Q1 2020 Earnings Call
[music].
We will follow at that time, if anyone should require operator assistance. Please press Star then zero and your touched on telephone as a reminder, this call may be recorded I would now like to introduce your host for today's conference Bahir Manios you may begin.
Thank you operator, and good morning, everyone. I Hope you are all keeping well and thank you for joining us for Brookfield infrastructure partners.
First.
Quarter earnings conference call for 2020.
On the call it with me today, Sam Pollock, our Chief Executive Officer, and Ben broaden our Chief operating officer.
Following our 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 in 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 our known risk factors I would encourage you to review our annual report on form 20-F, which is available on our website.
So I'll be kicking off the call today with a review of our operating results in a quick update on our balance sheet and funding plan. After my remarks, Ben will provide some commentary on the impact of the culprit pandemic and Sam will wrap up.
By providing an update on our recent strategic initiatives and provide an outlook for the rest of the year.
So results for the quarter reflect organic growth and incremental earnings associated with our asset rotation strategy.
On a per unit basis, AFFO was 77 cents, which is equivalent to 86 cents prior to our units, but which was in line with our prior year levels and to be clear there is no change in our dividend.
We understand that some people may misinterpret. These numbers differently. So we just thought we would clarified that on the call today.
FFO growth was primarily driven by organic growth of 6% and earnings associated with $1.6 billion of capital deployed in the prior year.
During the past year.
These positive factors were partially offset by the sale afford businesses some impacts related to the co fit situation into depreciation of foreign currencies.
Virus related impacts are primarily experience at our port and toll road operations affecting results by $10 million, while the lower Brazilian route reduced results by $17 million.
FFO from our utility segment totaled 146 million compared to 137 million in the prior year.
The segment delivered organic growth of 8%, reflecting the robust nature of our contracted unregulated cash flows in the segment.
This increase reflects inflation indexation and $310 million of capital Commission into our rate base over the past 12 months.
Results also benefited from the first full quarter contribution of our North American regulated natural gas transmission business acquired in October 2019.
These increases were partly offset by the sale of our Colombian regulated electricity distribution operation and the lower Brazilian real converted to us dollars, which lowered our results by $9 million.
Our transport segment delivered FFO of 120 million down from 139 million in the prior year.
Compared to the first quarter of 2019 results reflect the initial contribution from our North American rail operation as well as good pricing across our rail and road networks.
These positive impacts were more than offset by the loss of earnings associated with the sale for European ports business and an interest in our Chilean toll road operation.
When combined with the impact of for lower Brazilian real when converted to US dollars. These factors collectively reduced results by $18 million.
Our North American and Australian container terminal operations were impacted by lower trade activity from China in the first quarter due to cobot 19, reducing volumes by 13% and FFO by 5 million rich.
With that in 2019 levels.
The energy segment contributed FFO of 150 million compared to 107 million in the prior year.
Results increased by 12% on a same store basis, excluding the contribution from our gas storage operations, which as a result to.
Timing and whether or not higher spreads and Stuart greater volumes in the first quarter of flashier.
Our north American residential infrastructure business benefited from the signing of 50000, new customers and the ongoing success of our sales to rental strategy in the us.
We closed the acquisition of the federally regulated portion of our Western Canadian Midstream business in December 2019, with these operations fully contributing to results in the quarter.
From our data infrastructure segment.
FFO, there totaled 42 million and an increase of almost 50% relative to the prior year.
Our underlying business continues to perform well with FFO from our French tower operation, increasing due to inflation indexation and new points of presence added to our network.
Results also benefited from the contribution of our newly acquired data transmission and distribution operations in New Zealand in the United Kingdom on a data storage business in South America.
Turning now to our balance sheet and liquidity position and starting off it's worth highlighting that maintaining a disciplined and consistent approach the financing at both the corporate an asset level through the market cycles is the only way to be prepared for unexpected market downturns.
We implement prudent non recourse financings at our business, while maintaining a focus on liquidity and access to capital.
We also taken an active approach to managing our debt maturity profile.
Throughout the extended period of strong credit markets over the past five years, we proactively refinanced debt across our portfolio to extend our maturity profile and to minimize exposure to capital market disruptions.
Excluding amortization payments and ordinary course, working capital facility renewals.
We have only 10% of our debt maturing in the next three years.
So our maturity profile is very well laddered and we're in that we're in great shape as a consequence.
Our liquidity position is very strong as well, allowing us not only to support our our operating businesses, but also to opportunistically pursue new investments.
We currently have approximately $4.3 billion of total liquidity, including 3.3 billion of that at the corporate level.
We completed two financing transactions in April which added approximately $1.3 billion to our resources that included a 400 million dollar bond issuance.
And the addition off an incremental $1 billion star revolving credit facility that can be used to fund new investment opportunities.
Before I turn the call over to Ben I wanted to spend a few minutes discussing the resiliency of our business as it is a topic that we appreciate many investors are focused on during and following economic downturns.
I'll start off by saying that trying to predict future results is always a precarious thing to do especially during times that are truly unprecedented.
However, we do now have a few months experience operating through this new environment, which we now can reflect on.
When we measure the resiliency of our business, we begin with our utilities energy and data infrastructure operations, which contribute roughly about 70% to 75% if our annual FFO.
On a local currency basis, nearly all of these businesses continued to perform in line with budget.
The sustained the stability and sustainability of these results reflect the regulated and capacity based contractual frameworks of these operations.
While a few of our assets in these segments have moderate exposure to market sensitive revenues to impact to our overall results is expected to be less than 2% annually, even in a scenario where coal that has a prolonged effect.
The only other variables that may affect results is the timing of commissioning of our backlog of secured growth due to construction slowdowns or stoppages.
As an example, the pace of construction at our UK regulated distribution business slowed significantly in April as a national construction shutdown was implemented across the UK and homebuilder suspended operations.
While home construction, it's breed commencing in may activity levels may remain depressed for the balance of the year due to social distancing protocols.
The impact on our 2020 results is expected to be less than 3%.
More important though.
The potential decrease in FFO with only reflect a delay in the recognition of accounting revenue and not a permanent loss of cash flows or economic value.
This backlog will eventually be added to our rate base.
Approximately 30% of our annualized FFO comes from our transport segment.
Which includes rail ports and toll roads.
This is the segment, where we have the most exposure to GDP sensitive volumes.
Our rail assets, which generate approximately 50% of death AFFO in our transport segment.
It's proven very resilient in this current environment and ran on budget in the first quarter.
So far in April rail volumes in aggregate, our approximately 3% below planned levels.
Our rail networks carry predominantly basic bulk goods, such as iron ore agricultural and pulp and paper inputs and finished goods.
Our exposure to intermodal traffic, which has been more impacted by reduced trade flows is relatively low.
Our board assets are predominantly container terminals.
We experienced volume declines of approximately 15% in the first quarter.
Our portfolio and started to rebound early in the second quarters production from China came back online, but is still running approximately 10% blow plan today due to the general decline in economic activity.
Overall, our port volumes have been relatively robust as our assets are predominantly in the UK, Australia in California, where the goods. We move are critical to the basic functioning of these economies.
Our toll roads have been the most impacted from a volume perspective with traffic declines of approximately 40% across our portfolio.
These positive here.
The positive here is that in most jurisdictions, where we operate regulators have acknowledged.
At the current conditions qualify as a force majeure event, which positions us for the possibility of being kept hole on a value basis. These via either direct compensation or extension of the duration of our concessions.
In conclusion, we believed that the reduction in near term FFO due to the economic impact of Cove. It is temporary and that the long term run rate earnings capacity for our overall business. It's for the most part unaffected.
Furthermore, while our distribution payout ratio will likely exceed our target levels for the balance of the year. Our distributions remained remain covered by operating cash flows.
We also have ample liquidity and no near term refinancing requirements of any consequence, providing us the flexibility to pursue new investments and so is that I. Thank you for your time this morning, and I'll turn the call over Tibet.
Thanks, and thanks to here and good morning, everyone. Today I'll provide a summary of our key operating priorities as we navigate through the current environment.
But just before I talk about priorities I just wanted to highlight that our management team has had experience operating through numerous periods of market dislocation and uncertainty in the past and while the distinguishing factors of this downturn, we're the suddenness and the extent to the economic contraction. We know it is important to always.
Be prepared for challenges and therefore, all of our businesses maintain robust and detailed business continuity plans.
And these plans have served us well as weve maintained 100% asset availability to date through this period.
Our key areas of focus during the the current environment have been first the health and safety of our people second maintaining asset availability third monitoring counterparties and fourth revising our business plans with a focus on maintaining cash flows and strong liquidity.
So in terms of health and safety, we focused on ensuring our employees are following appropriate social distancing and where possible working remotely.
We've implemented a number of revised business processes to protect front line employees with a strong focus on protective equipment, including masks clubs sanitizer and implementing additional controls to ensure that all interactions done in a safe manner.
Given the broad scope of our operations, we have had some incidence of cobot nine cobot 19 illness across the group, but the numbers have been very modest and we've been able to avoid any larger concentrated outbreaks a month amongst our operating teams.
In terms of asset availability as I mentioned before we've maintained 100% availability throughout this period.
We quickly mobilized in the January February timeframe to ensure that all of our businesses were formally qualified as critical infrastructure in the jurisdictions in which we operate and we were granted this status across all assets.
This provides us with the right to maintain operations and labor mobility, even under severe lockdown scenarios.
We also implemented plans to access to assess our critical inventories of supplies and supply chains to ensure that we are mitigating risks beyond just our own asset base.
While we've had no availability issues to date as behavior mentioned a minute ago, we have had delays in certain growth projects due to construction restrictions, mostly at our last mile connections business in the UK and our fiber to the home network build outs in France.
But I'm pleased to report that as a very early may construction activity. In these jurisdictions has slowly begun to methodically restart.
In terms of Counterparties, we've had no issues across the group to date, our counterparties largely consist of either strong corporate counterparties that remain financially healthy or our revenues are socialized across diversified rate basis or bases of clients. So receiving payments has not been image.
Your issue so far.
And then the last area of focus has been on revising plans for each of our companies to ensure that any impacts from the economic contraction or well understood.
In instances, where we have experienced some revenue declines we have reduced costs and revise the timing of certain capital projects, where possible to ensure that cash flows remained strong and AFFO levels are maintained the greatest extent possible.
The last comment I'll make is we're very proud that our businesses have risen to the occasion in tough times.
In addition to keeping operations up many of our companies have made important contributions to the local communities in which we operate.
We're making a concerted effort across our various offices and portfolio companies to donate funds time essential equipment and supplies to support communities in first responders.
For example, in North America, our Western Canadian Midstream business is contributing to a number of local causes including donating equipment, such as portable generators to indigenous communities to generate electricity.
In the age of in the Asia Pacific Read region, Our New Zealand data distribution business has provided mobile connectivity to an isolation center that was used to quarantine people, who returned to New Zealand from Asia.
We also removed data limits on home broadband, while reducing prices for data plans and provided charging stations at local hospitals to benefit frontline health workers.
And in emerging markets, such as India, and Brazil, our businesses have undertaken programs to distribute food and personal protective equipment and have donated funds to support public health initiatives and various community projects.
So with that thank you for your time this morning, and I'll now turn the call over to Sam.
Thank you Ben and good morning, everyone.
For my remarks today I'll provide a brief update on some recent strategic initiatives falling which I'll finish up the comp are providing an outlook for the company.
During the quarter I'm pleased to report that we successfully launched Brookfield infrastructure Corporation or Betsy.
The special distribution of Bip C shares took place on March 30, Onest, whereby we issued existing unit holders with one class a share AVIP see for every nine units a bit therapy.
We have subsequently seen strong support for Bip C shares in the market with trading volumes over the first 30 days at over 50% of the public float and the share price trading in fact slightly higher than the LP unit price.
We're very pleased with the launch and the positive reception, thus far our intention is to fully support the growth of the bip see blow over time and are actively considering initiatives in this regard.
Our second major initiative has been to progress the closing of our large scale acquisition of approximately 130000 telecom towers in India from reliance Jio.
Reliance recently announced that strategic deal with Facebook, which we believe will significantly enhance the overall profile of our main counterparty.
The only significant outstanding approval remaining in order to close the transaction is from the department of Telecommunications, India and this is expected to be obtained in the coming weeks.
We expect to invest up to $500 million of equity in the business alongside our institutional partners.
Lastly, since March we've been actively evaluating a number of high quality publicly traded infrastructure businesses that have traded off along with the broader market.
While we are always analyzing the public markets for value opportunities. We've expanded our efforts. These last few months as a number of private transactions a decrease in light of the current environment.
Based on our analysis, we believe that certain companies are trading at substantial discount to their intrinsic value.
To date, we've invested approximately $450 million with bip shares being about $220 million into the shares of a handful of companies and hope that somebody's will lead to large scale transactions. If not we will monetize our stakes this share price recovers and earn attractive return sectors, we know well.
I'll close up today's call by discussing our outlook for the balance the year.
Our outlook as guided by the current state of affairs and the cautious approach most governments are taking towards opening up their economies.
We are nonetheless encouraged by reports from our colleagues who work in certain parts of Asia that Bari commenced reopening procedures.
Whereby in those markets. Many business activities have returned to somewhat near normal and are doing this while adhering to social distancing distancing protocols.
Our current view of global economic conditions is that the closure of non essential businesses will largely continued through the second quarter after which we will see a steady recovery the exact cadence varying by region.
While the significant stimulus injected into the economy by governments will help speed up the recovery.
We expect the shape of the recovery to be more of a switch you are the.
Assuming no significant second wave of infections in the fall, we anticipate most sectors and regions will return to more normalized environment.
We ended the year or during the first half of 2021.
If that is not the case, we have contingency plans in place and are confident in our ability to manage our existing operations, while also identifying investment opportunities.
While it's too early to comment on learnings from the pandemic, our conviction regarding the attractiveness and sustainability of infrastructure sector has been reinforced.
His with considerable pride that we've been able to report to you today that every operating business owned by briefly infrastructure was deemed an essential service and Thats has been operating throughout this period.
Our business is very resilient and therefore, we have the confidence to actually look for potential opportunities to grow the portfolio on a value basis.
We take a long term view when analyzing businesses and will not get caught up in the near term negativity.
As we have discussed in the past we tend to be more cautious when the economic environments frothy and we look to invest in scale when capital is scarce.
To that end, we began investing in the capital markets aggressively in March, but a pull back somewhat in April as the markets quickly recover.
We would describe our current investment posture as optimistically patient.
We believe that large scale value opportunity will arise over the next 12 months.
And we reminded by our experienced during the global financial crisis in 2009 in 2010, when the transformative Babcock <unk> Brown investment we made did not present itself to us to almost nine months after Lehman bankruptcy.
We passed on many opportunities before the right when it came along.
Our situation today is vastly better today than it was at the time, we execute the Dbi transaction.
Our market capitalization is approximately 15 times greater and we have committed infrastructure fund to invest alongside us that is almost 20 times larger.
And our sector, a geographic expertise and scale is greater as well.
We have a seasoned team focused on identifying transactions with a particular.
Area of interest around large scale value opportunities in the transport energy and utility sectors.
This concludes our remarks for today's call. So I'll pass the line back to operator, and we will we be please take acuity.
Thank you as a reminder, request we will need to print star woman your telephone to withdraw your question press the pound Keith.
One moment for questions. Our first question comes from Cherilyn Radbourne with TD Securities.
You May proceed with your question.
Thanks, very much and good morning.
Sam I Wonder if you could.
And a little bit too that discussion on how the investment team is pacing itself and I guess, if one were the view that the recovery might wrap and then one should act now.
And Im sure the pace of inbounds has picked up but on the other hand.
Businesses out there may not be positioned to withstand a drawn out recovery in which case when should be very patient.
Hi, Sherilyn.
I think.
I guess my comments to would be that that there's always the debt that day and Nate.
Trade of.
Fear of missing out and I know there are some of that that's taken place I think some of the exuberance in the last month in the in the market may have had been just that the.
That sentiment where people feared they were missing out on the crisis.
Our view and we've been through many crisis.
Over the last the 25 to 30 years well working.
Yes.
Has taught us that leasing typically take a lot longer to play out and theres, usually more shoes to drop and so.
It's possible this time could be different and the recovery comes back fast and.
We miss out.
We just think it's more prudent and based on our experience.
We think will be.
Rewarded for being patient and.
And seeing opportunities as they unfold over the coming quarters as opposed to try to jump into the market right now.
Okay, and then clearly there's been some concern about how well equipped countries like Brazil in India are to cope with the virus, maybe you can elaborate on what you're seeing on the ground.
Ben you and take this wonder limited.
Yeah look I'm happy to take it.
Yes shown so on the ground you too we are seeing.
I guess I'll deal with them separately in India, they've probably most of the issues have been concentrated in and around the Mumbai area.
In that area is still relatively shutdown, but other areas of the country have already slowly started to reopen economic activity and as you know both India and Brazil are huge countries with large population. So it's tough to generalize across the entire.
Country, but there are pockets where.
From our understanding where the issues are very contained and then there are other pockets, where I don't think they've quite flattened occurred yet. So we're seeing both dynamics at play out at the same time, which maybe is a bit similar to what we're seeing in north American some parts of Europe as well and then in Brazil.
Yup.
It's a bit of the opposite I think what you'll read in the media is that Brazil, hasnt quite flattened the curve yet we do know that in more in the south end of the country, it's probably flattened and they've been a bit more disciplined in the northern part of the country I don't think they're quite there yet on on flattening the curve.
But economic activities at a slowly picking up I guess just anecdotally.
Especially in the last probably two weeks, we have seen a pickup in activity across a number of businesses in India and in Brazil.
So slowly but surely we're seeing.
Some activity levels come back.
Great Thats my Q. Thank you.
Thanks Carolyn.
Thank you and next question comes from Robert Kwan with RBC Capital markets. You May proceed with your questions.
Thanks to money.
Just on the public's sturdy investments.
So just a few different things is there anything you can talk about where you see we're seeing the best value whether that be geography.
Or asset tight NAND you also mentioned that you pulled back somewhat so do you do you still see some pockets of values where.
Hi, Robert.
So I thought the first say that.
Yes, I won't be giving you our list of stocks or be too specific and I hope you understand that.
But that.
What I would say is that what's what's changed in.
Yes.
The past month, an app.
Yes from mid March two two today is that.
Yes, when the market really fell ops, we probably had a list of 10 to 15 names and we were we were trying to decide which ones are a focus on and we probably had intentions of.
Diving into many of them and we did dive into a bunch right off the bat.
That list has narrowed quite a bit as some of them very quickly recovered.
But there still are a few that.
We think.
Represent good value and our misunderstood in the market today.
And.
So that that that would be that change. That's happened is the number of opportunities as shrunk a little bit.
As far as.
Regions are.
Our focus is mostly in.
North American and Europe.
And those are the larger markets and there is some interesting names there.
Yes, Theres, probably maybe one or two that we're following.
In Asia Pacific, but.
I think thats as much as I can give you.
Fair enough and then just on that.
Have you made any initial approaches to the divorce or management teams for the securities that you have accumulated.
Yes, I don't think I don't think I typically give that type of.
Commentary on on on transaction, so I won't go there.
Assets.
You mentioned that it's still too early to make some definitive comments around this downturn, but as you noted looks it's not we haven't seen other cycles are global disruptions, but.
Early thoughts sates does the current environment cause any modification you're thinking as to how you approach asset classes, whether that's returns are hurdle rates financing structures or even just looking at.
So our portfolio construction and distribution policy really tenants, we get these types of events in it.
The becomes a lot clearance, which assets are truly resilience versus the ones that have expenditures.
Yes, I think Thats interesting question and that's one that.
I think deserves.
Examination over longer period of time so.
I think my and that kind of as I kind of alluded to in my remarks, the little early to draw to two may conclusions today, because I think we'll need to see how this all plays out.
I guess.
What I.
What I would reiterate a somewhat what we brought in the letter is that.
Yes, a lot a lot of the things that we have been following.
Have been very helpful and this particular crisis and whether that's.
Making sure you have.
Long dated maturity profiles.
Very manageable debt levels liquidity those are obviously critical in any downturn I think the diversification.
Has really helped us I think for some businesses that have just focused on if you are just focused and transportation today you are pretty.
Distressed the fact that we've got a broad based business has been very helpful.
It's always hard to nowhere.
Where distress will come.
And I think the as far as.
Elements of this that we know that we will have to focus on in future underwritings.
One is making sure that are forced mizher.
Clauses are bullet proof, we think they're very good in our concession agreements, but we'll now find out how good they are and so I think thats something that everyone will be highly focused on.
And then.
I think we've always.
Ascribed to higher return.
Threshold to patronage based businesses.
These are basically volume based assets like toll roads and ports and because.
We've never predict that this type of scenario per se, but we've always known that day cycles do come.
Im not sure everyone in our sector has done that.
But I think this will may be cause a slate re rating of.
Of toll roads and ports just because.
Yes people will recognize that.
Volumes can go down.
Great. Thanks, very much appreciate the commentary.
Okay.
Thank you. Our next question comes from Rupert Merer with National Bank proceed with your question.
Good morning, everyone.
Morning.
Sam you gave some comments on your outlook for the global macro environment looking specifically at Brazil, the rails traded down I don't think we're seeing much inflation there yet what what's your internal view on the potential for recovery in the real with easing of the impact to covert 19 or.
Or your view on the direction of the inflation in Brazil.
Thanks Robert.
Look we.
We havent changed our long term view of the country, we still believe that the fundamentals.
We remain very positive and.
Were you know as we've said on a number of calls over the past the year. We're pleased with the reforms that have been instituted by the finance Minister and we think the direction are taking is very positive.
It is unfortunate that.
The the political rhetoric has impacted.
The the reputation of the country a bit.
I think a lot of the.
I think a lot of the impact on the currency.
Has to do with.
The fact that it is a commodity export country and.
Whether its oil iron ore different things agriculture.
And that many countries, including Canada, and Australia have seen their currencies dropdown in and added on to that as it is to see the Latin America.
Hello So.
I think its or it's falling a bit more.
But yes in local currency, our businesses are doing extremely well and.
We believe that as uncertainty lifts over the coming quarters that you'll see.
A number and as you see oil prices go back up.
As the current.
Got it gets worked out.
You will see.
The real as well as a number of.
Other currencies.
Improved relative to US dollar I carry comment on inflation, because I think that said thats out of my air.
My bandwidth.
Hello.
Secondly, Ben you mentioned, you're looking to bring down costs in some areas to offset the impact of Cobra 19. When you talk about how much are able to flex costs in your operations and coming out of this gives me any potential for permanent benefits from from changes than you may be making to the business.
Yes look thats a good question.
Yes, I guess in terms of our ability.
To flex costs its.
It's pretty decent largely what we've done I'd say the strategic approach. We've taken is to maintain capacity. So we've generally.
Been furloughing certain employees in certain businesses, but maintaining the capacity.
For when activity returns to more normalized level. So it's been it's been meaningful to date, but it's been within approach of.
Keeping the ability to bring all the assets right back up to full potential.
When things rebound so I'd just make that strategic comment I'd say the second thing we've done we have a number of.
You know asset carve outs and cost out initiatives in businesses that we were executing in any event and if anything we just sort of accelerated some of those programs and.
It's really forced our management teams to work hard and dig deep on those I'd say, it's been a bit of if anything we've probably had a little bit of a very modest acceleration of some cost outs that we were going to undertake this calendar year and into early next year in any event.
Okay. So thats nothing.
That was already in the plans as far as are we moving cost.
Structure.
I wouldn't standing highly material I mean, my only other anecdotal observation is I do think people have been leveraging video.
Based meeting technology really well in the last couple of months and to the when anecdotally many of our businesses are talking about reducing travel budgets going forward, but thats just neither here nor there at this point, but it has been interesting to watch.
A large organization like ours seamlessly.
Move too much much deeper commitment to video based technology.
And actually have probably almost more face to face interaction than we would have six months ago or a year ago to some degree so.
Like I said more anecdotal than anything, but I do think there will be some impact a cost structures around leveraging technology.
Thanks.
Thank you. Our next question comes from Frederic Bastien with Raymond James You May proceed with your question.
Good morning, my questions for Sam you've you've historically stayed away from airports because of currently only high valuations.
Thinking maybe covidien that might be this this once in the life. Once last time opportunity for you guys to to get into that sector. What are your thoughts.
Hi, Frederic.
Well it's.
Yes, I think that's a perceptive comment.
Yes, it has been challenging in the past to invest undervalued bases in the airport sector.
And part of it because of the low return thresholds that people put to those type of businesses.
[music].
Yeah, we.
In spite of of whats taken place.
We still think that they are attractive assets.
There'll be some complexity in formulating.
Views regarding.
Yeah, the returned of air traffic in and the splits between domestic and international.
Which could give us an opportunity to.
To use some of our expertise.
In two to five or value so.
Without being too long winded embedded yes, I think you're right we will look at the sector.
If there is an opportunity to answer it undervalued basis then.
We would seek to do so.
And the and are there any appease have you looked at currently.
I can't comment on that.
Thank you good but also with tight was fine all right. That's all asked thank you.
Okay. Thank you.
Thank you our next question comes from.
Robert Kevin with BC capital markets. You May proceed with your question.
Hey, good morning, everybody I was wondering if you give a little bit more detail of the.
Structure and timing of.
Settling the forces are claim on the toll roads.
And it seems.
More logical that any of the settlements might to come at a form of extending the concession rather than.
Some type of other vallier transfer can you just comment on that please.
Yes, it's been here.
Yeah look it's always hard to guess the exact timing of these things I think some of them might happen relatively quickly once the world normalizes in some might.
Might take up to a year or more to.
To work out with the regulators and I do think you're right that generally speaking the.
You know the the easiest way to settle these types of Rebalancings is to just add duration to the concession contracts to keep the concessionaire revenue neutral. It generally have a little more unlikely that you'd get some cash payment. So I think concession extensions as probably the way it will go and I think it'll it'll.
Range in duration, but probably within the next year and shortly after that we'll have it all settled.
So that.
So we believe.
Amortized through quality or doesn't taken.
Closer capital So your return on capital.
In the original duration of the consistent in the original terms. So those extended years would be highly accretive.
Yes, I think Thats correct and they would the principal would be to fill in for the cash flows that you were missing during the period of abnormally low but that would be in France.
Just moving on to a currency following up on that so thats the nature of your platform, but as you can't really avoid currency risk.
Because their sole international scope, but.
Well the route.
Weakness in the Brazilian rail those given your costs to reconsider.
Maximum exposure levels, tiny one currency or otherwise change and risk management approach.
Yes, hi.
Look I think we've always.
Sought to create a balanced diversified portfolio by region.
And by sector and.
Yes, we haven't really changed our policies in that regard we are sensitive to it.
We made investments recently in the in Brazil that may be took a little higher than we normally would be but that was because we saw incredible value and we still think those investments will be.
Very accretive for us, namely the the pipeline transaction and the electricity transmission transactions.
And so im sure once those get realized.
We will naturally.
Be more balanced like we were in the past.
Sure Okay. Thank you.
Thank you. Our next question comes who doesn't Dodd with BMO capital markets. You May proceed to the question.
All right. Thank you good morning, guys.
Good morning.
And then a question on India.
Well the slowdown that were school. It just seems like it came at a really bad time, just given that.
There's a bit of a credit crisis before this all got started.
Just isn't syndicate your thoughts on what opportunities that you're seeing whether you've seen in an uptick in that opportunity set.
Devon, just typically the opportunity set in India.
Yes.
Yeah. So.
Well it today, our primary focus is just to close the Indian Kelly Telecom transaction.
Theres nothing that I would describe thats, particularly advanced in Indian on any other asset.
And to be honest.
Well.
Theres not a lot of private activity. There are few processes that we are involved with but they will get extended the due to just the.
Challenges of completing physical due diligence but.
Today, I would say in India.
There is nothing that were particularly focused on.
Okay.
Maybe switching gears.
Look a lot of your energy midstream assets, they're protected by.
Take or pay agreements.
Just wondering how you're feeling about counterparty risk.
Your Powerpoint assets.
Within the energy segment and in the utilities.
Yes, like I mentioned in my in my comments earlier, we're feeling pretty good about our counterparties at this point on the May on the midstream business, we largely have investment grade international players are very strong local competitors in that business, we've seen everyone behave.
Very rationally.
And and take prudent actions to make sure that they stay healthy through this period. So at this point, we havent seen any issues to date and broadly in the utilities. We also haven't had any large collection issues.
I know there has been a bit of a theme across various jurisdictions around allowing people to deferred payments of utility bills, but we haven't seen any impact in our businesses.
And in some instances we are seeing that governments are going to step in and help.
Provide support in those situations, but like I said, we're not actively engaged in any of that at this time. So no issues noted.
Noted today.
Okay. That's helpful. Thank you.
Thank you. Our next question comes from Andrew could skew it.
Since weeks you May proceed with your question.
Thank you good morning, probably the first questions to point of clarification on the 450 million that you've invested I think the language in the press release was.
Shares of a handful of companies.
Clarification of wasn't just shares or have you taken I mean holdings in debt positions of companies.
The vast majority of it is in.
In shares there might be.
A modest amount of debt, but it is primarily shares.
Okay. Appreciate that and then I think the color was also on just the the C.
That you plan on supporting the equity and there is maybe the playbook to look out what Brookfield renewable is doing with terraform power as as a potential use of the bitsy vehicle on the future.
I think what we one of the attractiveness for us of setting up the FC was having that flexibility that should an opportunity arose too.
To do a yep.
I am merger and acquisition utilizing shares we now had a.
Security, where we could affect a rollover for.
The.
I think thats been acquired so so yes it is available.
Hey, whether or not those opportunities will rise again I can't comment on it don't know but.
But absolutely.
If it if it helps do a transaction and makes it more palatable than we'd be prepared to use that.
That flexibility.
And then maybe just as a follow up I mean, clearly from a market standpoint, there's been receptivity to the vehicle how big do you think the market sizes for it see structure.
Versus your current LP structure at the top of the house.
And just to clarify Andrea you asking.
How how big you think to the demand is forward or how much capacity, we have issue more 50 I wasn't quite sure.
Hi, it's more months, it's more the investor interest in it.
That's the LP audiences act is to see structure audience to apps or three bucks.
So I.
At the.
First just to be clear, we'd be speculating because I don't really know the answer but based on the inbound.
And a number of conversations that beers had I would suspect it's several ex yes.
Okay. That's great. Thank you.
Okay. Thanks.
Thank you. Our next question comes from a suit said.
We think we'll medically they proceed with your question.
Thanks, Good morning, I have a one on transport and one on data infrastructure that thanks for all the details on on transport.
But I think corporate impact for the quarter.
Tools and poor you've quantified $10 million in Brazil, real a reduced by 17 million any thoughts on broadly quantifying in Q2 now that we are in may and directionally or any other color and then secondly.
Regulators have acknowledged this as a portion mature event is that in all jurisdictions or any specific ones.
Hi, a seat.
Good morning, except the here I'll start and.
Maybe Ben can jump in on the second question, but.
You know relating to.
To the co fit.
Impact.
It's still a mean, we did give a bit of at least as you mentioned a bit of color.
In the letter and in my remarks as to what we're seeing so far.
In Q2 at least.
And so that Sam.
Try our traffic volumes in our toll road business.
Going down by about 40%.
For our port operations being impacted volume wise by 10% to 15%.
And then our rail business somewhere in the range of 5% to 10%, albeit it's been.
It was better than that.
In April as far as.
Q3 in Q4 I'm looking at it all depends on how.
It goes as a Sam noted in his remarks with respect to openings of their economies.
But so does the biggest impact assuming things open up a little bit.
The biggest impact we will see is probably in Q2 with moderate recoveries happening.
In Q3, and Q4, but it's still a bit early.
To to to make assumptions.
And then just just maybe on the the force Majeure I would say, we own toll roads in India, Brazil, Peru, and Chile and.
The majority of them are in Brazil, India, and Brazil, I'd say if publicly acknowledged.
The force measure and in Peru, and Chile, we.
It's clear in the contracts.
And in certain notices that Weve exchange with the regulators so I'd say.
We haven't noticed any jurisdiction, where we don't think it applies.
Great and Ben in light of recent surgeon the data infrastructure. How are you seeing the competitive tensions in this area playing out any particular geography stand out as the global dynamic clearly shifts in this segment.
For data in general Yep.
I mean look I guess I would just.
I don't know that we're noticing any standout regional dynamics other than we do have a business in south American it's growing.
And there does seem to still be a need for data capacity, maybe maybe Ben just referred to.
What we're hearing from the big cloud.
Providers and the their need for more capacity.
Yes, I think.
Sam as Sam's highlighting we continue to hear from our clients.
You know in increasing demand, especially in South America and even.
For example, in our towers business in Europe, we continue to have Emma knows want to build new points of presence with us and new towers. So I think if anything we identified data infrastructure a number of years ago as a potential.
Sector to focus on and if anything I think its emerging today as.
And infrastructure asset class with all the characteristics you'd expect and as only become more important as a result of this current situation and less.
If I could sneak one quick in.
On on valuation you mentioned some companies are trading well below intrinsic value.
Could you perhaps compare these valuations are relative to prior downturn and perhaps talk generally about the bid asks are the reasonable it's been still way white.
Just conceptually.
I'm, sorry, I guess as Sam.
Look it's hard to compare to.
Previous cycles, I mean to only.
No major pull back.
On a broad scale with back in the GFC.
And we initially saw pullbacks of similar magnitude.
At this time, the recovery was much quicker and more broad.
I would say that.
Some of the the businesses that we're looking at Yale have had there.
Valuations cut more than half and so.
Thats whats, creating the opportunity.
Im not sure as much marconnet.
That's helpful. Thanks.
Thank you. Our next question comes from Rob Book with Scotiabank. You May proceed in question.
Yes, just a quick follow up when you're looking at your financing strategy moving forward with some of the monetization of grass. That's pushed off how are you thinking about.
Bridging that gap and could that see or additional bit units the U.S annual trip.
Hi, Rob.
Yeah, we.
I just make two quick comments in that first.
It would be hears remarks, you mentioned that we.
Arranged to boast facility that effectively.
Bridges the asset sales.
For us.
And.
We will utilize that and.
Fires the resumption of asset sales.
We expect that.
Ill either in the latter half of this year or.
Next year, they will resume so we're not expecting there to be a lengthy delay.
And I guess.
Part of what gives us the confidence to say that is.
Just.
What we've noticed with our investor base on the institutional side as people are just getting on with business.
The attractiveness of the sector abating.
Yes, putting aside some of the transport assets.
Yes, it's only been highlighted by what's gone on and the amount of capital out there is massive and interest rates are lower so we know valuations will hold up well and we've already seen resumption of activity in the renewable power and.
Data infrastructure sectors.
And we expect that.
The energy and transport sectors won't be far behind it so.
Look.
This is a.
And our view at this stage a.
A delay and resumption of activities.
Should be should continue or should resume.
In the fall early next year.
Appreciate the color Thats it from me. Thank you.
[music].
Thank you. Our next question comes from Longview by doing with Industrial Alliance. You May proceed with your question.
One quick question for me, you mentioned counterparty risk because into a major issue for you. So far today I'm. Just wondering if you can comment on what are the issues that were you. The most today given the kind of arms.
I'd say a few areas.
Issues we've had.
We have a big backlog or our backlog of construction projects in many of our utilities businesses and in some of the jurisdictions, where those are located.
Construction activity was mandated to either slowdown or come to a halt for a period of time, we're starting to see activity resume as I mentioned in my comments.
So that's been one of the impacts I think the here touched on the impact on our transport sector in terms of some of the volume dynamics.
But apart from that a we've been monitoring issues around counterparties liquidity.
And the health and safety of our people very closely and we Havent had any major issues our assets have been pretty resilient, yes, maybe I'll just add to that.
I think on a.
Individual asset micro level, we don't see any major.
Issues, where were the biggest issues at reside and this is this is always the case irrespective of where we are now. It's just more heightened is government policy or regulation has an unintended consequence, and so lots of governments are responding to the epidemic.
With with policies some that are well thought out some that are not well thought out and frankly, that's the biggest risk for any company out there in the world.
Putting ourselves.
But as long as a sensible decisions are made then.
We're confident that we'll work through this.
Okay Thats helpful.
Okay. Operator, thank you Nick is that all the costs are all questions.
Yes, I'm answering any questions at this.
Okay, well, thank you and thank you operator, and thank you everyone for joining the call. This morning, and we really really appreciate your ongoing support and we wish you and your family's continued health during these challenging times.
I am pretty ladies and gentlemen.
Thank you for participating in today's conference. This concludes today's program you may now disconnect everyone have a great day.