Mayors water summit

1. Title Slide Mayors water summit Pension Funds as a Possible Source of Capital for Public Infrastructure December 8, 2010 Guest Speakers: Craig Beevers & Thad Wilson

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4. Bulleted List with Headings Infrastructure overview Why is Private Capital Attracted to Infrastructure Assets? Due to recent market turmoil and the perceived threat of inflation, private capital is attracted to tangible infrastructure assets offering: Low volatility Predictable cash-flow Attractive real returns Low correlation with other asset classes Attractive features of drinking water and wastewater infrastructure investments: Capital intensive Varied sizes ($10$100+ million) Very long investment horizon Stable, secure cash-flows Monopolistic characteristics Massive need for investment

5. Table of Terms private capital’s appeal Why Should Municipalities be Attracted to Private Capital? 1 Studies cited by Jack Wells, US DOT Chief Economist, have found that each $1 billion in infrastructure investment could generate 34,800 jobs.

6. Bulleted List with Headings PRIVATE INVESTMENT VEHICLES Variety of Direct & Indirect Sources of Private Capital Direct Investment Secondary Investment • Public Pension Funds • Corporate Pension Funds • Sovereign Wealth Funds • Insurance Companies • Private Equity Funds • Unlisted Funds • Listed Funds • Fund of Funds Listed Corporates Infrastructure Assets

7. Table of Terms THE DIRECT APPROACH Direct Investment by Public Pension Funds

8. Process Spectrum of Potential structures Not a “One Size Fits All” Approach Public Ownership DBO Joint Venture DBOF / Concession Private Ownership • Strengths • Long-term ownership • Alignment of interest • Ability to optimize leverage • Challenges • Minority ownership for investor • Untested structure • Rate setting mechanism • Example • Potentially structure similar to Indianapolis transfer agreement • Strengths • Coordination of design, build and operations process • Long-term, stable cash-flow stream • Challenges • Structuring of financial and operational risks • Getting the contract terms “right” up front • Example • PERC Water’s Santa Paula, CA Water Recycling Facility • Strengths • Control over design, build and operations process • Very long-term cash-flow stream • Challenges • Structuring of financial and operational risks • Political acceptance • Rate setting mechanism • Example • Publicly traded utilities Investor Perspectives: Potential Pension Fund Investment Structures

9. Table of Terms CONTACT INFORMATION