Q2 2021 Brookfield Infrastructure Partners LP Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Brookfield infrastructure Partners L. P quarter, 2.2021 results and at this time all participants are in a listen only mode. After the speaker's presentation.
<unk> there will be a question and answer session to ask a question during the session. Please press star 1 on your telephone. Please be advised today's conference call is being recorded.
Thank you at this time I will turn the call over to David Grant C. F O. Sir Please go ahead.
Thank you operator and good luck.
Morning, everyone.
As you all for joining us from Brookfield.
Sure.
Second quarter earnings conference call for 2021.
My name is David and I on the Chief Financial Officer.
Joining me today, the Sam Pollock.
The executive officer, and our guest speaker of this quarter, Dave joined the investment professional responsible for the transport.
Following our remarks, we look forward depending on the questions.
This time I'd like to remind you that on responding to questions as well as talking about our growth initiatives on our financial the operating performance, we may make forward looking statements.
They 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.
Now with respect to performance. We're pleased to report the Brookfield infrastructure had another strong quarter funds from operations or <unk> totaled $394 million or <unk> 85 per unit, an increase of 18% compared to the second quarter of 2000 on 'twenty.
At our UK regulated distribution business and toll road volumes, our base business grew by 16% relative to the prior year.
These positive factors were partially offset by the impact of asset sales completed in the last year, which have resulted in nearly $2 billion of proceeds as we deploy the capital at higher returns it should accelerate our earnings base.
Now focusing on the key highlights of our operating segments, starting with the utility which generated F of followed $190 million an improvement of 21% over the prior year.
All businesses within the segment continued to perform well in the current environment with the results, reflecting 10% organic growth due to inflation indexation and the commissioning of almost $400 million into rate base during the last year.
Results also benefited from the acquisition of the remaining interest in our Brazilian of regulated gas transmission operations.
These contributions were partially offset by the impact of asset sales of part of our capital recycling program.
Specifically at our UK regulated distribution business, we reported another strong quarter, new connection activity more than doubled relative to the shutdown impact of the levels in the same period last year and on connection sales of growing nearly 30%.
This increase in connection sales was in part driven by a robust pickup for water connections, which exceeded plan by 45% of.
The water market continues to open the future sales are expected to include a much more meaningful percentage of water network connections, which will complement our existing gas electricity and fiber offering.
<unk> from the transport segment with $173 million, an increase of 36% compared to the prior year.
On a same store basis segment results grew by 26% at the economic expansion is propelling higher volume right.
Operations with volume sensitivity of seeing strong year over year increases and continued to build momentum from the second half of 'twenty 'twenty 1.
Further transport <unk> benefited from contributions from our U S. LNG export terminal the closed in September of last year.
The which is partially been offset by the the partial sale of our Australian export terminal completed in December.
Focusing on volume for the quarter activity across our transport networks continues to accelerate at the government imposed restrictions ease.
The rail operations volumes increased 4% relative to the prior year and were supported by a recovery of pre pandemic car of those levels and record operating efficiency metrics at our North American rail business.
Strong activity across both container and bulk products resulted in aggregate volume growth at our core assets of approximately 18%.
Lastly, traffic across the toll roads increase of approximately 30% of commuter volumes returned and heavy traffic levels remained robust.
During the quarter, our U K port operations secured several new commercial wins and contract enhancements.
Together these opportunities should require approximately $30 million of capital and increase the company's run rate EBITDA for the business by over $10 million annually.
The initiatives will increase the container and bulk capacity and are anchored by long term inflation linked contract protected by minimum volume guarantees.
Moving to our midstream segment or <unk> totaled $60 million, an increase of 14% from the prior year on a same store basis.
Results for the quarter reflects strong GAAP transportation volumes as well as the commissioning of the second phase of the Gulf Coast expansion project, both on our U S gas pipeline.
All of that were offset by the previously announced sale on the 12.5% stake in the pipeline, which was completed in March.
Our midstream businesses continued to benefit from the strengthening of commodity environments supporting customer growth plans and initiatives. This is lots of several longer term commitments from our customers, including a 15 year of multi facility contract from a major producer that will support the modernization of of key assets in Western Canada.
In addition, with the support of customers and community stakeholders. We are advancing several projects that once operational will continue to reduce carbon emissions and are evaluating the feasibility of hydrogen opportunities across our existing assets.
Finally, the data segment reported at the fall of $60 million, which was 40% higher than the prior year.
This increase was primarily due to the contribution from the Indian Telecom business acquired last year as well as organic growth supported by the build to suit tower on fiber to the home program at our French Telecom operations, which have led to local currency EBITDA, increasing 13% of all what's the kind of prior year.
Our Asia Pacific Data Center operations commence construction of a facility in New Zealand and initiated the large scale expansion at an existing location in Adelaide Australia.
The New Zealand is our first in the country and is anchored by a contract with a leading global hyperscale customer.
These projects will require approximately $135 million of capital with bip share being approximately $40 million and are scheduled for completion in the second half of 2022.
Now before turning the call over to Dave joined I'll briefly highlight the strength of our balance sheet, we maintain the dynamic approach to managing our debt maturity profile and derisking the balance sheet and with interest rates low everywhere, we are pushing out our maturities and lowering our overall cost of pet.
During the quarter, we completed several initiatives to further strengthen our balance sheet and enhanced our debt profile.
Cross our portfolio, we raised nearly $7 billion to refinance existing debt at attractive long term rates, while extending the maturities between 5 and 10 years of most of them.
As we advance our pipeline of investment opportunities and organic growth projects, which Sam will touch on shortly we have a robust balance sheet to support these initiatives and remain opportunistic on our approach.
Following the completion of the sale of our U S District energy operation in mid July total liquidity currently stands at $6.5 billion of which approximately $5 billion resides at the corporate level.
These levels position us extremely well to funds Brookfield infrastructure upcoming investment opportunities.
Now with that I'll pass the call over to day.
Thanks, David and good morning, everyone. David you on it and I'm pleased to be joined today's call to provide a spotlight on our north American transport operations Yeah.
Many of the you know U S. GDP grew 6.5% in the second quarter. The economy now exceeded pre pandemic side. Many of our businesses are benefiting from the economic recovery and are well positioned to deliver even stronger performance against the favorable economic backdrop, we have 2 assets in North America that exemplify the growth potential we're seeing.
<unk> is well positioned to acquire integrate and drive value in the smaller rail operations. In addition, GW benefits from consolidation and M&A activity in the sector more broadly on class 1 railroad the combined or acquire smaller networks competition and of our operational considerations can lead to unique transaction opportunity.
She enjoys the expansive network and strong reputation of the independent of viable and safe operator, they've got a logical partner for any class 1 going through this process. As an example, when C. S X announced the acquisition of Panam rail in 2020. They were both the ownership and operational complexities that created the opportunity for Ginny.
We need to become the operator of the Pan am southern of critical real connection of the Boston area. After the transaction received regulatory approval current merger activity in the sector, which I'm sure everyone has read about cut on like similar opportunities.
Moving over the tray pack. This is our container terminal business with locations in Los Angeles, and Oakland, the largest and ninth largest ports in North America. The deepwater ports on your irreplaceable and provide critical infrastructure for the import and export of goods into and out of the United States. We invested in trade back in 2014.
The introduced automation at the Los Angeles terminal early in our ownership we have developed 1 of the most environmentally friendly and lowest cost terminals in North America trade back and therefore, it has a significant competitive advantage over other terminals that are able to weather various market conditions, and we'll capture higher margins and the economic activity accelerates.
Driven by robust customer demand year to date volumes are up 24% and 13% in Los Angeles, and overland respectively, and we expect this trend to continue and the economic recovery differentially benefits from the U S are just import and export facilities of tray pack, our industry, leading turnaround times of shots.
He terminal of choice for shipping lines to improve their trend the time between.
In North America over the last few months shipping lines from all 3 global alliances of contact of trade back of enquire about available capacity, noting our strong reputation for reliable service.
Commerce penetration expands and retailers of men's shorter and shorter lead times Tribeca is uniquely positioned to capture more services increase its volume and growth market share.
I had to put a pin in it there. Thank you for your time. This morning on I'll turn the call over to Sam.
It is true.
And the.
The good morning, everyone today, I will discuss the exciting strategic initiatives. We currently have underway and I'll conclude the call with our outlook for the balance of 2021.
As David mentioned earlier in the call. We ended the quarter was the significant cushion to our liquidity position because of it.
The recently completed the latest phase of our capital recycling program.
We received proceeds totaling $1.8 billion, thus far in 2021.
This is nearly half of our planned capital recycling activity that we expected through 2023.
With respect to our asset rotation of the just the divestment of our Canadian and U S District energy platforms closed in June and July respectively, and resulted in an aggregate proceeds of Brookfield infrastructure of approximately $1 billion.
In addition, we received net proceeds of approximately 350 million from the previous.
The previously announced the carve out of the worst of smart meter Brookfield at the.
The U K.
Now in terms of our growth initiatives.
We continue to progress the number of acquisitions of inorganic opportunities.
With respect to of busy privatized in inter pipeline, we believe our patience has paid off on it.
July 27th I feel that the board of directors formally recommended the existing shareholders accept the offer dispose of the termination of the proposed transaction from another company and recommendations from the 2 leading independent proxy advisers to put against that transaction.
We now expect the clear path to acquire the company with the tender offer expiring Tomorrow August 6.
Based on conversations today with many of IPO shareholders. We're confident that we are progressing with the privatization.
Deploy approximately $2 billion is the central of midstream operations.
The completion of this acquisition is expected in the third quarter. The will mark the start of the next expansionary period for our business, which should drive strong epitope of unit accretion.
We look forward to discussing our plans for the business at our upcoming Investor day event in September.
In July we announced a joint venture with digital real estate to the bill, but operating data centers in India.
Our intention is to replicate our success of a partnership in Latin America, where we've enjoyed the developed 9 data center since 2019.
India, the burgeoning data center market with the opportunity to develop urban sites for high quality of counterparty in the global cloud space.
Our outlook for the balance of the year of strong the global economy, we are experiencing solid growth low interest rates and the need for additional cash on large scale investments in both developed and emerging markets. The.
The combination of these market forces should bode well for our business.
I P. L is poised the naval contribute to our results going forward as we shift focus to value creation.
During our extended diligence period, we identified a number of strategic priorities from the company that will help drive top line growth for years to come on.
We're also progressing new accounts in their system.
And.
Our focus on using our kind of exercise.
Size of opera operating expertise and access to significant cap of it differentiate yourself.
Care of new investment opportunities.
And the global growth expectations continue to pick up.
We are well positioned across each segment to capitalize on increased economic help on the customer demand.
Organic growth of historically provide sustainable cash flow growth end of the pick up momentum.
Inflation of the markets in which we operated at higher than normal levels and GDP growth rates are near the highs not experience of the pure upon on the pulp of financial crisis.
The economic rebound should benefit our volume sensitive businesses, which primarily consist of our transport assets and certain utility of midstream operations.
We're also seeing elevated levels of customer led expansion projects.
Which of added to our growing backlog of contracted commercial lines of projects.
This leads to increased visibility into organic growth for the next year.
In combination with elevated inflation levels in the contracted backlog of over $2 billion.
We expect annual organic growth at or above our high end of.
The 6% to 9% target range of the near to the near term.
Lastly, capex type of activity remains robust and the key contributor to our solid balance sheet.
Basically 2 was approximately 2 billion of net proceeds and we continue to progress core processes to monetize the other mature and Derisked businesses, we anticipate generating approximately 1.5 of $2 billion of proceeds in the next 12 to 18 months to recycle into new investments.
That concludes my remarks for today and I'll pass the call back over to the operator to open the lines of Q&A.
Thank you Sir and as a reminder, please press star 1 on your keypad at this type of questions and we will pause for a moment to compile the Q&A roster.
Yeah.
Okay.
Yeah.
Yeah.
Okay.
And the first question will come from the line of.
Robert Kwan of RBC capital markets.
Great Good morning.
A lot of talk about the building backlog here and I'm just wondering when you look at the returns that you've locked in on on your backlog.
How does that compare to the history and if you can even just as well of numerically frame, where the backlog sits expected return wise versus your 12% to 15% equity IRR hurdles.
Yeah.
Maybe I'll.
I'll I'll start with that 1 Robert and then.
David or David will jump in with the some of their perspective on that yeah, I think for the most part.
When it comes to organic growth.
Yeah. These are the types of projects that you tend to have less competition to work because of the.
They relate to our franchise area or.
The specific business perimeter, where you don't have as much competition. So you don't see the same cost of capital pressures that you do on new investments, where you know people are you utilizing them you know various means to compete so.
What that means is our return.
The level of tends to be more consistent throughout the cycle and we don't see the the highs and lows. The same degree that you do in the M&A cycles, and so I I think are you on plus or -15% returns.
Bill or are still consistent we haven't seen a big drop off on that in fact in some respects you know with lower interest rates, maybe the fact that might benefit a bit during this period of time, because a lot of the projects are evaluated on an unlevered basis and on a levered basis.
And as part of the amount of projects.
You know as we telegraphed on the call.
We're seeing a increase in the level of our backlog I think if you look forward 6 months 2 of year, our hope would be that our backlog will be at levels higher than what we traditionally had and that's just because that's the reflection of the the growth of the economy that we're seeing.
Any other.
And and just the number of customer initiated projects that that are coming our way.
Obviously things can change.
You know with all of these new variants, whether it's the laminate Epsilon or you know the Delta you know those can always slow things down, but the if we don't see a slowdown because of that then I think.
There could be a a great level of backlog on board.
The only thing I would add I think Robert just from a from a clot from the standpoint.
I think our backlog of around $2.3 billion, which is pretty near I'd say the last few years, but we've taken out of our smart meter buildout that we sold our district energy operations of come out of that so part of the like for like basis, We're probably near the 2 and a half of 2.6 billion, which would be elevated for for our business. So I think that that's really what's driving some of the the rips.
Short of backlog.
And the has been the favorite thing a lot of customer initiatives of the map.
Part of them.
Just turning to acquisitions can you talk about the geographies and the asset classes, where you're seeing.
On the best opportunities the more importantly, good value, but also on the flip side of their asset classes, you're really interested in acquiring other that's gonna be airports, which you've talked about in the past where valuations just the very high relative to your own he was on balance.
Yeah.
So yet today the other.
On the large majority of our off of opportunities.
Or in Europe, and North America.
If I look at our pipeline.
Probably more than usual I'd say, we still have a.
Situations that we're progressing.
In the in South America, and in Asia, but probably less than what we've seen in the past on a relative basis.
And then you know so that's I would say that from a geographic perspective, you know looking at a.
From a sector perspective.
You know Theres no doubt.
We are seeing lots of opportunities and in data.
And that remains a big focus for us just a on the amount of capital that's being invested.
You know.
2 to just improve the connectivity of both fixed and wireless networks.
<unk> is off the charts and so you know we're in discussions property with every single of strategic player out there.
About how we can help out.
And so I think that will continue to be a big focus for us.
I'm encouraged by the the level of transfer opportunities. So Dave is the is extremely busy looking at a number of situations that there appears to be a lot more capacity constraints and so people are looking at expanding their networks to deal with that increase of capacity in the bay.
Uh huh.
The bottlenecks that they have in their systems and so I think the engagement with the shipping companies in particular the it's.
It's higher than it's been in lots of all of long time.
So I think we're very encouraged by that and we continue to look for opportunities are in the utilities sectors, where oh, well you know traditionally for from a debt perspective.
The returns might have been a bit lower but at the core.
Couple of things are higher you know as the as electrification of of Society of you know it takes off so I think we're hoping there could be opportunities for us.
And the other sectors as well.
Got it and just on any asset classes that you're really interested in acquiring but.
Your views on value are much lower than where we're the market.
Yeah.
The.
So.
I mean, maybe you you mentioned I think airports.
Earlier on I didn't touch on that.
We are.
That's the sector, we've been looking to get into.
You know, it's been noise in Australia, the transactions over there with the with the great assets Yeah.
The it does feel like a lot of these assets are trading at levels that you know maybe today don't make sense.
But we're always trying to see if we can come up with the value proposition for those type of assets debt that we can make work.
So I.
I don't think there's there's no sector that we're avoiding because of we're saying it's the it's a.
It doesn't make sense, but what I would say is you know we have a large set of opportunities and so we're picking the ones, where we think we can get the best risk adjusted returns. So we're not trying to force getting into the area, where we're just still kind of focus on driving returns and in debt deploying capital where we are.
Of our advantages.
Okay. That's great. Thank you very much.
Okay. Thank you.
The next question comes from the line of Rupert near of National Bank.
Hi, good morning, everyone.
So everything.
Looking at the dealer liquidity quite a high liquidity level right now of 6.5 billion and you mentioned the capital recycling initiatives remain robust.
At the IPO deal it looks like you could be issuing the stock there. So maybe the liquidity will remain high following that deal to.
How should we be thinking about.
The pace of of investment going forward versus capital recycling and where.
Where do you think this the liquidity level will little stand maybe at the end of this year on the end of next year.
Yes.
I'll start there and then.
Maybe.
Dave.
Jump in as well, but.
The first of all of you know I I can't speculate or predict where liquidity will end up because it obviously depends on a number of.
Transactions that may or may not take place on both on the sell on divestiture side.
Yeah, we always look to maintain healthy levels of liquidity, so that we can be opportunistic.
To take advantage of investment opportunities as the they arise.
Yeah, we are we have.
I'd say and extremely.
The robust.
The pipeline of opportunities to the best can't say, whether or not we will succeed in the all of them, but are you. If we do I think we are it could be at a level that's higher than will be seen over the last number of years.
And so that's 1 of the reasons why we maintain our high level and and you know as it relates to <unk>.
The other capital recycling I think.
We have a number of people asking questions about how we paced.
The processes and the you know.
Typically.
While this is a great time to sell assets and I think we've mentioned that in the past.
We don't try to.
Accelerate transactions.
Head of when we typically try to try to time them from a business plan perspective, you know each and.
Investment, we make we have a ah by you know.
Fix or improve and then sell a strategy to it and we try to get as much of those business the initiatives done the pour we.
Sell it the risk business that that's always been our our plan and typically as you know well in spite of whatever environment. We have what will will follow that strategy you know other than if.
We just feel that someone's prepared the to pay us even if a project isn't quite 100% debt. So forget the late pay for that that maybe we might accelerate a bit but for the most part of.
You know, we just follow our our long term investment strategy, bringing our investments to the market when it makes sense.
And and utilize the many tools that we have on our toolkit to finance new investments, whether that's from capital recycling, whether it's you know taken advantage of the of our issuing debt or equity in the capital markets would be the lots of ways of the financing growth.
Very good thanks, thanks for the color.
Looking at results in Q2 can you give some color on on what the you'd think the residual impact of the pandemic could be how much of a headwind would you say the pandemic was in the quarter and they've been looking at the Crystal ball, maybe what's the outlook for the next few months of barring any of any impact.
From the from the fourth wave of course.
Yeah.
Yeah, the Rupert as it's been here.
I think it's.
What we're seeing again the tremendous recovery from the pandemic across the board. So we're seeing it in all regions.
There may still be some fits and starts as the there's a lot of media attention on various as Sam mentioned, a couple of them earlier, but at this point, we're seeing a lot of momentum like I said the momentum is heavily on the side of our return the normal and growth across the board.
So while there may be a little you know fits and starts here and there at this point we have no reason, we're not seeing any change in that direction over many of them across the global portfolio of.
So I don't know if that's helpful. But that's the that'd be my color on that what are you seeing any.
Residual impacts on some of your businesses like <unk> like toll roads are you able to quantify what the impact is today.
Yeah, what I'd say at the very very modest maybe the only region, where we had a sequentially quarter over quarter, a little step back with interest in India. This quarter, we lost in the.
Millions of people.
Not at all the other businesses that were impacted in the prior year like out of the UK connections business was back on some pretty shutdown levels. Our Brazilian toll road is continuing to perhaps from heavy traffic. So I'd say, it's sort of just thought I'd say.
It starts and ends.
In India in April or early day, it was supposed to the only impact on our financial results this quarter.
Okay, Great I'll leave it there thank you.
Yeah.
Thank you and our next question will come from the line of Fred the rig bastion of of Raymond James.
Yes.
Hi, guys. The there was no mention of the foreign exchange headwind or tailwind in your prepared comments can you can you provide some color on any related impact in the quarter and whether you remain appropriately hedged on that front.
Right.
Yeah, David here I can I can handle that 1 I think from all of our popular in reverse order from a hedging perspective of where we're extremely happy with where we're at today.
Roughly 80% of all of our off of over the next 24 months is in the other denominated in U S D or hedged back to it. So I think that that's a really pretty much believes Brazil as the.
The only on hedged currency in our portfolio.
In terms of the impact this quarter I'd say there were very very modest I think the reais finished pretty flat year on year. It might have been off of a percentage of very nominal on a on a quarterly average out of hedge funds because of all in line with the prior year, so that and the the middle of a matching of might've been a million or 2 of the first following.
Packs are plus or minus of currencies.
And David what do you expect to the impact could be if if currencies stay the same maybe for the second half.
Yes, the second half of 3 I, if it stays where it is would be a bit of a tailwind of maybe 3.4% at the current levels and our hedge currencies are in life. So I've had the fastest was modestly positive.
Okay. Thanks for that.
But no I appreciate that the devastating floods from a few weeks back in Germany, and China words in your jurisdictions, but the big caused.
The stress test the already fragile global supply chain, that's the related disruptions had any knock on effects on us.
Either your transport business or.
Any other any other of your platforms broadly speaking.
It stayed here, but what I would say is.
Despite a lot of the headlines are around supply chain shortages and disruptions et cetera, I think what we're seeing on the ground is very strong demand across our parks of differences are relevant in that sense. So.
I can appreciate that's probably the pockets of the economy that are experiencing sort of disruptions, but we're not seeing it.
Okay. Good to know thanks, that's all I have.
Yeah.
Yeah.
And we do have a follow up from the line of Robert Cavalier of CIBC.
Yes. Thank you I just wanted to touch on the IPO of briefly here.
During the long pole of Stuff's kind of what's the you know.
Some of the discussion about trying to get into the trilateral discussions on what the other sooner.
Which I believe was for a potential carve out.
So nothing of a clearer line of sight on acquiring on appeal.
It's the possibility of a carve out still on board.
Yeah.
Hi, Robert.
From here.
But.
As you know I'm I'm I'm I'm.
Very superstitious when it comes to transaction, so I tend not to.
Look too far forward until they are completed and so are our people we tend not to speculate on what we might or might not do with the assets until we get all of them. So I think we're right now looking forward to it.
On a positive the outcome over the next coming weeks or we can get.
It gets the channel levels at the appropriate amount.
The amount and then move forward with the privatization of.
You know I think you know if we are successful in acquiring the business you know, we'll be very commercial on how we look at it.
You know maximizing the value and reducing risk across the portfolio.
And so that could involve.
The conversations with the host of partners, including.
The 1 that he wasn't too so but today I think it's you know it's too early to talk about that in the.
Rather than do that maybe at a later day.
Yeah, Okay I understand.
On the the southern billion of free pointed out I'm thinking here Oh no expense on the term was oh.
Equally important but I wonder if it from sort of ballpark you can give us some potential annual savings from the refinancing activity.
Yeah, Rob its David here.
And he learned because of $7 billion is the.
Gross asset level the number so by the time, we look at our ownership I'd say the interest savings won't be overly material probably.
I'm hesitant to give you a number of right now, but we can follow up with guidance.
Okay.
And I think that's sort of on its more of the things that jumped out of its more of the duration to your pointed out 1.
A lot of somebody else.
Go ahead I'm, sorry go ahead of them.
Oh I just spend on another question, but I can add a point on comment on that 1.
I just kind of at the the real benefit was.
Fully bought the businesses, we we would've had to assume you know various refinancings of it over the next couple of years and to be able to.
Accelerate those of financing so that Oh, they're now out of the way and the.
We've taken that risk off the table I mean that just.
Yeah, just positions us well for that investment I'd say.
We feel very very good of the lift with the accomplished.
Okay and then the last question from me on Tesla.
On the North American region.
The central infrastructure business I'm wondering how much capital you expect to deploy on tuck on acquisitions that are on it you can compare that to me.
On the growth expectations.
Yeah.
Look I.
The tuck in acquisitions, there are all kind of it would be relatively small other than if.
We can.
Combine or acquire 1 of them.
1 or 2 of the you know the other major players, it's a highly fragmented market.
And there's really only 2 or 3 businesses of scale.
And you know, we know who they are with the data.
We are and Ah well, we'll continue to have those conversations but I think for the most part of this is the organic growth story.
We've got a number of initiatives.
Underway of how we can you know much like we have in the U K increased the the products that we do we sell through the channel and increase the.
The the.
Various adoption partners, who can go on the caught that.
The variance dealer networks, where we can.
Leverage each other as distribution channels.
Over to the increase the amount of red on product that we can.
Searches so well.
We've got a whole bunch of initiatives underway.
That are organic in nature, and I think can grow that business a very.
Very substantially.
Okay. Thank you.
And the next question will come from the line of.
Now G. They doom of.
The industrial Alliance.
Hi, good morning.
So that's the.
Sure.
So it was going to I just wanted to start with the maybe some background on the digital Realty of JV, maybe you can just talk.
Talk about why it was the right time to establish the partnership and maybe a potential scale or magnitude of some of the investments you'll be looking at.
Sure.
All starts and Oh this is Mike.
But I think the the place to begin is Ah just with our initial joint venture initiative with the digital Realty I'm going back a couple of years ago, where we joined forces to to to buy.
Yeah.
Well, we thought it was a growth.
Platform in Latin America.
The business I think that had.
Maybe 8 mm.
The existing.
The data center in Brazil.
And plans to grow that substantially.
And I think both digital and ourselves thought that by combining their ill describe the industry, leading expertise in design and customer contacts with our knowledge of Brazil, and South America, we thought would make it very department of ball team.
Team and and that's proven to be the case, we've had tremendous success and that are in that particular investment.
Where we now have more than doubled the size of the business will be operating in 4 of 5 different countries over the next couple of years and we've already moved to Chile.
Chile, and and Ah, Mexico, and we're also looking to go into Colombia.
And then the other markets in the country of we can expand into so.
We've just really I think it went out of the park with them down there.
And you know given that strong relationship with the belt with them, what we thought the next natural place to go to.
We're both of US, yes opportunities to grow with India and with each of the market separately, and then decided that the <unk>.
Binding at week, combining our resources we could.
Accelerate and the and be more.
Aggressive in growing that business. So that's what we look to do we see India as an equally or maybe even higher growth market than Latin America.
The Oh, there's just rapidly growing data consumption and net.
Country and its debt.
We were talking or just the.
The the.
Fact that the streaming that goes on.
With the within the population there is just the off the chart.
And so.
The data consumption is going to appeal the need for significant in the country urban.
Data centers and so we think we're well positioned to do that we've already secured land and the Navi Mumbai.
Yeah, we wouldnt be looking at other markets like Schneider.
And I think you know the opportunity to invest a yep.
I think collectively are between us and.
Did you Realty you know over $1 billion over the next number of years I think is very.
It is very strong so yeah.
All of those might be.
Very ambitious goals.
We think that with the 2 of US we can build a very formidable franchise.
Well, that's a great color. Thank you and just to clarify the JV it's 50%.
Ownership from Bip and not the other partners with Brookfield correct.
No. It's the it it's at 50.50 with the fun and digital Realty.
And this is 25% the fund.
Okay, Okay got it perfect.
My other question is about some of the comment that you made about being at the high end of organic growth. So I guess over the near term, but it really it sounds like you know all of the drivers of organic growth of the firing.
Firing on all cylinders. So I'm trying to understand do you think it's fair to say that this sort of pace.
Can be sustained for not just the near term, but maybe on a number of years. If some of the same dynamics of continuing to play out.
Ooh I.
The tier 2 to say exactly the.
Predicting 2 part of the future, but there's no doubt the.
You know the the tailwind for the next 12 to 18 months I think everyone can feel very confident that it'll be there and hopefully you know if the if you know the various governments and and central banks can the can ensure that.
The economy doesn't get too overheated in the half and half to increase interest rates too much debt I think this can be sustainable for an extended period of time, but that's sort of what to keep an eye on.
Okay. Thanks best of luck.
Come on.
Okay.
Yeah.
Thank you I will now turn the call over to Sam Pollock CEO for closing remarks, you may begin.
Yeah.
Okay, well. Thank you operator, and thank you everyone, who joined US on the call per day and we appreciate.
You're listening in and hearing about our progress and we look forward to speaking to you again next quarter.
And I, just like the wish everyone and for those of you in the northern Hemisphere at least the a great summer holiday. Thank you.
Yes.
And thank you for your participation in today's conference call you may now disconnect.
Yeah.
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