Inve
stm
ent G
roup
Priv
ate
Infr
astr
uctu
re In
vest
men
t Opt
ions
Rest
rictio
nson
the
deve
lopm
ent
ofel
ectri
cge
nera
tion
and
trans
miss
ion
inC
alifo
rnia
have
cont
ribut
edto
the
term
inat
ion
ofa
num
ber
ofpr
ojec
ts,o
rpr
ojec
tsbe
ing
deve
lope
dou
tof
stat
eto
mee
tCal
iforn
ia’s
RPS.
27
Sour
ce:
Cal
iforn
ia D
epar
tmen
t of E
nerg
y (2
011)
Stat
us o
f RPS
PPA
s (2
002-
2011
) N
umbe
r
of P
roje
cts
Reje
cted
/can
celle
d 40
Ope
ratio
nal
93
In P
rogr
ess
135
Tota
l Pro
ject
s 26
8
Tota
l Ter
min
ated
14
.9%
Year
PP
As
(#)
In S
tate
(%
)
2002
13
10
0
2003
7
100
2004
3
100
2005
12
10
0
2006
6
100
2007
15
93
2008
30
80
2009
37
46
2010
62
81
2011
43
86
Attachment 1, Page 73 of 97
Pote
ntia
l Opp
ortu
nitie
s
Attachment 1, Page 74 of 97
Mek
eta
Inve
stm
ent G
roup
Pote
ntia
l Opp
ortu
nitie
s
We
expe
ctth
atpu
blic
pens
ion
fund
sw
illha
veam
ple
oppo
rtuni
tyto
inve
stin
priv
ate
infra
stru
ctur
ew
ithin
Cal
iforn
ia,a
ndw
illdo
sosu
cces
sful
ly.
We
expe
ctth
atit
will
bem
ore
chal
leng
ing
forp
ublic
pens
ion
fund
sto
inve
stin
infra
stru
ctur
eth
atis
curr
ently
inpu
blic
sect
orha
nds.
Des
pite
chal
leng
es,
we
belie
vepo
tent
ial
oppo
rtuni
ties
may
bege
nera
ted
thro
ugh
cons
ider
atio
nan
dex
plor
atio
nof
the
follo
win
g:
Stat
eag
ency
stat
us–
Publ
icpe
nsio
nfu
nds
are
clas
sifie
das
stat
eag
enci
es,
whi
chm
aypr
ovid
eth
emw
ithop
portu
nitie
sto
partn
erw
ithth
epu
blic
sect
oron
infra
stru
ctur
ein
vest
men
twith
outi
mpa
ctin
gth
eus
eof
publ
icfin
anci
ngso
urce
s.Th
epo
tent
iala
dvan
tage
sof
fere
dby
stat
eag
ency
stat
ussh
ould
beex
plor
edfu
rther
.
Mun
icip
alho
me
rule
–C
alifo
rnia
ison
eof
12st
ates
with
“Bro
adH
ome
Rule
.”H
ome
rule
mun
icip
aliti
esha
vegr
eate
rle
gala
utho
rity
toco
nduc
tth
eir
own
affa
irsw
ithou
tin
terfe
renc
efro
mst
ate
legi
slatu
res,
incl
udin
gth
ene
gotia
tion
ofPP
Ps.H
ome
rule
coul
den
able
bi-la
tera
lne
gotia
tion
betw
een
publ
icpe
nsio
nfu
nds
and
loca
lst
ate
agen
cies
rega
rdin
gpo
tent
ial
infra
stru
ctur
ein
vest
men
t.
Brow
nfie
ldan
dse
cond
ary
oppo
rtun
ities
–A
lthou
ghst
ate
PPP
prog
ram
sha
veta
rget
edgr
eenf
ield
proj
ects
,th
ere
may
beop
portu
nitie
sfo
rth
esa
leof
oper
atio
nal
publ
icin
frast
ruct
ure
asse
tsto
publ
icpe
nsio
nfu
nds.
And,
over
the
long
erte
rm,w
eex
pect
tose
ea
mar
keto
fope
ratio
nalP
PPpr
ojec
tsth
atm
ight
besu
itabl
efo
rpen
sion
fund
inve
stm
ent.
29
Attachment 1, Page 75 of 97
Mek
eta
Inve
stm
ent G
roup
Pote
ntia
l Opp
ortu
nitie
s
Prog
ram
sfro
mot
her
coun
tries
offe
rex
ampl
esof
stat
esu
ppor
tfo
rpr
ivat
ein
frast
ruct
ure
inve
stm
ent,
asw
ella
siss
ues
raise
dby
enga
gem
entw
ithpr
ivat
ein
vest
ors.
Que
ensl
and
Asse
t Sal
e Pr
ogra
m
In20
10,
aspa
rtof
abr
oade
rde
ficit
redu
ctio
npr
ogra
m,
the
gove
rnm
ent
ofQ
ueen
sland
,A
ustra
lia,s
old
five
stat
e-ow
ned
asse
tsut
ilizi
ngse
vera
ldiff
eren
tpro
cess
es.
Opp
ortu
nity
:Th
eas
sets
ales
raise
dap
prox
imat
ely
A$12
billi
on.
Con
side
ratio
ns:
The
sale
ofQ
ueen
sland
Mot
orw
ays
was
exec
uted
thro
ugh
the
off-m
arke
ttra
nsfe
rto
Que
ensla
ndIn
vest
men
tCor
pora
tion
(“Q
IC”)
,the
stat
epe
nsio
nfu
nd.
30
Asse
t Pr
ocee
ds
(A$
billi
on)
Mod
e of
Sal
e
Port
of B
risba
ne
2.3
99-y
ear l
ease
to c
onso
rtium
of p
rivat
e eq
uity
fund
s
Que
ensla
nd M
otor
way
s 3.
1 Tr
ansf
er to
sta
te p
ensio
n fu
nd
Que
ensla
nd R
ail
4.6
Publ
ic m
arke
t sal
e
Abb
ot P
oint
Coa
l Ter
min
al
1.8
99-y
ear l
ease
to in
dust
ry o
pera
tor
Fore
stry
Pla
ntat
ions
Que
ensla
nd
0.6
99-y
ear l
ease
to p
rivat
e eq
uity
fund
Attachment 1, Page 76 of 97
Mek
eta
Inve
stm
ent G
roup
Pote
ntia
l Opp
ortu
nitie
s
Ont
ario
/Gre
enEn
ergy
Inve
stm
entA
gree
men
t(“G
EIA”
)
In20
10,t
heG
over
nmen
tofO
ntar
io,C
anad
asig
ned
the
GEI
Aw
ithSa
msu
ngC
&T
and
Kore
aEl
ectri
cPo
wer
Com
pany
,pro
vidi
ngin
cent
ives
tobu
ildfa
cilit
ies
that
man
ufac
ture
rene
wab
leen
ergy
com
pone
nts.
Ifm
anuf
actu
ring
goal
sar
em
et,
Sam
sung
C&
Tw
illre
ceiv
eas
sista
nce
from
certa
inpr
ovin
cial
agen
cies
insit
ing,
perm
ittin
g,an
din
terc
onne
ctin
gth
epr
ojec
ts,
and
20-y
ear
pow
erpu
rcha
seag
reem
ents
with
the
Ont
ario
Pow
erA
utho
rity
onte
rms
simila
rto
the
prov
inci
alFe
ed-In
-Tar
iff(“
FIT”
)Pro
gram
.
Opp
ortu
nity
:Th
epr
ovin
cial
gove
rnm
ent
stre
amlin
edth
eap
prov
als
proc
ess
tosu
ppor
tre
new
able
sde
velo
pmen
t,w
hich
ince
ntiv
ized
priv
ate
inve
stm
ent
inge
nera
tion
and
trans
miss
ion
infra
stru
ctur
e.
Con
side
ratio
ns:
The
agre
emen
tha
sco
me
unde
rfir
eby
cert
ain
polit
ical
parti
es,
argu
ing
that
nosin
gle
corp
orat
ion
shou
ldbe
gran
ted
spec
ialt
erm
s,an
dth
atth
eco
stsa
ssoc
iate
dw
ithth
eag
reem
enta
reno
tdef
ensib
le.
31
Attachment 1, Page 77 of 97
Con
clus
ion
Attachment 1, Page 78 of 97
Mek
eta
Inve
stm
ent G
roup
Con
clus
ion
Insu
mm
ary,
this
docu
men
tid
entif
ies
seve
ral
cond
ition
sth
atha
veim
pact
edin
stitu
tiona
lin
vest
men
tin
Cal
iforn
iaIn
frast
ruct
ure:
•M
any
infra
stru
ctur
eas
sets
are
still
inpu
blic
owne
rshi
pan
dop
erat
ion,
and
thus
have
not
been
read
ied
orst
ruct
ured
toac
com
mod
ate
priv
ate
inve
stm
ent.
Inad
ditio
n,th
eus
eof
publ
icse
ctor
finan
cing
sour
ces
has
limite
dth
ero
leof
third
-par
tyin
vest
men
tand
priv
ate
parti
cipa
tion.
•Pr
otra
cted
bidd
ing
and
proc
urem
ent
proc
esse
sha
vere
duce
dth
epr
edic
tabi
lity
and
certa
inty
oftra
nsac
ting.
•Le
gisla
tive
initi
ativ
esha
veen
able
dPP
Ppr
ojec
tsto
finan
cene
win
frast
ruct
ure
deve
lopm
ent
and
cons
truct
ion.
Whi
lesu
chpr
ojec
tsar
eof
impo
rtan
ceto
the
stat
e,th
eym
ayno
tm
eet
the
risk/
retu
rncr
iteria
,or
the
inve
stm
ent
polic
yre
quire
men
tsof
publ
icpe
nsio
nfu
nds,
such
asC
alPE
RS.
•Pr
ivat
ein
frast
ruct
ure
sect
ors,
incl
udin
gce
rtain
utili
tyan
den
ergy
proj
ects
,ha
vebe
enm
ore
suita
ble
for
inst
itutio
nali
nves
tmen
t.Tr
ansa
ctio
nsin
priv
ate
infra
stru
ctur
ese
ctor
sha
vety
pica
llyfo
llow
eda
com
mer
cial
proc
ess,
and
invo
lve
the
sale
ofco
mpa
nies
with
esta
blish
edop
erat
ing
hist
orie
s.H
owev
er,t
hepr
oces
sfo
rob
tain
ing
envi
ronm
enta
land
deve
lopm
enta
ppro
vals
hasi
mpa
cted
the
pred
icta
bilit
yan
dce
rtain
tyof
trans
actin
g.
33
Attachment 1, Page 79 of 97
Mek
eta
Inve
stm
ent G
roup
Con
clus
ion
Des
pite
thes
ech
alle
nges
,the
rear
ear
easo
fpot
entia
lopp
ortu
nity
wor
thy
ofco
nsid
erat
ion:
•W
orki
ngw
ithap
prop
riate
,ex
pert
advi
sors
,pub
licag
enci
esm
aybe
able
toas
sess
and
deve
lop
inve
stib
leop
portu
nitie
sar
ound
exist
ing
oper
atio
nal
asse
tscu
rren
tlyun
der
publ
icow
ners
hip,
and
equi
pth
emse
lves
for
fruitf
uldi
scus
sions
arou
ndsu
chop
portu
nitie
sw
ithin
stitu
tiona
linv
esto
rssu
chas
Cal
PERS
.
•Th
egr
eate
rle
gal
auth
ority
gran
ted
tom
unic
ipal
ities
inC
alifo
rnia
unde
rBr
oad
Hom
eRu
lest
atus
may
allo
wfo
rlo
cala
ndre
gion
alau
thor
ities
tone
gotia
tean
dw
ork
dire
ctly
with
pote
ntia
linv
esto
rssu
chas
Cal
PERS
.
•St
ate
agen
cyst
atus
may
prov
ide
publ
icpe
nsio
nfu
nds
such
asC
alPE
RSw
ithan
adva
ntag
efo
rpa
rtner
ing
with
the
publ
icse
ctor
,by
prov
idin
gth
eab
ility
topa
rtner
with
outg
ener
atin
gan
adve
rse
impa
cton
exist
ing
publ
icfin
anci
ngso
urce
s.
34
Attachment 1, Page 80 of 97
Cas
e St
udie
s
Attachment 1, Page 81 of 97
Mek
eta
Inve
stm
ent G
roup
Cas
e St
udie
s
Cas
eSt
udy:
Was
tew
ater
PPP
36
Proj
ect
Sant
a Pa
ula
Was
tew
ater
Tre
atm
ent F
acili
ty
Back
grou
nd
Sant
a Pa
ula’
s or
igin
al w
aste
wat
er fa
cilit
y w
as b
uilt
in 1
939
and
need
ed to
be
repl
aced
in o
rder
to
com
ply
with
cur
rent
sta
te r
equi
rem
ents
. T
he c
ity f
aced
mor
e th
an $
8 m
illio
n do
llars
in
com
plia
nce-
rela
ted
fines
fro
m t
he S
tate
. T
he W
ater
Qua
lity
Con
trol B
oard
agr
eed
that
if
the
city
co
uld
com
e in
to
com
plia
nce
by
Dec
embe
r 15
, 20
10,
the
Boar
d w
ould
w
aive
th
e ac
cum
ulat
ed fi
nes.
Stru
ctur
e A
Des
ign-
Build
-Ope
rate
-Fin
ance
con
cess
ion
betw
een
a pu
blic
age
ncy
and
priv
ate
inve
stor
s.
The
proj
ect
was
con
tract
ed u
nder
Cal
iforn
ia G
over
nmen
t C
ode
5956
, w
hich
aut
horiz
es l
ocal
go
vern
men
tal
agen
cies
to
use
desig
n-bu
ild t
o co
nstru
ct f
ee p
rodu
cing
inf
rast
ruct
ure
faci
litie
s,
parti
cula
rly w
ater
sup
ply,
trea
tmen
t, an
d di
strib
utio
n.
In M
ay 2
008,
the
City
Cou
ncil
awar
ded
a 30
yea
r de
sign-
build
-ope
rate
-fina
nce
(DBO
F)
conc
essio
n to
San
ta P
aula
Wat
er, L
LC, a
join
t ve
ntur
e en
tity
owne
d by
Alin
da C
apita
l Par
tner
s LL
C a
nd P
ERC
Wat
er.
Und
er th
e co
nces
sion,
San
ta P
aula
Wat
er L
LC is
pai
d a
serv
ice
fee
that
is
expe
cted
to in
crea
se b
y 3%
eac
h ye
ar fo
r 30
year
s.
Opp
ortu
nitie
s Pr
ovid
ed a
priv
ate
capi
tal s
olut
ion
to a
mun
icip
ality
in n
on-c
ompl
ianc
e of
env
ironm
enta
l law
s.
Giv
en C
alifo
rnia
's g
row
ing
popu
latio
n an
d pe
renn
ial s
horta
ge o
f w
ater
, re
cycl
ing
is so
met
hing
m
uch
of th
e st
ate
will
nee
d to
con
sider
to m
eet w
ater
nee
ds.
Cha
lleng
es
The
DBO
F st
ruct
ure
requ
ires
inve
stor
s to
ass
ume
deve
lopm
ent
and
cons
truc
tion
risk
, and
w
ill n
ot p
rodu
ce c
ash
yiel
d un
til th
e pr
ojec
t is
oper
atio
nal.
Attachment 1, Page 82 of 97
Mek
eta
Inve
stm
ent G
roup
Cas
e St
udie
s
Cas
eSt
udy:
Avai
labi
lity
Road
37
Proj
ect
Pres
idio
Par
kway
Back
grou
nd
The
proj
ect
cons
ists
of t
he e
xist
ing
sout
h ac
cess
roa
d to
the
Gol
den
Gat
e Br
idge
, kn
own
as
Doy
le D
rive
or R
oute
101
. O
rigin
ally
bui
lt in
193
6, D
oyle
Driv
e w
as d
eem
ed s
truct
ural
ly a
nd
seism
ical
ly d
efic
ient
acc
ordi
ng to
pre
sent
sta
ndar
ds.
Stru
ctur
e Th
e Sa
n Fr
anci
sco
Cou
nty
Tran
sit A
utho
rity
ente
red
into
a 3
3 ye
ar D
esig
n Bu
ild F
inan
ce
Ope
rate
and
Mai
ntai
n co
nces
sion
with
Gol
den
Link
Con
cess
iona
ire,
LLC
, a
cons
ortiu
m le
d by
H
ocht
ief
PPP
Solu
tions
Nor
th A
mer
ica
and
Mer
idia
m I
nfra
stru
ctur
e N
orth
Am
eric
a.
Use
rs
wou
ld n
ot b
e as
sess
ed t
olls,
and
ava
ilabi
lity
paym
ents
wou
ld b
e m
ade
prim
arily
fro
m t
he
Stat
e H
ighw
ay A
ccou
nt.
Opp
ortu
nitie
s Pr
esid
io P
arkw
ay i
s th
e fir
st P
PP p
roje
ct t
o be
dev
elop
ed u
nder
SB
2X 4
. T
he t
rans
actio
n ut
ilize
s a
larg
e co
mpo
nent
of T
IFIA
fund
ing.
Und
er th
e av
aila
bilit
y pa
ymen
t stru
ctur
e, in
vest
ors
do n
ot a
ssum
e tra
ffic
risk.
Cha
lleng
es
As w
ith o
ther
PPP
s, P
resi
dio
Park
way
has
a 3
yea
r co
nstr
ucti
on p
erio
d, d
urin
g w
hich
the
pr
ojec
t w
ill n
ot b
e di
stri
butin
g yi
eld
to i
nves
tors
, an
d re
quir
es t
hat
inve
stor
s as
sum
e de
velo
pmen
t an
d co
nstr
uctio
n ri
sk.
And,
whi
le i
nves
tors
do
not
assu
me
traf
fic r
isk
unde
r th
e av
aila
bilit
y pa
ymen
t str
uctu
re, t
hey
neve
rthe
less
ass
ume
the
risk
that
the
publ
ic a
genc
y w
ill a
ppro
pria
te fu
nds
agre
ed u
pon
in th
e co
nces
sion
agr
eem
ent.
Attachment 1, Page 83 of 97
Mek
eta
Inve
stm
ent G
roup
Cas
e St
udie
s
Cas
eSt
udy:
Rene
wab
leEn
ergy
Gen
erat
ion
38
Proj
ect
Terr
a-G
en /
Alta
Win
d
Back
grou
nd
Terr
a-G
en is
a r
enew
able
ene
rgy
com
pany
with
app
roxi
mat
ely
830
meg
awat
ts (
“MW
”) o
f op
erat
ing
pow
er
plan
ts
acro
ss
geot
herm
al,
win
d,
and
sola
r te
chno
logi
es,
as
wel
l as
a
deve
lopm
ent
pipe
line
of
over
15
,000
MW
.
To
date
, al
l op
erat
ions
ha
ve
been
pr
imar
ily
focu
sed
on
Cal
iforn
ia.
In
2009
, G
loba
l In
frast
ruct
ure
Partn
ers
(“G
IP”)
acq
uire
d a
40%
of T
erra
-Gen
for a
ppro
xim
atel
y $5
56m
m.
Terr
a-G
en
acqu
ired
the
Alta
pr
ojec
t fro
m
Allc
o Fi
nanc
e G
roup
fo
r $3
25
mill
ion
plus
$6
5 m
illio
n of
w
ind
turb
ine
prog
ress
pa
ymen
ts.
Th
e pr
ojec
t is
loca
ted
appr
oxim
atel
y
100
mile
s fro
m L
os A
ngel
es i
n th
e Te
hach
api
regi
on o
f C
alifo
rnia
, w
here
a s
igni
fican
t po
rtio
n of
the
C
ompa
ny’s
exi
stin
g w
ind
asse
ts a
re in
ope
ratio
n.
The
Alta
Win
d En
ergy
Cen
ter
is ex
pect
ed t
o pr
ovid
e up
to
3,00
0 M
W o
f re
new
able
gen
erat
ing
capa
city
. W
hen
com
plet
ed, A
lta is
exp
ecte
d to
be
the
larg
est w
ind
pow
er p
roje
ct in
the
Uni
ted
Stat
es.
Stru
ctur
e Te
rra-
Gen
has
a P
ower
Pur
chas
e A
gree
men
t (“
PPA
”) w
ith S
outh
ern
Cal
iforn
ia E
diso
n (“
SCE”
) un
der
whi
ch
1,55
0 M
W o
f fut
ure
deve
lopm
ent i
s co
ntra
cted
, with
con
tract
pric
es a
djus
ting
for
chan
ges
in tu
rbin
e ca
pita
l co
sts,
inte
rest
rate
s an
d C
alifo
rnia
’s in
cent
ive
pric
ing
regi
me
for r
enew
able
pow
er.
Impo
rtant
ly,
Terr
a-G
en h
as o
ver
2,90
0 M
W o
f re
serv
atio
ns f
or c
omm
itted
tra
nsm
issio
n ca
paci
ty o
n ne
w
trans
miss
ion
faci
litie
s th
at a
re c
urre
ntly
bei
ng b
uilt
by S
CE.
Opp
ortu
nitie
s Th
e bu
lk o
f Te
rra-
Gen
’s c
apac
ity i
s lo
cate
d in
Cal
iforn
ia,
a m
arke
t w
ith h
igh
pow
er p
rices
, de
man
ding
Re
new
able
Por
tfolio
Sta
ndar
d (“
RPS”
) re
quire
men
ts (
33%
of
tota
l el
ectri
city
pro
duct
ion
by 2
020)
and
a
gene
rally
diff
icul
t de
velo
pmen
t an
d pe
rmitt
ing
envi
ronm
ent,
whi
ch e
nhan
ces
the
scar
city
and
val
ue o
f a
rene
wab
le e
nerg
y pl
atfo
rm.
Cha
lleng
es
For
Cal
iforn
ia u
tiliti
es t
o m
eet
the
stat
e’s
man
date
d 33
% R
PS b
y 20
20,
mul
tiple
lar
ge s
cale
fac
ilitie
s su
ch a
s Al
ta W
ind
will
nee
d to
be
deve
lope
d.
Cur
rent
env
iron
men
tal,
deve
lopm
ent,
and
perm
ittin
g ch
alle
nges
, how
ever
, hav
e re
sulte
d in
the
dela
y or
term
inat
ion
of m
any
such
pro
ject
s.
Attachment 1, Page 84 of 97
Mek
eta
Inve
stm
ent G
roup
Cas
e St
udie
s
Cas
eSt
udy:
Nat
ural
Gas
Pipe
line
39
Proj
ect
Ruby
Pip
elin
e
Back
grou
nd
Ruby
is
an a
ppro
xim
atel
y 67
5-m
ile F
ERC
Reg
ulat
ed n
atur
al g
as p
ipel
ine
to b
e co
nstr
ucte
d,
owne
d an
d op
erat
ed i
n a
join
t ve
ntur
e be
twee
n G
loba
l Inf
rast
ruct
ure
Part
ners
(“G
IP”)
and
El
Paso
Cor
pora
tion.
W
hen
com
plet
ed,
Ruby
will
tra
nspo
rt na
tura
l gas
fro
m t
he g
row
ing
Rock
y M
ount
ain
supp
ly re
gion
to th
e U
.S. W
est C
oast
mar
kets
.
Stru
ctur
e G
IP h
as c
omm
itted
to
inve
st u
p to
$70
0 m
illio
n in
thi
s jo
int
vent
ure
with
El P
aso,
whi
ch is
the
la
rges
t ow
ner
and
oper
ator
of
inte
rsta
te n
atur
al g
as p
ipel
ines
in
the
U.S
. O
nce
Ruby
is
oper
atio
nal,
GIP
and
El P
aso
will
ow
n an
d op
erat
e th
e pi
pelin
e on
a 5
0/50
bas
is.
Cur
rent
ly,
73%
of c
apac
ity is
con
trac
ted
(10-
15 y
rs).
Opp
ortu
nitie
s Th
e m
acro
env
ironm
ent
is fa
vora
ble,
bec
ause
pro
duct
ion
in W
este
rn C
anad
a, w
hich
is
the
bigg
est
supp
lier
to t
he W
este
rn U
S, i
s do
wn,
whi
le C
anad
ian
dem
and
is up
- c
ondi
tions
tha
t sh
ould
sup
port
addi
tiona
l su
pply
fro
m t
he R
ocki
es,
and
thro
ugh
Ruby
. T
here
is
also
an
incr
easin
g sh
ift f
rom
coa
l to
gas
in C
alifo
rnia
and
Can
ada,
whi
ch s
houl
d cr
eate
mor
e de
man
d fo
r gas
pro
duct
ion
and
gas
pipe
lines
.
Cha
lleng
es
Cal
iforn
ia is
the
pri
mar
y m
arke
t w
hich
Rub
y pi
pelin
e w
ill s
erve
. H
owev
er, t
he d
evel
oper
s de
cide
d to
not
to
build
the
pip
elin
e in
Cal
iforn
ia,
due
to c
once
rns
that
dev
elop
men
t ch
alle
nges
and
env
iron
men
tal a
ppro
vals
wou
ld p
rolo
ng th
e de
velo
pmen
t pro
cess
.
Attachment 1, Page 85 of 97
Refe
renc
es
Attachment 1, Page 86 of 97
Mek
eta
Inve
stm
ent G
roup
Refe
renc
es
Alte
rnat
ive
Proj
ectD
eliv
ery
Met
hods
forP
ublic
Wor
ksPr
ojec
tsin
Cal
iforn
ia,D
avid
S.G
ehrig
,Han
son
Brid
gett
LLP,
2009
Annu
alPr
ivat
izat
ion
Repo
rt20
10:A
irTr
ansp
orta
tion,
Reas
onFo
unda
tion,
2010
Build
ing
Cal
iforn
ia:I
nfra
stru
ctur
eC
hoic
esan
dSt
rate
gy,L
ittle
Hoo
verC
omm
issio
n,20
10
Cal
iforn
ia’s
Five
Year
Infra
stru
ctur
ePl
an20
03,C
alifo
rnia
Dep
artm
ento
fFin
ance
,200
3
Cal
iforn
ia’s
Incr
easin
gD
ebtB
urde
nTh
reat
ens
Stat
e’sA
bilit
yto
Fund
Vita
lInf
rast
ruct
ure
Proj
ects
,Ker
sten
Com
mun
icat
ions
,200
9
CEQ
ABa
selin
eC
onfu
sion
Thre
aten
sPr
ojec
tsTh
roug
hout
Cal
iforn
ia,N
ossa
man
n,20
11
Driv
ing
Inve
stor
Inte
rest
inFe
dera
llyFu
nded
Proj
ects
,KPM
G,2
011
Dat
abas
eof
Inve
stor
-Ow
ned
Util
ities
'Con
tract
sfo
rRen
ewab
leG
ener
atio
n,C
alifo
rnia
Dep
artm
ento
fEne
rgy,
2011
Fram
ewor
kC
ondi
tions
forF
orei
gnan
dD
omes
ticPr
ivat
eIn
vest
men
tin
Cal
iforn
ia’s
Infra
stru
ctur
e,Ba
yAr
eaC
ounc
ilEc
onom
icIn
stitu
te,2
010
Fund
ing
Inno
vatio
nsfo
rCal
iforn
iaIn
frast
ruct
ure:
Prom
ises
and
Pitfa
lls,K
esto
nIn
stitu
te,2
006
Just
the
Fact
s,Pu
blic
Polic
yIn
stitu
teof
Cal
iforn
ia,2
011
New
Inte
rest
inU
.S.A
irpor
tPriv
atiz
atio
n,Ja
cobs
Con
sulta
ncy,
2007
AnO
verv
iew
ofLo
calG
over
nmen
tGen
eral
Obl
igat
ion
Bond
Issu
ance
Tren
ds,C
alifo
rnia
Deb
t&In
vest
men
tAdv
isory
Com
miss
ion,
2008
Payi
ngfo
rInf
rast
ruct
ure:
Cal
iforn
ia’s
Cho
ices
,Pub
licPo
licy
Inst
itute
ofC
alifo
rnia
,200
9
Prop
osed
Wor
kPl
anfo
r201
1,Pu
blic
Infra
stru
ctur
eAd
viso
ryC
omm
issio
n,20
11
PPPs
and
Mun
icip
alH
ome
Rule
,Alle
n&
Ove
ry20
09
The
Stat
eof
Cal
iforn
iaD
ebtA
fford
abili
tyRe
port,
Stat
eTr
easu
rer’s
Offi
ce,2
009
Wha
tIsR
eally
Cau
sing
Rene
wab
lePr
ojec
tFai
lure
sin
Cal
iforn
ia?,
Man
att,
Phel
ps&
Phill
ips,
2011
41
Attachment 1, Page 87 of 97
Attachment 1, Page 88 of 97
Agenda
9:30 – 9:45 a.m. Welcome, Agenda, Introductions Anne Stausboll, CalPERS Priya Mathur, CalPERS Laurie Weir, CalPERS Richard Little, Price School of Public Policy, University of Southern California
9:45 – 9:55 a.m. CalPERS Infrastructure Investment Randall Mullan, CalPERS Todd Lapenna, CalPERS
10:00 – 10:45 a.m. CalPERS Infrastructure Transaction Examples Richard Little Randall Mullan Todd Lapenna
10:15 – 10:35 a.m. Transportation Needs and Funding – The State Perspective Richard Little Kome Ajise, Caltrans Steve Coony, State Treasurer’s Office Erica Martinez, Office of Assembly Speaker John A. Perez
10:35 – 10:50 a.m. Potential Investment Structures for CalPERS Richard Little John Pirog, Hawkins Delafield & Wood LLP
10:50 – 11:00 a.m. Break
11:00 – 11:45 a.m. Investment Challenges and Solutions Richard Little Geoff Yarema, Nossaman LLP Paul Ryan, J.P. Morgan Securities, LLC Jose Luis Moscovich, San Francisco County Transportation Authority
11:45 a.m. – 12:30 p.m. Lunch
CalPERS Infrastructure Investment Roundtable: Transportation
Thursday, April 5, 20129:30 a.m. to 2:45 p.m.
The Fairmont San Francisco950 Mason StreetSan Francisco, California
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12:30 – 1:45 p.m. Regional Agencies’ Projects and Approaches to Financing Richard Little Kenneth Phipps, Orange County Transportation Authority Mike Schneider, Infraconsult, LLC for Los Angeles Metropolitan Transportation Authority Marney Cox, San Diego Association of Governments Brian Mayhew, Metropolitan Transportation Commission/Bay Area Toll Authority Andrew Fremier, Metropolitan Transportation Commission/Bay Area Toll Authority
1:45 – 2:00 p.m. Break
2:00 -2:30 p.m. Potential Roles for CalPERS Richard Little
2:30 -2:45 p.m. Wrap-up and Thank You Richard Little Laurie Weir
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Agenda
10:30 - 10:45 a.m. Welcome, Agenda, Introductions Joe Dear, CalPERS Henry Jones, CalPERS Laurie Weir, CalPERS Tony Oliveira, Professor Economics/Public Policy
10:45 - 11:05 a.m. Water Needs and Funding – The State Perspective Tony Oliveira Steve Coony, State Treasurer’s Office Perla Netto-Brown, California Department of Water Resources Richard Sanchez, California Department of Water Resources John Rossi, Association of California Water Agencies and California Special Districts Association
11:05 a.m. - 12:15 p.m. Regional Agencies’ Projects and Approaches to Financing Tony Oliveira Gary Breaux, Metropolitan Water District of Southern California Philip Leiber, Los Angeles Department of Water and Power Eric Sandler, East Bay Municipal Utility District David Orth, Kings River Conservation District
12:15 - 1:00 p.m. Lunch
1:00 - 1:35 p.m. Investment Challenges and Solutions Tony Oliveira Doug Montague, Montague deRose Allan Marks, Milbank
1:35 p.m. - 1:45 p.m CalPERS Infrastructure Investment Program Tony Oliveira Randall Mullan, CalPERS Todd Lapenna, CalPERS
1:45 - 2:05 p.m. Potential Roles for CalPERS
Tony Oliveira Laurie Weir
2:05 - 2:25 p.m. Wrap-up and Thank you Tony Oliveira Laurie Weir
CalPERS Infrastructure Investment Roundtable: Water
Monday, April 23, 201210:30 a.m.
Crowne Plaza Hotel5985 W. Century BlvdLos Angeles, CA 90045
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Agenda
10:30 – 10:45 a.m. Welcome, Agenda, Introductions Anne Stausboll, CalPERS George Diehr, CalPERS John Chiang, State Controller Laurie Weir, CalPERS Tony Oliveira, Professor Economics/Public Policy
10:45 – 11:05 a.m. CalPERS Investment Overview: Infrastructure Investment Program Tony Oliveira Randall Mullan, CalPERS Todd Lapenna, CalPERS Sarah Corr, CalPERS
11:05 a.m. – 12:05 p.m. Energy Projects: Investment Challenges and Successes in California Tony Oliveira Ed Feo, Seaward Road Capital Mike O’Sullivan, NextEra Energy Inc. Alex Makler, Calpine
12:05 – 12:50 p.m. Lunch
12:50 – 1:10 p.m. Energy Projects: Investment Challenges and Successes in California (continued) Tony Oliveira Steve Doyon, Terra-Gen Ed Stern, PowerBridge LLC
1:10 – 2:10 p.m. Energy Needs and Funding: The State and Utilities Perspective Tony Oliveira Robert Weisenmiller, California Energy Commission Patrick Lee, San Diego Gas & Electric Stuart Hemphill, Southern California Edison
2:10 – 2:25 p.m. Potential Roles for CalPERS Tony Oliveira Laurie Weir, CalPERS
2:25 - 2:45 p.m. Wrap-up and Thank You
CalPERS Infrastructure Investment Roundtable: Energy
Thursday, May 24, 201210:00 a.m. to 2:45 p.m.
Sheraton San Diego Hotel and Marina1590 Harbor Island DriveSan Diego, California
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Infrastructure Roundtable Attendees Name Affiliation
Aijise, Kome California Department of Transportation Ailman, Chris CalSTRS
Altshuler, David Meketa Investment Group Ardhaldjian, Raffy City of Los Angeles
Beatty, Greg DPA Beeson, Dave Orange County Employee Retirement System
Bernstein, Sarah Pension Consulting Alliance, INC. Bettencourt, Rocel Senate Republican Caucus Billimoria, Farhad CalPERS Investment Office Blackledge, Scot CalPERS, GOVA
Bloom, Ron Lazard Freres & Co., LLC Bonner, Dale Cal-INFRA Advisors, Inc. Bourgart, Jim Parsons Brinckerhoff Boykin, Grant State Treasurer's Office Breaux, Gary Metropolitan Water District of Southern CA
Brown, Danny CalPERS Division Chief Burcar, Lisa Marie Professional Engineers in California Government Burford, Mary Ann CalPERS Executive Office
Burnett, Alex JP Morgan Carlson, Mike JP Morgan
Carol, Dan State of Oregon - Office of Governor John Kitzhaber Casarez, Ken LiUNA
Chambers, Judy Pension Consulting Alliance, INC. Chiang, John California State Controller Coony, Steve Office of State Treasurer Corr, Sarah CalPERS Investment Office
Costigan, Richard CalPERS Board of Administration Cox, Marney San Diego Association of Government
Crandall, Steve CalPERS, ITBS Cullison, Randy Tenaska Capital
Cunningham, Michelle CalSTRS Dear, Joe CalPERS Chief Investment Officer
Diehr, George CalPERS Board of Administration Doyon, Steve Terra-Gen Power LLC Dunn, Lucy Orange County Business Council
Eliopoulos, Ted CalPERS Investment Office Ellis, Chris CalSTRS
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Enderton, Laura CalPERS, Office of Stakeholder Relations Evans, Linda CalPERS Strategic Event MGMT
Feo, Ed Seaward Road Capital Fickett, Kent Ramco Generating Flocks, Sara California Labor Federation Fox, William N/A
Freeman, David Water and Energy Expert Fremier, Andrew MTC Friedman, Steven Huntington Capital
Galli, Barbara CalPERS Strategic Event MGMT Garvey, Jane Meridiam Infrastructure Gilloti, Rachel Clean Energy Fund (in place of Paul Frankel)
Glazier, Robert CalPERS Deputy Executive Officer, External Affairs Guillot, Janine CalPERS Investment Office
Hemphill, Stuart Southern California Edison Company Hendricks, Bracken Center for American Progress
Houlberg, John JP Morgan Hutson, Erin LiUNA
Jacobson, Kern Infra Consult LLC Jacobson, Rob Irvine Ranch Water District
Jelincic, JJ CalPERS Board of Administration Jenkins, Bryant Sperry Capital
Jones, Henry CalPERS Board of Administration Keiley, Harry CalSTRS Kelly, Liam KPMG
Kemmerer, John Environmental Protection Agency Kennedy, John Orange County Water District
Kennedy, Susan Health Benefits Exchange Kimport, David Nossaman Law Firm
Kulis, Mike San Diego Airports Lapenna, Todd CalPERS Investment Office
Larouche, Elisse Montague DeRose and Associates, LLC Lieber, Phil Los Angeles Department of Water and Power Link, Gary Senate Republican Caucus
Little, Richard AICP - Sol Price School of Public Policy, USC Liu, Peter Clean Energy Advantage Partners / CA Clean Energy Fund
Llyod, Barbara KPMG Lockyer, Bill State Treasurer
Luchetti, Peter Table Rock Capital
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Makler, Alex Calpine Marks, Allan Milbank
Martin, Andrew UBS Global Asset Management Martinez, Erica Officer of Assembly Speaker Perez Martling, Jim Sperry Capital Mathur, Priya CalPERS Board of Administration
Matson, Megan Table Rock Capital Mayhew, Brian Bay Area Transportation Authority
McAllister, Andrew California Energy Commission McCourt, Stephen Meketa Investment Group
McGuire, Terry CalPERS Board of Administration Milliron, Pam State Treasurer's Office
Moly, Rohimah State Treasurer's Office Montague, Douglas Montague DeRose and Associates, LLC Moscovich, Jose Luis San Francisco County Transportation Agency
Mullan, Randall CalPERS Investment Office Mullen, Mike Centerpoint
Murphy, Dennak SEIU Capital Stewardship Program Lead Murray, John W. Jr. Metropolitan Water District of Southern CA Netto-Brown, Perla Department of Water Resources
Oliveira, Tony Professor of Economics, Public Policy Ordonez, Ernie LiUNA Oros, Mickey Altergy Systems
Orr, Ryan Stanford University Orth, David Kings River Conservation District
O'Sullivan, Mike Nextera Energy, Inc. Pacheco, Brad CalPERS Office of Public Affairs
Palfreyman, Justin Lazard Freres & Co., LLC Park, Eileen CalPERS Investment Office
Partridge, William SunTech Phipps, Ken OCTA Picker, Mike Office of Governor Jerry Brown Pirog, John Hawkins Delafield & Wood LLP
Poree, Jenny Montague DeRose and Associates, LLC Randall, Charles IBEW Randolph, Sean Bay Area Council
Reed, Jeffrey SoCalGas Rossi, John Western Municipal Water District Ryan, Paul JP Morgan
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Saer, John GI Partners - Centerpoint Industrial/Infrastructure Sanchez, Richard Department of Water Resources
Sandler, Eric East Bay Municipal Utility District Sawers, Alistair Parsons Brinckerhoff Schaefer, Matt Nextera Energy, Inc.
Schneider, Michael Infra Consult LLC Schwartz, Howard CalPERS Board of Administration
Scow, Adam Food and Water Watch Seneviratne, Diloshini CalSTRS
Shanahan, Alan AFSCME Shea, Steve Office of Senate President Pro Tem Darrell Steinberg
Silvers, Damon ALF-CIO Smith, Shelley Ilene Grayshell Consulting
Stausboll, Ann CalPERS Chief Executive Officer Stern, Ed Powerbridge LLC
Tamminen, Terry Seventh Generation Advisors Tilmont, David IBEW
Tomasyan, Glenn SunTech Trevino, Theresia Riverside County Transportation Commission
Velez, Izakk LiUNA Weir, Laurie CalPERS Investment Office
Williams, Felicia Edison Mission Energy Williams, Karen Carroll Community Investments, LLC
Woo, Susan BATA Yarema, Geoff Nossaman Law Firm
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October 2012 2012.10.1
California Public Employees’ Retirement System400 Q StreetP.O. Box 942701Sacramento, CA 94229-2701(916) 795-3991(916) 795-3507 faxTTY: (916) 795-3240www.calpers.ca.gov
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