Q4 2020 Brookfield Infrastructure Partners LP Earnings Call

February 3, 2021

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Brookfield infrastructure Partners Q4, 'twenty and 'twenty results conference call and webcast. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any operator assistance. Please press star zero.

It is now my pleasure to introduce managing director Renee Luby and ski.

Thank you operator, and good morning, Thank you for joining us from Brookfield infrastructure partners fourth quarter earnings conference call for 2020.

On the call today is Bahir <unk>, Chief Financial Officer, David Grant Senior Vice President of Finance.

Sam Pollock, Chief Executive Officer, and Ben Vaughan 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 and responding to questions and 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 risk factors and I encourage you to review our annual report on form 20-F, which is available on our website.

With that I'll turn the call over to Bill.

Thanks, Renee and good morning, everyone.

We're all pleased to be here today to help take you through.

Our results for 2020, and providing you and operating update.

And my remarks. This morning will focus on providing a quick overview of FERC accomplishments for the year touch.

Touch base on our balance sheet and funding plans and then I will conclude by taking you through our approach to ESG.

So starting off from the results and accomplishment front I think it goes without saying that this past year was like nothing we've ever seen before.

From a business perspective, this unique environment showcased our resilience and strength of our business.

Our operations continued to deliver uninterrupted service. Despite many of the broad based restrictions that have been imposed globally.

Additionally, during the year, we added a number of high quality assets and key strategic sectors and geographies that we expect will become significant contributors to our future cash flow growth.

Our key accomplishments for 2020 were as follows first we achieved solid performance across our operating segments delivering <unk>.

<unk> growth of 9% in our businesses on a constant currency basis.

We deployed $2 $5 billion into new investments and organic capital projects with the notable highlights being the acquisition of a large scale portfolio of telecom towers in India, and and investment and a world class LNG export terminal, that's contributing to global decarbonization efforts.

We also generated over $700 million through capital recycling.

Completed four sales processes and several assets asset level financings that resulted in an average after tax IRR of approximately 20%.

And three times.

Multiple of our invested capital.

And last but not least we listed Brookfield infrastructure Corporation or <unk> on the New York and Toronto stock exchanges significantly expanding our market access.

<unk> on March 31, the listing was met with strong investor reception and robust trading volumes.

Shifting now to our balance sheet, our overall disciplined approach to financing at the corporate and asset level allowed us to remain focused on opportunistic transactions throughout the year.

With our attention on Derisking, our balance sheet and maintaining a healthy healthy liquidity position to support our growth opportunities. We completed several important initiatives and this historically low interest rate environment.

First we enhanced our corporate issuance profile.

And we did that by extending our debt maturity profile and.

Given the refinancing debt refinancings that we completed and with that our nearest corporate maturity does and now take place until 2024.

We also commenced the green preferred unit program, raising a total of $400 million.

Over two issuances of perpetual preferred units and the U S with an average coupon of approximately 5%.

This is a relatively deep and attractive market that we expect to continue penetrating.

Next we continued or.

<unk> maintained a robust <unk>.

And metrics and a strong investment grade credit rating.

We have a conservative balance sheet with approximately 85% of our term debt residing at the other.

Asset level on a non recourse basis, and a 21 times interest coverage ratio at the corporate level.

These factors support our strong investment grade rating of Triple B, plus stable, which was reaffirmed in June of 2020.

Lastly, we meaningfully advanced our capital recycling program generated over $700 million of proceeds and launched other sales processes that are progressing extremely well and Sam will make some remarks on that front later on the call.

Our liquidity position currently sits at $3 7 billion.

Of which $2 4 billion resides at the corporate level and.

And the near term, we expect to further strengthen our liquidity position by an incremental 2 billion are several sales processes near completion.

I'm also pleased to announce debt as a result of our strong financial and operating performance and robust liquidity position. Our board of directors has approved a quarterly distribution increase of 5% to 51 per unit in 2021.

This represents the 12th consecutive year of distribution increases for our business.

And lastly, before I conclude my remarks, we thought it would take some time today to address our approach to ESG or environmental social and governance.

We have a long history of owning and operating long life infrastructure businesses that provide essential services, both globally and in the local communities and which they operate.

ESG considerations have always been embedded in how we operate and underwrite our businesses and we make it a priority to actively engage with all relevant stakeholders on a regular basis.

And the investment communities increased focused on focus on this topic, we wanted to provide or provide you with a reminder of our approach and how some and highlight some recent initiatives in this regard.

To begin <unk>.

ESG considerations and monitoring practices are integrated and our underwriting and operating standards and.

We use our operating expertise to identify material ESG risks and opportunities when underwriting of prospective investment then develop and oversee the implementation of short and long term plans to drive performance.

And we drive strong cultures within our operating businesses by holding senior executives accountable for specific performance targets.

And leveraging our Brookfield network to bring new ideas and approaches to the organization.

Additionally, we invest and resilient businesses and accounts for stranded asset risk.

Avoiding stranded assets has always been top of mind for us as this risk could be influenced over time by various factors, particularly environmental considerations.

Using our midstream assets as an example, we're focused on businesses that are both resilient and active contributors to global decarbonization efforts.

Revenues generated are mostly contracted on a long term basis and have no commodity price or volume exposure.

We have a diversified base of creditworthy, counterparties and earn attractive cash yields.

Most importantly, there is significant upside potential should these assets be repurposed and the future as part of a global energy transition.

Lastly, I wanted to speak to our strategy around the measurement and reduction of greenhouse gas or <unk> emissions over time.

We are striving towards net zero emissions on and avoided carbon scope, one and scope two basis.

On that basis Brookfield asset management is currently net net net negative across its entire $600 billion asset portfolio.

Largely due to its ownership of one of the world's largest pure play and renewable power businesses.

Through our affiliation with Brookfield asset management, we can benefit from the broad expertise regarding the implementation and maintenance of industry, leading ESG policies and protocols and benefit from attributes shared at the group level.

It's also worth noting.

We track GH Ghd emissions, and we will develop and regularly publish de carbonization plans consistent with the Paris agreement.

With the envelope of net within the envelope of net zero, we will continue to own and operate certain essential infrastructure assets globally that transport fuel.

While natural gas related assets make up only a portion of our well diversified portfolio. We believe that they play an important role and the global energy transition and act as a bridge to renewables and potentially hydrogen.

We want to assure the investment community that when we acquired these assets we will be laser focused on the duration of cash flows.

We will operate them with.

Their contributions to the transition to net zero in mind and with plans to continuously improve them over time.

So with that thank you for your time and now I'll turn it over to David to discuss our operating results for the quarter.

And here and good morning, everyone.

Before turning it over to Sam I'll provide a review of operating results for the year as well as highlight some of our more recent operational achievements.

As Bahir mentioned this was a strong year for our business reported <unk> for 2020 totaled $1 $4 5 billion.

Compared to $1 38 billion and the prior year.

This 5% increase reflects the highly regulated and contracted nature of our cash flows as well as the embedded organic growth within the company.

After adjusting for certain timing related impacts associated with economic shutdowns earlier. This year <unk> would have been almost 10% ahead of 2019 levels.

Our results benefited from capital deployed across our segments and organic growth within our utilities midstream and data segments.

The single largest adverse impact on our results was the depreciation of the Brazilian real which reduced <unk> by approximately $100 million relative to 2019.

I will now touch on the underlying performance of our operations and this year start.

Starting with utilities. This segment generated <unk> of $659 million and 2020 and annual increase of 6% after adjusting for the impact of a weaker Brazilian real.

Our utility businesses performed well overall, reflecting the regulated and contractual nature of their cash flows.

And our UK regulated distribution business, new connection activity for the quarter average approximately 90% of prior year levels as construction activity steadily increased over the past six months cash.

<unk> sales exceeded plan for the first time since the initial government imposed shutdowns took effect, reflecting the strength of both our multi utility offering as well as the housing market.

In December our Brazilian regulated gas transmission operation received its annual inflationary tariff adjustment that will result in and almost 25% increase and revenues this year on a local currency basis revenues.

Revenues for this business are contractually linked to an inflation index, which increased substantially in 2020 because of the devaluation of the Brazilian real.

This contractual protection serves as a natural foreign currency hedge and will allow us to meaningfully grow <unk> next year.

Building upon the success of our North American operations, we have agreed to acquire a controlling stake and the largest independent residential infrastructure company in Germany.

The company provides low carbon heating solutions to over 20000 customers and we plan to leverage the existing platform to expand and this highly fragmented industry and Germany.

Total investment was initially $75 million with <unk> share being approximately $20 million, but we believe we can deploy significant follow on capital as we use this initial investment as a platform to grow residential heating and cooling solutions throughout Germany, and the rest of Continental Europe.

Moving to our transport segment, <unk> was $590 million, which raws relatively consistent with the prior year, despite a challenging environment and disruptions and global trade.

The segment benefited from the initial contributions of our North American rail operation and LNG export terminal.

Solid volumes across our rail networks and favorable rent settlements at our U K port operation.

These contributions were offset by lower volumes experienced at our toll roads and container parts. During the first nine months of 2020.

More recently traffic and volume volume levels across our GDP sensitive transport businesses continued to improve throughout the fourth quarter on.

On average carloads across our rail networks were broadly in line with the same quarter of 2019 and traffic levels and our toll road operations have improved highlighted by a 7% increase and Brazil on a same store basis.

Finally, our diversified terminal operations recovered index and after experiencing volume declines earlier this year fourth quarter moves were up approximately 10% year over year. We are encouraged by the trajectory of our transport businesses and expect performance to benefit as mobility restrictions begin to EPS.

Yes.

<unk> from our midstream segment totaled $289 million and increase of 18% compared to the prior year performance.

Performance. This year was excellent with organic growth contributing 13% despite challenges and global energy markets are highly contracted cash flows were uninterrupted by the economic shutdown and we benefited from robust transportation volumes as well as the commissioning of several new capital expenditure projects.

Specifically, our U S gas pipeline and reported very strong results during the fourth quarter with <unk>, increasing 25% above prior year levels.

Results were driven by favorable market conditions, particularly at our gas storage operations as well as the commissioning of two growth projects. These fully contracted projects involve system enhancements to increase deliverability of Gulf Coast LNG facilities.

Additionally, the business and substantially completed the second phase of its Gulf Coast expansion, which will further increase transport capabilities and the region.

This project involves approximately $200 million of capital spend with bip share being $100 million.

And is on track to be completed below budget once commissioned and the next few months the expansion will generate annual EBITDA of $45 million under long term take or pay contracts of which fifth share is $23 million.

Lastly, our data segment delivered <unk> $196 million and increase of almost 50, 50% compared to the prior year.

The step change increase is the result of organic growth and approximately $1 billion of capital deployed into various strategic growth initiatives over the last 24 months.

Recently, we've commissioned 22 megawatts of capacity at our South American data centers and constructed approximately 150000 fiber funds at our French telecom operations.

Combined these products will contribute annual EBITDA of $50 million.

Of which 50 share is approximately $10 million.

And finally, the integration of our recently acquired Indian Tower operations is progressing nicely with key commercial activities well underway and January we signed a binding term sheet with one of the leading mobile network operators and the country to install their telecommunications equipment on our towers.

This is a notable milestone for the co location strategy that formed a core part of our investment thesis and should lead to similar arrangements with other network operators.

With that I'll now pass the call over to Sam.

Okay. Thank you David and good morning, everyone.

From my remarks today I'll discuss several of our strategic initiatives and then touch on our outlook for the year ahead.

As Bill mentioned.

At the outset of the pyramid.

Pyramid debt to the call we have had a successful year on the investment front.

During the year, we deployed approximately $1 billion into two highly cash generative data and transfer assets and we also invested over $900 million or.

Or approximately $400 million net of project level financing to advance key capital projects within our existing businesses.

And this will significantly contribute to our organic growth in the coming years.

We also purchased over $600 million of shares and the handful of publicly traded infrastructure companies that trade at substantial discounts to their intrinsic value.

Many of those companies recover quickly, which resulted in approximately $60 million of realized gains and the year.

We continue to hold the remaining companies and hope that at least one of these physicians will lead to a larger transaction.

In December we lifted our Australia export terminal on the Australian stock exchange through.

Through the initial public offering we sold a 20% interest received proceeds of approximately $100 million.

And and retained a 49% stake.

The successful lifting demonstrate the value and demand for stable cash flow producing infrastructure businesses.

In addition, I am pleased to share that just this week, we agreed to sell our North American district energy business and width.

We first acquired the business back in 2012.

And through years of targeted organic growth and follow on acquisitions. It has grown to be the largest energy system, and North America and delivers heating and cooling to over 800 buildings.

As a result of our asset management initiatives. The business is well contracted and are substantially derisked growth pipeline has been put in place, making this business attractive to institutional investors.

The sale will be in the form of two separate transactions for total consideration of $4 1 billion.

On an enterprise value basis.

Net proceeds to bip are expected to be approximately $950 million.

We will earn over a 30% IRR on our investment and a multiple invested capital of over six times.

This result is the culmination of years of effort to grow and Derisk the business through many initiatives.

Looking ahead, we are well positioned to capitalize and new infrastructure investment opportunities and foresee our capital recycling program to be a principal source of funding.

As we've mentioned in the past, we expect 60% to 75% of growth opportunities to be funded through the monetization of mature derisked assets.

We anticipate approximately 4 billion and proceeds from capital recycling over the next two years.

Now turning to our outlook for the business. We've entered 2021 with a great deal of optimism Guy.

Guided by a fairly positive backdrop anchored around historically low interest rates.

And a global rollout of several COVID-19 vaccines that are currently underway.

This should result, and a gradual reopening of economies around the growth during the first half of the year.

This backdrop bodes well for the global economy, and more specifically for our GDP sensitive assets.

Our ports toll roads and rail businesses have proven their resilience and.

And we anticipate they will outperform during a period.

A return to normalcy and anticipated period of economic expansion.

Additionally, our midstream businesses performed well and 2020 do their contracted nature.

However, increased economic activity should lead to even higher market sensitive revenues, which had historically comprised approximately 15% to 20% of our revenues.

The key priority heading into 2021 is to convert our substantial pipeline of attractive opportunities and to investments as.

As we discussed at our Investor Day in September we believe we are entering and infrastructure Super cycle, where the investable universe of opportunities will grow materially and our access to low cost capital remains strong.

We continue to target to deploy over $2 billion and 2021.

And Furthermore, the contribution from new investments is expected to be enhanced by our capital recycling program, which is on track to deliver $2 billion of proceeds and a record for us in any year.

That concludes my remarks for today and.

And operator I'll pass the call back over to you to open up the line for questions.

Thank you.

As a reminder to ask a question you will need to press star one on your telephone.

To withdraw your question press the pound key.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Rupert <unk> with National Bank.

Hi, good morning, everyone.

Good morning, or good morning.

A bit here looking at your ESG approach and there seems to be increased competition from zero carbon assets today.

Rich could compress a return on those assets, but other assets like midstream assets look like they could be out of favor assuming youre seeing this trend and asset valuation how do you balance your ESG goals.

With cash flow returns on new investments.

Good morning growth rate I may pass that one over to my partner and volume.

Yes, Hey, Rupert it's been volume here.

Look in terms of that ESG has been a focus for us for many years, both set of Brookfield wide level and within the infrastructure group.

So it's really important to us and clearly today.

And ESG is the focus and with a specific focus on carbon and I would just say we welcome this transition and on the investment side.

We've been taking and carbon reduction targets and you account for a long time, so the kinds of targets that we're seeing as bahir mentioned and the Paris accord and and the upcoming Glasgow Glasgow Summit.

And that are going to be coming up and.

And.

From our perspective this does not mean, we won't own high quality assets for example, and the midstream space.

But we will focus on ensuring that we are taking those reduction targets into account and have plans to transition the businesses over time and make sure we're earning an appropriate return on and return of capital. So.

It's fairly consistent with the ESG approach, we've been using for many many years.

So then when Youre looking at new assets, you can look for opportunities to reduce the carbon footprint and maybe improve the market view what that asset over time.

Is that a way then to improve returns and your view.

Yes, and maybe I'll jump in Rupert.

I think it's a multifaceted approach.

The the first thing is within our existing portfolio obviously.

We're implementing plans to reduce our carbon footprint.

As it relates to new investments as we carryout diligence on various assets we're looking for.

And on opportunities, where we can reduce them and as Bahir mentioned at the outset, we are taken to account.

Future trends and our analysis of these assets and what <unk>.

<unk> carbonization efforts could mean to them.

But I think to your earlier point.

We still have a very balanced approach to what assets. We are looking at and so we are still very much focused on high quality midstream businesses, where we can earn an attractive return and we will continue to invest and those type of assets.

And we're also looking at.

Yes.

New technologies and new.

Environmentally attractive businesses that might capture carbon.

And where those returns make sense, and we think that and the coming years with government incentives and with improvements in technology. Many of those businesses will become economic and we do appreciate that we will have to compete for them.

But we will invest on a basis, where we can get the proper returns.

So sorry for that long winded answer, but hopefully that sounds great.

Thank you a quick one for David looking at the inflation indexation on your billing and gas pipeline are we going to see.

Similar levels of inflation and your other Brazilian assets this year or how should we be how should we be looking at that opportunity.

Yes, good morning Rupert.

It's a great question and I'd say the debt.

Toll roads and the rail networks that we own and Brazil are subject to a different inflationary measure it's closer to 3% to 4% annually. So probably in line with its target and traditional level sorry, you wouldn't see the same local currency growth and those other segments.

And sorry, guys. Thank you.

Thank you.

Next question comes from the line and the Robert Kwan with RBC capital markets.

Great Good morning.

First question is on the acquisition opportunities, you're seeing and you previously highlighted.

It is.

Trends supporting your growth and data.

And on the energy side, you also highlighted multiyear opportunities, but tactically.

And valuations when you kind of.

A lot more and the public security side.

Can you, maybe just update your views and especially.

And so opportunities on those two but as well.

Given your outlook for reopening and GDP sensitivity.

And do you also have a tactical interest and <unk>.

And capital and assets that maybe arent performing well right now, but you see benefiting from reopening more so than others.

Hi, Robert all cash.

Of that one so I think the question was.

Has our investment posture changed for the data and midstream sectors and.

And.

Are there opportunities for businesses that are not performing well.

Well today, so in relation to the first part of the question.

Yes, we still see.

Significant opportunities in and.

And both data and midstream.

At the moment for different.

For different reasons data continues to require massive amounts of capital to.

Complete the 100 year transformation of the backbone of that sector.

And the opportunities our global I would say the the issues. It has so much supply of opportunities on the data side. It's a valuation challenge there is a lot of.

New entrants into the market and obviously, we need to pick our spots carefully.

We think that.

The areas that we're focused on.

Tend to be.

Businesses.

Participating in the fiber rollout across Europe and.

And North America.

We looked into net debt tower.

Tower opportunities around the world data center opportunities and particularly greenfield opportunities in <unk>.

Asia Pacific.

And we continue to evaluate these.

And data distribution companies similar to what we've done and.

And New Zealand, because we see that as an opportunity for us down the road.

So many.

And many situations on that front on the energy side, it's more of a value situation, we still think that there's businesses that arent.

Trading at their intrinsic value that we think would make sense for us and that's going to be a focus for the coming year.

And then on.

Those businesses that aren't performing as well today because of the shutdown.

The one that we've highlighted the most over the last over the last couple of quarters has been the airport sector.

We continue to monitor opportunities.

We don't yet have.

Anything that has been actionable for us we have seen.

Some activity on the <unk> space that others have.

<unk>.

But.

Ourselves we're still.

Watching and and hoping that something comes up.

That's great and if I can finish just on capital recycling.

And it's been a focus and mature de risked assets.

Much just the disconnect between.

Private market M&A valuations versus what you think your investors attach.

Publicly and valuations play into any other decisions.

And if it does what assets and the portfolio do you see as having the greatest disconnect and what.

You think you can sell them out and valuation or multiple wise versus what you think the market is actually within your share price.

Yeah.

That's interesting question Robert.

Yes.

Look.

The public markets.

That's a bit more challenging for me to comment on.

Yes.

And public investors view.

Valuations across all the different sectors I think some businesses.

Trade extremely high others, not as much but I think today.

More broadly.

The public markets, probably beer the interest, we see and the private side so midstream.

Is not trading as robustly and that's probably the same on the private side, whereas on the data and.

And utilities side, we are seeing relatively strong valuations and the public markets as well and the private markets.

I'm not sure that day.

And a massive disconnect.

I think.

From our perspective.

<unk>.

We just think theres, a tremendous discipline to continue to recycle our businesses.

And we think it's highly accretive for our own.

Corporate finance strategy too.

Al assets, once they've been derisked and and.

And we can sell them to a buyer who will attach and single digit returned to them and then reinvest that.

At returns, where we can earn double digit <unk>.

And that strategy has worked well for us for over a decade and.

We tend just to focus on continuing to execute that as opposed to worrying about.

The differences between public and private valuations.

Alright, great. Thank you very much.

Thank you.

And our next question comes from the line of Brexit and speed with Raymond James.

Good morning, guys and congratulations to both Bahir and David on their respective appointments.

Thank you guys do you see the German residential infrastructure company that you just acquired D C and that business. The same kind of growth potential you saw him and her care or for that matter and wave.

Yeah.

Hi, Frederic it's Sam I'll touch on that one as well.

I'll make two comments.

First one it's today, a very tiny investment so the actual.

Relative size of that investment vs.

And of care or the differences or the magnitude of well over 100.

But.

The reason we were attracted to and the reason we were attracted to the European market is because we have seen what we've been able to achieve here in North America, and we think that we can replicate that success over and that market and it's highly fragmented.

And.

Based off that the research we've done.

We believe that the receptivity to the product and services that and a care provides and North America will be well received there. So today, it's a very small investment because it's small the growth can be very substantial.

Whether or not we can turn it into the same scale as.

And a care and North America time will tell but it's a massive market the investable universe, it's huge.

And hopefully we can.

Achieve the same success that we did with the your.

And the organic growth with and wave and.

And bill with similar type business.

Okay, no thanks for that color.

Just curious what impacted the boards decision to approve the distribution increase sort of at the low end of your target range. I mean, I know you have lots of irons and fire.

Lots of ability and opportunities to deploy capital and time organic growth opportunities but.

There anything else that you could add to that.

Hi, Frederic it's bahir, maybe I can take that one.

We're optimistic obviously about what 2021 has in store.

For our business, but we're also just mindful.

The impact of Covid or the pandemic has just taken a bit.

Longer than first anticipated.

With the vaccine rollout, there's been a lots and lots of stocks and and goes here.

And so just in light of that we just we thought.

From the side of caution and.

And we think 5% is very attractive and this market and.

And given all of the various things we have on the investment front.

We have a lot of good use for that cash anyway, and that we're going to retain.

And that business. So so so we think this.

It was a sound decision okay.

I'm, not and Thats fair point.

Last question, perhaps from David you mentioned the impact of the Brazilian real on the business and 2020 wondering what the impact was and the fourth quarter and and secondly.

And if.

Exchange rates don't really swing materially from from now on what would be sort of the impact on this year's results.

Yes, so I'll start and fourth quarter, it was about $25 million.

Predominantly in our regulated transmission and our toll roads.

And then if I.

Look at our average rate for 'twenty and 'twenty relative to where we are today, it's relatively in line and it's going to be able within a percent or two right now at the current levels. So I wouldn't expect it to be a headwind.

Looking ahead at these levels.

Okay. Thanks, Thanks, guys.

Thank you.

Thank you and our <unk>.

Question comes from the line of Robert could tell each day with CIBC capital markets.

Hey, good morning, everyone and thanks for the comments.

Comments I just wanted to follow up on.

Book with out of the midstream investment opportunity outlook. So I was wondering with the data.

The pandemic and the work from home and reshape the growth outlook for the data centers and the data business in general.

And higher operated Sam.

And maybe I'll start off and it might pass it over to Ben as well because.

I think he can give some.

Granular examples from our existing businesses, but.

Yes.

Long story short.

Take up rates and demand for.

Data has.

Never been stronger so we're.

For the businesses that we've acquired or the fiber systems that we're rolling out.

Take up is faster and.

And demand for.

Our space and our Hyperscale facilities.

And is extremely strong so we've been able to where we've had land.

Attract tenants to to build hyperscale facilities and.

And we don't see any slowdown in that and and and a number of markets, particularly in Asia, where theres onshoring of data storage and we see.

Particular demand for per data centers, but maybe Dan you want to talk a bit about.

<unk> and a few of our other yeah, maybe just to add a little bit of color from you on the ground operations like we are building out a number of fiber to the home networks and France and R.

Our adoption curves of people switching to those fiber networks has been above our expectations pretty much since COVID-19 started so.

And there does appear to be some day.

And demand pull from the fact that people are more at home and want higher quality data services and as Sam mentioned and our in our Hyperscale data center business, sometimes and those data centers, we have a little bit of extra capacity, we can bring to bear for our clients and we're seeing them call and that is it.

And it sort of a small little amounts that we can add to.

And improve the service offering to them, but we're just seeking.

And almost a very strong appetite to fully use the data centers and to adopt a fiber networks.

Okay. That's helpful.

Follow up on the and the co location agreement.

Thanks, Mike.

On the co location and soccer and just in general what co location or.

And can get to and India.

And our business planning horizon.

Yes, so we're targeting a co location rate up but pretty modest one of one five over about a five year period. So it's it's.

It's not.

And other markets, we do see colocation rates and the two to three range.

And as Dave mentioned in his comments, we've kicked it off with our our first tenant and they'll have their initial equipment on many of our towers starting this quarter.

So that's the level we're targeting.

Okay and you may have.

And gross premiums.

Previous comments, but my and my last question from me.

And the midstream side and I was just one.

Wondering it's early days of August please call, but can you tell us what impact.

By the administration and this early auctions and hard on additional investments and the U S Mint premiums.

And maybe it's for some quick comment on the potential further LNG investments and what.

And what im getting at is.

Is it worthwhile waiting.

Just to see the full and.

Oh well.

And the administration might do or.

Thank you.

And you should.

We are optimistic given the long term value and some of these awesome.

Okay.

Well look.

Maybe I'll tackle that one.

First I would say.

No.

We are accustomed to investing across different administrations.

And.

While.

There is obviously a very progressive.

<unk>.

We expect as we have seen.

And.

And many.

Previous transitions that.

Youll policies will be somewhat.

Slowed.

With the opposition and doing what they typically do so.

Yes.

And while.

And I think this is the comments we tried to make earlier.

The general trend is very obvious to everyone and and that is what we are including in our.

Underwriting programs, but.

We don't expect there to be and.

Immediate changes this is a transition that's going on it's not a end of.

Of carbon.

And the technological could happen today.

And.

So look we're taking a very pragmatic and and I think.

Our cautious approach to our investing in that sector.

And we are mindful of the policies of the.

The new administration.

Okay. That's fantastic. Thank you.

And our next question comes from the line of Debbie Dodge with BMO capital markets.

Thanks, Good morning, guys.

Good morning, good morning.

My first question's on Tds, well I think it is.

Ties into one of your earlier.

Answers on valuations and the datacenter, but just wondering if there are there synergies and having the various services provided by T. T. D F. Under one company or do you think that business could be more valuable if they wish.

Split off and do a couple of more pieces.

Low.

I think each of the businesses at Tds stands on its own.

And.

While there are certain synergies that you can get.

Each of the lines of businesses, it's in the broadcast sector of the tower sector and the fiber to the home sector and they can each also stand on their own.

Very well so we run the business with distinct P&L for each business to make sure that we're tracking returns and profitability and margins and everything you would expect individually and so it can work very well together and each of the business is also stands on their own very well.

Okay. Okay. Thanks for that.

We've also seen that.

Government and.

And Colombia, they've been looking to privatize.

Some of it that kind of a two part question here first are there assets in the privatization process and Colombia that look interesting Tibet and secondly are there other countries, where you've seen infrastructure privatization.

Gaining momentum.

So I guess I would just its Ben.

Again Devin.

We've seen government privatization programs for example, and South America for many decades. So those programs have been in place and sometimes a day accelerate and sometimes a day.

They sort of decelerate a bit.

But there are obviously.

Yes.

Acquired from the assets, we own today, we acquired through those private education programs and so we'd obviously take a look at everything and I think in general.

And that what we're noticing is a need for governments to raise capital and a desire we are seeing some signs of them putting.

Good programs in place and.

Clarifying regulations, and improving regulatory frameworks to try to attract capital so.

It's sort of a constant theme and we would.

We would take a look at assets as we've always done and the past.

Maybe the other thing and I'd add is.

If youre looking for indications of.

Accelerating versus decelerating of programs typically they follow election cycles. So no difference in South America vs.

Asia or in and North America even.

And when the new administrations come and they tend to start programs and then when you get close to elections, they tend to slow down or stop.

And so we see that very much and South America as well.

Okay, Thanks, Pat and I'll turn it over.

Thank you and our next question comes from the line of our seats and with <unk>.

Bank of America.

Thanks, and good morning, appreciate all the discussions on midstream and ESG if I could.

And kind of probe a little bit on what you're seeing or what you're thinking about where your early days the U S versus international opportunities you mentioned.

And our Paris, Glasgow, clearly, we're going to have a price of carbon and the U S and.

It looks like you're well positioned on the LNG value chain, but wondering if something like a carbon capture would at some point makes sense to you I just wanted to get your all your thoughts and then on the flip side when I'm looking at international Midstream.

I see majors and national oil companies.

Looking to dispose and storage and transportation assets that could have visible duration of cash flow with the even adjusted for card, but I'm just wondering how youre weighing the opportunity said U S international any thoughts on that.

Jeremy to address the carbon capture and triple it.

And.

Yeah.

And I think it's early days I think as.

And I think we've been trying to say many times over on the call.

We are and the early stages of tranche a transformation that's going on and I think there will be opportunities.

Geographically.

Got it.

Im not sure where they are focused and the U S or not but things like carbon capture hydrogen mixing electrification of certain equipment versus versus using fuel directly to power. It. There are a lot of opportunities that I think theyre going to come out.

And we're well positioned because we're in a lot of these industries.

And we're going to have direct experience in delivering on these transitions over time.

No.

It seems early days to be overly specific but we have work streams underway and all of our companies to look at these transformations and start to think through how we can make money and where we can make money with them.

Yeah, and I'll just just on your second point on international versus U S opportunities.

I would say.

The investment pipeline today and is well balanced across all the geographies.

But if I had to say maybe compared to historic levels were probably slightly more weighted to North America then.

International.

But.

But it's.

And we're pursuing things everywhere.

Got it got it and I appreciate the color and then the comment on Q4 average traffic exceeding prior year on a same store basis by 5% pretty impressive and I think you mentioned, Brazil, but just wondering any.

Any other regions that stand out and <unk>.

And that makes.

Yes, I can take that David.

I think the other notable growth year over year would be and India, we've seen.

Tickets at a 5% increase on our portfolio, we have two different portfolios. There. So overall and our blended basis were probably 5% ahead of where we were last year and then our two other geographies being <unk>.

Peru, and Chile are broadly and I think we're maybe down 5% there just due to the mix and they are predominantly more light vehicle traffic growth.

And with people continuing to work from home and certain regions that that doesn't impact.

Mobility and travel across our networks, but overall I think if you put it altogether given the size of Brazil, and our network, we're probably up four 5% and year on year on a total basis.

Thanks, a lot Dave.

And the problem.

Thank you and.

Our next question comes from the line of Andrew Kuske with Credit Suisse.

Thanks, Good morning, I guess, the question is probably per Sam or per bench.

And it really just relates to the Brookfield return focus and overtime and Thats really a duration do per value with an operational bend.

How do you think about depth overall output.

And I ask the question in the context of <unk>.

And you could clearly by some assets for value and the marketplace that have lower multiples attached with them that made the grade bps overall valuation and multiple versus higher multiple assets and the market.

Would actually average up your models, how do you think about that dichotomy of the returns versus the stock impact on and off basis.

Yeah, Hi, Andrew.

So look I am.

Our strategy I think is very clear we are very much DCF investors and.

And return focused multiples feel a bit short term ish and view because they will go up and down, but if we invest well and our underwriting are strong we get the returns then on a long term basis, we will deliver our results and so I appreciate it.

Some investors who might.

Yes, Mike be unhappy with mix and the.

And quarter to quarter basis, because <unk>.

Today.

Towers are looked at and more favorably than than say, our midstream asset but.

I think as long as we do our job and deliver the cash on cash returns and the Dcfs and then we will do well.

And obviously the part we have to deliver on as those terminal values and the right on this terminal value, but thats the thats obviously.

The main focus of our buses long term investors as getting that terminal value right.

That's helpful and then maybe because that dichotomy exists and the short term and nature of multiple partners.

Lead you to have more opportunities on really structural separation approaches where you can flexibly Viper value and then strip out the more loved us and repackage them and then how the unloved Donaldson and other bucket.

Yeah look I think.

I think what you're getting at which is right.

Yes.

Cuz.

Yes.

Various investors and maybe some management teams get focused too much on the short term.

Yes things.

Value don't trade, our businesses don't trade at their intrinsic value and you can.

Either five per value account.

And Thats more complex and.

And break it apart into the various pieces and earn value. So I think that is definitely a big part of our toolkit and and that's.

What we're trying to do and.

And and beating the market and when I called that is finding those.

Situations, where we can buy for value.

Okay. That's great. Thank you very much.

Okay. Thank you Andrew.

Thank you I would now like to turn the call back over to CEO, Sam Pollock for any closing remarks.

Thank you operator, and I appreciate everyone spending the time today and I know, it's a long call but.

And we appreciate your support for the company and look forward to speaking to you again next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call and webcast. Thank you for participating and you may now disconnect.

Yes.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Brookfield infrastructure Partners Q4, 'twenty and 'twenty results conference call and webcast. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

And now my pleasure to introduce managing director Renee Luby and ski.

Thank you operator, and good morning, Thank you for joining us from Brookfield infrastructure partners fourth quarter earnings conference call for 2020.

On the call today is Bahir <unk>, Chief Financial Officer, David Grant Senior Vice President and edge.

Sam Pollock, Chief Executive Officer, and Ben Vaughan Chief operating Officer.

Following their remarks, we look forward to taking your questions and comments.

For further information on known risk factors I encourage you to review our annual report on form 20-F, which is available on our website.

With that I'll turn the call over to be here.

Thanks, Renee and good morning, everyone.

I'm pleased to be here today to help take you through.

And our results for 2020 and provide you an operating update.

And my remarks. This morning will focus on providing a quick overview of FERC accomplishments for the year.

And I touched based on our balance sheet and funding plans and then I will conclude by taking the share our approach to ESG.

Just starting off from the results and accomplishment front I think it goes without saying that this past year was like nothing we've ever seen before.

From a business perspective, this unique environment showcased our resilience and strength of our business.

Our operations continued to deliver uninterrupted service. Despite many of the broad based restrictions that have been imposed globally.

Additionally, during the year, we added a number of high quality assets and key strategic sectors and geographies and we expect will become significant contributors to our future cash flow growth.

Our key accomplishments for 2020 were as follows first we achieved solid performance across our operating segments delivering organic growth of 9% in our businesses on a constant currency basis.

We deployed $2 $5 billion into new investments and organic capital projects with the notable highlights being the acquisition of a large scale portfolio of telecom towers in India, and then investment and a world class LNG export terminal, that's contributing to global Decarbonization efforts.

We also generated over $700 million through capital recycling.

We completed four sales processes and several assets asset level financings that resulted in an average after tax IRR of approximately 20%.

And three times, a multiple of our invested capital.

And last but not least we listed Brookfield infrastructure Corporation or <unk> on the New York and Toronto stock exchanges significantly expanding our market access.

Launched on March 31, the listing was met with strong investor reception and robust trading volume.

Shifting now to our balance sheet, our overall disciplined approach to financing at the corporate and asset level allowed us to remain focused on opportunistic transactions throughout the year.

First we enhanced our corporate issuance profile.

And we did that by extending our debt maturity profile and given.

Given the refinancing debt refinancings that we completed and with that our nearest corporate maturity. There is and now take place until 2024.

We also commenced the green preferred unit program, raising a total of $400 million.

And over two issuances of perpetual preferred units and the U S with an average coupon of approximately 5%.

This is a relatively deep and attractive market that we expect to continue penetrating.

Next we continued our maintained a robust.

Credit metrics and a strong investment grade credit rating, we have a conservative balance sheet with approximately 85% of our term debt residing at the asset level on a non recourse basis and and.

At 21 times interest coverage ratio at the corporate level.

These factors support our strong investment grade rating of Triple B, plus stable, which was reaffirmed in June of 2020.

Lastly, we meaningfully advanced our capital recycling program generated over 700 million net proceeds and launched other sales processes that are progressing extremely well and Sam will make some remarks on that front later on the call.

Our liquidity position.

And it fits a $3 7 billion.

Which $2 4 billion resides at the corporate level and.

The near term, we expect to further strengthen our liquidity position by an incremental $2 billion at several sales processes near completion.

This represents the 12th consecutive year of distribution increases for our business.

And lastly, before I conclude my remarks, we thought we would take some time today to address our approach to ESG or environmental social and governance.

We have a long history of owning and operating long life infrastructure businesses that provide essential services, both globally and in the local communities and which they operate.

ESG considerations have always been embedded in how we operate and underwrite our businesses and we make it a priority to actively engage with all relevant stakeholders on a regular basis with.

And with investment communities increased focused on focus on this topic, we wanted to provider and provide you with a reminder of our approach and how some and highlight some recent initiatives in this regard.

To begin <unk>.

And <unk> considerations and monitoring practices are integrated and our underwriting and operating standards.

And we use our operating expertise to identify material ESG risks and opportunities when underwriting of prospective investment then develop and oversee the implementation of short and long term plans to drive performance.

We drive strong cultures within our operating businesses by holding senior executives accountable for specific performance targets.

And leveraging our Brookfield network to bring new ideas and approaches to the organization.

Additionally, we invest and resilient businesses and accounts for stranded asset risk.

Avoiding stranded assets has always been top of mind for us as this risk could be influenced over time by various factors, particularly environmental considerations.

Using our midstream assets as an example, we're focused on businesses that are both resilient and active contributors to global decarbonization efforts.

Revenues generated are mostly contracted on a long term basis and have no commodity price or volume exposure.

We have a diversified base of credit worthy counterparties and earn attractive cash yields.

Most importantly, there is.

Significant upside potential should these assets be repurposed and the future as part of a global energy transition.

Lastly, I wanted to speak to our strategy around the measurement and reduction of greenhouse gas or <unk> emissions over time.

We are striving towards net zero emissions on and avoided carbon scope, one and scope two basis.

On that basis Brookfield asset management is currently net net net negative across its entire $600 billion asset portfolio.

Largely due to its ownership of one of the world's largest pure play renewable power businesses.

It's also worth noting.

We track GH Ghd emissions, and we will develop and regularly publish decarbonization plan consistent with the Paris agreement.

With the envelope of net within the envelope of net zero, we will continue to own and operate certain essential infrastructure assets globally that transport fuel.

We want to assure the investment community debt. When we acquired these assets, we will be laser focused on the duration of cash flows.

We will operate them with.

And their contributions to the transition to net zero in mind and with plans to continuously improve them over time.

So with that thank you for your time and now I'll turn it over to David to discuss our operating results for the quarter.

Thank you Bahir and good morning, everyone.

Before turning it over to Sam I will provide a review of operating results for the year as well as highlight some of our more recent operational achievements.

As Bahir mentioned this was a strong year for our business reported <unk> for 2020 totaled $1 $4 5 billion.

Compared to $1 $38 billion from the prior year. This.

And this 5% increase reflects the highly regulated and contracted nature of our cash flows as well as the embedded organic growth within the company.

After adjusting for certain timing related impacts associated with economic shutdowns earlier. This year <unk> would have been almost 10% ahead of 2019 levels.

Our results benefited from capital deployed across our segments and organic growth within our utilities midstream and data segments.

The single largest adverse impact on our results was the depreciation of the Brazilian real which reduced <unk> by approximately $100 million relative to 2019.

I will now touch on the underlying performance of our operations this year sorry.

Starting with utilities. This segment generated <unk> of $659 million and 2020 and annual increase of 6% after adjusting for the impact of a weaker Brazilian real.

Our utility businesses performed well overall, reflecting the regulated and contractual nature of their cash flows.

And sales exceeded plan for the first time since the initial government imposed shutdowns took effect, reflecting the strength of both our multi utility offering as well as the housing market.

In December our Brazilian regulated gas transmission operations received its annual inflationary tariff adjustment that will result in and almost 25% increase in revenue this year on a local currency basis.

Revenues for this business are contractually linked to an inflation index, which increased substantially in 2020 because of the devaluation of the Brazilian real.

This contractual protection and serves as a natural foreign currency hedge and will allow us to meaningfully grow <unk> next year.

Building upon the success of our North American operations, we have agreed to acquire a controlling stake and the largest independent residential and infrastructure company in Germany.

The company provides low carbon heating solutions to over 20000 customers and we plan to leverage the existing platform to expand and this highly fragmented industry and Germany.

Total investment was initially $75 million with <unk> share being approximately $20 million.

And we believe we can deploy significant follow on capital as we use this initial investment as a platform to grow residential heating and cooling solutions throughout Germany, and the rest of Continental Europe.

Moving to our transport segment, <unk> was $590 million, which rather relatively consistent with the prior year, despite a challenging environment and disruptions and global trade.

The segment benefited from the initial contribution of our North American rail operation and LNG export terminal and solid volumes across our rail networks and favorable settlements and our UK port operation.

These contributions were offset by lower volumes experienced at our toll roads and container parts. During the first nine months of 2020.

More recently traffic and volume volume levels across our GDP sensitive transport businesses continue to improve throughout the fourth quarter on average carloads across our rail networks were broadly in line with the same quarter of 2019 and traffic levels at our toll road operations have improved highlighted by a 7% increase and.

<unk> on a same store basis.

Sure.

<unk> from our midstream segment totaled $289 million and increase of 18% compared to the prior year.

Specifically, our U S gas pipeline reported very strong results during the fourth quarter with <unk>, increasing 25% above prior year levels.

Additionally, the business and substantially completed the second phase of its Gulf Coast expansion, which will further increase transport capabilities and the region.

This project involves approximately $200 million of capital spend with bip share being $100 million and.

Lastly, our data segment delivered <unk> $196 million and increase of almost 50, 50% compared to the prior year.

Step change increase is the result of organic growth and approximately $1 billion of capital deployed into various strategic growth initiatives over the last funds formats.

Recently, we have commissioned 22 megawatts of capacity at our South American data centers and constructed approximately 150 500 funds at our French telecom operations.

Combined these products will contribute annual EBITDA of $50 million of which <unk> share is approximately $10 million.

<unk> strategy that formed a core part of our investment thesis and should lead to similar arrangements with other network operators.

With that I will now pass the call over to Sam.

Okay. Thank you David and good morning, everyone.

From my remarks today, I will discuss several of our strategic initiatives and then touch on our outlook for the year ahead.

As Bill mentioned.

At the outset of the pyramid.

And as of the call we have had a successful year on the investment front.

During the year, we deployed approximately $1 billion into two highly cash generative data and transfer assets and we also invest over $900 million.

Our approximately $400 million net of project level financing to advance key capital projects within our existing businesses. These will significantly contribute to our organic growth in the coming years.

We also purchased over $600 million of shares and a handful of publicly traded infrastructure companies that trade at substantial discounts to their intrinsic value.

Many of those companies recovered quickly, which resulted in approximately $60 million of realized gains and the year.

We continue to hold the remaining companies and hope that at least one of these physicians will lead to a larger transaction.

In December we lifted our Australian export terminal on the Australian stock exchange through.

Through the initial public offering we sold a 20% interest received proceeds of approximately $100 million.

And have retained a 49% stake.

The successful lifting demonstrate the value and demand for stable cash flow producing infrastructure businesses.

In addition, I am pleased to share that just this week, we agreed to sell our North American district energy business and ways.

We first acquired the business back in 2012.

And through years of targeted organic growth and follow on acquisitions. It has grown to be the largest ditched energy system, and North America, and deliberate heating and cooling to over 800 buildings.

The sale will be and a 402 separate transactions for total consideration of $4 1 billion on an enterprise value basis.

Net proceeds to bip are expected to be approximately $950 million.

We will earn over a 30% IRR on our investments and a multiple of invested capital of over six times.

This result is the culmination of years of fabric to grow and Derisk the business through many initiatives.

Looking ahead, we are well positioned to capitalize and new infrastructure investment opportunities and foresee our capital recycling program to be a principal source of funding.

As we've mentioned in the past, we expect 60% to 75% of growth opportunities to be funded through and monetization of mature derisked assets.

We anticipate approximately 4 billion and proceeds from capital recycling over the next two years.

Now turning to our outlook for the business. We've entered 2021 of the great deal of optimism Guy.

<unk> fairly positive backdrop anchored around historically low interest rates.

And a global role and have several COVID-19 vaccines that are currently underway.

This should result, and a gradual reopening of economies around the growth during the first half of the year.

This backdrop bodes well for the global economy, and more specifically for our GDP sensitive assets.

Our parts toll roads and rail businesses have proven their resilience.

And we anticipate they will outperform during a period.

A return to normalcy and anticipated period of economic expansion.

Additionally, our midstream businesses performed well and 2020 do their contracted nature.

Increased economic activity should lead to even higher market sensitive revenues, which had historically comprised approximately 15% to 20% of our revenues.

Yes.

The key priority heading into 2021 is to convert our substantial pipeline of attractive opportunities and divestments as.

We continue to target and deploy over 2 billion and 2021.

That concludes my remarks for today and.

And operator I'll pass the call back over to you to open up the line for questions.

Thank you.

As a reminder to ask a question you will need to price star one on your telephone.

To withdraw your question press the pound key.

Please standby, while we compile the Q&A roster.

And our first question comes from the line of rubric.

With National Bank.

Hi, good morning, everyone.

Good morning, good morning.

Okay here looking at your EPS key.

Key approach and there seems to be increased competition from zero carbon assets today.

And it could compress a return on those assets, but other assets like midstream assets look like they could be out of favor assuming youre seeing this trend and asset valuation and how do you balance your ESG goals.

With cash flow returns on new investments.

Good morning growth rate I may pass that one over to my partner and work.

Yes, Hey, Rupert it's been volume here.

Look in terms of that ESG has been a focus for us for many years, both setup Brookfield wide level and within the infrastructure group.

It's really important to us and clearly today.

And ESG is the focus and with a specific focus on carbon and I would just say we welcome this transition.

And on the investment side.

And we've been taking and carbon reduction targets and new accounts for a long time, so the kinds of targets that we're seeing as bahir mentioned in the Paris accord and and the upcoming Glasgow Glasgow Summit.

And that are going to be coming up and.

And.

And from our perspective. This does not mean, we won't own high quality assets for example, and the midstream space.

And I'd say, it's fairly consistent with the ESG approach, we've been using for many many years.

So then when Youre looking at new assets, you can look for opportunities to reduce our carbon footprint and maybe.

Prove the market view, what that asset over time and is that a way then too.

Returns and your view.

Yes, and maybe I'll jump in Rupert.

I think it's a multifaceted approach.

The the first thing is within our existing portfolio obviously.

And we're implementing plans to reduce our carbon footprint.

As it relates to new investments as we carryout diligence on various assets we're looking for.

And opportunities, where we can reduce them and as bahir mentioned at the outset, we are taken to account.

Future trends and our analysis of these assets and what day.

Carbonization efforts could nature of them.

But I think to your earlier point.

We still have a very balanced approach to what assets. We are looking and so we are still very much focused on high quality midstream businesses, where we can earn an attractive return and we'll continue to invest and those type of assets.

And we're also looking at.

Yes.

New technologies and new.

Environmentally attractive businesses that Mike captured carbon.

And compete for them.

But we will invest on a basis, where we can get the proper returns.

So sorry for that long winded answer, but hopefully that helps great.

Got it. Thank you that's a quick one for David looking at the inflation indexation and on your billing and gas pipeline or are we going to see.

Similar levels of inflation and your other Brazilian assets this year or how should we be how should we be looking at that opportunity.

Yes, good morning Rupert.

It's a great question and I'd say the debt.

Toll roads, and our rail networks that we own and Brazil are subject to a different inflationary measure it's closer to 3% to 4% annually. So probably in line with its target and traditional allowance you wouldn't see the same local currency growth and those other segments.

And sorry, guys. Thank you.

Thank you.

Next question comes from the line from Robert Kwan with RBC capital markets.

Great Good morning.

First question is on the acquisition opportunities, you're seeing and you previously highlighted positives and.

Other trends supporting your growth and data.

And on the energy side, you also highlighted multi year opportunities, but tactically.

And with weight valuations when you kind of get.

A lot more and the public security side.

Can you, maybe just update your views and especially.

And you saw opportunities on those two but as well.

Given your outlook for reopening and GDP sensitivity.

And do you also have a tactical interest and invest in capital and assets that maybe arent performing well right now, but you see benefiting from reopening more so than other.

Hi, Robert.

Of that one so I think the question was.

Has our investment posture changed for the data and midstream sectors and.

Are there opportunities for businesses that are not performing well.

Well today, so in relation to the first part of the question.

Yes.

We still see.

Significant opportunities in <unk> and.

And both data and midstream.

At the moment for different.

And for different reasons data continues to require massive amounts of capital to.

Yes.

<unk> the 100 year transformation.

The backbone of that sector.

And the opportunities our global I would say the the.

The issue isn't so much supply of opportunities on the data side, its evaluation challenge and Theres a lot of.

New entrants into the market and obviously, we need to pick our spots carefully.

We think that.

The areas that we're focused on.

Tend to be.

Businesses.

Participating in the fiber rollout across Europe and.

And North America.

And we looked at it.

Tower opportunities around the world data center opportunities and particularly greenfield opportunities in.

Asia Pacific.

And we continue to evaluate these.

And data distribution companies similar to what we've done and.

And.

And in New Zealand could we see data and opportunity for us down the road.

So.

Many many situations on that front on the energy side, it's more of a value situations. We still think that there is businesses that arent.

Trading at their intrinsic value that we think would make sense for us and.

And that's going to be a focus for the coming year.

And then on.

Those businesses that aren't performing as well today because of the shutdown.

The one that we've highlighted the most over the last over the last couple of quarters has been the airport sector.

We continue to monitor opportunities, we don't yet have.

Anything that has been actionable for us we have seen.

And some activity on the FBI space that others have looked at pursuing.

But.

Ourselves we're still.

Watching and hoping that something comes up.

That's great and if I can finish just on capital recycling.

Time, and it's been a focus and mature derisked assets.

How much does the disconnect between.

Private market M&A valuation versus what you think your investors attach.

Publicly and valuations play into any other decisions.

And if it does what assets and the portfolio do you see as having the greatest disconnect between what.

What you think you can solve and that valuation or multiple wise versus what you think the market is.

And within your share price.

That's an interesting question Robert.

Yes.

Look.

From the public markets.

And that's a bit more challenging for me to comment on.

Yes.

And public investors view.

Valuations across all the different sectors I think some businesses.

Trade extremely high others, not as much but I think today.

More broadly.

The public markets, probably beer the interest, we see and the private side so midstream.

Is not trading as robustly and that's probably the same on the private side, whereas on the data and utilities side, we are seeing relatively strong valuations and the public markets as well and the private markets.

I'm not sure there's a massive disconnect.

I think.

And from our perspective.

<unk>.

We just think theres, a tremendous discipline to continue to recycle our businesses.

And we think it's highly accretive for our own.

Corporate finance strategy too.

Sell assets Wednesday, being derisked and and.

And we can sell them to a buyer who will attach a single digit return to them and then reinvest debt at returns where we can earn double digit <unk>.

And that strategy has worked well for us for over a decade and.

We tend just to focus on continuing to execute debt as opposed to worrying about.

The differences between public and private valuations.

Got it great. Thank you very much.

Thank you and our next question comes from the line of Frederic <unk>.

And with Raymond James.

Good morning, guys and congratulations to both Bahir and David on their respective appointments.

Thank you guys.

Do you see the German residential infrastructure company that you just acquired DC and that business. The same kind of growth potential you saw him and her care or for that matter and wave.

Hi, Frederic it's Sam.

Sam I'll touch on that one as well.

I'll make two comments.

First one it's today, a very tiny investment so the actual <unk>.

Relative size of that investment vs.

And our care or the differences or the matches at well over 100.

But.

The reason we were attracted to and the reason we're attracted to the European market is because we have seen what we've been able to achieve here in North America, and we think that we can replicate that success over and that market and it's highly fragmented.

And.

Based off the research we've done.

We believe that the receptivity to the product and services that and our care provider and North America will be well received there. So today is a very small investment because it's small the growth can be very substantial.

Whether or not we can turn it into the same scale as.

And a care and North America time will tell but it's a massive market the investment universe is huge.

And hopefully we can.

Achieve the same success that we did with <unk>.

The organic growth with anyways, and and build a similar type business.

Okay. Thanks for that color.

Just curious what impacted the board's decision to approve the distribution increase sort of at the low end of your target range. I mean, I know you have lots of irons and fire.

Lots of ability and opportunities to deploy capital and organic growth opportunities but.

Is there anything else that you could add to that.

Hi, Frederic it's bahir, maybe I can take that one.

Look out and we're optimistic obviously.

And what 2021 has in store.

For our business, but we're also just mindful.

Good day impact of Covid or the pandemic has just taken a bit.

Longer than first anticipated.

And with the vaccine rollout has been a lots and lots of stops and and goes here.

And so just in light of that we just we thought.

And our of the side of caution and.

We think 5% is very attractive and this market and.

Given all of the various things we have on the investment front, we have a lot of good use for that cash anyway, and that we're going to retain and.

And that business. So so so we think this.

<unk>.

With this acquisition.

Sam.

No that's fair fair point.

Ask question, perhaps from David you mentioned the impact of the Brazilian real on the business and.

2020 wondering what the impact was and the fourth quarter and secondly.

If.

Exchange rates don't really swing materially from from now on what would be sort of the impact on this year's results.

Yes, so I'll start and fourth quarter was about $25 million a Boe.

Low predominantly in our regulated transmission and our toll roads and.

And then if I look at our average rate for 2020 relative to where we are today, it's relatively in line and it's going to be able to say on a per cent or two right now at the current levels. So I wouldn't expect it to be a headwind looking ahead at these levels got it okay. Thanks, Thanks guys.

Thank you.

Thank you and our next question comes from the line of Robert <unk> with CIBC capital markets.

Hey, good morning, everyone and thanks for the from a comment.

Comments I just wanted to follow up on.

Book, the data and the midstream and transplant opportunity outlook, so starting with a data hub how's the pandemic and the work from home try and reshape the growth outlook for the data centers and without a business in general.

Yes.

And the higher operated Sam.

And then maybe I'll start off and maybe pass it over to Ben as well because.

I think he can give some.

Granular examples from our existing businesses, but.

Yes.

Long story short.

Yes take up rates and demand for.

Data has.

It has never been stronger so we're.

For the businesses that we've acquired or the fiber systems that we're rolling out.

Take up is faster and.

And demand for.

And our space and our Hyperscale facilities.

<unk> is extremely strong so we've been able to where we've had land.

Attract tenants to to build hyperscale facilities and.

And we don't see any slowdown in that and and and a number of markets, particularly in Asia.

Where theres onshoring of data storage and we see.

In particular demand for for data centers, but maybe and you want to talk a bit about.

<unk> and a few of our other than maybe just add a little bit of color from beyond the ground operations like we are building out a number of fiber to the home networks and France and R.

Our adoption curves of people switching to those fiber networks has been above our expectations.

Pretty much since Covid started so.

And there does appear to be some dimmed.

Demand pull from the fact that people are more at home and want higher quality data services and as Sam mentioned and our in our Hyperscale data center business, sometimes and those data centers, we have a little bit of extra capacity, we can bring to bear for our clients and we're seeing them call on that.

And it sort of a small little amounts that we can add to.

Improved the service offering to them, but we're just seeking.

Almost a very strong appetite to fully use the data centers and to adopt a fiber networks.

Okay. That's helpful.

Follow up on the Indian co location agreement one and.

Might that have.

On the Colocation plasma and just in general what co location Doctor.

And can get too and indeed.

Overall business planning horizon.

Yes, so we're targeting a co location rate up a pretty modest one of one five over about a five year period. So it's.

It's not.

Other markets, we do see colocation rates and the two to three range.

And as Dave mentioned in his comments, we've kicked it off with our our first tenant and they'll have their initial equipment on many of our towers starting this quarter. So so that's the level we are targeting.

Okay and you may have.

And partly addressed previously.

Previous comments.

And I have questions on the midstream.

The midstream side and.

I'm wondering it's early days of August please still but can you tell us what impact.

Fundings and the strength and the jewelry options with add on additional investments and the U S net premiums.

And maybe just for some quick comment on the potential further LNG investment.

And what im getting at.

And.

Is it worthwhile waiting.

And just to see the full and.

And what the administration wants to or.

Thank you.

And you should be optimistic given the long term value.

And in some results.

Yes.

And well look.

Maybe I'll tackle that one.

First I would say.

Yes.

And we're accustomed to investing across different administrations.

And.

And while.

There is obviously a very progressive.

Debt.

We expect as we have seen.

And.

And many.

Previous transitions that.

Youll policies will be somewhat.

Slowed with opposition and doing what they typically do so.

Yes.

While.

And I think this is the comments we tried to make earlier, yes. The general trend is very obvious to everyone and that is what we are including NR.

Yes.

Underwriting programs, but.

We don't expect there to be and.

Immediate changes this is a transition that's going on it's not a end of <unk>.

Of carbon.

And technologically.

Could happen today.

And.

So look we're taking a very pragmatic and and I think.

And our cautious approach to our investing and that sector.

And we are mindful of the policies of.

The new administration.

Okay fantastic. Thank you.

And our next question comes from the line of Debbie Dodge with BMO capital markets.

Thanks, Good morning, guys.

Good morning, good morning.

My first question is on Tds.

Ties into one of your earlier.

Answers on valuations and the data sector, but just wondering if there are there synergies and having the various services provided by T. Tds under one company or do you think that business could be more valuable and go with.

Split off and do a couple of more pieces.

I do.

Each of the businesses at Tds stands on its own.

And.

While there are certain synergies that you can get.

Each of the lines of businesses, it's in the broadcast sector of the tower sector and the fiber to the home sector and they can each also stand on their own.

Very well so we run the business with distinct P&L for each business to make sure that we're tracking returns and profitability and margins and everything you would expect individually. So it can work very well together and each of the business is also stands on their own very well.

Okay. Okay. Thanks for that.

We've also seen that the government and.

And Colombia, they've been looking to privatize.

Some of its assets so kind of a two part question here first are there assets in that privatization process and Colombia that look interesting Tibet and secondly are there other countries, where you have seen infrastructure privatization.

Gaining momentum.

So I guess I would just its Ben.

Again Devin.

And we've seen government privatization programs for example, and South America for many decades. So those programs have been in place and sometimes a day accelerate and sometimes day.

They sort of decelerate a bit.

And that there are obviously up.

Yes.

Acquired some of the assets we own today, we acquired through those privatization programs. So we'd obviously take a look at everything and I think in general.

And that what we're noticing is a need for governments to raise capital and a desire we are seeing some signs of them putting.

Good programs in place and.

Clarifying regulations, and improving regulatory frameworks to try to attract capital so.

Instead of a constant theme and we would.

And we would take a look at assets as we've always done and the past.

Maybe the other thing I'd add is.

If youre looking for indications of.

Accelerating versus decelerating of programs typically they follow election cycles. So no difference in South America vs.

Asia or in.

And North America even.

And when.

New administrations come and they tend to start programs and then when you get close to elections, they tend to slow down or stop.

And so we see that very much and South America as well.

Okay, Thanks, and thanks for that and I'll turn it over.

Thank you and our next question comes from the line of seats and with Bank of America.

Thanks, and good morning, appreciate all the discussions on midstream and ESG if I could.

Kind of probe a little bit on what youre seeing or what you're thinking about where your early days U S versus international opportunities now, but you mentioned.

Paris, Glasgow, clearly, we're going to have a price of carbon and the U S.

And.

It looks like you were well positioned on the LNG value chain, but wondering if something like a carbon capture would at some point makes sense to you I just wanted to get your all your thoughts and then on the flip side when I'm looking at international Midstream.

I see majors and national oil companies.

Looking to dispose and still.

Storage and transportation assets that could have visible duration of cash flow with even adjusted for card, but just wondering how youre weighing the opportunity.

<unk> said U S international any thoughts on that.

Jeremy to address the carbon capture and should look.

I think it's early days I think as.

And I think we've been trying to say many times over on the call.

We are and the early stages of tranche, a transformation thats going on and I think there will be opportunities geographically.

Got it.

And I'm not sure whether they are focused in the U S or not but things like carbon capture hydrogen mixing electrification of certain equipment versus versus using fuels directly to power. It. There are a lot of opportunities that I think is going to come out.

And we're well positioned because we're in a lot of these industries.

And we're going to have direct experience in delivering on these transitions over time so.

And it seems early days to be overly specific but we have work streams underway and all of our companies to look at these transformations and start to think through how we can make money and where we can make money with them.

Yeah, and I'll just just on your second point on international versus U S up opportunities.

Yes.

I would say.

On the investment pipeline today is well balanced across all the geographies.

But if I had to say maybe compared to historic levels were probably slightly more weighted to north America than international.

But.

<unk>.

But it's.

And we're pursuing things everywhere.

And any other regions that stand out and.

And that makes.

Yes, I can take that David.

I think and the other notable growth year over year would be and India. We've seen.

Take it to the 5% increase on our portfolio, we have two different portfolio. There. So overall on a blended basis, we're probably 5% ahead of where we were last year and then our two other geographies being Peru, and Chile are broadly Atlantic, where maybe down 5%. There just due to the mix. They are predominantly more light vehicle traffic growth and.

And with people continuing to work from home and certain regions that that doesn't impact.

And mobility and travel across the network, but overall I think if you put it altogether given the size and Brazil on our network and we're probably up four 5% year on year on a total basis.

Thanks, a lot David.

And the problem.

Thank you.

And our next question comes from the line of Andrew Kuske with Credit Suisse.

Thanks, Good morning, I guess, the question is probably per Sam or for Pam.

And it really just relates to Brookfield return focus over time, and that's really a duration do per value with an operational beds.

How do you think about debt overall positioning and I asked the question on the context.

You can clearly by from assets for value and the marketplace that have lower multiples attached with them that made the great overall valuation and multiple versus higher multiple assets and the market that.

And I would actually average up your doubts how do you think about that dichotomy of the returns versus the stock impact on a GAAP basis.

Yeah, Hi, Andrew.

So look I.

Our strategy I think is very clear we are very much DCF investors and.

And return focused multiples feel a bit short term ish and.

View, because they will go up and down.

If we invest well and are underwriting are strong we get the returns then on a long term basis, we will deliver our results and.

So I appreciate it.

Some investors who might.

Yes, Mike <unk>.

Be unhappy with mix.

Quarter to quarter basis, because <unk>.

Today.

Towers are looked at more favorably than than say, our midstream asset but.

I think as long as we do our job and deliver.

The cash on cash returns and the.

And the Dcs and we will do well.

And obviously the part we have to deliver on and as those terminal values and be right on the terminal value, but thats the thats obviously.

The main focus of us as long term investors as getting that terminal value right.

That's helpful and then maybe because that dichotomy exists and the short term nature of multiple focus.

Lead you to have more opportunities on really structural separation approaches where you can effectively by per value and then strip out from our loved assets and repackage them and then have the unloved assets and that other bucket.

Yes look I think.

And I think what you're getting at which is right.

Yes.

And the various investors and maybe some management teams get focused too much on the short term.

Yes things.

Value don't trade, our businesses don't trade at their intrinsic value and you can.

Either five per value a company that's more complex and.

And break it apart into the various pieces and earn value so I think that.

That is definitely a big part of our toolkit and Thats.

What we're trying to do and.

And and beating the market and I'll call. It that is.

Finding those situations, where we can buy for value.

Okay. That's great. Thank you very much.

Okay. Thank you Andrew.

Thank you I would now like to turn the call back over to CEO, Sam Pollock for any closing remarks.

Thank you operator and.

I appreciate everyone spending the time today I know, it's a long call but.

We appreciate your support for the company and look forward to speaking to you again next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call and webcast. Thank you for participating and you may now disconnect.

Q4 2020 Brookfield Infrastructure Partners LP Earnings Call

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