What are we?

Milken Institute is a financial innovation think tank that uses appropriate financial technologies and translates smart practices into scalable, market-oriented (pull) solutions that democratize capital.

Some more answers… Milken Institute

Who are clients?

Government

Non-profits

When started?

• Since 2002, in Israel

How much have we done?

• 94 Fellows

• 5 Books

• 30 Labs

• 54 Reports

• Not including results

Who supports?

• Philanthropy

• Private mission investors

• Government

By the numbers…

$20 Billion Sovereign Wealth Fund

$4 Billion Trade Protocol with China

$100 Million Waste Treatment Facility

$120 Million Solid Waste Treatment Program

$150 Million Small Business Guarantee Program

$230 Million Biotech Fund

$50 Million Social Investment Fund

$100 Million Regional Development Fund

$200 Million Fuel Substitutes Program

$1 Million Fuel Pioneers Prime Minister’s Prize

0.9 1.2

1.4

2011 2012 2013

Program Operating Budget (Millions)

Think tank market

What

Why How How to finance? How to build? How to organize? How to manage?

What is the impact of poverty? What is benefit from education? What is cost of income inequality?

Why should the government be involved in solving social and economic problems?

Formula & approach

Applied Research

Fellows Program

Financial Innovations

Labs®

Policy Results

Relevance Skills

Smart

practices

Readiness Global reach Networks

Delivery

Milken Institute in Israel

Milken Institute in Israel

Environment

Solid Waste

River Basins Financing

Ecosystem services

Fuel alternatives

Social

Investing

Affordable housing

Financial inclusion

Social capital market

Social impact bonds

Regional

development

Regional financing

Infrastructure

Brownfield reuse

Development finance

Global

Competitiveness

Technology Development

Human capital

Capital Markets

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Environmental Workshop:

Biodiversity – Polasky and Moore

(Jan 26-27)

Financial Inclusion Workshop/ Citi (Feb 26)

Global Conference Panels & Briefings (April 29-May 3)

Financial Innovations Lab: Capital Markets

(May 4)

Financial Innovations Lab: Heritage Asset District Financing

(July 28)

Globes Business Conference Life

Sciences, Frontier Markets, Fellows (Dec

7-8)

Environment Workshop: Stability Economics/ Watershed

Conservation ( Batker/ Costanza/ Kubiszewski)

(Nov 3-5)

Financial Innovations Lab: Affordable Housing (Oct 16-17)

Environment Workshop: Eco-systems Services Valuation

(Ghermandi) (July)

Fellows Orientation (Oct 1-7)

Fellows Selection (June 16)

Negev & Galilee Fund Report Publication (Ministry of Economy) (Nov)

Financial Inclusion Report

Guy Rolnick/The Marker/Harel Locker-PMO Strategic Issues

Workshop (April)

Kidron River Financing Strategy Report Publication

(April)

Environment Workshop:

Ecological Economics

(Perrings)

(Nov 20-23)

Financial Innovations Course Launch

(June-Oct)

EU Workshop on Kidron River Financing with Minister Martinus

(Nov 1-5)

Helmsley Trust Investment Committee Briefing

(Oct 14)

Social Investing JFN Webinar (Nov)

Capital Market Lab

Report Release

(Dec)

Fellows Research & Production (June-Sept)

Kidron River Financing –

Quartet Briefing

(July)

Social Investing Workshop/ Seminar –

Jewish Agency & JFN (March) President’s

Conference

Milken Institute Israel Center – 2013

Fellows Recruitment (Mar – May)

Milken Institute Fellows, 2012-13

Milken Institute Fellows, 2013-14

Impact investing training workshop

Financing Israel: The innovation nation

Environmental finance workshops

Briefings for Quartet and Kerry Plan teams Transboundary river/watershed basins

Affordable housing labs

Globes Israel Business Conference Milken Institute Fellows panel, December, 2013

California-Israel Innovation Agreement March 6, 2014

Facing global threats through innovation

Water

Fuel Alternatives/Energy

Food/Agritech

Health

Cybersecurity

Next steps: linking the two promised lands with other start-up

nations

Organize intergovernmental, economic development, and technology/training teams for each action area (water, health, energy, food, cyber).

Establish joint innovation funds for scale-up PPP projects in California, Israel, or in frontier demonstration markets.

Start.

Translational valley of death

*Includes $21B/yr from NIH academic grants (2011) and $1.3B/yr from medical research foundations (2009). **Includes $584M/yr from NIH SBIR (2011), $400M/yr from angel investors (2011), and $6B from VCs (2011). Sources: Research America, National Institutes of Health, CB Insights, National Ventura Capital Association, Center for Venture Research.

Life sciences fund(s)

Standard Venture Capital structure

LP’s will be the Israeli government and the private sector

Government commitment as a core LP

Minimal capital to be raised by private sector investors - LP’s

Experienced managers

Sustainable life sciences industry

NEXT

PPPP Bio-Fund ?!

Public Private Philanthropy Partnership

P4

Different types of capital fill different needs

Note: The capital investment associated with adoption is depicted to indicate that it may well exceed $175 milion/year. Sources Mohr Davidow Ventures.

The water- energy nexus

Source: Dr. Yoram Cohen (UCLA WaTeR Center).

Energy production and generation require water

Water pumping, treatment and distribution require energy

Reduced water conveyance and increased water recycling

Decreased energy consumption and smaller carbon footprint

Investment opportunities along the water cycle

Source: Calvert Global Water Fund.

Israeli government goal Promotion of eco-innovation

Establishment of sustainable

knowledge-based eco-innovative

industry

Taking part in solving global sustainability

problems

Israeli case study The ICT sector

Leading academic abilities

Industrial capabilities & entrepreneurial culture

Human capital

International cooperation

Supporting government programs

3 decade - long global demand for information

and communication technologies

Security & military needs drive long term, wide scope research and development

Geographical isolation requires independent

capabilities

Need Supply Demand

Israel’s climate challenges Climate & rainfall

Within Israel’s small area there are 4 distinct climate zones

The average rainfall decreased over the last decade

Source: insectour.blogspot.com.

Extreme Desert

Mediterranean

Desert

Saharan

The next Israeli case study? Global sustainability challenges & Israeli agro-technological innovation

Israeli Agro-Technological Innovation

Energy

Water Food

Global Sustainability Challenges

Global leader in agro-technology (especially arid areas) and water systems

Ranked first in the world in use of

recycled water One of the highest rankings in

agricultural yields, in a variety of climates

The next Israeli case study? Agro-technology

Leading academic abilities

Long term basis of innovative agro-tech and water solutions

Human capital

International cooperation

Supportive government programs

Geography:

scarcity of arable land

Climate:

scarcity of water resources

Growing world population and limited land & water supply demand advanced water &

agriculture technologies for food (and fuel) supply

“Island” Need Supply Demand

Israeli government initiatives Goals and desired Outcomes

32

Efficient, Stable and Competitive Energy

Sector

Reduction of Greenhouse Gas Emissions by 20%

(compared to business as usual scenario)

Development of a Competitive Advantage of

the Israeli Market

Energy Policy in a natural gas based market Competitiveness, energy security & stable supply

10% Renewable Energy From initiation to grid parity

20% Energy Efficiency Economic feasibility and wide range of solutions

Transportation: green tax, global demonstration site Decrease dependency on oil

Encouragement of innovation and R&D in Cleantech Technology as engine for growth and efficiency

Israeli government initiatives Designated programs

Oil-free initiative Natural gas

policy

Greenhouse gas emission reduction program

Solar energy tariff scheme

Agro-tech initiative

National water initiative

Chemicals Water Agritech Printing/ Equipment

ERP/ Billing

Chips/ Systems

Algorithm/ Controls

Energy Storage

Optics

Clusters of technology expertise

Power Electronics

Major systemic challenges: Fostering robust, viable, supply chains Bridging the readiness gap: research, derisking, deployment Generating market pull Funding joint beta sites—California-Israel-Third Countries Cross-cutting support: Capital investments Government policies

Building joint PPP funds for global solutions

Corn/Sugar Cane Food Sugars Ethanol/Biodiesel Vehicle Fuel Blends

Soybean/Palm Triglycerides/Oils Isobutanol Animal Feeds

Hetero/Algae Biomass Sugars Succinic Acid/BDO Jet Fuels

Corn Stover/Wheat Straw Pyrolysis/Bio-oil Green Diesel Plastics

Miscanthus/sorghum Terpenes/Alkanes Fibers

Switchgrass Syngas

Perennial grasses Gaseous substrates

Reverse beta-oxidation

Photo/Algae Electrofuels

Biomass Production

Key Intermediates Platform

Chemicals

New Genetics New Feedstock Intermediates

New Conversion Pathways

New Applications

Product Categories

MARKET

RE

AD

INE

SS L

EV

EL

Value/supply chain

Focus on scaling proven clean energy

Current CEDA proposals advocate three purposes for the bank:

Financing commercial projects with new/risky technology

Scaling proven clean energy

Funding manufacturing

“Scaling clean energy development” is the most efficient model

Low risk profile

Minimal equity requirements

Guarantee rather than actual funding

Requires the least amount of financial reserves-2%

Supports the greatest level of spending – $625B

Low risk profile is most appropriate for a government sponsored funding entity

Item New Technology

Projects Scaling Clean

Energy Manufacturing

Facility

Description

Financing to get the first commercial scale project built with new clean energy technology

Financing to quickly scale proven technologies

Financing for new US located manufacturing facilities

Risk Profile Medium – High Low High

Economic Outcomes

Cost overrun risk, and operational life risk – likely not zero, but significant impairment possible

Tight range over five year period – chief risk is resource risk (e.g. wind)

Outcomes can be binary – obsolete technologies with specialized equipment will be close to zero

Equity requirements

20% - 40% 20% 50%

Guarantee or Full funding

Mix US –Israel Guarantee Full Funding

Reserves required 20% 2% 30%

Supported Spending w/ $10B

$70B

$625B $66B

37

Evolution of infrastructure project public-private partnerships

(PPPs)

Financial Markets Perspective

Increased willingness to shift cost to users

New focus on optimizing revenue streams

Longer-term perspective on revenue generation

capability of infrastructure assets

Risk sharing and allocation key driver for governments

Government Perspective

Catalysts

New Paradigm for Infrastructure Investment

Through Public-Private Partnerships

Alternative Finance Methods: Public-Private Partnerships

Increase in global liquidity

Patient international equity investors

Private sponsor appetite for infrastructure investments

Established long-term international concession financing models

Established international credit and rating criteria

Fiscal challenges

Increasing capital needs

Lack of funding sources

Resistance to tax increases

Infrastructure maintenance/ development

needs

Management of non-core assets

Operational cost savings

Accelerated project requirements

How to find a substitute for oil? R&D process: fuel choice

Israeli Prime Minister declares a strategic national goal at the President’s Conference: To get the world off oil

Israeli Prime Minister convenes a special inter-ministerial committee chaired by the head of Israel’s National Economic Council (NEC). The task: To craft policy, within 90 days, that will lead to oil independence

The head of NEC requests a Financial Innovations Lab™ from the Milken Institute Israel Center. A Milken Institute Fellow is assigned to the project immediately

A day after Global Conference the Institute holds a Financial Innovations Lab.™ Interim report is submitted in a record 14 days and immediately impacts suggested policy and regulation

Prime Minister Netanyahu receives a full draft of policy recommendations from the head of the NEC. The draft is accompanied by the Israel Center’s lab report and by a Milken Institute Fellow’s research paper

10.2009 2.2010 3.2010 4.2010 7.2010 9.2010 12.2010 2.2011

Israel Center Senior Director Glenn Yago attends a cabinet meeting and explains the recommendations to all government ministers

The Israel Center holds a special round table with senior government and business leaders during Israel’s largest business conference

Government decision to adopt the NEC plan including: •Channeling NIS 14 billion •Support R&D •Establish a one-stop-shop

Impact: fuel choice

• Goal: Accelerating Innovation for global oil alternatives

• Economic impact: NIS 14 billion over a decade

• Duration to government action: 11 months

Energy Governance Through Innovation: Reducing Global Oil Dependency in Transportation Through Innovation

Research to results: fuel choice

How to sustain river basins? R&D process: river basin financing

Kahn Family Foundation sponsors project financing study for waste

treatment facilities, 2012

Milken Institute: Project financing discussions with EU, Dutch, German, and

philanthropic delegations, 2012-2013

Kidron Valley/Wadi Nar Steering Committee Formed,

2007

Kidron Valley/Wadi Nar Steering Committee begins Master Plan,

2010

Milken Institute: Financial Innovations for Freshwater Revitalization: Transboundary Project

Finance in Israel, Jordan and the Palestinian Authority, 2009

Kidron Valley/Wadi Nar Masterplan completed, 2013

Milken Institute: Financing Kidron/Wadi El Nar Revitalization, Project Report, 2012-2013

Milken Institute: Project briefings with EU, Quartet representatives, and Kerry

team, 2013-2014

2007 2008 2009 2010 2011 2012 2013

Milken Institute: Heritage Asset District Financing Financial Innovations Lab featuring

regional financing plan for Kidron River District, 2013

EU grants to support Steering committee and community

planning work, 2010

Source: Milken Institute Israel Center, 2013

2014

JIIS: Policy for the Preservation and Development of the Upper Kidron Valley – the Visual Basin of the Old City of Jerusalem, 2009

Research to results: river financing

How to access capital in Israel’s regions? R&D process: regional economic development

2007 2008 2010 2011 2012 2013

Lab: Financial Innovations for Economic Recovery and Development in Northern Israel, 2007

Lab: Accelerating Medical Solutions in Israel: Building a Global Life Science Industry, 2008 Fellow: Financial Model for Leveraging

Philanthropy for Regional Development, Idan Richman, 2012

Fellow: Energy Governance through Innovation: Reducing Global Oil Dependency in Transportation, Zviya Baron, 2010

Research: Financing Microenterprises, Anat Arbel, 2010

Fellow: Economic Integration Process in SE Asia and the Pacific, Amit Einhorn, 2011

Fellow: Building National Competitiveness in International Tenders and Projects, Anat Lindenbaum, 2010

Fellow: Increasing Finance Supply for SMEs, Shir Kahanov, 2012

Fellow: Encouraging Multinational Corporations in Life Sciences to Conduct R&D in Israel, Carmit Avidan Shpalter, 2012

Joint Venture Project: Regional Development Financing Initiative, 2012-2013)

Roundtables: Regional and Economic Crisis Roundtables, 2011-2012

Fellow: Credit Information for SMEs, Naomi Himeyn Raisch, 2011

Fellow: Israel Employment Service, Noor Ferro Zaheraldeen, 2013

Fellow: OCS, Amos Shtibelman, 2013

Fellow: Productivity Gaps, Gilad Brand, 2014

Research: Regional Development Financing, 2014

Research to results: regional and economic developments

Development, Management and Capital

London Mumbai Tel Aviv New York

• Structured approach to operationalize country level interventions

• Profitable, Sustainable, Private sector driven

– Country level example: Rwanda 100% Clean Energy Plan

– Cross-border example: India-Israel Impact Innovation fund

COUNTRY LEVEL INTERVENTIONS – 2 OPERATIONAL EXAMPLES

• Country Need – Rwanda

• Acute need for power

• Scarce Resources Analysis

• Conventional and renewable resources

• Domain Partner

• Bloomberg New Energy Finance

• Gap

• Capital mechanisms to secure capital for energy access

• Scenario / Solution

• 100% Clean Access – Scenario and country level business model

• Verticals

• Solar , Hydro, Geothermal

• Operational plan

• Ignite – Connect 1 Million homes to Power

• Create Operational Partnership to execute

• Gov, utility , Pivot Access, Aghozo-Shalom

• Vestas, Azueri, Ecofys

COUNTRY LEVEL INTERVENTION – RWANDA

WHITE PAPER 11 November 2013

© Bloomberg Finance L.P.2013

No portion of this document may be reproduced, scanned into an electronic system, distributed, publicly displayed or used as the basis of derivative works without the prior written consent of Bloomberg Finance L.P. For more information on terms of use, please contact sales.bnef@bloomberg.net. Copyright and Disclaimer notice on page 13 applies throughout. Page 4 of 13

Figure 2: Energy demand and supply – pipeline (GWh)

Figure 3: Energy demand and supply – 100% Clean Access (GWh)

Source: Bloomberg New Energy Finance, MININFRA. Note: All demand scenarios designed for 100% electrification. Assumes all planned

capacity is built. The left chart shows generation from publicly announced power projects currently under development (planned, under

construction and operational); the same projects that are included in Figure 1. The right chart includes supply from the clean energy projects

shown in Figure 1 and additional generation needed for 100% clean access.

2. 100% CLEAN ACCESS PLAN

2.1. Future energy mix

Rwanda will need an additional 0.4–1.5TWh of clean energy by 2020 over and above the current

project pipeline to achieve 100% access to renewable energy. Analysis shows that the country’s

rich natural resources would be sufficient to meet this demand.

Rwanda is located on the western side of the East Africa rift system and has high potential for

geothermal power production, estimated at 700MW from four sites. There are 333 potential small

hydropower sites in the country. If each can produce at least 2MW, this amounts to a potential of

660MW. Rwanda has good solar resources with insolation at 5kWh/m2/day average. The

biomass in the country should easily be sufficient to support a 20MW plant – a small-scale facility.

We outline one scenario that meets the 100% Clean Access criteria in Figure 5. This includes the

58MW of operational hydropower in the country and the clean power part of the existing pipeline,

which equals 471MW (Figure 4; details in Appendix A). Adding a further 390MW by 2020 would

create enough generation to meet demand in the continued growth scenario with renewable

energy alone (Figure 6) – giving 919MW of power in total. The additional 390MW capacity is a

mix of hydropower (140MW), solar (130MW), geothermal (100MW) and biomass (20MW).

Figure 4: Capacity additions in pipeline (MW)

Figure 5: Capacity additions under 100% Clean Access (MW)

Source: Bloomberg New Energy Finance, MININFRA. Note: Both charts assume all clean power in the pipeline is built. The left chart shows

capacity additions from publically announced power projects currently under development (planned, financing secured or under construction); the

same projects that are included in Figure 1.

Geothermal and hydropower make up the backbone of the 100% Clean Access grid with 400MW

and 360MW, respectively. There is also a particular opportunity to expand the solar market in the

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2014 2016 2018 2020

Fossil energysupply

Clean energysupply

Continuedgrowth demand

High demand

Low demand

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2014 2016 2018 2020

Clean energysupply - additional

Clean energysupply - pipeline

Continued growthdemand

High demand

Low demand

0

100

200

300

400

2013 2014 2015 2016 2017 2018 2019 2020

Solar

Peat

Hydro

Methane gas

Geothermal

0

100

200

300

400

2013 2014 2015 2016 2017 2018 2019 2020

Biomass

Solar

Hydro

Geothermal

The 100% Clean Access

plan contains 919MW

from clean sources

WHITE PAPER 11 November 2013

© Bloomberg Finance L.P.2013

No portion of this document may be reproduced, scanned into an electronic system, distributed, publicly displayed or used as the basis of derivative works without the prior written consent of Bloomberg Finance L.P. For more information on terms of use, please contact sales.bnef@bloomberg.net. Copyright and Disclaimer notice on page 13 applies throughout. Page 4 of 13

Figure 2: Energy demand and supply – pipeline (GWh)

Figure 3: Energy demand and supply – 100% Clean Access (GWh)

Source: Bloomberg New Energy Finance, MININFRA. Note: All demand scenarios designed for 100% electrification. Assumes all planned

capacity is built. The left chart shows generation from publicly announced power projects currently under development (planned, under

construction and operational); the same projects that are included in Figure 1. The right chart includes supply from the clean energy projects

shown in Figure 1 and additional generation needed for 100% clean access.

2. 100% CLEAN ACCESS PLAN

2.1. Future energy mix

Rwanda will need an additional 0.4–1.5TWh of clean energy by 2020 over and above the current

project pipeline to achieve 100% access to renewable energy. Analysis shows that the country’s

rich natural resources would be sufficient to meet this demand.

Rwanda is located on the western side of the East Africa rift system and has high potential for

geothermal power production, estimated at 700MW from four sites. There are 333 potential small

hydropower sites in the country. If each can produce at least 2MW, this amounts to a potential of

660MW. Rwanda has good solar resources with insolation at 5kWh/m2/day average. The

biomass in the country should easily be sufficient to support a 20MW plant – a small-scale facility.

We outline one scenario that meets the 100% Clean Access criteria in Figure 5. This includes the

58MW of operational hydropower in the country and the clean power part of the existing pipeline,

which equals 471MW (Figure 4; details in Appendix A). Adding a further 390MW by 2020 would

create enough generation to meet demand in the continued growth scenario with renewable

energy alone (Figure 6) – giving 919MW of power in total. The additional 390MW capacity is a

mix of hydropower (140MW), solar (130MW), geothermal (100MW) and biomass (20MW).

Figure 4: Capacity additions in pipeline (MW)

Figure 5: Capacity additions under 100% Clean Access (MW)

Source: Bloomberg New Energy Finance, MININFRA. Note: Both charts assume all clean power in the pipeline is built. The left chart shows

capacity additions from publically announced power projects currently under development (planned, financing secured or under construction); the

same projects that are included in Figure 1.

Geothermal and hydropower make up the backbone of the 100% Clean Access grid with 400MW

and 360MW, respectively. There is also a particular opportunity to expand the solar market in the

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2014 2016 2018 2020

Fossil energysupply

Clean energysupply

Continuedgrowth demand

High demand

Low demand

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2014 2016 2018 2020

Clean energysupply - additional

Clean energysupply - pipeline

Continued growthdemand

High demand

Low demand

0

100

200

300

400

2013 2014 2015 2016 2017 2018 2019 2020

Solar

Peat

Hydro

Methane gas

Geothermal

0

100

200

300

400

2013 2014 2015 2016 2017 2018 2019 2020

Biomass

Solar

Hydro

Geothermal

The 100% Clean Access

plan contains 919MW

from clean sources

• Country Need - Israel

• Increase trade between the most innovative economy to the one that needs it most

• Scarce Resources Analysis

• Access to Indian SME, Smart Local capital

• Domain Partner

• Small Industries Development Bank of India

• Gap

• Local capital, skill, culture, patience

• Scenario / Solution

• Provide BD / Operational / Financial envelope to Israeli companies entering India

• Verticals

• Mature innovative technologies that are needed in India

• Operational plan

• Israel India Impact Innovation Fund

• Operational Partners

• Kaenaat, SVCL, SIDBI, MoE

COUNTRY LEVEL INTERVENTION – ISRAEL-INDIA