Q4 2020 Brookfield Infrastructure Partners LP Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Brookfield infrastructure Partners Q4, 2020 results conference call and webcast at.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session to.
To ask a question. During this 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's now my pleasure to introduce managing director Renee Luby Jansky.
Thank you operator, and good morning, Thank you for joining us for 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.
On 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 in 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 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.
Our results for 2020 and provide you an operating update.
My remarks. This morning will focus on providing a quick overview of FERC accomplishments for the year.
I'll 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 on 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 in 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 organic growth of 9% in our businesses on a constant currency basis.
We deployed $2 $5 billion into new investments in organic capital projects with the notable highlights being the acquisition of a large scale portfolio of telecom towers in India and then on investment in our 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 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 in 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 doesn't 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 in 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 on.
Maintaining a robust.
<unk> metrics and a strong investment grade credit rating, we have a conservative balance sheet with approximately 85% of our term debt residing.
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.
In the near term, we expect to further strengthen our liquidity position by an incremental $2 billion as several sales processes near completion.
I'm also pleased to announce that 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 in 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 the investment communities increased focused on focus on this topic, we wanted to provide or provide you with a reminder of our approach on how some I'd highlight some recent initiatives in this regard.
To begin <unk>.
ESG considerations and monitoring practices are integrated in our underwriting and operating standards.
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 in 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 in 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 an 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 loss.
Largely due to its ownership of one of the world's largest pure play renewable power businesses.
Through our affiliation with Brookfield asset management, we can benefit from their broad expertise regarding the implementation and maintenance of industry, leading ESG policies and protocols and benefit from attribute shared at the group level.
It's also worth noting.
We track GH Ghd emissions, and we will develop and regularly publish de carbonization plants.
<unk> 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 day play an important role in 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.
For 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 on 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% a pack of 2019 levels.
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 star.
Starting with utilities. This segment generated <unk> of $659 million in 2020, and annual increase of 6% after adjusting for the impact of a weaker Brazilian wrap.
Our utility businesses performed well overall, reflecting the regulated and contractual nature of their cash flows.
At 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.
Connection 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 adjustments that will result in an almost 25% increase in revenues 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 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 in 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 in this highly fragmented industry in 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 rose relatively consistent with the prior year, despite a challenging environment and disruptions in global trade.
The segment benefited from the initial contribution 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 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 on our toll road operations have improved highlighted by a 7% increase in Brazil on a same store basis.
Finally, our diversified terminal operations recovered at X 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.
<unk> from our midstream segment totaled $289 million, an increase of 18% compared to the prior year performance.
Performance. This year was excellent with organic growth contributing 13%. Despite challenges in 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 reported very strong results during the fourth quarter with <unk>, increasing 25% above prior year levels.
Results were driven by favorable market conditions, particularly on 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 has substantially completed the second phase of its Gulf Coast expansion, which will further increase transport capabilities in 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 in the next few months the expansion will generate annual EBITDA of $45 million under long term take or pay contracts of which fits share is $23 million.
Lastly, our data segment delivered <unk> $196 million, an 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 <unk> 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 in January we signed a binding term sheet with one of the leading mobile network operators in the country to install their telecommunication 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 Cup is bigger.
That's on 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.
Or 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 in the 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 in 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 receiving proceeds of approximately $100 million.
And have retained a 49% stake.
The successful lifting demonstrated the value 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 two years of targeted organic growth and follow on acquisitions. It has grown to be the largest district energy system in North America, and deliberate heating and cooling to over 800 buildings.
As a result of our asset management initiatives. The business is well contracted and are substantially derisk 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 investments and a multiple of 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 on 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 of proceeds from capital recycling over the next two years.
Now turning to our outlook for the business. We've entered 2021 was a great deal of optimism Guy.
Guided by a fairly positive backdrop anchored around historically low interest rates and a global road of several COVID-19 vaccines that are currently underway.
This should result in 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 we.
They will outperform during a period.
Of return to normalcy and anticipated period of economic expansion.
Additionally, our midstream businesses performed well in 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 revenue.
The key priority heading into 2021 is to convert our substantial pipeline of attractive opportunities into investments as.
As we discussed at our Investor Day in September we believe we are entering an 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 in 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 a record for us in any year.
That concludes my remarks for today.
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.
And our first question comes from the line of Rupert <unk>.
With National Bank.
Hi, good morning, everyone.
Good morning, good morning.
I'll be here looking at your ESG approach, there seems to be increased competition for zero carbon assets today.
Rich could compress a return on those assets on other assets like midstream assets look like they could be out of favor assuming youre seeing this trend in 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 benchmark.
Yes, Hey, Rupert it's been on here.
Look in terms of that balance 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 a day.
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 carbon reduction targets into accounts for a long time, so the kinds of targets that we're seeing as bahir mentioned in the Paris accord and in the upcoming Glasgow Glasgow Summit.
That are going to be coming up and.
From our perspective. This does not mean, we won't own high quality assets for example on the midstream space, but.
But we will focus on ensuring that we're 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 on 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.
A way then to improve returns on your view.
Yes, maybe I'll jump in Rupert.
I think it's a multifaceted approach.
The the first thing is with within our existing portfolio obviously.
We're implementing plans to reduce our carbon footprint.
As it relates to new investments as we carry on diligence on various assets we're looking for.
On opportunities, where we can reduce them and as Bahir mentioned at the outset, we are taken to account.
On future trends and our analysis of these assets and what day.
<unk> average 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 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 in those type of assets.
And we're also looking at you.
Huge.
New technologies and new.
Environmentally attractive businesses that might capture carbon.
Where those returns make sense and we think that in the coming years with government incentives and with improvements in technology may 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 profit 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 on your billion gas pipeline are we going to see.
Similar levels of inflation on your other Brazilian assets this year or how should we be how should we be looking at that opportunity.
Hey, good morning Rupert.
It's a great question I'd say the debt.
Toll roads and the rail networks that we own in Brazil are subject to a different inflationary measure it's closer to 3% to 4% annually. So probably in line with its target on traditional level thought you wouldn't see the same local currency growth in those other segments.
Pretty good 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.
Trends supporting your growth and data.
And on the energy side, you also highlighted multiyear opportunities, but tactically.
With weight valuations when you kind of get.
A lot more on the public security side.
Can you maybe just update your views, especially.
<unk>.
So opportunities on those two but as well.
Given your outlook for reopening GDP sensitivity.
You also have a tactical interest.
Investing capital in assets that maybe aren't performing that well right now, but you see benefiting from reopening more so than others.
Hi, Robert I'll tackle 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 today, so in relation to the first part of the question.
We still see.
Significant opportunities in <unk> and.
In both data and midstream at the moment for different.
For different reasons data continues to require massive amounts of capital to.
Yes.
Fleet 100 year transformation of the backbone of that sector.
And the opportunities our global I'd say the.
The issues isn't so much supply of opportunities on the data side. Its evaluation 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 on the fiber rollout across Europe.
In North America.
We looked into net tower.
Tower opportunities around the world data center opportunities and particularly Greenfield opportunities.
In Asia Pacific.
And we continue to evaluate these.
Data distribution companies similar to what we've done it.
In New Zealand could we see that as an opportunity for us down the road.
So.
Many many situations on that front on the energy side, it's more of a value situation. We still think that there is 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 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 FBI space that others have been 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 throughout time, it's been a focus on mature de risked assets.
How much does the disconnect between.
Private market M&A valuation versus what you think your investors attach.
Publicly as valuations play into any of the decisions.
And if it does what assets in the portfolio do you see as having the greatest disconnect.
You think you can solve on that valuation or multiple wise versus what you think the market is actually within your share price.
That's an interesting question Robert.
Yes.
Yes.
Look.
On the public markets.
That's a bit more challenging for me to comment on.
Yes.
Public investors view.
Valuations across all the different sectors I think some businesses.
Trey extremely high others, not as much but I think today.
More broadly.
On the public markets, probably beer the interest we see on 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 in the public markets as well in the private markets.
I'm not sure that day.
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.
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 that at returns where we can earn double digit <unk>.
And that strategy has worked well for us for over a decade.
We tend just to focus on continuing to execute that as opposed to worrying about.
The differences between public and private valuations.
On a great. Thank you very much.
Thank you.
And our next question comes from the line of Frederic <unk> with Raymond James.
Good morning, guys and congratulations to both bahir on David on their respective appointments.
Thank you guys.
Do you see the German residential infrastructure company that you just acquired do you see in that business. The same kind of growth potential you saw on Ana care or for that matter and wave.
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 versus.
And our care or the differences or the Max at well over 100.
But.
The reason we were attracted to and 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 in that market and it's highly fragmented.
And.
Based on the research we've done.
We believe that the receptivity to the product and services that <unk> 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 in North America time will tell but it's a massive market. The investable universe is huge.
And hopefully we can.
Achieve the same success that we did with <unk>.
The organic growth with anyways in 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 on fire.
Lots of ability and opportunities to deploy capital on 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 we're optimistic obviously.
On 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 lot of lots of stops and goes here.
And so just in light of that we just we thought.
On the side of caution.
We think 5% is very attractive in this market.
Given all of the various things we have on.
On the investment front.
We have a lot of good use for that cash anyway that we're going to retain.
In that business. So so so we think this.
Was it was accounts decision.
Not that's fair fair point.
Last question, perhaps from David you mentioned the impact of the Brazilian real on the business in 2020 wondering what the impact was in 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 the fourth quarter was about $25 million.
So predominantly in our regulated transmission in our toll roads.
And then if I look at our average rate for 2020 relative to where we are today, it's relatively in line, it's going to be 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 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.
Comments I just wanted to follow up on.
We'll sit down on the midstream investment opportunity outlook, so starting with the data.
As the pandemic and the work from home trend reshape the growth outlook for the data centers and went out of business in general.
So on higher operating Sam.
Maybe I'll start off and I 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.
Demand for.
Space and our Hyperscale facilities.
Is extremely strong so we've been able to where we've had land.
Attract tenants to to build hyperscale facilities.
And we don't see any slowdown on that in and in a number of markets, particularly in Asia.
We're onshoring of data storage.
Particular demand for for data centers, but maybe then you on talk a bit about.
<unk> in a few of our the day, yeah, maybe just to add a little bit of color from beyond the ground operations like we are building out a number of fiber to the home networks in France and are.
Our adoption curves of people switching to those fiber networks has been above our expectations pretty much since COVID-19 started so.
There does appear to be some day.
Demand pull from the fact that people are more at home and want higher quality data services and as Sam mentioned in our in our Hyperscale data center business, sometimes in 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.
It's sort of a small little amounts that we can add to.
<unk> improved our service offering to them, but we're just seeing.
Almost a very strong appetite to fully use the data centers to adopt the fiber networks.
Okay that's excellent.
Just a follow up on the Indian.
Colocation agreement.
Might that have.
On the co location thoughts on it.
Just in general what co location Doctor.
And can get to.
Yes.
Overall business planning horizon.
So we're targeting a co location right.
Pretty modest one of one five over about a five year period. So it's.
It's not.
On other markets, we do see colocation rates in 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. He may have.
Partly addressable.
His comments, but my question is on the on the midstream side.
Just wondering it's early days, obviously still but can you tell us what impact.
On the administration and certainly options on hard on additional investments in the U S premiums from.
Maybe for some quick comment on the potential of further LNG investments.
What im getting at.
Is it worthwhile waiting.
Just to see the full impact.
What the administration wants to or.
Do you think.
You should be optimistic given the long term.
Are you seeing some results.
Well look.
Maybe I'll tackle that one.
First I would say.
We we are accustomed to investing across different administrations.
And.
While.
There is obviously a very progressive.
<unk>.
We expect as we have seen.
On.
And many.
Previous transitions that.
Youll policies will be somewhat.
Slowed.
With opposition doing what they typically do so.
Yes.
While.
And I think this is the comments we tried to make earlier.
The general trend is very obvious to everyone and that is what we are including in our.
Underwriting programs, but.
We don't expect there to be.
Immediate changes this is a transition that's going on it's not a end of.
Of carbon.
And technologically.
Could happen today.
And.
So look we're taking a very pragmatic and I think.
Our cautious approach to investing in 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's on Tds.
Ties into one of your earlier.
Answers on valuations from the data sector, 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 up into a couple of more pieces.
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 in 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 businesses also stands on their own very well.
Okay. Okay. Thanks for that.
So we've also seen that the government in Columbia, they've been looking to privatize.
Some of its assets. So it kind of a two part question here first are there assets in that privatization process in Colombia that look interesting Tibet and secondly are there other countries, where you have seen infrastructure privatization so gaining momentum.
So I guess I would just it's Ben.
Again Devin.
We've seen government privatization programs for.
For example in South America for many decades so those.
<unk> had been in place and sometimes they accelerate and sometimes they do.
<unk>.
They sort of decelerate a bit.
But there are obviously.
Yes.
Acquired some of the assets we own today, we acquired through those private transition programs. So we'd obviously take a look at everything and I think in general.
On that govern 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 in the past.
Maybe the only 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 versus.
Asia or in the.
In North America even.
When.
New administrations come in 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 in South America as well.
Okay. Thanks, Thanks for that I'll turn it over.
Thank you and our next question comes from the line of <unk> with Bank of America.
Thanks. Good morning, appreciate all the discussions on midstream and ESG, if I could.
Kind of probe a little bit on what you're seeing or what you're thinking about where your early days U S versus international opportunities you mentioned.
Paris, Glasgow, clearly, we're going to have a price of carbon in the U S.
<unk>.
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 early thoughts and then on the flip side when I'm looking at international Midstream.
I see majors and national oil companies looking.
Looking to dispose of 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 set U S international any thoughts on that.
Jeremy to address to carbon capture.
I think it's early days I think as.
I think we've been trying to say many times over on the call.
We are in the early stages of tranche, a transformation thats going on and I think there will be opportunities geographically.
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 theyre going to come out.
And we're well positioned because we are in a lot of these industries and we're going to have direct experience in delivering on these transitions over time so.
It seems early days to be overly specific but we have work streams underway in 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.
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.
On.
But if I had to say maybe compared to historic levels were probably slightly more weighted to north America than international.
But.
But it's.
We are pursuing things everywhere.
Got it got it 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.
Any other regions that stand out.
That makes.
Yes, I can take that David.
I think the other notable growth year over year would be in India, we've seen.
Think it's about a 5% increase on our portfolio, we have two different portfolios. 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 <unk>.
Peru, and Chile are broadly in line I think we're maybe down 5% there just due to the mix. They are predominantly more light vehicle traffic growth.
And with people continuing to work from home in 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 on our network, we're probably up four 5% year on year on a total basis.
Thanks, a lot David.
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 for Sam or for Bam.
And it really just relates to Brookfield return focus overtime, and Thats really a duration do per value with an operational bend.
How do you think about bps overall asset position and I asked the question on the context.
You can clearly by some assets for value on the marketplace that have lower multiples attached with them that made the grade debt overall valuation on multiple versus higher multiple assets in the market that.
I would actually average up your balance how do you think about that dichotomy of the returns versus the stock impact on on that basis.
Yeah, Hi, Andrew.
So look I.
Our strategy I think is very clear we are very much DCF investors.
And return focused multiples feel a bit short term ish in view, because they will go up and down but if we invest well in our underwriting of strong we get the returns then on a long term basis, we will deliver our results and so I.
Shape.
Some investors might.
Yes, Mike.
Be unhappy with mix.
The core core basis because <unk>.
Today.
Towers are looked at in more favorably than than say, a midstream asset but.
I think as long as we do our job and deliver the cash on cash returns in the Dcfs, then we will do well.
And obviously the part we have to deliver on as those terminal values is the rate on those terminal values, but that's obviously the.
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 in the short term nature of multiple focus.
That lead you to have more opportunities on really structural separation approaches where you can effectively buy for value.
Strip out the more loved us and repackage them and then have the unloved assets on another bucket.
Yes look I think.
I think what you're getting at which is right.
Because.
Yes.
Various investors and maybe some management teams get focused too much on the short term.
Things.
Values don't trade businesses don't trade at their intrinsic value and you can.
Either FIFO value.
That's more complex and.
And break it apart into the various pieces and earned value. So I think that is definitely a big part of our toolkit and that's.
What we're trying to do.
In beating the market I'll call it that is.
Finding those situations, where we can buy for guidance.
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 <unk>.
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.
Sure.
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Yes.
Yes.
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