Calpers unit steams into U.S. port with $9 bln offer

(This story is part of a special Reuters series on infrastructure)

By Jim Christie

SAN FRANCISCO, April 3 (Reuters) - The largest U.S. public pension fund, Calpers, is considering a nearly $9 billion investment in the state-owned Port of Virginia, underscoring its growing interest in infrastructure and states' need for public works dollars amid the economic slump.

The initiative at the $174 billion California Public Employees' Retirement System, best known as Calpers, comes as investors study how to profit from infrastructure -- and a push in Washington to stimulate the national economy with public works that cash-strapped states and local governments, including port authorities, may not have the means to launch.

U.S. ports may especially need to turn to investors to back capital improvements amid a difficult market for issuing bonds, a traditional funding source for port projects.

"In these uncertain financial times ... you aren't going to be able to do it alone," said Aaron Ellis, a spokesman for the American Association of Port Authorities.

Investors may see ports as a way to ride out an economic recovery. Trade may be down because of the recession, but cargo volumes through seaports have been rising over the long term and are sure to rebound, Ellis said.

"This country is not going to stop trading," Ellis added.

Calpers spokesman Clark McKinley declined to comment on the seaport effort and the strategy behind it, but said the fund is keen on infrastructure. "We're exploring, assessing, talking to other players in the market," he said on Thursday.

LONG-HAUL REVENUES

Other pension funds are interested as well because infrastructure assets can outlive their retirees. The Dallas Police & Fire Pension System, for instance, this year became the first U.S. public pension fund to take direct equity stakes in an infrastructure public-private partnership.

The fund joined investor teams led by Spain's Cintra Concesiones de Infraestructuras de Transporte S.A. CCIT.MC that recently won initial approvals to lease two Texas freeways. The deals include rebuilding lanes, adding toll lanes and managing the roads for 52 years.

Calpers' seaport effort would also be a public-private tie-up, proposed by CenterPoint Properties, which was acquired in 2006 by CalEast Global Logistics, a decade-old joint venture between Calpers and LaSalle Investment Management, a global real estate investment manager and Jones Lang LaSalle Inc (JLL.N) subsidiary.

CenterPoint has offered the state of Virginia $8.9 billion over the life of a 60-year concession that would allow it to lease and modernize the Port of Virginia, the third largest seaport on the East Coast. The unsolicited proposal has triggered a 120-day window during which competing offers may be made.

"I would expect based on the level of interest expressed so far there will be competing proposals," said John Milliken, chairman of the board of commissioners of the Virginia Port Authority, which ultimately will decide the successful bid.

CenterPoint was unavailable to comment but its statement on its offer speaks to high expectations for the port. "We're located in the middle of the Atlantic seaboard and we're able to handle the largest ships now in use and that are on drawing boards," Milliken noted. "That can't be said of many ports."

SWEETENING THE OFFER

CenterPoint also offered $500 million upfront to pay down port debt -- an offer similar to one in a port public-private tie-up in Sacramento, California-based Calpers' backyard.

Last month the Port of Oakland, California approved a 50-year deal worth about $700 million in current dollars to lease berths to Ports America Outer Harbor Terminal LLC, which is affiliated with infrastructure fund Highstar Capital.

The deal also gives the U.S. West Coast's third-busiest container seaport $60 million upfront to retire port revenue bonds next January.

Upfront cash would go a long way to advance public-private port tie-ups amid uncertainty in the municipal debt market, said Cheryl Taylor, deputy director for finance and administration at the Port of Stockton, California.

Credit rating agencies, concerned about the cost of port improvements, would welcome the paying off of debt, Taylor said, adding that "I'd love it if someone came in today and said, 'Here's a check.'"

(Editing by Chizu Nomiyama)