North american infrastructure debt at black rock, susan gray and david nassan. [applause] thank you, kevin we have hard act to follow. The administration has really prioritized a big boost to Infrastructure Spending on the order of a trillion dollars, clearly thats a very big sum but also very much warranted. Public construction in this country has been declining for years and is now 1. 5 of gdp annually. Just to put that into context, western europe on average spends 2. 5 of gdp annually and china, closer to 8 of gdp. Any of you who have spent time on the roads and airports wont be surprised the u. S. Infrastructure report card from the American Society of civil engineerings and i think they gave them a great of a dplus. Over the past your years with over 4. 5 trillion. So we have two big questions. First, funding a trillion dollars in spending is a daunting task. So even if direct federal spending is only a fraction of that. Some suggest it could be on the order of 150 billion to 250 billion over the next decade. Where is Congress Going find the money . The outlook for u. S. Infrastructure spending, like so much else, may be influenced how the whole tax reform process plays out and as you heard this morning, uncertainty still reigns there. The second point is that mobilizing private sector funding for infrastructure on such a big scale is going to be very challenging. While Publicprivate Partnerships have been very popular in europe and canada and australia, they have not been used in the u. S. Theres been a lot of discussion on how to incentivize more private sector funding, the tax credits, for example, proceeds of repatriation tax, support from Municipal Bond market. Details are very much lacking. Another issue is its just not that easy to get shovelready infrastructure projected line up and execution, especially for big projects, can take a very long time. So for a whole variety of reasons i tens to be in case theres plenty of private capital ready to suspend but not enough bankable projects to fund so lets turn to our experts. Do you remember that were happy to take questions so go ahead and submit them via the app. Dave, countries all over the world, everybody focuses on infrastructure but whether this brokensfield, whether it is updating existing truck tour 0, green field, starting out freshment what impediments are are you seeing . At General Electric we commit capital to infrastructure all over the world, and if you think about the probable probably recent today said 50 trillion, and i a significant part needs to be private. So think. Bridging the need and capital out there that wants to invest in infrastructure because it is a good, predictable investment, the first its the process to incentivize private investment. Transparency is orbit. An ability to share investors they can get the return they expect. Theres an enormous amount of ability to incentivize capital but too many projects to be evaluated. So you need to become. Transparent process. Form documentation that people can understand. Enormous evidence that suggests that when countries go out with transparent processes in order to invent invent e incentivize. Capital will follow. The second thing is understanding there are different pools of capital, along the various aspects of infrastructure investing. For example, early state development investing, small pools of capital, highest amount of risk, most amount local usinged national required. Needs some development from Financial Institutions to engender growth and truck infelt. Seconds infrastructure financing. Theyre looking for a predictable, legal Regulatory Regime and takeout financing by long, durable Institutional Investors and then once a project is operational, then its easy to find investors. Thats where your Institutional Investors come in, so understanding that all infrastructure dollars are created equal and having a clear and transparent prois the way to facilitate infrastructure investment. Interesting. This tiaa is a major invest glory infrastructure and globally and the u. S. , how do you see infrastructure as an Asset Allocation strategy. Do you have enough . I think portfolio al lobe indication i die pent dont out whan that profolio is meant to do. Portfolio is meant to do. I invest on the general account is a fixed Income Portfolio and the Infrastructure Investments we make are more of the alpha, per se, for that particular client that were investing in behalf of. I do want to echo the comments made that it theres different type of infrastructure investing capital. We are investing in construction as a federal construction. We have taken a Little Development risk to try to gain higher return, but i think there is opportunity for folks to plan different parts of the capital structure, both representedded here today and different faces of investment. I think one of the challenges for folks to invest in infrastructure is maybe the especially in the United States is the lack of understanding of how investors play in the Capital Structures for these assets. As more education comes forward you will see a lot more you mean here in the us. In the United States, Publicprivate Partnerships. Interesting. If you look throughout the spectrum in the us, i know this is your focus, where are you seeing opportunities for investing like yourself . Its going to depend on how you define infrastructure. The definition of infrastructure is broadening. We often hear the term core and core plus in industry so we are investing in both core and core plus assets. I would define core as your traditional transportation assets, toll roads, bridges and if you look at the piece three assets that are in the pipeline today, a majority of those investable assets are in that category. You also have social infrastructure which would include other types of entities like fiduciary buildings that can be privately financed, water and waste would be another category. For us today we are focusing increasingly on telecommunications because the way infrastructure is being used is changing as Technology Changes. So for plus will require maybe a different set of understanding and skills versus the core assets in the marketplace as well. You have that skill set in place i guess, structure must be building up over the years. We may be staying with our investors for a minute so infrastructure has come out as a distinct asset class under the funds under management. Blackbox for example went active in channeling infrastructure investment. What do investors look for in Infrastructure Investments . Investors have many needs and i think as priscilla mentions one has to be careful about what ones own definition of infrastructure is. As an example, one investor might think of Core Infrastructure as more sectoral where we might think of infrastructure more in terms of risk. So i think one that needs to be very specific and definitive about what type of risk one is taking and what type of characteristic that involves. So that could involve core, meaning a low risk investment, core plus meaning slightly higher risk value added meaning more developments risk, construction risk and opportunistic meaning you are taking more business and cycle risks but our clients are different investors across the spectrum and we attempt this system in defining that risk and investing in that specific risk area so that entails something with investmentgrade senior debt and infrastructure transactions, growing low in the capital structure to highyield mezzanine and eventually to equity as well so our investors look for global, they really look for the global accumulation along the infrastructure space and a good diversification along the various sectors and that involves a small correlation to the Economic Cycle so i think thats one of the key aspects of infrastructure and allocation to infrastructure looks to take advantage of that. Its a low rate, have you seen people moving along the sectors in infrastructure . Yes indeed. With the continued low Interest Rate environment, thats one of the reasons that a lot of investors have moved into the infrastructure class and alternatives more broadly as well. Weve seen that in infrastructure debt, on the equity side we see that in infrastructure equity. One thing to keep in mind though is that a lot of investors and managers that matter have a style creep, promising or looking for certain infrastructure assets to return with certain risk parameters but finding out that those transactions are available at that risk return intersection. So increasing the risk to receive the same amount of return is what weve seen a lot of in the market, one has to bevery cognizant. Ive been doing more on the origination of structuring, or the province of banks. Absolutely. Weve seen more and more direct investors, as opposed to investors investing through managers. This is an increasing trend again to try to capture that Additional Return at the same risk point. Thats not always possible, its a competitive market. A lot of times it takes a lot of resources, rate relationships, a lot of effort to Fund Transactions and that can be challenging at institutions where you do not have the ability to pursue a lot of different asset processes on your own. So thats a constant challenge, each investor has to think about and you cant be best in class in every aspect class so you have to kind of take the battles and judge where you think you are going to land those transactions. Ive wondered maybe we can share that through the readings aspect, the ratings play a part in infrastructure markets so they provide more transparency, and an assessment is sort of relative risk. The executive council on infrastructure Bipartisan Policy Center has had a very comprehensive report , the new american model for infrastructure, i know you guys are involved in that, 80 tell us about that and recommendations. Thanks, i see the globalist as the cochair. Of the executive council. On infrastructure and policy center and we worked with a number of other institutions, cognitive institutions including Pension Funds and financial funds to put this report together and one of the things the report was trying to do is to say how do we unlock the capital that is necessary to go into infrastructure in the United States for the next 50 years because we clearly as you can see theres a lot of interest in equity and debt investors in investing more. And us infrastructure. But relative to some of the other models in the local private infrastructure market, the infrastructure isnt moving as quickly particularly on the transport side as it has been on the country. So this report essentially looked at some key elements where changes could be introduced which could have an impact on either increasing the pipeline, improving the procurement processes and really picking up on the things that private sector can bring to the table in terms of adding value here so taking a life cycle view of assets from the shortterm view of asset putting in place procurement processes that recognize that. We spent a lot about this transfer and the capacity of private investors to take risks that maybe the Public Sector doesnt want to take or doesnt even necessarily feel that they are comfortable taking. Also, there are a number of recommendations in the report about leveraging the private capital market. That the us has and looking to supplement the very effective taxexempt market within instruments that can really leverage the fact that there are private businesses and weve seen this in the utility sector and midstream sector a significant amount of interest in capital going into those sectors when you have instruments like rates and peril pays that provide a mechanism to happen and finally, the other piece that was i think the key, the part of the report was looking at technological change. And the capacity of the private sector to take account of the future by taking a long view and looking at how technological change and new technologies could be leveraged to improve the operation of infrastructure assets and taking responsibility for longterm maintenance of infrastructure assets. So i think in summary, the pipeline also, the pipeline of i think this appeal is really the key issue that people are trying to grapple with and rivaling different mechanisms to do that. Before we move on to the us focus i wanted to pick up a couple things you mentioned and asked maeve to comments. You mention procurement, thats an issue so a cumbersome finding procurement process can get in the way and the pipeline issue, have you seen changes in that over the years . Is it Getting Better in terms of pipeline . I think its Getting Better. Im in the world is a big place so certain areas of the world. Can be very transparent, pure german process, that will facilitate a lot of investment. Japan does it exceedingly well. Some places in south america have done it significantly well. I would say as long as people can understand what that procurement process looks like and really get a sense of the riskadjusted returns in their investment, they will deploy capital there. I would say sometimes there is a risk or a worry that certain countries have about sourcing but sometimes its hard to have a cumbersome procurement process and the timing that it would take, sometimes you might want to think about sourcing as long as its transparent to get the infrastructure build might work. Im going to direct one quick question from the audience before we move on to the west and its kind of a definitional issue. You are referring to the definition of infrastructure and the question is what extent are oil and Gas Pipelines or other Energy Assets included in infrastructure . We are large midstream investment thats a pretty decent size of our portfolio and we consider midstream infrastructure depending on the revenue, how the revenue is derived. If it has more exposure to the volume metric risk of the hyper partisan where its located, then its considered more of an energy flame but if its a contract, where it take or pay, where the speaker which is the client , the infrastructure word for clients whose maybe painting pictures of that. That pipeline and we consider it more of an infrastructure amount. That midstream sector has because of, there has not been a lot of opportunities for private investors to participate because its been such a liquid market, through the nlp sector and thats a great example of how tax and regulatory environments help industry that has a significant amount of capital expenditure. Promotes, and be able to tap into large sums of capital so given that the liquid market, Midstream Companies are able to readily Access Capital markets so from our perspective i guess the general question is it going to depend on what the revenue exposure is and we will consider the energy infrastructure. Id like to turn now to the us or outlook for us infrastructure in dollar programs in Infrastructure Spending, what you think is meant by that and how much is that, can we get stirred up from some private sector, stepping up your allocation to infrastructure and more of a pd . We love to add, the assets portfolio, we are proud owners of the assets today not only in the United States but in europe. I think we are cautiously optimistic about whats going to happen and how thats going to play out. Obviously we are waiting to hear what the plan is going to be, making maybe the latest ive heard is theres an infrastructure plan that will be unveiled in the next month. But certainly there are folks who are going to be speaking earlier today were closer to that topic and certainly i am but i think what were seeing in the marketplace and certainly i would welcome to hear what other folks on the panel are seeing is that there is a higher degree of all types of investors to tap into this sector of the investment market. However, i think i do think their ability to do so will depend on how many people they have to claim to focus on the sector, thats going to be dependent on whether we are direct and a Fund Investment or part of the capital structure. Dave, i want to ask you a little bit about on the policy side and also add your question thats coming by and maybe about this in the back of our minds, how should we look at potentially investment in infrastructure from say chinese and japanese investors . Maybe think about that but does infrastructure all over the world, you think about your experience, making maybe the us needs to think about and consider something major infrastructure. So i think the three things that i would focus on, the first would be, i think the administration will get this, im speaking here later but i have great confidence that team will get this right. First is the go down the Publicprivate Partnership is already paid without having input from the private sector as to what they need in order to make investments in infrastructure. I think everyone has their own set of requirements thats necessary that you want to incentivize private needs and talk to them at the front end of the process. The second is that i think you ought to really think about if you want to get 1 billion of investment in the United States, defining infrastructure pretty broadly. When you think about the Infrastructure Investments needed in the us, theres a whole titration thats responsible when you think about Grid Stability and what the influx is, when you think about pipeline damage and applications of that. Theres an enormous amount of investment required thats not related to shovels and dirt, is related to the new frontier of digitization and third, i think you really need to understand that there is a lot of capital out there and what it needs to be harnessed is new clarity as to how that capital can be deployed andthe returns , even in the United States so i would argue that relevant regulatory certainty about the investments is just as important as giving money from the us taxpayer, when you think about the fact that Asset Classes like transmission, new energy bills, new power plants that need to be the developed, Renewable Energy, once investors realize what the return expectations will be and have clarity that the regulators will allow those projects to be built and those Construction Projects to be excavated and the Land Acquisition rights will be powered, capital will flow so the administration when it focuses on that, if they get as much time to providing the level of red tape larrythats necessary, capital will flow to new projects. Id like to draw a little bit on the Digital Infrastructure aspect of what youve been saying. I thought you were nodding your head. You sit on the board, dont you, of the us toll road and powerplant. Are you seeing more interest, emphasis on digital . I think that Technology Impacts your investments at a lot of different levels. If you own a toll road, how you think about the tolling system and the changes in upgrading those systems and how much is that going to cost you . Is that Maintenance Cost embedded in the projections you are making . We have a large interest in renewable projects. How is Battery Storage going to change that subsector and how stable or how stable those that technology and Battery Storage . Beat so i think we are thinking about technology pretty regularly and sometimes people think about infrastructure, they think rick and mortar but technology definitely has to be front of mine as well, not only our Due Diligence when you are underwriting something but also as longterm holders like we are where we are Holding Assets for 50, 20, even 30 years, how that Technology Change the use of a particular asset , thats something we need to be thinking about pretty regularly. We had a question here related to user fees but it makes you think, all this new, great Digital Information is expensive but at the same time putting money into projects like this need to earn the type of return they need to earn. What about sort of rater use of user fees, using can be broader acceptance of user fees . And would that help in, there are a lot of things, most of the sectors dont have a hold on them. I think one of the things that is positive about issues is providing people with a Better Service and if you for example want to drill a hole on a water system together and you put technological improvements in place and you provide something thats a Better Service to the citizens of the community and you do it in the ppt, you can , you know, you can potentially look at a different arrangement depending on what the circumstances are. Thats obviously one of the things about ppp is they need to be sensitively handled in the context of Community Need and Community Views and there needs to be an effective prioritization of what infrastructure is built and in what way and it has to do with something people understand the virtues of why processes are being closed. Having said that, if we cant find it get through that process and make that process a more effective and widespread process, we have to see how we can effectively bring the private sector in to make these changes. I think it really depends on the type of asset as well so if you take for example the greenfield toll road, thats not going to lend itself well to an efficient cost to financing whereas if you have a toll road thats been running and the traffic patterns have been established for manyyears, the financiers can look at that and test that , sensitize that and provide an efficient cost for them so it depends on the type of asset. It depends on what type of projects come out of the plan and to what extent those are being, ms. Brownfield. If i could stay with you for a minute, going back to theidea of funding infrastructure plans , tax credits have gone up quite a bit so two aspects is that you expect the ultimate plan to involve some sort of tax credits and what that looks like and how effective would that be in spurring more private Sector Investment . There had been a lot of details about the administrations plans for infrastructure but tax credits have been mentioned as, an avenue for incentivizing investment in infrastructure. Theres very good examples like Renewable Energy, low Income Housing tax credits that have incentivize theprojects in those sectors. However, theres also, there tend to be bottlenecks as well. You have to find an entity that is willing to take those tax credits and have taxable income, understand that sector, is willing to take that projects, regulatory risks that they might have to in order to be an investor in that transaction. I think thats one of the tools that is obviously available. But there are some possible plaintiffs that come along with that as well. If tax credits were to be extended to infrastructure projects, im sure there would be an incentive to invest in those projects. Weve seen that very well in the Energy Sector and some of that capital was moving into and endorse a fine into broader infrastructure as well but i think thats one of the avenues, there are several other avenues that we look back on history, theres been several other avenues that have been used as well, the america bonds, thats one example. The hash grant which was in lieu of tax credits, which was a program several years back that was viewed generally as a very successful program. So i think taken as a whole, there are a lot of tools that can be used for an administration and incentivizing particular sectors of the industry. So there are also skeptics , that a lot of these are tax breaks might go to projects that are going to be done anyway. It seems like thats an issue as well. To spring forward. I think that is one of the challenges, the rias programs have not run sort of smoothly at the beginning and that they are always kinks that need to be worked out and you need to make sure theres no use of the system. But generally speaking, i think where we live in a fairly efficient market, if there is an incentive provided for a project, again, not to use Renewable Energy over and over but i think thats a very recent example, we seem to cost per in General Energy and they been, back me up on this, theres been, a lowering of the cost per in solar plants as well aswind farms. And that has , utility that purchased that power has benefited from that and thats happened really over the last 5 to 10 years. In the scope of the tax credits being available to those sectors. I would echo that comment that there is obviously a distortion of some kind when theres a subsidy being provided but that subsidy has allowed a significant amount of investment to take part in broad wind technology, close to parity with that and solar is going to go down even quicker than that and you have to wonder whether or not that investment would have been made without that large amount of support for those tax credits. Another concern for have about the idea that federal spending on infrastructure would be ramped up is to put a crowd out, the private sector money. Already its hard to get business deals, is that something that the concern on the private sector side . Absolutely, id say i think our sort of message would be that there is plenty of private capital available on sort of the folks. From all the way to equity. So its more a question of getting the projects over the finish line and how can the federal government use their funding in the most optimal way to maximize the number of projects that over the finish line. I would say that there is plenty of capital available on the private side as well as. I think the government can, the government can the and authority and can do an excellent job of identifying staff that were recovered. Once those are identified, they potentially cover the other government via their own challenges or private partnerships, the risk sharing. Once those gaps are identified and covered, theres a large amount of private investment. Yes, i would head to that, looking at expediting the, and of course they want to make sure the projects are different. But often an area where the project is, theyre deserving in the process changing on and that goes through multiple political cycles and they are required Political Support so theyre dealing with those sort of issues and providing more flexibility for ways in which the Public Sector can partner to build out air force build up, to build up trends and looking at the lessons that are being learned that we were talking about earlier about how quickly we can mobilize capital into the sector. They had 400 civilians roughly thats gone in over the past number of years. There are a lot of examples that we can go to actually really check that trillion dollars. For example, we spent a Pilot Program in the sector which has been in place for over a decade and hasnt really managed to actually get a lot of Publicprivate Partnerships in the area. But this is an area where there are key changes to be had from the private sector, global sector of operations. I think theres a lot of great examples that people who have used a different variety of tools. And in for a concession, particularly for example, which is a very developed, welldeveloped market, pure concession for a toll road and the winner of that conception, and some of their tollroad concessions will be allowed to generate extra. The government will take that risk of the pool but it will expand the concession. So that the adjuster actually gets the return so its a way of the government not actually showing up Additional Capital but the investor retaining the return over a longer period of time so there are different tools and for an example that we can take on this to hopefully make best practices. Were coming toward the end of our time so i like to get any recommendations you have about the infrastructure plans but one quick question here from the audience, is there a role for the epa in processes for infrastructure and this gets to the question about making things easier on the regulatory side. Id say its kind of speeding up any kind of approval, with price controls but just having more resources, thats what it takes to get these approvals. Okay, recommendations, what if you got . Transparency from policymakers will incentivize capital. They might not in trouble. I would say, think about the life cycle, in procurement. And think about where capital markets, there is an advantage that this country has over anywhere else in the world, it can be more effectively leverage and also think about ways that the private partners in more effectively enter into these longterm plans. Id say consistency so building on the themes mentioned, consistency across different projects or for example, Publicprivate Partnerships. They are a belief 34 states havelegislation in place but only a handful have actually , have gotten these projects across the finish line. You dont even have a process in place. Right, if there was a way to have aconsistency framework , from an investor standpoint that would add to the transparency. That would allow much more to commence. Not to interrupt the ttc has actually put out a draft framework which a number of states have adopted. I would echo all the previous comments that maybe showcasing in a little bit more clear manner what the benefits are. I think sometimes theres a perception that theres a greedy investor, they are coming in and taking over. These projects and a lot of us are actually representing the constituency base of this country and are investing on the half of protecting the financial future of the people that we are investing money on behalf of. I think sometimes that gets lost in the messaging. Good messaged and on. Please join me in thanking our panel for a great discussion. [applause]. [music]