Q1 2021 Brookfield Infrastructure Partners LP Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to Brookfield infrastructure Partners first quarter 2021 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.
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It is now my pleasure to introduce CFO David <unk>.
Thank you operator, and good morning, everyone. Thank you all for joining us for Brookfield infrastructure partners first quarter earnings conference call for 2021.
The early indicators give us optimism that this trend will continue on our business will benefit as more regions participated in this recovery.
Now moving on to our strong results for the quarter <unk> grew organically by 8% due to inflationary tariff increases modestly higher volume is associated with the early stages of economic recovery and the completion of $800 million worth of capital projects commissioned in the last 12 months.
Results for the quarter were further supplemented by favorable market dynamics produced by weather events that led to exceptional performance on our midstream segment.
These positive factors were partially offset by the impact of foreign exchange and a number of our segments and the higher management fee relative to the prior year.
Utilities segment generated <unk> of $166 million up 7% over the prior year on a constant currency basis.
All businesses within the segment are performing well with the results benefiting from inflation indexation and the commissioning of almost $400 million of capital into rate base over the last year.
These contributions are partially offset by the sales too mature businesses in 2020.
New connection activity at our UK regulated distribution operation exceeded plan by approximately 15% during the quarter. These.
These results reflect good levels of construction activity that has been unaffected by government imposed restrictions as well as positive momentum in the housing sector. The.
The business also recorded strong connection sales with several large multi utility project secured during the quarter. We believe this momentum will persist supported by advanced vaccination, rolo and economic restrictions, having largely been lifted.
Within a utility operations in Brazil results that are regulated gas transmission business increased 21% in local currency terms compared to the prior year. This.
This increases primarily attributable to annual inflationary tap adjustment that was confirmed at the end of 2020.
Following the quarter, a new law was enacted to promote continued investment and growth in Brazil's energy sector. The.
Total strength and preparedness of our gas storage business through the extreme weather conditions experienced in the United States.
In March our U S gas pipeline commissioned the second phase of its Gulf Coast expansion project will increase transport capacity in the region and was completed on time and below budget.
Relative to a $200 million total capital investment or approximately $75 million net to debt. The expansion will generate annual EBITDA of approximately $45 million on a 100% basis or 70 $217 million net Tibet.
This episode is under long term contract with an investment grade counterparty.
Completion of this important project coincided with a partial monetization of the business the Sam will touch on in his remarks.
<unk> from the data segment totaled $60 million, an increase over 40% versus the prior year.
This reflects the contribution of the Indian Telecom Tower acquisition completed in August as well as organic growth of 7% across our existing businesses.
This organic growth included inflationary price increases built into our telecom tower in datacenter customer contracts as well as the rollout of additional points of presence and fiber to the home at our French telecom operations.
We advanced two priorities within our data transmission and distribution platform during the quarter first off we significantly de risk the cash flow profile of our French telecom business. So the execution of 15 year contract extensions with two mobile network operators or <unk> customers.
Secondly, our Indian Telecom tower operations finalize the long term Master services agreement with and commenced hosting hosting services for a second leading them and now we are now focused on the rollout of these services to additional tower locations across our network in India as well as increasing colocation on our tower infrastructure.
Now, but before turning the call over I'll briefly touch on our balance sheet, which is in excellent shape due to ample liquidity levels and a well ladder maturity profile.
Credit where credit markets also remain highly supportive for the type of assets we own.
With no material asset maturities in 2021, our focus for the year will be on completing opportunistic financings across our portfolio.
With revenues largely adjusted for inflation or focus on financing assets with long term fixed rate debt will provide further operational leverage and an economic recovery.
Okay. So the UK.
The basis today is highly diversified through the following revenue streams.
First our statutory harbour authority states provide the perpetual right to look up the river system in charge customers to bust through it.
These fees contributed over 40% of EBITDA and provide recurring stable and inflation linked cash flows.
Second as a landlord port we lease land adjacent to report on the long term agreements with high quite the counterparts.
These leaders have embedded inflation escalation extremely high renewal rates, given the strategic location of the port and contribute approximately 40% of EBITDA.
Lock our port operations services contributed approximately 20% of EBITDA and involve handling services integral to our customers supply chains.
The evolution of the board, however, do not happen overnight.
Position, the business and enable it to benefit from attractive regional dynamics, we delivered on several value creation activities over the past decade.
And to make sure just a few.
We developed a force centric strategy focus on integration with customer supply chains, and attracting new volumes to report.
We reinvest at over 120 million of operating cash for us to expand facilities and on to capacity a modernized power infrastructure.
We actively attracted new long term customers due to region, including the development of the world's largest biomass power station.
And we invest in import automation to transition away from carbon intensive activities and into renewable and sustainable source foods on products.
And will refine on speed ports legacy capital structure, increasing debt levels in the business commensurate with its growing EBITDA.
The business as perform extremely well in the last decade, and the next 10 years look to be even better.
With a successful vaccine rollout the uk's poised to experience near term economic expansion out of many other parts of the world.
This go inside with the emergence from nearly a half decorative Brexit induced straight overhang.
Furthermore to encourage additional investment and promote new trade relationship with the EU. The UK government awarded eight coveted Freeport status designations, one of which was given to <unk> site PD ports main location.
Day status provides benefits from Doc savings simplified custom procedures, streamline redeveloped processes and government support.
In addition to a favorable macroeconomic backdrop to business is highly visible near term growth.
First <unk> receives annual inflationary tariff increases on 80% of its revenues, which bodes well for near term inflationary expectations.
Second we anticipate highly captive customers to continue to provide growth opportunities and incremental revenues as legacy Conservancy on property charges contractually reset to market rates.
<unk> you have large scale expansion on the way, including expect the new volume from from the development of the world's largest fully highlight mine and it almost two for the increasing our container terminal capacity.
Finally, the region is recognized as a renewable energy hub and has received core status as a sense of renewable engineering from the UK government.
We are confident in this highly visible growth opportunities should contribute to dabbling EBITDA over the next five years and could even triple results by $2030.
So we day I. Thank you for your time this morning, and was turn the call over to set.
Thank you gap and good morning, everyone.
From my remarks today I'll discuss the strategic initiatives. We currently have underway and then conclude the call with our outlet for the balance of 2021.
As David mentioned, our pipeline of perspective investment opportunities as robust and we have substantial available liquidity support these initiatives.
We also expected further enhance our capital positioned through the modulation of additional mature assets in the next year and a half the.
The combination of the current low interest rate environment and demand for well contracted mature assets has allowed us to make meaningful progress on our near term capital recycling targets.
I will begin by highlighting from sales that we have secured our complete recently.
In early March in conjunction with our partners in the business, we complete the sales of 25% minority interest in our use gas pipeline.
Forbids share, which was 12, 5% net proceeds total of $412 million.
This implies an enterprise value of approximately five $2 billion on 100% basis, which values the company around $300 million above R. I for is carrying value.
Further set the recapitalization on the business of 2015 over 75% of invested capital has been returned to us and we realize and IRR, 21% on this partial sale.
Neck, as we talked about last quarter.
We are advancing two separate transactions to complete the divestment of R. U S on Canadian District energy platforms.
For for $1 billion.
<unk> sales achieved a multiple of cap of over six times and underscore the meaningful by creative over eight years of ownership.
We anticipate closing of a Canadian transactions occur in the next month with the sales of U S operation falling shortly thereafter.
Total proceeds to Brooklyn infrastructure from the sales are approximately $950 million.
And lastly, subsequent to quarter and we.
We agreed to sell our portfolio of smart meters in the net kingdom and attractive valuation, reflecting the highly contracted nature of the business and high growth directory under the UK energy transition plan.
Berkeley infrastructure will received net proceeds after debt repayment of approximately $350 million.
The portfolio will be carved out of our UK regulated distribution business and sold on a standalone basis.
During our ownership period and including the proceeds from the sale we are to IRR, 58%.
While we are surface value from the sales mature businesses. We've also made significant progress on two investment initiatives during the quarter.
First in February alongside or institutional partners. We for me lots of $5 billion takeover offer to shareholders of enter pipeline limited to privatize the company.
If successful we will deploy approximately $2 billion of cash in depth C shares into a high quality portfolio of Canadian midstream assets.
Second subsequent to quarter and alongside on institutional partners, we acquired the remaining 10% interest in our Brazilian regulated gas transmission business that was not already owned.
We are funding the acquisition with additional at the level of debt and that did not require further capital.
The investment is a great opportunity to increase our exposure to a fully contracted inflation linked cash flow producing assets that we have owned and operated for four years and therefore, we know very well.
Looking at the balance of the year as the vaccine raw progressive we anticipate that global economies will reopen albeit at varying speeds.
Based on our experience today.
<unk> growth will be robust at the combination of pent up demand and substantial fiscal and monetary stimulus fuels a strong recovery.
The economic recovery in Asia in the U S is already contribute to solid demand in rising prices for several commodities.
As a result of higher prices for materials on demand for higher wages. The central focus for many comments is turned towards inflation.
This economic backdrop should create a favourable environment for our operations.
As we've said many times, where the core attribute of our business is this predictable performance through economic cycles. The.
The resilience of our operations was proven over the past year or peripheral infrastructure stands deliver stronger performance during periods of economic expansion.
We believe that are full cycle investment strategy as well suits the current environment.
We are aggressively executing capital recycling initiatives to capture attractive valuations for a high quality derisked assets, we've already been highest successful on this effort and are well underway meeting our near term target of $2.5 billion a proceeds from asset sales.
We're also determined to remain disciplined and our capital deployment for new investments and pursue opportunities that meet are strict risk adjusted return profile.
We will focus on commissioning are strong backlog of organic growth projects and pursue tuck in acquisitions, where we have a strategic advantage and larger multifacet transactions, where we can leverage are operating expertise and scale.
That concludes my remarks for today I'll pass the call back to the operator for questions.
Thank you Sir.
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Our first question comes from the line of Rupard Mirror with National Bank.
Alright.
Okay.
I am here on good morning.
What day would prevail or the the smart meter business in the UK. How are you thinking about the remaining portion of the the UK utility maybe you could talk about some of the conditions there that might make the remaining part of the business less mature or less interesting to reset cycling at this point.
Hi, Roberta all type of that one.
I, probably said on on many occasions that.
Every one of our businesses.
Could be sold at some point in time that the only caveat to that was probably be UK as probably a business that we will never sell or at least can't proceeds at the moment.
And Britney is because it has such as.
A unique.
Position in the market, where it's able to reinvent itself.
With new products and and essentially serve.
Yeah, the whole building market.
In the United Kingdom, which is always growing and adding new product. So.
This was.
An opportunity, where we developed a specific line of products in that business.
We matured the business.
And once we thought it was fully value we sold that particular.
Product line, but we have many product lines and the company and we're looking at new product lines going forward. So I think short answer is we would not look to sell the business, but we made in the future if we have certain.
Businesses within the business that makes sense to harvest, that's probably what we would love to do.
How easy is it to to separate the Smart me her business from from the rest of the utility operations any Lawson.
Alternating efficiency or or opportunities to cross cell.
Yes, there is.
Every carvel requires some complexity, but this was a relatively stand alone.
Investment initiative.
And one that others have standalone businesses like it so it was easy for us to replicate what other businesses look like.
We don't foresee any.
Just synergies from the sale that's what your question was.
Yes, okay great.
And then just secondly, so strong volume growth and rails strong volume growth that supports given the the pandemic really started in queue to Los here, Let's say, let's say I'll look for.
Volume growth into cue too long I mean imagine we should expect more of the same of what we saw on queue, one but potentially can we see.
A year over year volume increases in queue too.
Yeah, maybe I'll I'll I'll start and then Dave from jumping or or or bend, but.
What you're seeing is a a bearing speed recovery as you are aware, yes, we have operations around the world.
Some jurisdictions like Asia, and North America.
U S has started to recover quicker and so we have seen.
Those volumes in those markets improve and the first quarter expect that to continue in fact, I think in our port a rail operations we are seeing.
Lots of new activity in cash initiated demand. So I think we'll continue to see growth.
In those regions, but what you'll also see in regions that are lagging where they're still.
Restrictions related to COVID-19, particularly South America, where we have all the total roads, we have a railroad.
As well as India and a few other places even Canada for that matter, which is a bit behind you'll see those market start to pick up.
In the.
In the coming quarters, and so we should see further.
Improvement in results from businesses in those jurisdictions.
Oh, sorry, I'll get back in the queue. Thank you.
Okay.
Thank you.
And our next question comes from the line of Robert Claws, with RBC capital markets.
Good morning.
If I can start with.
You talked about.
EBITDA over the next five years 19 cheerleaders swollen.
Possibly accompanied by 2030 on it.
Is there one or two things that really need to come together.
For for that type of EBITDA growth to materialize, there's a really just selection of all the things that keep on line.
Well, maybe I'll, let GAAP ticket first stab at that and then.
I can also add to so gas due on to describe.
The growth wedges.
<unk>.
Yes, Hi rock good morning.
There should not that there's a number of different devers that will come to fruition to common years.
There is significant.
There's a very strong commercial pipeline that were built in recent years with very favorable micro outlook and then there's a number of larger projects like for example, the Anglo American Pollyanna like mine, there will be that will have a meaningful meaningful contribution to results.
But there is a number of those.
LNG Regasification with respect to come on line in the coming years.
And.
We also have additional momentum for example, with the designation of T. Sigh as a free part we expect that to drive forward to invest main day area and it's a critical element of the Goldman strategy to stimulate the local economy, which will benefit PD sports. So there is a number of different elements that will come together and contribute to dose.
<unk> expected results.
On it and how much of that is locked in.
Versus things that you think will will unfold.
The way, we think about it is there is an element of that is.
Contractually locked in.
For example, the MTP power plant and then there's elements. There is what we think is captive is are essentially customers that have invested significant amount of capital in the area or in the port itself and and really have a vested interest in continuing to operate on <unk>.
<unk> reports and those are the likes of anglo-american would decline developing a multi billion.
Mine with over 100 years lifetimes.
And so and then on top of that we have more investment driven growth like E container terminal expansion. So roughly you could probably split those predominantly between captive in contracted with additional optionality.
Around the non-contract a growth.
Yeah.
Robert maybe I'll, just add that there's really three elements to the growth wedges and gaps described two of them, but the other one relates to the uplift in rent from the rent reviews, which we expect to see a number of them.
Come to fruition over the coming quarters, and some to be reflected that have just <unk>.
Just no just got.
Signed and.
And arbitrator over the last two quarters and so there are significant lift from that shares the lift from the investments from calf captive customers, which gab, it's mentioned, which is M. GT the LNG as well as the Anglo American operations, which are all well underway.
And very very visible and then there are certain.
Expansion initiatives that we're undertaking that we have on our control.
Which are reflective of the near capacity that we're at with our container container terminal operation, where we know just from the growth on the last number of years that we require further investment to meet that demand. So I'd say for the the growth in the next five years were extreme.
Really confident about the doubling and then the tripling obviously, there's a few things that have to happen but.
Ah La that's very visible as well.
On it I can.
GBI.
And now that you've got final approval.
To move to the new regulatory framework.
In terms of your optimism there is that do you think that there's like what's the ability to new your.
Your fees.
And pain.
Let's say for example, a cabinet point or or does your optimism really more about protection against some of the potential declines, suggesting and cost of capital parameters, given low interest rate environment around access from it.
Sorry, Robert it's been here.
I'd say, our optimism is more in surround the fact that our assets fully used and utilized so it's oversubscribed by its users. So there's a strong demand for the service that it provides and.
Think there is.
There could be room.
In the in the right structure for some appreciation overtime given that its over subscribed and and strong demand. So I think that I don't know if I understood. Your question, but that's the fundamental underpinning of of why we think this was a favorable development.
Got it yes. That's helpful to you are expecting an actual or potential increase in EBITDA on cash flow versus just kind of protecting what you're going on.
I think that's correct. That's correct. That's correct I think you'd be look at how some of the light touch regulatory approaches work the airports in Australia, they're very constructive for both customers and for the owners, we expect that same environments for this facility.
Okay. If I can just finished with what you are seeing on the acquisition side, we've I've seen in equity price recovery. So I don't know if that kind of takes away from potential other privatization opportunities.
As you think about your discussions on carve outs pricing equity prices may be taken pressure off on some of those companies to think about carve outs and also just touch on what you're seeing from the government privatization.
Okay. So I think there's two questions there.
Maybe I'll start with.
The government.
Situation just the opportunities with.
I guess, both the Canadian and.
U S governments have been bulk of.
Encouraging infrastructure development.
I would say.
Early days.
Because.
On.
We're still trying to determine.
What role they would like the private sector to play in a lot of those.
Very ambitious infrastructure plans, we do think it makes sense for the private sector to have a big role on it but.
That that's still to be determined.
On.
And I think just given the amount of projects there'd be contemplated.
That will be two opportunities.
As it relates to.
The rest of the world.
There's lots of opportunities that are being similarly discussed elsewhere, I think with balance she's constrained.
It only it's only a matter of time before new programs, new incentives are put in place for the private sector too.
Generate growth through infrastructure.
As it relates to carve outs.
From.
Different companies.
It is a.
A very.
Highly liquid market environment and so.
Company is looking to source capital have a number of of opportunities in both the debt and.
Credit markets to source capital.
But I would say that.
We've always been successful in.
And finding opportunities.
Around the world, we have a large team in place.
Where we can come up with when when transactions with companies that are looking to.
Not only just look for the lowest cost capital, but also for flexibility and expertise to work with and building companies.
And today, I think where we see a lot of that and where we see a lot of opportunities it in the data.
Sector, where we're working with a number of the telecom companies.
In.
Either expanding our datacenter operations of a lot of.
New build.
Investment opportunities as well as.
Fiber.
Developments, particularly with the fiber to the home so.
I'm optimistic that we will find great opportunities, but I also don't want to.
Minimize what is a fairly.
Liquid environment and.
With fairly high valuations.
Thank you very much.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone.
Our next question comes from the line of Andrew Kluski with Credit Suisse.
Thank you good morning, maybe.
Good question first just on on the accounting.
And that relates to the weather impacts that you saw on I guess, that's really centers on the rock Port Rockport business, and then gap storage on so, but you S $55 million total impact on the quarter, how much would you view as being normal storage on.
The games and a quarter versus what you booked.
Andrew if David here I think.
As you know that business well it does have a little volatility period to period. So normal storage level is carpet that I think back the number you reference would be relative to last year, albeit last year was quite low so I think normally it's probably.
About $10 million of a from a quarter and we did outperformed effect. So I think there is a bit of.
About a dozen that's about that's how.
Okay I appreciate that color and then the bigger broader question.
And I guess, if you look back over the last year, obviously, you've got one of your total do smell very public and that process. So maybe it was just put that one side, but the other total hold positions that you took over the course of the year in some cases of exited.
What's the Postop on just the returns that you've made.
And then the rationale core you'll leaving wasn't strictly evaluation based or you couldn't force.
Probably go to getting control or you just saw better risk adjusted returns elsewhere I know, that's a lot sort of pattern with that question, but if you could give us color too much appreciated.
Yes, Hi, Andrew.
Look I.
I see the the total as really just one tool on our toolkit as far as.
Creating a transaction opportunities.
Often we we.
We see situations where based on our.
Knowledge of the sector in our transactions that we've undertaken where we see a mismatch between private and public valuations.
And that will provide us an impetus to take a position.
Really not knowing at that time, if we can convert that into a private transaction.
And so.
Often that will result in a transaction as it has over the last 12 years on occasion.
And sometimes it just results in a in a game, but it's a it's an important part of.
Of our business development activity too too.
<unk> for Miss price Securities.
Take positions and then see if we can.
Right something out of it.
And sometimes it leads to something sometimes it just turns out to be a good investment in and at the appropriate time, when we think that we don't have a.
And the ability to convert will just sell it off.
Appreciate the color and then if I if I may just an extension of that.
You increase your dialogue with governments around whether they'd be triple P arrangements, which you've had in the past, although a long time ago or water infrastructure and maybe this is more super core focused on core plus.
You increase your dialogue, they're just given government's line since being strength.
Yes, I would say today.
Every government around the world is seeking input from us.
On thoughts of how the private sector.
Can be helpful. On how the government can be helpful to the private sector in investing further capital so they're looking for.
Ideas around.
Various tax credits or other incentives to to spur that.
Infrastructure development and so that's feedback debt that that we give.
On a proponent basis and.
Hopefully these two opportunities.
Today I would say.
We have not seen the the level of inverse.
Investment opportunity from governments that we expected or hoped to see but I do think I still remain highly confident that over the next five to 10 years, there will be significant volume of.
Of opportunities from that sector.
That's great. Thank you.
Okay. Thank you Andrea.
Thank you.
No I'm showing no further questions at this time, so with that I'll turn the call back over to C. E O Sam Poland for any closing remarks.
Okay. Thank you operator, and thank you everyone, who participated our call today we.
I appreciate your interest in the company and I look forward to providing you further updates in the.
In the next quarter. Thank you very much.
This concludes today's conference calls and Webcasts. Thank you for participating and you may now disconnect.
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Ladies and gentlemen, thank you for standing by and welcome to the Brookfield infrastructure Partners first quarter 2021 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.
Be advised that today's conference is being recorded if you require any further assistance. Please press star zero.
It is now my pleasure to introduce CFO David Great.
Thank you operator, and good morning, everyone. Thank you all for joining us from Brookfield infrastructure partners first quarter earnings conference call for 2021.
My name is David friend, and I am the Chief Financial Officer of Brookfield infrastructure Partners. Joining me today is Sam Pollock, our Chief Executive Officer, and our guest speaker this quarter Gabrielle them on taxi managing director based on our London office flow.
During our remarks, we look forward to taking your questions at.
At this time I would like to remind you that in responding to questions as well as talking about 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 would encourage you to review our annual report on form 20-F, which is available on our website.
We're pleased to report that Brookfield infrastructure had a strong first quarter on a 2021 looks like it will be an excellent year coming off an extremely resilient in 2020, the business generated first quarter funds from operations or <unk> of $431 million or <unk> 93 per unit up 20% compared to the prior year.
This solid start reflects the benefit of inflationary revenue escalators as well as new contracts and capital expansion projects completed in the last year taking.
Taking into account the 5% distribution increase announced in February our payout ratio for the quarter was 70% from SFO.
Many of our businesses are benefiting from higher volumes associated with robust demand for various industrial and agricultural commodities performance for the balance of the year will be further aided by GDP and consumer related volume growth, which is not yet meaningfully contributed to results.
The vaccine rollout remains in the early days in many countries. However in the U S and UK, where solid progress has been made we are seeing immediate improvement in economic growth and consumer activity.
These positive early indicators give us optimism that this trend will continue and our business will benefit as more regions participated in this recovery.
Now moving on to our strong results for the quarter <unk> grew organically by 8% due to inflationary tariff increases modestly higher volumes associated with the early stages of economic recovery and the completion of $800 million worth of capital projects commissioned in the last 12 months.
Results for the quarter were further supplemented by favorable market dynamics produced by weather events that led to exceptional performance on our midstream segment.
These positive factors were partially offset by the impact of foreign exchange and a number of our segments and our higher management fee relative to the prior year.
The utilities segment generated <unk> of $166 million up.
Up 7% over the prior year on a constant currency basis.
All businesses within the segment are performing well with results benefiting from inflation indexation and the commissioning of almost $400 million of capital into rate base over the last year.
These contributions were partially offset by the sale of two mature businesses in 2020.
New connection activity at our UK regulated distribution operations exceeded plan by approximately 15% during the quarter. These.
These results reflect good levels of construction activity theres been unaffected by government imposed restrictions as well as positive momentum in the housing sector. The.
The business also recorded strong connection sales with several large multi utility projects secured during the quarter.
We believe this momentum will persist supported by our debt vaccination rollout and economic restrictions, having largely been lifted.
Within our utility operations in Brazil results on a regulated gas transmission business increased 21% in local currency terms compared to the prior year.
This increase was primarily attributable to annual inflationary tariff adjustment that was confirmed at the end of 2020.
Following the quarter, a new law was enacted from our continued investments in growth in Brazil's energy sector.
<unk> removes the exploration day pipeline authorizations, thereby converting this asset base to a perpetual franchise.
We have also advanced the build out of our electricity transmission operations in the country with the completion of approximately 600 kilometers of transmission lines during the quarter the.
On the platform now has approximately 2600 kilometers of operating transmission line, which distribute electricity that is primarily generated from renewable energy sources.
We are on track to complete the balance of the projects, which represent a further 2700 kilometers over the next 18 months.
<unk> from our transport segment was $162 million, an increase of 17% over the prior year.
The gradual reopening of economies has contributed to volume growth at our rail and ports businesses.
Supported by robust demand for commodities in Australia, and Brazil volumes on our rail networks increased almost 10%.
Volumes on our container terminals increased by almost 20% compared to the prior year driven primarily by consumer led activity in the United States based on Australia.
Results also benefited from the contribution of our U S. LNG export terminal that was acquired on September. These positive factors were partially offset by asset sales as a result of our capital recycling initiatives and foreign exchange.
During the quarter the regulated regulator of Australian bulk export terminal provided a final decision.
Affirming the transition to a light handed regulatory framework under this model, we will directly negotiated pricing with the users of the terminal.
Net of operating under a single regulated tariffs the new framework will become effective in July and will allow the company to establish rates that better reflect the economic value of the facility to customers.
Contracts with customers, we will retain the favorable features that exist on our previous frameworks such as on our availability based revenues and the socialization of customer obligations.
<unk> from our midstream segment totaled $146 million for the quarter nearly a twofold increase over the prior year.
Strong performance reflects robust customer demand and the completion of an expansion at our U S gas pipeline results for the quarter also benefited from the operational strength and preparedness of our gas storage business through to the extreme weather conditions experienced in the United States.
In March our U S. GAAP pipeline commissioned the second phase of its Gulf Coast expansion. The project will increase transport capacity in the region and was completed on time and below budget.
Relative to a $200 million total capital investment on approximately $75 million net to debt. The expansion will generate annual EBITDA of approximately $45 million on 100% basis, or 70 $217 million net to debt.
This episode is under long term contract with an investment grade counterparty.
Completion of this important project coincided with a partial monetization of the business the Sam will touch on in his remarks.
<unk> from the data segment totaled $60 million, an increase over 40% versus the prior year.
This reflects the contribution of the Indian Telecom Tower acquisition completed in August as well as organic growth of 7% across our existing businesses.
This organic growth included inflationary price increases built into our telecom tower in datacenter customer contracts as well as the rollout of additional points of presence and fiber to the home at our French telecom operations.
We've asked two priorities within our data transmission and distribution platform during the quarter first off we significantly de risk the cash flow profile of our French telecom business. So the execution of 15 year contract extensions with two mobile network operators or <unk> customers.
Our Indian Telecom tower operations finalize the long term Master services agreement with and commence hosting hosting services for a second leading <unk>. We are now focused on the rollout of these services to additional tower locations across our network in India as well as increasing colocation on our tower infrastructure.
Now, but before turning the call over ill briefly touch on our balance sheet, which is in excellent shape due to ample liquidity levels NOL ladder maturity profile.
Credit markets also remain highly supportive for the type of assets we own.
With no material asset maturities in 2021, our focus for the year will be on completing opportunistic financings across our portfolio.
With revenues largely adjusted for inflation or focus on financing assets with long term fixed rate debt will provide further operational leverage and an economic recovery.
We have a healthy pipeline of prospective investment opportunities and substantial available liquidity to support. These total liquidity currently exceeds $4 billion.
Of which $2 6 billion as at the corporate level secured capital recycling initiatives will add over $1 3 billion to our corporate liquidity in the coming months and we expect to further enhance our position.
On $1 billion to $1 5 billion through the monetization of additional mature assets in the next year.
With that I will now pass the call over to gas.
Thank you David and good morning, everyone I'm pleased to be joining you on today's call to provide a spotlight on our U K port operation PD ports.
We acquired <unk> in 2010 as part of the recapitalization of popcorn on routing infrastructure.
Ever since our management team has worked tirelessly to diversify the <unk> customer base and reinvent the business.
Today, as we shift towards a more sustainable economy, we believe PD ports. He is on the brink of yet another transformation.
Before I jump into more detail on its growth potential let me take a step back and provide a quick overview on the merits of the business.
As with any island country 40 infrastructure is vital to the UK economy with an estimated 90% the country's goods traded on robbing by sea.
Our operations on 13 sites and serve as the gateway to Northern England through critical rail and road linkages.
This group of scars, well located and connected lendl ports on lock worldwide markets and offer direct transport links to all corners of the U K.
Debate on today is highly diversify through the following revenue streams.
Our statutory Habra authority status provides a perpetual right to look up the river system and charge customers to pass through it.
These fees contributed over 40% of EBITDA and provide recurring stable and inflation linked cash flows.
Second as a landlord port release land adjacent to report on our long term agreements with high quality Counterparties.
These leases have embedded inflation escalation extremely high renewal rates given the strategic location of the port and contribute approximately 40% of EBITDA.
Last our port operations services contributed approximately 20% of EBITDA and involve handling services integral to our customers' supply chains.
The evolution of the board, however, do not happen overnight, the best positioning the business and enable it to benefit from attractive regional dynamics, we delivered on several value creation activities over the past decade.
And you mentioned just a few.
We developed a core centric strategy focused on integration with customer supply chains, and attracting new volumes to report, we've reinvested over $120 million of operating cash flows to expand facilities and on capacity and modernize our infrastructure.
We actively attracting new long term customers due to region, including the development of the world's largest biomass power station.
And we invest in import automation to transition away from operating intensive activities into renewable and sustainably sourced foods and products.
And we refinanced <unk> ports legacy capital structure, increasing debt levels in the business commensurate with growing EBITDA.
The business has performed extremely well in the last decade, and the next 10 years look to be even better.
With the success of <unk> rollout the Uk's poised to experience near term economic expansion out of many other parts of the world.
Please go inside with emergence from nearly a half negative Brexit ing used straight overhang.
Furthermore to encourage additional investment and promote new trade relationship with the EU. The U K government awarded eight coveted Freeport status designations.
One of which was given to <unk> Si PD ports main location.
This data provides benefits from tax savings simplified custom procedures streamline redevelopment processes and government support.
In addition to a favorable macroeconomic backdrop the business is highly visible near term growth.
First PD ports received annual inflationary tariff increases on 80% of its revenues, which bodes well for near term inflationary expectations.
Second we anticipate highly captive customers to continue to provide growth opportunities and incremental revenues as legacy Conservancy in property charges contractually reset to market rates.
Further we have large scale expansions underway, including expected new volumes from.
From the development of the world's largest fully highlight mine and it almost twofold increase in our container terminal capacity.
Finally, the region is recognized as a renewable energy hub and has received core status as a central renewable engineering from the U K government.
We are confident in this highly visible growth opportunities should contribute to doubling EBITDA over the next five years and could even triple results by 2030.
So we day. Thank you for your time this morning and was during the call over to Sam.
Thank you GAAP and good morning, everyone.
From my remarks today I'll discuss the strategic initiatives. We currently have underway and then conclude the call with our outlook for the balance of 2021.
As David mentioned, our pipeline of prospective investment opportunities is robust and we have substantial available liquidity to support these initiatives.
We also expect to further enhance our capital position through the monetization of additional mature assets in the next year and a half.
The combination of the current low interest rate environment and demand for well contracted mature assets has allowed us to make meaningful progress on our near term capital recycling targets.
I'll begin by highlighting some sales that we have secured our complete recently.
In early March in conjunction with our partners on the business. We completed the sale of a 25% minority interest in our U S gas pipeline.
For <unk> share, which was 12, 5% net proceeds totaled $412 million.
This implies an enterprise value of approximately $5 2 billion on 100% basis, which valued the company around $300 million above our <unk> carrying value.
Further since the recapitalization on the business in 2015 over 75% of invested capital has been returned to us and we realized an IRR of 21% on this partial sale.
Next as we talked about last quarter.
We are advancing two separate transactions to complete the divestment of our U S and Canadian District energy platforms.
For $4 1 billion.
These sales achieved a multiple of capital of over six times and underscore the meaningful value created over eight years of ownership.
We anticipate closing of the Canadian transaction to occur in the next month with the sales of U S operations. Following shortly thereafter.
Proceeds to Brookfield infrastructure from these sales are approximately $950 million.
And then lastly, subsequent to quarter end, we agreed to sell our portfolio of smart meters in the United Kingdom, and an attractive valuation, reflecting the highly contracted nature of the business and high growth trajectory under the Uk's energy transition plan.
Brookfield infrastructure will receive net proceeds after debt repayment of approximately $350 million.
The portfolio will be carved out of our UK regulated distribution business and sold on a standalone basis.
During our ownership period and including the proceeds from the sale, we earned an IRR of 58%.
While we have surface value from the sale of mature businesses. We've also made significant progress on two investment initiatives during the quarter.
First in February alongside our institutional partners, we formally launched the $5 billion takeover offer to shareholders of inter pipeline Ltd to privatize the company.
If successful we will deploy approximately $2 billion of cash and Pepsi shares into a high quality portfolio of Canadian midstream assets.
Second subsequent to quarter end alongside our institutional partners, we acquired the remaining 10% interest in our Brazilian regulated gas transmission business that was not already owned.
We are funding the acquisition with additional asset level debt and that did not require further capital.
The investment is a great opportunity to increase our exposure to a fully contracted inflation linked cash flow producing assets that we have owned and operated for four years and therefore, we know very well.
Looking at the balance of the year as the vaccine raw progresses, we anticipate that global economies will reopen albeit at varying speeds.
Based on our experience to date GDP growth will be robust as the combination of pent up demand and substantial fiscal and monetary stimulus fueled a strong recovery.
The economic recovery in Asia, and the U S has already contributed to solid demand and rising prices for several commodities.
As a result of higher prices from materials and demand for higher wages. The central focus for many economists is turned towards inflation.
This economic backdrop should create a favorable environment for our operations.
As we've said many times one of the core attributes of our business is it's predictable performance through economic cycles.
The resilience of our operations with proven over the past year, our Brookfield infrastructure stand to deliver stronger performance during periods of economic expansion.
We believe that our full cycle investment strategy is well suited to the current environment.
We are aggressively executing capital recycling initiatives to capture attractive valuations for our high quality de risked assets. We've already been highest successful on this effort and are well underway and meeting our near term target of $2 5 billion.
Proceeds from asset sales.
We are also determined to remain disciplined in our capital deployment for new investments and pursue opportunities that meet our strict risk adjusted return profile.
We will focus on commissioning our strong backlog of organic growth projects and pursue tuck in acquisitions, where we have a strategic advantage and larger multifaceted transactions, where we can leverage our operating expertise and scale.
That concludes my remarks for today I'll pass the call back to the operator for questions.
Thank you operator.
As a reminder to ask a question you will need to present, our one on your telephone.
So withdraw your question press the pound key.
Once again, if you have a question. Please press star one on your telephone.
Our first question comes from the line of Rupert <unk> with National Bank.
Oh, sorry.
Okay.
Good morning.
With day Richard.
On the smart meter business in the UK. How are you thinking about the remaining portion of the UK utility maybe you could talk about some of the conditions there that might make the remaining part of the business less mature or less interesting for <unk>.
At this point.
Yeah.
Hi, Robert I'll tackle that one.
I, probably said on many occasions that.
Yes every one of our businesses.
Could be sold at some point in time.
Only caveat to that was probably be UK is probably a business that we will never sell our at least cash proceeds at the moment.
And really it's because it has such a.
<unk> unique.
Position in the market, where it's able to reinvent itself.
With new products and and essentially serve.
Yes.
The homebuilding markets.
In the United Kingdom, which is always growing and adding new products. So.
Yes. This was on.
On opportunity, where we developed a specific line of products in that business.
Matured the business.
And what we thought it was fully valued we sold that particular.
On product line, but we have many product lines in the company and we're looking at new product line going forward. So I think short answer is we would not look to sell the business, but we may in the future if we have certain.
Businesses within the business that makes sense to harvest, that's probably what we would look to do.
How easy is it to separate the smart meter business from on the rest of the utility operations any loss in <unk>.
Our operating efficiency are our opportunities to cross sell.
Yes, there is.
Every cargo require some complexity, but this was a relatively standalone.
Investment initiative.
And ones that others have standalone businesses like it so it was easy for us to replicate what other businesses look like.
We don't foresee any.
Dis synergies from the sale and Thats what your question was.
Yes, okay great.
And then just secondly, so strong volume growth in rail strong volume growth at the ports given the pandemic really started in Q2 last year, let's say, let's say outlook for <unk>.
Volume growth into Q2.
I imagine we should expect more of the sales while we saw in Q1.
Can we see.
Year over year volume increases in Q2.
Yeah, maybe I'll start and then Dave can jump in or or or Ben but.
What youre seeing is a.
Bearing speed recovery as you are aware, we have operations around the world.
Some jurisdictions like Asia and.
In North America.
The U S has started to recover quicker and so we have seen.
Those volumes in those markets improve.
First quarter I expect that to continue in fact, I think in our port and rail operations, we are seeing.
Lots of new activity and capture initiated demand. So I think we'll continue to see growth.
In those regions, but what you'll also see us.
In regions that are lagging where theres still.
Restrictions related to COVID-19, particularly South America, where we have all the toll roads, we have our railroad.
As well as Indiana to other places, even Canada for that matter, which is a bit behind youll see those markets start to pick up in the.
In the coming quarters, and so we should see further.
Improvement in results from businesses in those jurisdictions.
Alright ill get back in the queue. Thank you.
Okay.
Thank you.
Our next question comes from the line of Robert Kwan with RBC capital markets.
Great Good morning.
If I can start with PDP.
<unk> talked about.
We have EBITDA over the next five years 19 fairly visible and quite possibly come from about 2030 on.
It.
Is there one or two things that really need to come together.
For for that type of EBITDA growth to materialize or is it really just collection of all the things that you think your bottom line.
Well, maybe I'll, let GAAP take a first stab at that and then.
I can also add to it so GAAP <unk> described.
The growth wedges.
Yes, hi, Rob good morning.
On the short answer is there's a number of different levers that will come to fruition day coming years.
There is significant.
There's a very strong commercial pipeline that we built in recent years with very favorable macro outlook and then there is a <unk>.
Number of larger projects like for example, the Anglo American Polyol mining there will be that will have a meaningful meaningful contribution to results.
But there is a number of those.
LNG Regasification.
To come on line in the coming years.
And.
We also have additional momentum for example, with the designation of <unk> site as a three part we expect that to drive further investment in the area and it's a critical element of the government strategy to stimulate the local economy, which will benefit PD ports. So there is a number of different elements that will come together and contribute.
To dose expected results.
On it and how much of that is locked in.
You versus things that you think will.
Will unfold.
Yes.
Yes, the way we think about it is there is a net amount of that is contractually locked in.
For example, the <unk> power plant and then there is element. There is what we think is captive is our essentially customers that have invested significant amount of capital in the area or in the park itself and then really have a vested interest in continuing to operate on.
Through PD ports and those on the likes of annual American would decline developing a multibillion.
Line without over 100 years lifetime.
And so and then on top of that we have more investment driven growth like the container terminal expansion. So rapidly you can probably split those predominantly between captive and contracted with additional optionality.
Around the non contracted growth.
Robert maybe I'll just add debt.
It's really three elements to the growth wedges and.
GAAP describe two of them, but the other one relates to the.
<unk>.
Up lift in rent from the rent reviews, which we expect to see a number of them come.
Come to fruition over the coming quarters, and some to be reflected debt or just.
You just know just got.
Signed and.
Arbitrate it over the last two quarters and so there are significant lift from that there is the lift from the investments from cap captive customers, which GAAP, It's mentioned, which is mgd the LNG as well as the Anglo American operations, which are all well underway and <unk>.
Very visible and then there is certain.
Expansion initiatives that we're undertaking that we have in our control.
Which are reflective of the near capacity that we're at with our container container terminal operations, where we know just from the growth of the last number of years that we require further investments to meet that demand. So I'd say for the debt growth and then the next five years we're extra.
On the confident about the doubling and then the tripling, obviously theres a few things that have to happen but.
A lot of that is very visible as well.
On it if I can.
In terms of Tbi and now that you've got the final approval.
Moving to the new regulatory framework.
In terms of your optimism there is that do you think that there is like what's the ability to new <unk> your <unk>.
Fees up on.
Net.
An example, like abbot point.
Or is your optimism really more about protection against some of the potential declines you could have seen in cost of capital parameters, given the low interest rate environment around taxes.
Okay.
Robert It's Ben here.
I would say.
Our optimism is more.
<unk> around the fact that our asset is fully used and utilized so it's oversubscribed by its users. So there is a strong demand from the service that it provides and we.
We think there is.
There could be room.
In the in the rate structure for some appreciation over time, given that it's oversubscribed and in strong demand. So I think thats I don't know if I understood. Your question, but that's the fundamental underpinning of why we think this is a favorable development.
Got it that's helpful. So you're expecting an actual or potential.
<unk> increase.
On an EBITDA and cash flow versus just kind of protecting what you've got.
I think that's correct. That's correct. That's correct I think if you look at how some of the light touch regulatory approach has worked for the airports in Australia had a very constructive for both customers and for the owners, we expect that same environment for this facility.
Okay. If I can just finish with what youre seeing on the acquisition side, we've obviously seen an equity price recovery.
Don't know if that kind of takes away from potential other privatization opportunities.
As you think about your discussions on carve outs rising equity prices may be taking pressure off on some of those companies to think about carve outs and also touch on what you're seeing from the government privatization point of view that'd be great.
Okay. So I think there is two questions there.
Maybe I'll start with.
The government.
Situation just the opportunities with.
I guess, both the Canadian and.
U S governments have been vocal about.
Encouraging infrastructure development.
I'd say, it's early days.
Because.
We're still <unk>.
Trying to determine.
What role they would like the private sector to play in a lot of those.
Very ambitious infrastructure plants, we do think it makes sense for the private sector to have a big role on it but.
That's still to be determined.
And I think just given the amount of projects that are being contemplated.
That will lead to opportunities.
As it relates to.
The rest of the world.
There's lots of opportunities that are being similarly discussed elsewhere, I think with balance sheet constrained.
Yes.
It only it's only a matter of time before new programs, new incentives are put in place for the private sector too.
Generate growth through infrastructure.
As it relates to carve outs.
From.
Different companies.
It look it is a.
A very.
Highly liquid market environment and so.
Company is looking to source capital have a number of of opportunities in both the debt and <unk>.
Credit markets to source capital.
But I would say that.
We've always been successful.
In.
And finding opportunities.
Around the world, we have a large team in place.
Where we can come up with win win transactions with companies that are looking to.
Not only just look for the lowest cost of capital, but also for flexibility and expertise to work with.
Building companies.
And today, I think where we see a lot of that and where we see lots of opportunities in the data.
Sector, where we're working with a number of the telecom companies.
In.
Either expanding our data center operations and put a lot of.
Newbuild.
Investment opportunities as well as.
On a fiber.
Developments, particularly with the fiber to the home so.
I'm optimistic that we will find great opportunities, but I also don't want to.
Minimize what is a fairly.
Liquidity environment and.
With fairly high valuations.
Thank you very much.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone.
And our next question comes from the line of Andrew <unk> with Credit Suisse.
Thank you good morning, maybe a nitpicky question first just on on the accounting.
And it relates to the weather impacts that you saw on I guess, that's really centers on the rock port that's a rough line Cosmos and then GAAP storage on so but U S $55 million about the full impact from the quarter, how much would you view as being normal storage.
On the gains in a quarter versus what you booked.
Andrew It's David here I think.
As you know that business well it does have a little volatility period to period. So normal storage levels is tougher. So I think that the number you referenced would be relative to last year, albeit last year was quite low so I think normally it's probably.
About $10 million of effort from our quarter and we did outperform it there. So I think there's a bit of.
And it doesn't matter.
Okay.
Okay I appreciate that color and then the bigger broader question.
And I guess, if you look back over the last year, obviously, you've got one of your total holds is now very public.
And that process. So maybe ill just put that one aside but the other toehold positions that you struck over the course of the year in some cases speculative.
It's the Postop on.
On just the returns that you've made.
And then the rationale for leaving strictly valuation based on where you couldnt foresee.
Probability of getting control or are you just saw better risk adjusted returns elsewhere, I know thats a lot sort of packed into that question, but if you could give us color much appreciated.
Yeah, Hi, Andrew.
Yes.
Look I.
I see the tolls as really just one tool on our tool kit as far as.
Creating a transaction opportunities.
I often.
<unk>.
We see situations where based on our.
Knowledge on the sector and our transactions that we've undertaken where we see a mismatch between private and public valuations.
And that will provide us an impetus to take a position.
Yes, really not knowing at that time, if we can convert that into a <unk>.
Private transaction.
And so.
Often that will result in a transaction as it has over.
The last 12 years on occasion.
And sometimes it just results in a gain but it's a it's an important part of.
Of our business development activity to two.
Monitor for mist price Securities.
Take positions and then see if we can.
Great something out of it.
And sometimes it leads to something sometimes it just turns out to be a good investment and at the appropriate time, when we think that we don't have a.
Sure.
And the ability to convert will just sell it off.
Appreciate the color and then if I may just an extension of that.
You increased your dialogue with governments.
Around whether they'd be triple P arrangements, which you had in the past all of our long time ago or water infrastructure and maybe this is more super core focus to core core plus.
Have you increased your dialogue there just given government clients since we think strength.
Yes, I would say today.
Every government around the world is seeking input from us.
On thoughts of how the private sector.
<unk> can be helpful. On how the government can be helpful to the private sector in investing further capital so they're looking for.
Ideas around.
Various tax credits or other incentives.
Spur that.
Infrastructure development, and so thats feedback debt debt that we give.
On a pro forma basis and.
Hopefully it leads to opportunities.
Today I would say.
Yes.
We have not seen the level of <unk>.
Investment opportunity from governance that we expected or hoped to see but I do think I still remain highly confident that debt over the next five years to 10 years, there will be significant volume of <unk>.
Opportunities from that sector.
That's great. Thank you.
Okay. Thank you Andrew.
Thank you <unk>.
And I'm showing no further questions at this time, so with that I'll turn the call back over to CEO, Sam Pollock for any closing remarks.
Okay. Thank you operator and.
And thank you everyone, who participate on our call today we.
I appreciate your interest in the company and look forward to providing you further updates in the in the next quarter. Thank you very much.
Sure.
This concludes today's conference call and webcast. Thank you for participating and you may now disconnect.