Q4 2019 Earnings Call
At this time all participants are in a 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'd now like to introduce your host for today's conference Melissa 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 2019.
On the call today's share many of our Chief Financial Officer, Sam Pollock, Our Chief Executive Officer.
We also have the condo Rashid senior Vice President investments and Brookfield infrastructure group, joining us as the guest speaker this quarter as well as bands 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 intent talking about our growth initiatives 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 risks factors I would encourage you to review our annual report on form 20-F.
Which is available on our website.
That I turn the call over to be here.
Hi, Thank you Melissa and good morning, everyone.
Please 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 will provide a spotlight on our approach to value creation and explain to you all the various things we're doing it and our care.
Sam will finish off the call with a discussion of our recent strategic initiatives and.
We'll provide an outlook for the year ahead.
2019 was a great year for Brookfield infrastructure, our financial results and operating performance were strong.
Funds from operations or FFO totaled 1.38 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, the 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> 0.5 through seven five cents per unit.
Starting in March of 2020 or $2.15 on an annualized basis. This increase is at the midpoint of our 5% 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 AFFO of 577 million in 2019. This is consistent with the prior year, which 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.
The 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 at approximately 200000, new homes, the highest level of activity during our 10 year ownership as well as the sale of 300000, new connections at 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 offerings recently created as a result of our partnership with Sky fiber broadband.
These positive trends combined with capital Commission into rate base contributed to a 10% increase in FFO 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 acre 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 port 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 straightly import.
In 2019, our UK Port Operation Commission, approximately 20 million pounds of capital.
Of 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 increases the result of contributions from recently secured contracts.
Hi, probability growth from captive customers and new revenues related to the commissioning of the world's largest biomass power station.
FFO from our energy segment 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 acquired two 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 segment 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 franchises.
These acquisitions includes three data storage operations in the us, 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. The 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 1000 built to suit towers operational 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 and funding plans.
The most noteworthy acquisition financing completed this quarter was the 2.6 billion a financing an 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 severed 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 at our North American residential energy infrastructure operation to refinance existing higher cost debt in that business, which the Condor will touch more on in his remarks. In addition to refinancing our debt at our UK port operation, which allows for.
$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 two built 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 of our regulated.
Distribution operation in Colombia, with proceeds of 100 million to bet and finally, we completed the sale for further 33% interest in our Chilean toll road business in early February for $170 million.
Furthermore, during the fourth quarter, we signed the binding agreements 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 far 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 risked 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 of approximately 23, and three of 23% and three and a half times respectively.
So with that thank you for your time this morning, and I'll turn the call over its Connor.
Thank you behavior and good morning, everyone. My name is to garner issues and I'm pleased to join today's call to provide a spotlight on our 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 the monetize assets debt 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 of for strategy during each year of 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 energy there 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 and this business shares of number of similar features with our UK regulated distribution business.
At the time of acquisition, we were attracted to enter appears 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 U.S market.
To elaborate further on the capital structure optimization, Paul since we acquired the business it was or belief that endocutters capital structure was not optimal given the long term contracted cash flow profile of the underlying business.
And our care has over 1 million long term rental contracts with low rates of attrition consistent real price growth and high customer renewal rates.
We examined available financing structures and 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 to 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 US we're focused on implementing a dealer adoption model that will compliment 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 vision accelerated this growth further by offering a partnership model to HVAC 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 in Texas to offer residential infrastructure products to a large subset of this utilities clients.
The pilot has being well received and we're working on the long term rollout of the program.
And our care also recently partnered with our Canadian District energy business to provide to participate in housing development project, representing an opportunity to offer services do 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 the good morning, everyone.
From 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 for bip.
CBB is a leading fiber to the home business in the United States, Serbia, approximately 1.3 million residential and business customers in greater Cincinnati in Hawaii.
This is an attractive business with substantial growth prospects.
The transaction is subject to shareholder and regulatory approvals, which is 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 Betsy.
During the quarter, we've made advancements in its formation and subject to receipt of regulatory approvals. This expects to complete the special distribution of class a shares of Betsy to Bip unit holders in the first half of 2020.
As a reminder, FC will provide investors with and 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 CS 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.
FCS class a shares will also be exchangeable into LP units or the cash equivalent FCC discretion at any time as well as provides 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 removed 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 advised situation and 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 a 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 saw a passive back to the operator and we'll be pleased to take some questions.
Thank you.
Ladies and gentlemen, if you had a question at this time. Please press the Star then the one key on your Touchstone telephone.
If your question has been answered we wish we move yourself from the Q. Please press on key.
One moment 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 I'll touch on that and.
And then.
Now might turn over the bad been actually just got back from India and he can maybe give you. Some further comments as well as talk about in general but.
Well 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 a 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 of the other operators and others to 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 be 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 a 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 Sam.
Hi, 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 rate 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.
Moving on Q entered 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 was assisted counter.
Yes look so previously.
The financing in place was public bonds and terminals.
And the entered care business is.
As it is is growing fast both in Canada as well as as the use 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 worst is when they were financed but now with the securitization facility in place we can almost immediately securitize the contracts after they are sourced soul.
I think Ed I think thats.
Thats.
Yes, yes, the only thing is joining I'd add to that is.
Previously yield when we funded the the growth through our Capex line that 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 of capital invested.
Okay that on it.
Got it and Thats My Q. Thank you.
Our next question comes from Robert Kwan with RBC capital markets. Your line is now open.
Greg money.
To start with.
See you 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 the commentary.
Hey, Robert its.
Be 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 expect 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, it's just early days to talk about that.
Got it.
If you just look at minus 10 or 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 lot of organic growth upside and and 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 currencies accrued measure of country sentiment just wondering how you're thinking about any potential.
Acquisitions down there given your prior experience.
Hi, Rubbermaid, all Taca taca that Sam here.
Yes, I guess just to add to comment on your that the first part of your question.
I don't think you should read anything into.
Whether or not you know were that the pipeline is less or more I think the fact the manner as we have.
A lot going on right now and the investments 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 would want you to read anything into.
The letter because I think things are very robust.
As far as.
Brazil.
And.
Did you commented on the the currency being over reflection of the conditions in the market.
At 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 has come off a little bit as well.
So we do expect a rebound.
I think the them 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.
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 in what we are investing in is incredibly valuable. So I guess is a double edged sword.
And just definitional not electricity transmission comment does that create opportunities, although recognizing it's pretty short order, though to turn those and put those back out to market.
Yes, I think it's not a 2020.
Initiative, we have a lot of.
Work to do to complete some developments I think we will get better value if we can.
Ill have.
Yes, 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 and that could be a very attractive business too to liquidate.
Perfect. Thank you very much.
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 oil dri drivers were around us business.
Lifeline.
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 and 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 and.
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 now Fred it's it's been here. So so if you're talking just in general, but the energy group.
We did have us.
A big increases you noted at at 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 that 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 your and 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 it's got to infrastructure business, you've been obviously very busy.
You are seeing increased competition.
Right now seeing that would CBB, but would appreciate your view on that.
Broadly speaking.
I Frederic.
Look I would say I'm highly confident.
Ill and what gives me that confidence is the fact that we now have.
Yes data franchise in each part of the world.
And and we are 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.
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 kit deliveries to leverage and I think I continue to continue to see lots that business going forward.
Thank you.
Thanks.
Our next question comes from Rupert Merer with National Bank Financial Your line is open hi, good morning, everyone.
Sam Brookfield recently closed the infrastructure funds for.
20 billion I believe is little larger than what 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.
Hi, Rubric DM.
I guess, just stealing first with our.
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.
Yes, 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 a large scale.
More complicated transactions.
And do it on a basis, where we don't necessarily have to cloud bumper 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 with those institutional investors.
Yes, just makes our franchise that much better.
And your pro rata ownership stake second to remain constant going forward.
Yes, the same is still 25%.
Okay. Thanks, then secondly, I'm a quick one here you talked about some refinancings in the quarter and there's some discussion in the statements about the refinancing of the UK Port 350 basis point reduction in your your interest costs are there any other opportunities for refinancing costs here.
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.
Big question, though 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 that aside from that one the other ones were pursuing our smaller in terms of quantum.
Great. Thanks, I'll leave it there.
Yes.
Our next question comes from the line of Robert Catellier with JBC capital markets. Your line is now open.
Hi, Good morning, everybody I, just wonder does start if you can be a little bit more explicit on.
What impacts are expecting from the Corona virus from Brexit when you set the 2020.
FFO per unit.
Right.
Hello.
Hi, Robert It's Sam maybe all I'll tackle that.
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.
We've done better NIE canvassing of all our operations very recently.
To assess any potential impacts on safety, our people or just the operations and.
Ill.
Our view today, and 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.
We do expect to see some.
Implications the most of those should be timing differences.
Yes.
I think there could be some delayed shipments.
Some shifts that don't come as full to some for ports in Australia or the west coast of the us.
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 the health and depending on how things unfold, obviously, but today, we just don't see a much of an impact.
And Brooks.
And Brexit.
Good question the.
Yes, I think as we reported in the past here 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 be UK business.
We ended last year. They are relatively modest I think today with the uncertainty removed yeah, we think that there'll be renewed investment in UK.
And so.
There are in fact could be a bit of a a bump in that regard.
Longer term looking out 510 20 years from now it's hard to say.
What the impact will be but.
In the short run if anything we may see a positive impact.
Modest though.
Okay Thats helpful color and then just they're actually going to ask the same portions Rupert on the financing.
But.
Different angle I guess is maybe you can just.
Clarify.
What the cost savings were on the GW, our refinancing and then more broadly.
It doesn't sound like there is a lot more equity to be harvested from refinancing.
I'm wondering if there's if you're going after term ticking bonuses will rates and extending term.
And then just on the competition have you seen any irrational behavior from competition.
Where do you suspect there are factoring in or underwriting.
Much lower rates.
Interest rates and their approach.
Ill, maybe I'll deal the last one first and then be here.
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 on our underwriting.
But I guess as a general comment.
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 we still are able to find opportunities here and there and the.
I'm sure it at some point things will.
Normalized.
So there may be overview yep.
Hey, Robert Sarver, GW I think.
Im not sure if you're referring to the existing debt that the business had.
In the past that down maybe I can get back to you on but all I would say is that and I made I think this come in at our call last quarter. 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.
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. The 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 may.
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 I stays.
Near current levels.
Hey, Devon now.
Ill attempt Darling.
It's actually I think.
Opposite.
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 it picks up from Q2 to Q4.
So on a holistic basis I do expect Q1 to be lower Q1, two and trying 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 2019 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 real in the rupee up until.
Q3, 2021, and I think 2021 compared to 20 twentys virtually flat.
Okay. That's helpful.
US midstream a this is going to targeted sector.
For a while now stock prices for.
A lot of the remaining MLP continued vendor a lot of pressure just wondering if you're still 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.
Hi, Devon.
Yes again in the short answer is yes, and yes.
Yes, we still.
Yes, it's a sector, we think it's critical to the economy.
And we do see ill.
Interesting opportunities, particularly relative to past years, when the MLP market was much stronger this today.
Yes, we do see lots of companies whether it's a.
Take private or just structured transactions, where public companies need private capital to the system. So.
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.
Thank you good morning, I first question, probably for the here and it's just on the capital recycling program.
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 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.
On that Andrew.
But invests in them a minimum of 25% of before transactions, which is our.
It's called our global flagship fund and value add fun to win a target returns in the 12% to 15% range.
I'd say.
25, plus it's obviously minimum 25% plus any co investments or additional capital wants to.
Due in large transactions and then.
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Super Core fund is an open ended fund its targeting returns in the.
Say, the 8% to 9% range.
Bip is not an investor in that fund.
And while there's opportunities to invest alongside the fun, if there's significant co investment opportunities on a given the return threshold.
It's highly unlikely that we would do that.
The dip 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 have 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.
Okay.
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, how awful what bases that is that a kind of annualized Q1, 2020 base or including Indian telecoms and does that foresee additional unsecured investments right now.
Hey, Robert Saab 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.
2019, and so.
That assumes is.
Obviously, the hedge rates I spoke about earlier it assumes that.
Were flat on Bel Ray how.
Two.
To Q4.
But at the higher end, maybe you get a little bit of 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 Q ones 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.
But 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 on the overall activity in the region.
Yes, hi, Rob it's been here look thankfully the impact of these fires on us has been minimal.
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.
The odd train path here or there that really got deferred because of localized issues.
Our port operations, we Didnt have a couple of days of downtime.
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.
Is there a timing.
Sort of element in the creation of the mid tier the distribution of bid C.
The union sort of May want to wait on that distribution to see how the CVB transaction plays out or you go ahead with did see distribution.
Regardless of developments of the CBD I'm just curious on line.
Yes, Hi, Jeremy.
It's Sam here.
The bip see.
Transaction.
Isn't impacted at all by the CBB deal the CBB deal is Theres no.
Shares involved in that transaction as a pure cash transactions.
And.
That.
Closing meal.
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 it 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 did see 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 CBD opportunity in process as well as the likelihood of the deal getting close I know you're.
We anticipate in Q4 closings as mentioned, but obviously there was an unsolicited higher offer me for CBD and just curious with the path forward as 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's going to ask me about the the C. Let me do it.
[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.
The competing proposal, whether or not it may come to fruition or not.
Yes, where I guess, all I will say is we're monitoring.
Developments closely.
Yeah, we feel weve.
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.
You have towards.
Matching the entire offers or you know do you typically do.
China, let your offer standards of value in Boston her thing that we've kind of.
Not not necessarily narrow, but this is our offer in order to achieve our returns and you know going higher we would compromise that ability is that philosophy, there are not necessarily.
Well I will leave you can go through our history, we've done many.
Take privates, whether its Bakken Brown as you know.
Niska I can probably go through a whole host of them.
Yeah, sometimes the transactions go through smoothly other times, they're a bit more complicated.
Yes, we we look at each situation differently.
And you know, we protect our interest and try and do the best deal. We can't we're not going to be crazy abetted, but obviously, a little will take into account to the economics of each situation.
Okay, and then what is kind of the Max up at this point.
The CBD board do they need to respond to the unsolicited offer or what's the next kind of milepost for up to look for.
Yes, it should 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 thank everyone I think that was a record for a number of questions that we received for is that right Tracy.
Yes, it should not so thank you for your interest and that we appreciate the.
Oh, you support and look forward to top 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. Thanks.
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