Q4 2019 Earnings Call
Good day, ladies and gentlemen, and welcome to Brookfield infrastructure Partners fourth quarter 2019 conference call. At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
If anyone should require operator assistance. Please press Star then zero on your Touchtone telephone.
As a reminder, this call may be recorded.
I would now like to introduce your host for todays conference well. This slow you may begin.
Thank you operator and good morning.
Thank you all for joining us for Brookfield infrastructure partners fourth quarter earnings conference call for 29 team.
On the call today's share many of our Chief Financial Officer, Sam Pollock, Our Chief Executive Officer.
We also have to Condor Rashid senior Vice President investments and Brookfield infrastructure group, joining us as the guest degree this quarter as well it depends on our Chief operating officer.
Following their remarks, we look forward to taking your questions and comments.
At this time I'd like to remind you that in responding to questions and <unk> talking about our growth initiative and our financial and operating performance. We may make forward looking statements. These statements are subject to known and unknown risks and future results may differ materially for further information on known best Doctors I would encourage you to review our annual report on form 20-F.
Which is available on our website.
I I turn the call over to be here.
Thank you Melissa and good morning, everyone.
I'm pleased this morning to discuss our results of operations and to also provide a quick update on our balance sheet and funding plan.
After my remarks, I'll hand, it off to see Condor.
Who'll provide a spotlight on our approach to value creation and explain to you all the various things we're doing it and her care.
Sam will finish off the call with a discussion of our recent strategic initiatives and.
Provide an outlook for the year ahead.
2019 was a great year for Brookfield infrastructure.
Financial results and operating performance were strong.
Funds from operations or F., a FFO totaled 1.3 billion or $3.40 on a per unit basis, and not represented an 11% increase on a comparable basis and 9% increase on a total basis over 2018.
Operating conditions during the year were favorable in all regions, enabling us to execute on our full cycle investment strategy of acquiring high quality assets, creating value through our active asset management programs and recycling capital on attractive basis.
The capital markets were also strong, allowing us to raise equity to fund growth and to secure debt at historically low interest rates.
Before I discuss our results for the various operating segments I'm pleased to share with you that as a result to for a strong financial and operating performance robust liquidity position and positive outlook for the business. Our board of directors approved an increase to our quarterly distribution of 7%.
<unk> 0.5375 cents per unit.
Starting in March of 2020 or $2.15 on an annualized basis.
This increase is at the midpoint of our fight to 9% long term target and represents the 11th consecutive year of distribution increases for our company.
Now onto our results and as I noted earlier in my remarks results for 2019 reflected solid organic growth and execution of for acid rotation program, our AFFO benefited from organic growth of 9% and contributions from new investments.
Our utility segment contributed four 577 million in 2019.
This is consistent with the prior year, which can included the contribution of approximately 25 million from Chile, and electricity transmission business sold in 2018.
The segment generated organic growth of 8%, reflecting inflation indexation and 300 million of capital Commission into our rate base.
Results also benefited from the initial contribution of the North American regulated natural gas transmission business acquired in October.
These contributions were partially offset by the weakening of foreign currencies, which lowered our results in this segment by 14 million.
Our UK regulated distribution business delivered exceptional results in 2019 despite.
The uncertainties surrounding Brexit.
Results were driven by the installation of utility connections that approximately 200000, new homes, the highest level of activity. During her tenure ownership as well as the sale of 300000, new connections and level surpassed only by the record so sales achieved last year.
These results bring our current order book to an all time high of 1.15 million connections.
Our fiber offering performed well ahead of expectations with a 36% increase in sales in part due to the successful rollout of our new fiber offering was recently created as a result for our partnership with Sky fiber broadband.
These positive trends combined with capital Commission into rate base contributed to a 10% increase in AFFO relative to the prior year.
In October we completed the acquisition of two operating natural gas transmission assets in North America, and our integration efforts are progressing well.
These regulated assets operate under take or peg arrangement with an investment grade counterparty that extends through 2041.
Our transport segment generated FFO of 530 million compared to 518 million in the prior year.
Organic growth of 5% was driven by GDP linked volume increases and higher tariffs across most of our operations.
The segment benefited from strong agricultural volumes in Australia, and Brazil, and higher traffic and tariffs of three and 4% respectively across our global toll road portfolio.
FFO from our board operations exceeded prior year levels by 25%, excluding the contribution from our European Port Operation, which was sold in mid 2019.
This increase primarily reflects growth in container volumes at our UK operations. In addition to higher tariffs that are Australian port.
In 2019, our UK Board Operation Commission, approximately 20 million pounds of capital.
Capital projects for warehouse development automation initiatives and capacity expansion at our container terminal in response to growing customer needs.
The business is on track to increase its EBITDA by over 50% in the next two to three years.
This increase is the result of contributions from recently secured contracts.
Hi profitability growth from captive customers and new revenues related to the commissioning of the world's largest biomass power station.
FFO from our energy segment. It was 412 million an increase of 53% over the prior year.
This significant increase is primarily attributable to the 1.2 billion of capital deployed to acquire to North American businesses in late 2018, and a natural gas pipeline in India in the first quarter of 2019.
Results also benefited from organic growth of 16%, which was attributable to higher volumes at our North American natural gas pipeline business and new customer connections at our distributed energy businesses in North America.
FFO from our data infrastructure segments totaled 136 million in 2019, an increase of over 75% relative to 2018.
This step change in AFFO was the result of contributions related to capital deployed at our French telecommunication business as well as for new investments, which enabled us to establish our global data infrastructure franchise.
These acquisitions includes three data storage operations in the U.S., Brazil, and Australia as well as a data distribution business in New Zealand.
Our French telecommunication business has been supporting customers with several large scale organic growth projects.
Through its built to suit tower program to business has strengthened its relationships with major mobile network operators by assisting them in meeting their national coverage requirements.
We commissioned 245 towers in 2019 and expect to have a total of approximately a thousand built to suit towers operation in the first half of 2020.
Additionally, our fiber to the home deployment is ahead of underwriting with almost 35% of the portfolio now built or under construction and the first network scheduled to be completed in the first quarter of 2020.
So that concludes our report on financial and operating results for the year, but before I conclude my remarks, I'll briefly touch on our current balance sheet in funding plans.
The most noteworthy acquisition financing completed this quarter was the 2.6 billion a financing institutional term loan market.
We did to fund the acquisition of our North American rail business.
This debt issuance was heavily oversubscribed as credit investors continue to seek high quality names that are financed that at prudent levels.
We achieved strong pricing and terms that are consistent with high quality investment grade issuers, completing a separate seven year financing with a coupon of LIBOR plus 200 basis points.
We also capitalize on favorable markets the complete several important financings in our existing businesses.
First we raised approximately 2 billion Canadian dollars that our north American residential energy infrastructure operation to refinance existing higher cost debt in that business.
I would stick under will touch more on in his remarks. In addition to refinancing our debt at our UK port operation, which allowed for a $110 million of capital to be returned to bet. In addition to reducing our average annual financing cost by 3.5%.
Despite a year of outsized capital deployment, our balance sheet remains healthy with $3 billion of total liquidity in place at year end, and almost 2 billion with 2.2 billion of that residing at the corporate level.
We're also making good progress on the next phase of our capital recycling program completing three asset sales that we announced last quarter.
First the sale of our Australian District energy and distribution business that we closed in November that generated net proceeds to bip of 280 million second we closed the divestment if our regulated distribution operation, Colombia with proceeds of 100 million to bet and finally, we completed the sale for further 33% entry.
And our Chilean toll road business in early February for 170 million.
Furthermore, during the fourth quarter, we signed the binding agreement to sell our North American electricity transmission operation for for proceeds of approximately $60 million to bet.
We established this business over a decade ago and as part of as part of fate government led program to support renewable power generation in Texas.
Since commissioning the transmission system in 2014, the company has been a best in class operator, with an extensive track record of stable distributions.
Given the de risk mature state of the business and substantial investor demand for North American regulated assets. We viewed this as an opportune time for us to sell.
The transaction is expected to close in mid 2020, and generate an IR and a multiple of capital approximately 23, and three if 23% and three and a half times respectively.
So with that thank you for your starting this morning, and I'll turn the call over its Connor.
Thank you for here and good morning, everyone. My name is to garner issue that I'm pleased to joint todays call to provide a spotlight on or investment strategy and how we create value in our businesses.
Our investment strategy consists of three core components number one you by high quality infrastructure assets at attractive entry points to we employ an active asset management approach and three you monetize assets that at their full value potential and start over again by investing into higher returning opportunities.
Our deep operating expertise is central to the second component offer strategy during each Europe ownership, but particularly in the early years. After we acquire business, we identify and implement initiatives that increase the value of that investment.
And this value is created through various means including revenue growth margin improvement Ed capital structure optimization.
To bringer investment strategy to life and to showcase some other ways, we create value in our businesses. We thought it would be interesting to take you through a case study on entered care, our north American residential energy infrastructure business.
Since the acquisition of the business in late 2018, we had been focused on several initiatives that highlight our active approach to asset management quick recap I don't care is a leading provider of essential residential energy infrastructure, such as water heaters furnaces air conditioning or HVAC systems and other in home services.
The business operates in a sector and region that we understand well in this business shares that number of similar features with our UK regulated distribution business.
At the time if acquisition, we were attracted to enter gears high quality annuity like cash flows established market position in Canada and significant growth potential in the U.S.
Since acquisition the business has been performing well and we have been focused on two key value creation leavers number one capital structure optimization and two sales growth in the us market.
To elaborate further on the capital structure optimization, Paul since we acquired the business. It was their belief that endocutters capital structure was not optivo given the long term contracted cash flow profile of the underlying business.
And our care has over 1 billion long term rental contracts with low rates of attrition consistent revealed price growth and high customer renewal rates.
We examined available financing structures that ultimately concluded that entered cares Canadian rental business was uniquely positioned for securitization financing.
So in December of last year, we recapitalized the business through the issuance of approximately $2 billion of primarily AAA rated securitized debt.
This is a marquee financing as it is the first of its kind for this type of business in the Canadian market.
The proceeds were used in part due to redeem $1.4 billion of public bonds and term loans.
We reduced the cost of debt in the business by over 50 basis points, while substantially improving the credit rating of the assets from Triple B low due primarily Tripoli.
Furthermore, prospectively the securitization facility also provides a mechanism to efficiently fund organic growth and future tuck in acquisitions, thereby reducing the need to inject capital to fund this growth.
Overall, this financing was very accretive to our underwriting and improves the competitiveness of the business.
Now moving onto the second value creation lever to facilitate rental growth in the U.S.. We are focused on implementing a dealer adoption model that will complement the tuck in acquisition and sales to rental conversion strategy is currently underway.
While rental conversions are well ahead of plan, reaching over 40% in the fourth quarter. We believe is an accelerated this growth further by offering a partnership model to expect dealers in markets, where we do not have presence today.
In addition to the dealer model, we have various other initiatives underway with Brookfield managed businesses to further enhance growth.
Earlier this year, we launched a pilot program with a utility Texas to offer residential infrastructure products to a large subset of this utilities clients.
The pilot has been well received and are working on the long term rollout of the program.
And our care also recently partnered with there can you Didnt district energy business to provide to participate in housing development project, representing an opportunity to offer services to a community scale district energy system.
With the Canadian securitization now complete and additional growth strategies underway, which will be financed in a much more accretive manner. We are well positioned to expect equity returns in the high teens and potentially higher exceeding our conservative it's good underwriting for this business.
And with that I will now turn the call over to set.
Thank you Scott under.
And good morning, everyone.
For my remarks today I'll provide an update on some recent strategic initiatives and give an outlook for the business.
The fourth quarter was very active from an investment perspective.
In December we expanded our data infrastructure segment committing nearly $1 billion in three separate transactions.
This includes the previously announced Indian Telecom towers business as well as two new investments, which I'll touch on now.
In late December we agreed to acquire 100% of Cincinnati Bell or what will probably referred to as CVB going forward and that take private transaction.
Which could result in an investment of up to $480 million per bit.
CBB is a leading fiber to the home business in the United States are being approximately 1.3 million residential and business customers in greater Cincinnati and Hawaii.
This is an attractive business with substantial growth prospects.
The transaction is subject to shareholder and regulatory approvals, which if if obtained would likely result in the closing of this transaction in late 2020.
Around the same time, we completed the acquisition of UK based independent wireless infrastructure company investing $140 million.
It is comprised of over 2000 fully contracted operating towers and distributed antenna systems.
The business the business is well positioned to capture expected network growth in the UK and has significant potential to leverage Brookfields real estate holdings to expand into other jurisdictions inside and outside of the UK.
At year end, we closed the previously announced acquisition of Janseen, Wyoming for $500 million net debt and the federally regulated assets of our western Canadian natural gas gathering and processing operation for $250 million.
On our call last quarter I report on our effort to launch Brookfield infrastructure Corporation or Bip see.
During the quarter, we've made advancements in information and subject to receipt of regulatory approvals dip expects to complete the special distribution of class a shares of Pepsi to Bip unit holders in the first half of 2020.
As a reminder.
We will provide investors with an alternative way to gain exposure to our global infrastructure business.
We believe a corporate entity will be attracted to many investors, particularly in the United States in Europe, who have historically been averse to our partnership structure.
Fifth sees class a shares will be structured with the intention of being economically equivalent to bit LP units, including by having the right to receive identical distributions.
Fiftys class a shares will also be exchangeable into LP units or the cash equivalent epilepsies discretion at any time as well as provide simplified tax reporting and other tax advantages.
So now changed your actions and provide a brief outlook of the year ahead and the current economic environment.
We've entered 2020 with both positive and negative development in regard to global growth.
The signing of the phase one of the trade deal between the United States in China remove some of the impediments to global growth.
Unfortunately, the outbreak of the Corona virus has significantly disrupted economic activity in China, which will have global implications.
Trying to be positive about that if the financial effects from this outbreak are similar to those fell during the Sars outbreak in 2003.
We expect that the slowdown will be short lived.
From a bit perspective, we do not anticipate any material financial impact from the current advise situation I remain optimistic regarding that business outlook for the regions we operate in.
We did not have any operations in China and potential disruption to commodity supply chains should not have any significant impact on our overall activity.
Looking beyond these current headlines our business is well positioned for continued growth and our outlook remains positive.
We anticipate delivered another year of organic growth at the high end of our 6% to 9% target range.
We're focused on executing the next phase of our capital recycling program and we are on track to raise at further $1.5 billion.
We plan to deploy this capital into higher yielding new investments, which should provide for another period of outsized FFO growth.
While quarter results. This year may be impacted by the timing of new investments in sales, we anticipate that our run rate exit FFO per unit in 2020 will be approximately 12% to 15% higher than current levels.
Now this concludes our remarks for today's call and so I'll pass it back to the operator, and we'll be pleased to take some questions.
Thank you.
Ladies and gentlemen, if you have a question at this time please press the star than the one key on your Touchtone telephone.
Your question has been answered we wish we move yourself from the Q. Please press the pound key.
For questions.
Our first question comes from Cherilyn Radbourne with TD Securities. Your line is now open.
Thanks, very much and good morning.
Wanted to ask a question on the Indian Telecom acquisition.
Thank you will sounds like it has a lot of upside potential based on co location as well as the tower build out program. Maybe you can just give us a sense of how quickly that growth might progress.
Hi share on maybe.
Ill touch on that and.
And then.
No I might turn over the bad been actually just got back from India and he can maybe give you. Some further comments as well as pocket, but in general but.
We.
Yes, we're very excited by the opportunity.
Obviously, just the fact that we bought.
A business of that scale from the dominant provider in that market gives us an incredible position. It's also brand new infrastructure and so it's highly coveted by the other operators in that market as far as them getting access to it we've already received inbounds from some there.
Other operators Theres two other major players in the market and our expectation is that we.
Could lease up.
40 upwards of 40% of the the tower base.
In relatively short order, so that that would the exciting it's not done yet but.
The first we have even closed yet so the fact that we already have groups approaching us and looking to come on is fantastic. So.
The the short answer is very optimistic about the leasing up the additional capacity and I'll bet, you want to add anything and maybe just give a sense of Indian general.
Yes sure Sim.
Shirley.
Yes, So I was in India, just last week with the team talking a lot about this and as Sam said, so far it's going very well.
Maybe two additional comments first of all this is a very modern network of towers. These were all very recently built and it truly is a national network. So it's attractive to some of the other EMEA knows because of the location in rural areas. So.
As Sam mentioned, we've had good discussion so far with the other EMEA knows and expect take up in the only other comment I'll make which probably is obvious is just the market opportunities tremendous in India. This is a massive market and growing.
Very rapidly and the penetration rates of of cell phone usage.
Definitely provides a lot of sort of wind at the back in the coming years for this modern portfolio to get.
Fully utilized by all the Eminem, so we're pretty positive so far.
Great well that's good color.
Just moving on to enter care. The letter indicates that the new securitization facility provides a mechanism that will reduce the need to inject capital to fund growth going forward. Maybe you can just elaborate on that a little bit more.
Yes, sure sure like and I can take this while this is together.
Yes look so previously.
The financing in place was public bonds and term loans.
And the agriculture business is.
Is is is growing fast both in Canada as well as as the us and the challenge previously was.
We would almost have to there was a little bit of for time lag between when the contracts for source worse is when they were financed but now with the securitization facility in place we kit almost immediately securitize the contracts after they are sourced soul.
I think Ed I think thats.
That's.
Yes, yes, the only thing you any I'd add to that is.
Previously when we funded the growth through our Capex line and meant that the funding was limited based on the amount of the capital invested whereas now with a securitization.
The amount of capital we can obtain from.
[music].
The investment is based off the value of the contract and so that allows us to finance.
Much more of the capital growth than previously, which was just based off capital invested.
Okay got it.
Got it that's my two thank you.
Our next question comes from Robert Kwan with RBC capital markets. Your line is now open.
Great Good morning.
Just start with that see just wondering if you have any updates on initiatives to stem conversions back to the LP units and just kind of promote the uptake of the common shares.
Hey, Robert it's a bit here. So so it's still early days on that front, we are exploring.
A few different alternatives, but the main priority.
As of today is just dealing with.
Sort of.
The last pieces of the various regulator and stock exchange.
Sort of query queries that we've been getting in and all is going well on that front just as an update.
I like to have that done and listed by March 30, Onest or shortly thereafter, and then we will sort of explore.
Different options to do what you just said, but at this point is it's just early days to talk about that.
Got it.
If you just look at this kind of more of an M&A topic looking at this quarter's letter it seems to be focused a lot more on executing the announced acquisitions a lot of organic growth upside in some of the financial restructuring and optimizing the capital structures.
With prior quarters alluding a lot more to M&A Im just wondering kind of what's that outlook in specifically on Brazil, using the currency is accrued measure of country. Sender then just wondering how youre thinking about any potential.
Acquisitions down there given your prior experience.
Hi, Robert maybe I'll tackle tackle that Sam here.
Yeah, I guess just to add to comment on your that the first part of your question.
I know that you should read anything into.
Whether or not you know were that the pipeline is less or more I think the fact that matter as we have.
A lot going on right now and the investment side. It will be closing on large tower deal. We just closed the tower transaction in December which was a quick close.
For for that transaction and the and of course, we have CBB underway. So I'd say there is actually quite a bit going on and all that is a relatively sizable amount of capital.
And the conditions have not changed I think we're seeing lots of good opportunities across the various sectors. So I think.
I wouldn't want you to read anything into.
The letter because I think things are very robust.
As far as.
Brazil.
And.
You commented on the the currency being over reflection of the conditions in the market.
Yes, some of that currency volatility.
Maybe because of.
What's going on in China today, we've seen that with Australia as well the currencies off quite a bit.
Canada has been as badly hit but it has come off a little bit as well.
So we do expect a rebound I think the with the market opportunity in Brazil is very exciting.
Most of what we are looking for down there are additions to our existing platforms.
We have.
Great activity going on in a sense yard datacenter business that businesses.
Exceeded our expectations.
Theres a number of toll road opportunities that are coming to market that will be very interesting for our toll road platform.
And.
The only place where maybe we pull back little bit in that market is on the transmission front electricity transmission, we continue to monitor the various.
Auctions that take place.
The more recent auctions had been very competitive.
And so we've not.
I wouldn't say today that we're optimistic that we will find great value on that front, but what it does mean is what we did buy and what we are investing in is incredibly valuable. So I guess is.
The double edged sword.
And just to finish on that electricity transmission comment does that create opportunities, although recognizing it's pretty short order, though to turn those and put those back out tomorrow.
Yeah I think.
It's not a 2020 initiative, we have a lot of.
Work to do to complete some developments I think will get better value if we can.
Ill have a.
Majority of the lines constructed I think by the end to 2020 or mid 2021, we should be 75% to 80% through our development program at that point.
That could be a very attractive business too to liquidate.
Perfect. Thanks very much.
Thanks.
Our next question comes from Frederic Bastien with Raymond James Your line is now open.
Good morning, Thanks for taking my call.
My first questions on the energy platform you guys had a very robust 2019 from an organic growth perspective.
How do you see volume and connections growth unfolding over the next couple of years.
Venue.
Sure I can I can take that it's been speaking I'm, assuming you're referring overall to our energy operations, mostly north American.
Correct, but a lot of the driving drivers were.
Around us business and the pipeline.
Yes look we have a number of of projects underway the market strong.
And there's a lot of gas that needs to flow to the new LNG terminals on both getting built on the west coast in the Gulf. So we continue to see strong demand we have a number of.
I would characterize it as our US business has a number of projects underway to increase compression then.
Basically create very capital efficient extra capacity on the pipe to meet that new demand and we don't see that.
Well, it's moderated a little bit we do still see some growth potential in the coming years.
Thats helpful, but thats, how I would characterize it yeah, Fred it's it's been here. So so if you're talking just in general, but the energy group.
We didnt have us.
A big increases you noted that had and GPL due to a number of contracts that we were able to win in addition to a couple of projects that we commissioned.
So the backlog there.
Is is pretty thin right, now, but where you'll see a lot of the energy growth.
Happening going forward in the next couple of years will be and you mentioned connections in the or in your question. So so we do expect double digit type growth in district energy. In addition to our North American residential infrastructure business.
And that in total.
We'll be the key driver for the energy operating group going forward.
That's great. Thanks, Thanks for that color.
Next question for Sam.
How confident are you with your ability to further scale up that fits add on to structure business you've been obviously very busy.
You are seeing increased competition.
Right now seeing that with CBB, but would appreciate your view on that.
Broadly speaking.
I Frederic.
Look I would say I'm highly confident.
And what gives me that confidence is the fact that we now have a data franchises each part of the world.
And and we represented in.
Each of the sectors within the AD data infrastructure world that we want to be in so we have fantastic presence in towers.
We have expanded from towers into das systems, which we see lots of growth in.
Yes, we have a number of fiber optic systems and we're continuing to pursue.
Fiber to home projects around the world.
And we obviously have.
A very large presence in data storage with our data center businesses in Asia, North America, and South America. So.
The fact that we have these footprint gives us tremendous deliveries to leverage and I think I continue continue to see is.
For that business going forward.
Thank you.
Thanks.
Our next question comes from Rupert Merer with National Bank Financial your line is open.
Good morning, everyone.
Sam Brookfield recently closed the infrastructure fund for.
20 billion I believe is little larger than what do you were targeting can you talk about how that impacts the outlook for deal flow with that than for example.
You see any any changes in your target return hurdles or any changes in bips pro rata ownership stake in future deals.
I refer to the.
I guess just dealing first with are there any changes to our approach or returns are in like that no. The there won't be any change in our approach. We are still seeking returns in the 12, 50% range.
And the sector and.
Geographic targets are all the same.
So there's no change in that regard.
Yeah, I think the.
The benefit and this is something we've talked about on on previous calls is.
Our ability to.
Leverage this additional institutional capital to build our out our franchise is incredible.
Enables us to pursue.
Large scale more complicated transactions.
And do it on a basis, where we don't necessarily have to club up or team up with others, which adds complexity to transaction, we can basically pursue them on our own.
Or alongside the co investment capital of our institutional partners and that that gives us one of the rarest franchises in the industry and so.
I guess all I would say in conclusion is is the fact that we had this $20 billion of capital plus those relationships.
Those institutional investors.
Yes, just makes our franchise that much better.
And your pro rata ownership stake.
Going to remain constant going forward.
Yes, the same is still 25%.
Hi, Thanks, and secondly, a quick one here you talked about some refinancings in the quarter and there's some discussion in the statements about the refinancing at a UK port the 350 basis point production in your your interest costs are there any other opportunities for refinancing cross.
Our asset base.
Hi referred.
I think those at the big ones.
Although there's a couple of.
Others that we might be pursuing better smaller in nature and the big question, So and which could be the one thats most material could be another potential up financing at our Brazilian.
Transmission business, our NTS a similar to the one we did a couple of years ago that would be the big one if we were able to do something on that front or if it's attractive but aside from that one the other ones were pursuing our smaller in terms of quantum.
Great. Thanks, I'll leave it there.
Thanks.
Our next question comes from the line of Robert Catellier with JBC capital markets. Your line is now open.
Hi, Good morning, everybody just wondered just started if you can be a little bit more explicit on one impacts are expecting from the Corona virus. Some brooks it when you set the 2025.
FFO per unit.
Right.
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Hi, Robert It's a Sam maybe I'll I'll talk to us.
So just to be clear today.
We're not.
Forecasting any impact from the virus on our on our operations.
So I don't think the number that we've that I gave you are that peers given in the past.
Reflects any adjustments because of that.
And you know we've done better NIE canvassing of all our operations very recently.
To assess any potential impacts on safety, where people or just the operations and yelp via our view today, obviously, we'll watch to see how things unfold.
Is that the the impact from the slowdown in China.
We will be relatively modest.
Yes.
Yes, we do expect to see some.
Implications, but most of those should be timing differences.
Yes.
I think there could be some delayed shipments a some shifts that don't come as full to some for ports in Australia or the west coast of the us on the could be some potential delays in shipments of iron ore coal or something.
From some of our Australian operations, but again, those should not be permanent in nature and should be caught up so.
Today, and this is subject to revision of of health, depending on how things unfold, obviously, but today, we just don't see a much of an impact.
And Brexit.
And Brexit.
Good question the.
Yes, I think as we reported in the past when we didnt see much.
Impact on operations I would say from a high level.
Yes, there was.
There was probably some delays in investments from a number of people in the country.
And that might have had some.
Impact on.
PD ports and and our UK business at the end of last year, there relatively modest I think today with the uncertainty removed yeah. We think that there will be renewed investments in the UK and so.
There are in fact could be a bit of a bump in that regard.
Longer term looking out 510 20 years now it's hard to say.
What the impact will be but.
In the short run if anything we may see a positive impact of modest though.
Okay. That's a that's helpful color and then just there was actually going to ask the same portion is rupert on the financing.
But.
A different angle.
This is maybe you can just.
Clarify.
Now what the cost savings were on the GW, our refinancing and then more broadly.
It sounds like there's a lot more equity to be harvested from refinancing.
But I'm wondering if there's if you're going after term by taking advantages will rates and extending term.
And then just on the competition have you seen any irrational behavior from a competition.
Where are you suspect there are factoring in or underwriting.
A much lower rates.
Interest rates and their approach.
Ill, maybe I'll do the last one first and then be here can think about the your question on the refinancings, but.
I guess.
It's always tough to tell I mean competition has been stiff for the last number of years.
Yes, I'm not privy to what people are our underwriting.
But I guess as a general comments.
Europe remains the most competitive market because of.
Zero to negative rates and.
Yes, I have to assume that that's low rates is is a factor in those higher valuations.
But yes, we still are able to find opportunities here and there in the.
I'm sure it at some point things will.
Normalized.
So there may be overdue yep.
Hey, Robert Sarver, GW I think.
Im not sure if you're referring to the existing debt the business had.
In the past that down maybe I can get back to you on but all I I'll I would say is that and I made I think this coming that our call last quarter that the financing that we did was about 75% sorry 75.
Basis points ahead of our underwriting.
Assumptions, so that was a big positive.
For us.
And.
With respect to terming out our debt, we've been actually doing a lot of that over the past.
A couple of years, if you look at our maturity profile over the next two years, it's very very modest so.
Naturally we will be extending.
Term.
Albeit in the Grand scheme of things that may not move the needle all that much just because we've been dealing with the bigger stuff over the last couple of years and whats coming down.
Next couple of years as smaller in nature, so hopefully that answers.
Thank you very much.
Our next question comes from Devon, Dodge with BMO capital markets. Your line is now open.
Good morning, I, just wanted to start with the question on FX.
Appears that you're hedged FX rate should be a positive in the first half, but this benefit made.
Fade away as you get into deeper into 2020, just wondering how you're thinking about.
Effects and its impact on your results over the next 12 to 18 months, assuming the re ice stays.
Near current levels.
Hey, Devon now.
Ill attempt Alan.
It's actually I think.
Office it.
Because in Q1.
Our Australian dollar hedge rate just due to timing of when we put those contracts in place.
Is actually lower than Q1, 2019, but then picks up from Q2 to Q4.
So on a holistic basis I do expect Q1 to be lower Q1, two and train to be clear were lower than Q1 19, but for the full 2020 year I think it's up our hedge rates are about 3% to 4% higher than 2000.
Isn't 19 as a whole so for the full year, it's going to be a positive, albeit Q1 is lower and.
And and we're hedged.
Just on the second part of your question if you're looking ahead for 18 months or so we're hedged for all of those currencies, except for the reality the rupee up until.
Q3, 2021, and I think 2021 compared to 20 twentys virtually flat.
Okay. That's helpful.
US midstream a this has been a targeted sector.
For a while now.
Stock prices for.
A lot of the remaining MLP is continue to be under a lot of pressure just wondering if you're.
You'll see this as an attractive sector and if you're optimistic you'll have a chance to deploy capital over the next call. It one to two years.
Yes, Hi, Devin.
Yes again in the short answer is yes, and yes, yes, we still its a sector. We think it's critical to the economy and we do see.
Ah interesting opportunities, particularly relative to past years.
When the MLP market was much stronger. This today, yes, we do see lots of companies whether its a.
Take privates or just structured transactions, where public companies need private capital to assist them. So.
I I think there will be interesting opportunities in your head.
Alright, thank you.
Our next question comes from Andrew Pesky with Credit Suisse. Your line is now open.
Thank you good morning, I'd first Chris is probably for the here and it's just on the capital recycling program and maybe just a point of clarity what assets remain on the balance sheet versus the interest would be a positive Bam funds.
Hey, good morning, Andrew I.
I think we're left with three assets.
That are held directly on SAP balance sheet and that would be our UK.
Connections business.
Our north American gas transmission business.
Or gas pipeline business and GPL.
And the third one being.
Our.
Western Australia.
Rail business.
Okay, that's great.
Thank you for that and then maybe just a follow up is the interplay between the Super Core Fund Bam has and that was used for Cove point.
And then say before and then just Pip itself, how do how do you envision that working together and how is the delineated.
I want that Andrew.
But invests in them a minimum of 25% of 54 transactions, which is our.
It's called our global.
Hi, Chip fund and value add fun, the one that targets returns in the 12% to 15% range.
And I'd say.
25, plus it's obviously minimum 25% plus any co investments or additional capital wants to do.
Due in large transactions and then.
Super Core fund is an open ended fund its targeting returns in the say the 8% to 9% range.
Fifth is not an investor in that fund.
And while there's opportunities to invest alongside the fund if there's significant co investment opportunities.
Given the return threshold.
It's highly unlikely that we would do that the Pip is seeking returns.
This the same as the flagship fund.
That's very helpful. And then maybe just a follow up is there a prospect for certain assets once they reach a certain valuation point or maturity level from stabilization of cash flows.
To effectively how bad assets transfer from before one of the funds into the Super core on a longer term basis.
No I think the.
I think we decided that the.
That falls into life is too short camp and.
We will sell assets to third parties.
Okay. That's great. Thank you.
Our next question comes from Rob help with Scotiabank. Your line is now open.
Good morning, just quick question on the on the kind of 2020 exit guidance of told a 15% higher than current levels.
Off of what bases that has got a kind of annualized Q1, 2020 base or including Indian telecoms and does that and foresee additional unsecured investments right now.
Hey, Robert SAB here, maybe I'll tackle that one so so yes, what were alluding to there is.
That are hopefully by Q4 2020, our results on a per unit basis will be 12% to 15% higher than the 86 cents that we reported.
In in Q4.
2000, and and 19 and so.
What that assumes is you know.
Obviously, the hedge rates I spoke about earlier.
It assumes that.
Were flat on Delray how.
Two.
To Q4.
But at the higher end, maybe you get a little bit of a pickup in the Ral.
And it also assumes that.
Yes, Geo the Indian deal close is pretty much at the end of Q1.
2020, and assumes that CBB closes in Q4, so thats why we felt that Q4 is probably a better run rate to speak about.
And also because we have a bunch of asset sales on the go and so we've taken a crack at assuming when dose will.
Well close at which point in time, and so Thats why Sam made the comment in his remarks that you know between Q1 to Q3, you'll have some maybe some ups and some downs, depending on which quarter. Some investments closed then or some asset sales closing.
By Q4, we should have gotten all this stuff all the pluses and minuses contributing.
Or taking account in our results on a on a full basis for the quarter.
All right. That's helpful. And then just turning kinda over to Australia, Australia wildfires kind of have been simmering down now, but any impact on Q4 and lingering impacts into Q1 on the operations and the overall activity in the region.
Yeah, Hi, Rob it's been here look thankfully the impact of these fires on us has been minimal.
All our people are okay, and all of our assets are okay. So we're really had no.
Direct impact on any assets, we did have some minor impacts like YOD train path here or there that really got deferred because of localized issues.
Our port operations, we did have a couple of days of downtime and because of just air quality conditions and bringing the labor into the port wasn't available that day, so minor things like that but overall not a big impact in seems to have subsided at this point.
Thank you for the color.
Yes.
Our next question comes from Jeremy Rosenfield with Industrial Alliance. Your line is now open.
Thanks, Hi, guys, just one cleanup question related to bid C and.
How that may or may not interplay with the CBB transaction.
Is there a is there a timing sort of element in the creation of the mid tier the distribution of bid C.
That you sort of may want to wait on that distribution to see how the CBB transaction plays out or you go ahead with the bid see distribution.
Regardless of developments of the CBB Im just curious on nine.
Yes, Hi, Jeremy.
Sam here.
Yes, the bip see.
Transaction.
Isn't impacted all by the CBB deal CBB deal is there is no.
Shares involved in that transaction as a pure cash transaction.
And.
That.
Closing the deal.
It's just dependent on.
Its own regulatory.
Constraints and so.
And if we confuse you.
The the regulatory issues that we hear spoke about we had to clear from a sccrc perspective, I have nothing to do the CBD transaction.
No I was just curious in terms of whether you wanted to make sure that the Ibs C was in place before.
To provide greater liquidity for for a bit but.
But I guess that's answer that question. Okay. That's it for me. Thank you.
Okay.
Our next question comes from Jonathan Reeder with Wells Fargo Securities. Your line is now open.
Hey, good morning gentleman, Thanks for taking my question.
Can you give us a more indepth update on the CBB opportunity in process as well as the likelihood of the deal getting close I know you're.
Anticipated Q4 close you just mentioned, but obviously there was an unsolicited higher offer made for CBD and just curious with a path forward is both from.
Maybe these board perspective, as well as you know brookfields propensity or willingness maybe match higher offers without compromising return hurdles.
Hi, Jonathan I was wondering if someone was going to asked me about the.
[laughter].
And and look I am Unfortunately, I don't think it's appropriate that I really get into that and much detail I can't speculate about the board or what.
It's a competing proposal whether or not it may come to fruition or not.
Yes, we're I guess all I will say is we're monitoring.
Developments closely.
Yeah, we feel we've.
Built a good relationship with the company and we remain.
Enthusiastic about completing the deal.
We think it's good business and we hope we can get it.
Is there any sort of philosophy at Brookfield towards.
Matching the entire offers or do you know do you typically do.
Now, let your offer stand as a value investor, saying that it's kind of.
Not knowing that sort of best case scenario, but this was our offer in order to achieve our returns and you know.
Going higher we would compromise that abilities that philosophy, there are not necessarily.
Well I will leave you can go through our history, we've done many.
Take private whether its babcock <unk> Brown as you know.
Niska I can probably go through a whole host of them.
Sometimes a transactions go through smoothly other times, they're a bit more complicated.
Yes, we you know we look at each situation differently and you know, we protect our interest and try and do the best deal again, we're not going to be crazy about it but.
Obviously, a little will take into account to the economics of each situation.
Okay, and then what is kind of the Mexican at this point to the the CBD Board do they need to respond to the unsolicited offer or what's the next kind of milepost for up to look forward.
Well, yes, yes, it to be ferry those are that's probably a question better for the company.
But ill as.
What we know is that proposal was put in its still not a from proposal and.
Until it becomes a from proposal then there is nothing for anyone to respond to.
So it may be a nothing or maybe it turns and something we don't know.
Okay. Thanks, I appreciate the time.
Okay. Thank you.
I'm showing no further questions in queue at this time I'd like to turn the call back to samples for closing remarks.
Okay. Thank you operator, and take care, everyone. I think that was a record for a number of questions that we received for is that right Tracy.
Yes. She is not so I. Thank you for your interest and that we appreciate the.
All your support and look forward to talk to you again next quarter.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program you may all disconnect everyone have a great day.
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