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Jerusalem InstituteMilken Innovation Center

www.MilkenInnovationCenter.org

Milken Innovation Center

Based at the Jerusalem Institute for Israel Studies, we are a financial R&D center that focuses on building financial solutions to enable Israel to move from the “start-up nation” to the “scale-up nation.”

Fellows

ProjectsFinancial

Innovations Labs

We build practical, market-based, data-driven solutions that achieve results…



Fellows launch -January

Biomedical Financial Innovations Lab –

March

Milken Global Conference - April

Sustainable Water Financial Innovations

Lab - July

Cyber Heritage Workshop - June

Green Building Financial Innovations Lab -

September

New Fellows launch -October

Globes Business

Conference -December

Milken Alumni Program -

February

Milken Global Fellows launched -

June

Jan May Jun Jul Aug Sep Oct Nov DecAprMarFeb

East African Capital Market Financial Innovations Lab -

October

HU Financing Innovations Course

WATEC 2015 Water Initiative - October

UC Financing Innovations Course

2015 Milestones

Financial Inclusion and

Affordable Housing Lab

reports





March



Lab - July



September


Globes Business

Conference -December


February


June


East African Capital Market Financial Innovations Lab -

October


WATEC Water Initiative - October


2015 Milestones

Financial Inclusion

and Affordable

Housing Lab reports




March


Lab - July



September


East African Capital Market Financial

Innovations Lab -October


2015 MilestonesFinancial Innovations Labs and Workshops

Financial Inclusion

and Affordable

Housing Lab reports






February


June




2015 MilestonesFellows and Training




March



Lab - July


June




2015 MilestonesCalifornia-Israel Global Innovation Partnership



-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Percentage GDP Growth

Israel OECD Average

Source: Bank of Israel & OECD



-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Current Account Balance in Israel (as % of GDP)

Source: Bank of Israel



0%

1%

2%

3%

4%

5%

6%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Budget Deficit in Israel (as % of GDP)

Source: Bank of Israel



High-technology Industries: electronic components, electronic communication equipment, equipment for control & supervision, pharmaceutical products etc.

Medium-high-technology Industries: chemicals & refining petroleum, machinery & equipment, electronic equipment & electrical motors etc.

Medium-low-technology Industries: mining & quarrying, rubber & plastic products,, metal products, ships & boats, jewelry etc.

Low-technology Industries: food products, beverages & tobacco, textiles, wearing apparel & leather, paper, printing & wood products etc.

Sou

rce: Cen

tral Bu

reau o

f Statistics



Israel outpaces developed countries in both % of R&D employees per capita and R&D expenditures as a % of GDP

Source: OECD



Ease of Doing Business – from the World Bank’s 2016 ‘Doing Business’ Reports



OECD Average Israel

Source: http://www.oecd.org/social/income-distribution-database.htm

Inequality & Income-Distribution

OECD Countries



₪ -

₪ 100,000,000,000

₪ 200,000,000,000

₪ 300,000,000,000

₪ 400,000,000,000

₪ 500,000,000,000

₪ 600,000,000,000

₪ 700,000,000,000

₪ 800,000,000,000

Market Capitalization - Tel Aviv Stock Exchange

Source: http://www.tase.co.il/ Main Market Data – שווי שוק

http://www.tase.co.il/



Memorandum of Understanding

Co-innovation leadership team

launchedFinancial

Innovations Lab

Pilot projects and policy initiatives designed

International fellows deployed

California-Israel Global Innovation Partnership…and launched this process



A few numbers that make a difference

83%

10%

Water recycling rate

57%80%

Share of managed water for agriculture

137

473

Average urban water use(L/Capita/day)

31%

1%

Wastewater share for Agriculture

Israel California

6%

19%

Electricity for water use

98,421

393,683

Total water consumption in all sectors(L/Capita/day)

Sou

rces

: M

ilken

Inn

ova

tio

n C

ente

r, Is

rael

Wat

er A

uth

ori

ty, N

ew T

ech

, Mek

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etaf

im,

oth

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8430 2+3+



Israel’s water performance……for consumers and agriculture



The ecosystem

RecyclingReservoir Aquifer Waste TreatmentNature

Municipal

Industry

Agriculture

Collection & Distribution



Reservoir Aquifer RecyclingWaste TreatmentPrimary sources (nature)

Municipal

Industry

Agriculture

Collection & Distribution

Private water rightsOveruse and

contaminationClimate change

Regulatory burdens

Low costs

Inertia

Energy costs

Technology risk

High capital costs

New sources/

desalination

Source protection

and remediation

Bundling solutions for scale

Use performance-based

capital structures

Leverage energy

connection

Deploy service-based

revenue models

Bar

rie

rsSo

luti

on

sHow we framed the question…in the

context of the eco system



What have we learned in Israel…

….that can be used in California

Use financial innovations to shift risk and open markets

Install infrastructure as a service

Reward technology performance (water savings=higher returns)

Invest in continuous innovation

Design regulation to facilitate market-driven change

Bundle solutions to create financeable scale

Leverage cross sector linkages (energy, agriculture, and water)



Design practical solutions with California and

Israeli partnerships for

real projects that demonstrate “how

to” get these projects done

Water Projects

Technology

Project Structure

Capital Structure

Regulatory

Outcomes

Community



Municipal systemsBundle services to create scale for

suppliers and investors

Incentivize vendors to perform

Shift risk from municipal water system to investors

Target pilot projects that can make a difference…

Farmers•Commodity crops (e.g. alfalfa,

corn, soy, etc.)

•Shift from flood to precision irrigation

•Farmers unconnected to public systems

•Deploy systems solutions to enable independence and

increase efficiency of water uses



Targeted solutions for farmers

Deploy water saving technologies in

commodity ag (alfalfa, soy, corn, etc.)

Shift risk from the farmer to investor

Create capital structure that leverages water

savings

Reduces water consumption

Increases agricultural competitiveness

Eligible Farmers

Government

Tax Credit Investors

Savings

Lower water consumption –lower water charge for

eligible farmers

$

$+

Tax Credit graduated on

the basis of water savings

% of savings paid on

technology performance

% of installation

paid up front

Sou

rce:

Milk

en In

no

vati

on

Cen

ter

Technologies:•Precision irrigation and

nutrition•Recycling and small

scale desalination•Low water crops•Aquifer management

Water sources and savings and

measured

$+

Watershed Protection offsets issued based on reduced aquifer usage

and recovery

Watershed offset credits sold to

investors Bank/Carbon credit auction

Ag Loan/Guarantee

Sales proceeds of the watershed offset

creditsExport Trade Credit

Guarantee

6

Cooperative Extension

Training of workers on the use of

new technology

Eligible Farmers

Government

Tax Credit Investors

Savings

Lower water consumption –lower water charge for

eligible farmers

$

$+

Technologies:•Precision irrigation and

nutrition•Recycling and small

scale desalination•Low water crops•Aquifer management

$+

Watershed Protection offsets issued based on reduced aquifer usage

and recovery

Watershed offset credits sold to

investors Bank/Carbon credit auction

Ag Loan/Guarantee

Export Trade Credit Guarantee

1

Water Solutions for agriculture

Cooperative Extension

7 8

2

3

4

5 9



Targeted solutions for farmers

Deploy water saving technologies in

commodity ag (alfalfa, soy, corn, etc.)

Shift risk from the farmer to investor

Create capital structure that leverages water

savings

Reduces water consumption

Increases agricultural competitiveness

Water Solutions for agricultureWater Solutions for agriculture

deploy new technologies on

10% of the target farms

estimate savings of 455 billion gallons of water per year or

2.8% of the human water consumption in California

avoid spending approximately

$908 million on water and $59

million in energy costs

fiscal cost of $141 million in tax credits and

approximately $59 million annual in new farm loans

over 10 years

Using 13 trillion gallons

57,000farms

can save 455 billion gallons

or 2.8% of California’s

water



Bundle services to create scale for suppliers and

investors

Incentivize vendors to perform; implement

systems financing; convert vendors to

service model

Shift risk from municipal water system to

investors

Create living laboratory for innovations

Environmental Service Partnership (ESCO)

Investor

Lower water use and higher quality

Municipal Water District

$

$+

% of installation paid on performance benchmarks

% of installation paid up front

Sou

rce:

Milk

en In

no

vati

on

Cen

ter

Water quality

treatment and

monitoring

$+

Export Trade Credit Guarantee

Smart Metering

Leak detection/ management

System security

Aquifer monitoring/

remediation/ storm water

retention

$

Municipal service payments paid on

performance with a “bump” in the

payment based on outstanding

performance

Participation loans to Israeli water

technology companies

Investment in company

first California

installation

$+

$+

Waste water treatment

and recycling/

desalination

Watershed Credits and/or carbon credits

Design performance-based infrastructure solutions

Water Solutions for Municipalities

Tax exempt financing/ IBank-

CLEEN

1

2

3

4

5

6

78

9



Bundle services to create scale for suppliers and

investors

Incentivize vendors to perform; implement

systems financing; convert vendors to

service model

Shift risk from municipal water system to

investors

Create living laboratory for innovations

Design performance-based infrastructure solutionsWater Solutions for Municipalities

deploy new technologies

to target a 6% reduction

in municipal water use

estimate savings of 180 billion gallons of water per

year or 1.1% of the human water

consumption in California

avoid spending approximately $522 million on water and

energy costs

Spend approximately $55.3 million annually

in new municipal water project loans

over 10 years

Using 3 trillion gallons annually

214 water authorities

can save 180 billion gallons

annually

or 1.1% of California’s

water

27FOR INFORMATION ONLY

Large, centralized wastewater treatment plant:• Huge footprint – Not in my backyard• Very high capex for long-term capacity• Very energy-intensive – high opex• Noisy, smelly, very obvious• Very hard to reuse water without huge

purple pipe network – more capex

Small, distributed wastewater treatment plant:• Small, flexible footprint blends into

neighborhood• Modular – expand as needed• Very energy-efficient – low opex• No odor, quiet, neighborhood-friendly• Local water reuse saves $M’s in purple pipe

Emefcy Group Ltd (ASX: EMC)

Fewer of these… …More of these

• Proven Israeli wastewater team – founded AqWise (350 plants in 30 countries)

• 90% lower energy revolutionizes wastewater treatment - $93B market


Water Sale Business Structure

Emefcy Financial Partner

Special-Purpose Vehicle

Customer

Integrator, O&M partner, asset

manager

Provides treatment services & optionally

recycled water

Sells plant to SPV

Receives list price, income

Receive preferred share of income till hit hurdle IRR, then

reduced share till target IRR

Fund list price purchase for equity

Build, O&M services

Agreed fees

Fees for 10 year contract on take-or-pay basis

SPV owns plant, depreciates asset, can allocate benefit to partner in exchange for lower pre-tax IRR

Similar to Solar PPA with Similar Partnership Flip, Depreciation


Everyone Benefits

Who Benefit

Customer • Avoids capex• Lowers operating costs• Gains water security• Avoids all operating headaches

Financial Partner • Locked in 10+ year IRR with protection• Fast time to hurdle IRR• Ability to invest further funds at protected IRR

EMC • Recurring revenue stream with committed financial partner



Moving forward on two tracks

Business to Business (B2B)

Business communications

channels

Industry events and networking (e.g. 29/6/16)

Sales

Government to Business

(G2B)

Policy development

teams

Pilot project design and

implementationProject to scale

Sho

rter t

erm

Long

er te

rm



We are moving forward…

IDE -Carlsbad

Encinidas –rain harvest/ storm water

retention

Amiad

LA CleantechIncubator



Israel California

Regulatory relief

Tax credits and subordinated debt

Offsets and carbon credits

Technology development

Export trade guarantees

Technology guarantees

What does a water relationship between Israel and California look like?



California-Israel Global Innovation Partnership Water Team Milestones

July JuneDecAug Sept Oct Nov MarFebJan April May

Financial Innovations Lab – Water

Sustainability–July 13

California water project

development –Dec-Jan

Lab initial findings and recommendations -

October

Carlsbad IDE/Rady

Event tour Sept 2

Financial tools development and

modellingSeptember - November

Project concept development for

initial (pilot) implementation

Work planning and development

August-October 2015

WATEC- Oct 13-15California-Israel Panel –

Oct 12Water

Innovations Work Team Meetings in

CaliforniaDec – Mar 2016

Legislative briefings and

policy development

Oct-Jan

Water-Energy-Food Nexus

Team Meeting Berkeley

Feb/March 2016

Milken Institute Global Conference Panel and Private Briefing Sessions

April 2016

Cleantech networking event showcasing sustainable water

strategies– Oct 14

Legislative visit to Israel Jerusalem - October

Working meeting on Trade Finance Protocol – Oct 11

Water Innovations Work Teams

Meetings in IsraelMarch 2016

Water leadership roundtable at Hoover Institution/Stanford –

Jan 2016

Legislative proposals introduced in

California Jan/Feb 2016

California government water and Agriculture delegation in

Israel – June, 2016

Israel – California Water Business

event, June 29th



The plan.a sustainable water future

HELPING FARMERS

GROW MORE WITH LESS

Naty Barak | Chief Sustainability Officer

Agent of Change: The California-Israel Global Innovation PartnershipMilken Institute Global Conference, May 4, 2016

NETAFIM - 35 YEARS IN THE UNITED STATES Established in 1981 in California

our current offices, distribution and manufacturing facilities are located in Fresno

Precise, reliable and user-friendly solutions for diverse agricultural applications including row crops, orchards and vineyards

From sugar cane in Hawaii to wine grapes in California’s Napa Valley and from cotton in Texas to citrus trees in Florida, drip achieves healthy, profitable harvests

DRIP IRRIGATION – THE ANSWER TO CALIFORNIA’S NEEDS

Simcha Blass who invented drip irrigation was motivated by Israel’s needs Our farm manager at Kibbutz Hatzerim wanted to keep it just for our crops In reality it was meant for California (and for a water starved world…)

In 2014, California Gov. Jerry Brown and Israeli Prime Minister Benjamin Netanyahu launched the California-Israel Global InnovationPartnership, a strategic alliance aimed at meeting such global challenges as water scarcity, agricultural productivity, low-carbon energy alternatives, and improved health, education and cybersecurity. Many of California's and Israel's world-class assets are involved, including research parks, technology incubators, universities and laboratories. The goal is to build public policies, create novel business models and develop innovative financing to help deploy solutions to the challenges facing these two dynamic, technology-driven economies. This panel of business, scientific and government leaders will report on the progress to date as well as some of the partnership's ideas for fueling economic growth, raising productivity and reducing poverty and inequality.

Agriculture is largest user of water resources

Drip has been tremendously adopted in California in high value crops (almonds, nuts, wine grapes)

Drip hasn’t been adopted in commodity crops (alfalfa, corn, rice), which are the largest consumers of water

With the water drought in CA, commodity crops in general, and alfalfa in particular, are a key driver of potential water savings, when using drip

THE CHALLENGE IN CALIFORNIA - SAVE MORE WATER

Optimizes moisture and aeration conditions

Ensures precise quantities of water and nutrients directly to root zone

Reduces release of gases to atmosphere due to imprecise fertilizer usage

Increases yields and enhances productivity per unit of soil and water

Modular design fits smallholder plots

NUTRIGATION™

THE TECHNOLOGY – DRIP IRRIGATION

IRRIGATE THE PLANT, NOT THE SOIL

POTENTIAL CROP #1:ALFALFA ON DRIP IRRIGATION - IT’S POSSIBLE!

• Seth Rossow, farm manager for the last five years

• The alfalfa operation, just south of Merced, CA, provides feed for a dairy near Hanford, CA

• Since he has access to compost from the dairy operation in Hanford, he uses that resource

as much as possible (for Nutrigation)

GOOD PRACTICE: ALFALFA, BERT WILGENBERG FARMS

California’s nearly 2 million dairy cows produce 65

billion pounds of waste

each year

The nitrates in manure can pollute water sources

and pose a serious threat to water quality and the

health of millions of Californians

In the Central Valley, the long-term application of

cow manure to crops has resulted in extensive

groundwater degradation

POTENTIAL CROP #2: FEED - APPLICATION OF DAIRY MANURE VIA SUBSURFACE DRIP IRRIGATION

Prevent millions of pounds of manure from polluting water

sources

Increase water use efficiency to address drought

Enable rapid adoption of drip irrigation by utilizing liquid

manure in drip systems

Improve producer’s ability to manage nutrients applied to the

field

Save thousands of dollars in fertilizer costs

Increase yields

Address environmental challenges

Save millions of gallons of groundwater by using recycled

manure water as a nutrient

PARTNERING WITH CALIFORNIA’S DAIRY INDUSTRY -THIS PROJECT WILL …

GOOD PRACTICE: DEJAGER FARMS, CHOWCHILLA, CA

Developed product specifications for the successful implementation of subsurface drip

irrigation (SDI) in dairy effluent applications

Created management protocols for controlled blending of fresh and effluent water at

agronomic rates

Demonstrated water savings and yield increase

benefits of SDI in the dairy crop mix:

silage/winter wheat

Demonstrated the value of controlled application of

water and effluent/nutrients as a mitigating system

for upcoming groundwater regulation on the dairy industry

POTENTIAL CROP #3: RICE

California rice is primarily grown in the

Sacramento Valley on laser-leveled, flood

irrigation fields

On average, rice requires 5.1 feet of water applied

per growing season - very water intensive

Netafim is installing subsurface drip irrigation on

42 acres of conventional rice at Lundberg Family

Farms, Richvale, CA

We expect to see efficiencies in:

• Water and power savings

• Reduced tail water run off

• Yield increases

THANK YOU

Healthcare is in the midst of

a disruptive transformation

1.FINANCIAL PRESSURE

2.FROM PATIENT TO CONSUMER

3.THE TECHNOLOGY AS ENABLER

DISRUPTIVE FORCES

As A Result,

Everyone Is Making His Move

The players are moving all across the

value chain

Pharma

commodity?

The value chain itself is also changing

New players, providing new front door to

healthcare, are aiming to take a bite

Tech entrepreneurs fueled by VCs are

growing quickly

Who would be the new

We need to look from the future back

How?

Closer to the patient

Where?

We Understand We need To Move

How are we coping with

the upcoming change?

We provide the world’s

largest medicine cabinet

We are maximizing our assets

1,000 molecules

35,000 products

Medical devices

We are present in more

than 100 markets

We have a large global footprint

We put our medicines in

the hands of 250 million patients every day

1 out of 6prescriptions in

the UK


the US


Germany

We started a journey

to understand our patients,

connect with them

and provide them with

more than just a pill

June2015Jun 2015

Aug 2015

IN JUST 4 MONTHS!!!

What are we offering Jonathan for

his asthma?BUT…Patient and Physician cannot be sure that:• The dose was taken• The dose was fully

inhaled• # doses left in the

tank

Easy to use smart inhalerBreathactivated

Opening cap-prepares a dose

But still… Doctors cannot• Track treatment progress • Provide feedback

to patients

Gecko’s smart e-CAPAutomatic

track & record of medication usage

Provides feedback to the patient

Encourages adherence by setting goals

BUT what else can we do

with all the collected data?

IBM Watson’s Big Data Algorithm

• Collects data from multiple sources

• Analyzes data • Provides preventative

alert to patient

Our journey is moving forward

We continue to explore additional solutions for our patients

Oral tablets

What are we offering Jill and her

multiple chronic diseases?

BUT…For a patient taking 8-10 different pills a day:• It is easy to forget a pill• Mixing pills can be dangerous• Interactions with the doctor are

inconvenient

Drug-Drug Interactions management

tool

Oral tablets

BUT…How can we enhancepatient adherence?

Multi-functional smart pill dispenser

Oral tablets

BUT… What if the patient is still

having trouble adhering to treatment?

Dispenser pictures are taken from the public domain

First-in-class automatic implanted

dispenser

Oral tablets

• Each implant contains 100's of

micro-reservoirs

• Release each dose at precise

times

• Controlled via wireless remote or

can be programmed in advance.

BUT…what if the patient needs to see a doctor urgently?

24/7 virtual doctor consultation

Oraltablets

Virtual doctor visit

We are always searching for more…

We continue to search for additional solutions for our patients

Oral tablets

We are hoping to leverage the

California-Israel innovation agreement

for creating additional partnerships

to explore for the game changing solution

World Bank Analytical and Advisory

Assistance (AAA) Program

China: Addressing Water Scarcity

Background Paper No. 3

Water Resources Management in an AridEnvironmentThe Case of Israel

__________________________________________________________________________July 2006Environment and Social DevelopmentEast Asia and Pacific RegionThe World Bank

Mark Gold, D.Env. – UCLA Associate Vice Chancellor

Pinch hitting for Felicia Marcus

Chair, State Water Resources Control Board

S T A T E W A T E R R E S O U R C E S C O N T R O L B O A R D

R E G I O N A L W A T E R Q U A L I T Y C O N T R O L B O A R D S

California water is complicated

Precipitation vs. Population

Feast or Famine

--Colorado River too --

Major Water Projects

Federal – Central Valley Project (CVP)

State – State Water Project (SWP)

Local – Many other projects throughout state, including Colorado River system, Hetch Hetchy, EBMUD, Owens Valley

Source: Water Environment Foundation

Welcome to California on Climate Change

March 27, 2010 March 29, 2015Source: NASA

The New Normal?

85

Precipitation, snowpack at historically low levels

Image Credit: http://www.tucsonnewsnow.com/story/28705289/western-us-drought-having-big-impact-on-much-needed-spring-snowmelt, Yosemite Conservancy

http://www.tucsonnewsnow.com/story/28705289/western-us-drought-having-big-impact-on-much-needed-spring-snowmelt

California Water Action Plan

Make Conservation a California Way of Life Increase Regional Self-Reliance and Integrated Water

Management Across All Levels of Government Achieve the Co-Equal Goals for the Delta Protect and Restore Important Ecosystems Manage and Prepare for Dry Periods Expand Water Storage Capacity and Improve

Groundwater Management Provide Safe Water for All Communities Increase Flood Protection Increase Operational and Regulatory Efficiency Identify Sustainable and Integrated Financing

Opportunities

Water Bond 2014

Water Quality, Supply, and Infrastructure Improvement Act of 2014 – $7.545B

Hard fought, but near unanimous vote at end

Real mix of “all of the above” Down-payment on full needs, but a lot that is good, visible, and paves way for next round

Learning from Israel Efficiency first: Urban and Agriculture

How to blend different reuse options: recycled water, stormwater capture, desal

Recognizing and communicating the shared challenges and shared solutions, including behavioral

Role of technological innovation

Importance of data

Israel-California MOU MOUWork together to find opportunities to advance the ball, e.g.,

Developing irrigation technology clearinghouse with partners including Milken to connect our agricultural sector with the innovation that we need.

Work on coming up with financing mechanisms, education/R&D plans

Hosted several delegations of Israeli water experts.

Most important—developing relationships and convening. Inspiration and connection.

90

GOAL: 100% renewable energy, 100% locally sourced water, & enhanced ecosystem health by 2050

UCLA Grand Challenge: Sustainable LA

Turf Replacement – A $500 Million+ Social Engineering Conservation Experiment in Southern California

Wastewater Treatment Plant of the Future (WWTPoF)

Energy positive

Fresh water for Indirect Potable

Reuse/Direct PR

Reduce ocean discharge

Source of nutrients

Profit center for cities

V24b-finalhttp://grandchallenges.ucla.edu

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