INFRASTRUCTURE INVESTMENT AS AN ASSET CLASS Idar Kreutzer, CEO Finance Norway Oslo,

Significant infrastructure investment needs 2 Source: Booz Allen Hamilton

Global pension assets Absolute and evolution (USD billion)

Liability Driven Investments 5 Valuing liabilities – and matching the value change profile If the liabilities' duration is 15, then a 2 percentage points fall in interest rates alters the present value of liabilities with 30% if this change is simply carried through for the purpose of liability valuation Which assets (apart from too few long dated bonds) yield 30% with certainty over 4 months? 2 % point fall in rates Assets 100 Liabilities 100 Liabilities 130 Assets % increase in liabilities Example: duration 15 Source: Bloomberg 20 yrs swap ?

Funding Sources and Requirements 6 EQUITY BONDS BANK LENDING Rating/Credit quality Liquidity Duration Stable cash flow Exclude non financial risk Acess to colateral/real asset

EU  Increased political dynamics  Solvency II  Stress testing  Rating requirement 7 Regulatory progresses and political sentiment Norway  Politically sensitive  Domestic life insurance – regulatory hurdles  Solvency II Adaption Objective: Same risk – same rules – same capital requirements

Closing remarks 8 Identified opportunity  There is a near perfect match between Life and Pension liabilities seeking long-term assets, and the corresponding need for long-term financing of infrastructure investments throughout the world Criteria for success  Supply meets demand: Relevant arenas for investor/project ownver/regulator dialogue  A public and regulatory desire to make it happen – “from restriction to rational stimulus”  Structuring projects to meet targeted investor needs