Q2 2022 Brookfield Infrastructure Partners LP Earnings Call
[music].
Thank you for standing by and welcome to Brookfield infrastructure Partners' second quarter 2022 earnings Conference call.
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 this session you will need to press star one one on your telephone.
I'd now like to hand, the call over to CFO , David Kratz. Please go ahead.
Thank you operator, and good morning, everyone welcome to Brookfield infrastructure Partners' second quarter 2022 earnings conference call as.
As introduced my name is David Kratz, and I'm, the Chief Financial Officer of Brookfield infrastructure partners.
Joining me today is Sam Pollock, our Chief Executive Officer, and Matt Grimes Senior Vice President of our investments team for the infrastructure group.
I'll begin today with a discussion of our financial and operating results for the second quarter of 2022 as well as touch on the strength of our balance sheet and current liquidity position.
I'll, then turn the call over to Matt, who will walk through how de carbonization can influence capital allocation and new investment teams.
Finally, John will provide an update on strategic initiatives and provide concluding remarks.
During our commentary we will be joined standby, our chief operating officer for our question and answer period.
At this time I would like to remind you that in our remarks today. 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 are pleased to report another quarter of record financial results funds from operations or <unk> increased 30% compared to the same period last year, while <unk> per unit was 20% higher at 67.
Organic growth remained robust at 10%, reflecting the benefit of elevated inflation as well as the commissioning of approximately $1 billion of new capital projects and over 3 billion of capital deployed in new investments over the last 12 months.
Taking a closer look at our operating results by segment, starting with utilities, adjusted EBITDA increased 14% relative to the prior year, reflecting the benefits from inflation indexation, the commissioning of approximately $500 million of capital into rate base and the contribution from two Australian utility acquisitions completed earlier this year.
<unk> for the overall segment was consistent with the prior year. As these noted benefits were offset by the impact of higher borrowing cost at our Brazilian assets, which increased by $25 million compared to the prior year.
After removing the impact of these costs <unk> increased 12% over the same period last year.
Our UK regulated distribution business continues to perform well as connections activity increased 17% compared to last year.
Our order book of $1 5 million connections is at a record high reflecting our backlog of new home deliveries that were were delayed due to the pandemic.
These are expected to drive strong growth into the second half of the year.
We completed two tuck in acquisitions within our North American residential infrastructure business during the quarter, including the largest New York based on metering provider and a portfolio of 9000 sub metering connections in British Columbia, and Alberta further expanding our existing footprint in Western Canada.
On our European residential infrastructure business. It became one of the first installers in Germany to provide customer access to electric heat pumps under long term rental agreements.
Switching to a heat pump usually carries a high upfront costs and result, Tds transition process for customers.
Offering a rental product with a carefree package, we were able to double our expected sales in the first month we.
We anticipate increase in customer penetration to those looking for an easy transition to environmentally friendly heat pumps Athene, Matt will elaborate on during his remarks.
Moving onto our transport segment, which continues to experience elevated demand as global supply chains remain constrained.
<unk> was $119 million $199 million for the quarter, an increase of 15% compared with the prior year.
Highlights include a 16% increase in <unk> across our global toll road portfolio, driven by inflationary tariff tariffs and an increase of 8% and traffic levels.
At our diversified terminal operations performance continues to benefit from higher rates congestion surcharges and the contribution from our U S. LNG export terminal, which commissioned a sixth commercial liquefaction train earlier in the year.
Performance has also remained strong in our rail networks with inflationary tariff increases offsetting the softer volumes and the impact of foreign exchange.
Our North American rail operation announced it will serve a new U S based electric vehicle or EV ecosystem.
Andre Motor group, who will invest five $5 billion into a dedicated EV and battery manufacturing facility, along our Georgia Central railway that is scheduled to begin commercial production in the first half of 2025.
We expect our rail network will transport inbound materials to support production as well as provide outbound transportation of new vehicles to markets across the United States.
Additionally, in May 2022, the Western Australian government formally announced the first package of federal and state government funding towards the Western Australian agricultural supply chain improvement program.
Total Australian $200 million program, we expect our Australian rail network will receive approximately $60 million to upgrade our track to handle incremental capacity. The program combined with our existing capital plans will facilitate the shifting of more grain freight from truck onto our rail network.
Our midstream segment generated <unk> of $170 million for the quarter nearly triple the prior year, primarily due to the acquisition of our diversified Canadian midstream operation same.
Same store results were favorably impacted by the robust commodity price environment and higher utilization of our existing infrastructure compared to the prior year.
Commissioning at our Heartland petrochemical facility within is progressing in line with our expectations during the quarter. We completed the startup of our polypropylene plant and shipped our first railcars of the product to our customers. The entire Heartland complex is scheduled for an integrated startup in the third quarter once fully in service approximately 70 per.
<unk> of our volumes are contracted on a nine year weighted average term.
These are agreements are structured to provide cash flow stability and eliminate direct commodity price exposure similar to our other midstream operations.
<unk> from our data segment was consistent with the prior year at $60 million.
<unk> underlying growth from additional points of presence and incremental megawatts commissioned in the last 12 months as well as inflationary price escalators were offset by the impact of foreign exchange.
Our French telecom operation has been selected by a local municipality to rollout 15000 additional fiber connections to the home.
This is estimated at approximately 22 million euros of growth capital underpinned by a 25 year concession agreement with the local authority.
This is an attractive addition to our existing fiber network of over 700000 connections our fiber business expects to complete the rollout in 2023 with commercialization rates significantly exceeding our plan levels.
Now I'd like to touch on the strength of our balance sheet.
Our corporate and asset level balance sheets are well capitalized with limited exposure to rising interest rates through proactive issuance of fixed rate and long dated debt.
Capital markets remain open and supportive of our business due to our strong investment grade credit profile and high quality asset base.
In April we proactively issued $600 million of corporate issuance corporate notes in the Canadian market.
Operating with significantly oversubscribed and split between a 12 year and a 30 year tranche with an average coupon of approximately five 5%.
Also during the quarter, we completed several asset level financings to reduce risk by opportunistically locking in fixed rates and extending our average duration, most notably in investment grade markets at our diversified Canadian midstream operation and our UK regulated distribution business.
Following this activity approximately 90% of our borrowings have been fixed for an average duration of over eight years with less than 1% maturing in the balance of this year.
From a funding perspective at the end of the quarter. We ended liquid we ended the quarter with $2 8 billion of available corporate liquidity and have since made significant progress on our asset recycling strategy at Sam will highlight we have secured asset sales that will add over $700 million of our current liquidity position and fully fund our new investment activity.
For the balance of the year, we have three additional sales processes underway that are combined to generate approximately $1 $5 billion of net proceeds.
I would like to thank you all for your time this morning, and I'll now pass the call over to Matt.
Thank you David and good morning, everyone I.
I am pleased to be joining today's call to discuss decarbonization of the global economy, and the resulting investment opportunities.
Our view is that this multi decade initiative will require substantial infrastructure investment to improve and replace the existing energy supply chain.
To achieve these aggressive net zero targets governments businesses and individuals must balance increasing energy consumption with the goal of reducing carbon footprints. This fundamental shift in how the world is pallet is expected to be a catalyst for growth in our existing businesses, both organically and through new investment activity.
<unk>.
We separate these opportunities into two categories, firstly supply side, which relates to the industries and companies directly responsible for the carbon emissions and secondly demand side, which focuses on consumer preferences for energy efficient solutions.
On the supply side, we believe the fuels used today to power the global economy will lead the transition to a net zero economy will be runoff safely and responsibly.
Our existing midstream assets are predominantly natural gas highly utilized and strategically located we believe these characteristics favorably position us to participate in the energy transition through the adoption of emerging technologies as well as through the shift in the global energy mix from coal.
<unk> gas LNG and eventually to hydrogen.
To date, we have been most active on demand side decarbonization initiatives to assist those seeking ways to increase energy efficiency lower energy consumption and reduced reliance on fossil fuels.
Recently, we have made investments in smart meters and sub metering, which in April energy demand management through real time information about energy usage.
We are also investing in building a platform of residential energy infrastructure businesses in North America and Europe .
The combination of evolving regulatory requirements and growing preference for low carbon high efficiency in home energy solutions provide significant tailwind for this segment.
As essential in home infrastructure increases in cost and complexity customers should be more inclined to adopt all rental model to alleviate the high upfront cost of new technology, such as heat pumps and solar panels.
Through Homeserve, we will extend our rental model value chain by offering high minus subscription based recurring repair policies, but residential infrastructure products.
This investment creates an opportunity to scale, our existing residential energy operations in North America, where we constantly have a large presence.
In the U S alone HVAC installation replacement and subscription base for paying memberships currently have an addressable market of in excess of $40 billion that is expected to grow at a 5% compounded annual growth rate over the long term.
In Europe , where we have a smaller presence this acquisition accelerates our growth plans and provides a model for expansion into other markets, we know well.
As the global economy moves closer to net zero targets, all new investment opportunities, we will have transition elements given our focus on generating sustainable long term returns for our unit holders.
Operating capabilities extensive development experience and ability to leverage the Brookfield ecosystem.
<unk> well to secure supply and demand side decarbonization investment opportunities, we look forward to sharing our progress with you in the future.
That concludes my remarks for today I will now pass the call over to SaaS.
Thank you, Matt and good morning, everyone.
As David discussed we had a strong first half of the year.
On top of our operational achievements and strong financial performance. We have successfully deployed a secured new investments for bip totaling approximately $2 8 billion.
Well in excess of our estimated $1 5 billion annual target.
As mentioned last quarter, we successfully invested approximately $700 million into two Australian utility investments, including the take private of an Australian regulated utility business <unk> and the acquisition of an Australian smart metering business in telecom.
This quarter, we have secured three additional acquisitions in the utilities and data segments for a further capital commitments of approximately $2 1 billion.
In early May we announced an agreement to acquire unique group a provider of wholesale and retail telecommunications services to customers and businesses in Australia.
We have now received shareholder and court approvals and expect this transaction to close in early August .
Total brookville equity for the investment is estimated to be $850 million with bip share at approximately $200 million.
During the quarter. We also signed an agreement to acquire Homeserve, a leading global provider of home services operating across North America, and Europe , which Matt discussed earlier on the call.
The total equity required for this investment is estimated to be $5 billion.
With <unk> share at approximately $1 3 billion.
The acquisition is expected to close in the fourth quarter of this year.
In July we secured our third acquisition at 51% interest in a $17 5 billion German tower portfolio alongside another institutional investor.
This marquee portfolio of approximately $36 three.
<unk> hundred 6000 tower Telecom towers in Germany, and Austria was acquired from Deutsche Telekom.
Europe's largest telecom operator.
Roger Telecom will retain a 49% stake in the assets and we'll continue being anchored customer under a 30 year Master services agreement.
Total Brookfield equity for the investment is estimated to be $2 5 billion.
With bip share at approximately $600 million.
During the quarter, we were equally successful on the capital recycling front.
In the past several weeks, we signed definitive agreements to sell four assets generating nearly $900 million in aggregate proceeds to bip.
In June we signed an agreement and close the sale of our 49% interest in a U S container terminal business in Los Angeles, and open to our existing partner.
Over our eight year whole period, we successfully execute our business plan to grow and diversify volumes.
As well as fully automate operations at the Los Angeles terminal.
These enhancements combined with the supportive market backdrop and constrained terminal capacity created an opportune time to monetize the business and an attractive valuation.
Our exit multiple was over 40 times pre pandemic EBITDA and was approximately 20 times last year's normalized EBITDA, which was a record for the business.
The sale resulted in an IRR of 19% during our holding period with proceeds after debt repayment of 700 million or approximately $280 million net to bip.
We also signed agreements with Indian toll road business and the exit EBITDA multiple of over 14 times.
With proceeds of over $600 million or approximately 200 million net to bip.
Closing is expected in Q4 and is subject to customary regulatory approvals.
In mid July we signed an agreement to sell a 500 mobile telecom tower portfolio that was previously owned within our New Zealand Telecom business in.
In 2019, we acquired a 50% stake in a fully integrated telecom network, where approximately seven times EBITDA.
Three years later, we were able to successfully exit the towers at a 34 times 2023 pro forma EBITDA.
And returned nearly all of our invested capital.
The transaction is expected to generate proceeds of $1 billion.
Which results in a $140 million net to bip with closing in Q4 this year following customary regulatory approvals.
And most recently, we reached an agreement to carve out and sell a portfolio of 24 100 kilometers of newly constructed electricity transmission lines in Brazil.
Total proceeds will be approximately $800 million.
Approximately 240 million net to bip, which implies an IRR of 22% in U S dollars.
We expect the transaction will close in Q4, and we'll be focused on the organic build out of the remaining 3000 kilometers of transmission lines in the country.
As David has highlighted his remarks, we continue to be active in our capital recycling program with three additional sale process underway.
We anticipate that combined these transactions could generate $1 5 billion of proceeds.
That will be used to fund future M&A activity.
I will now conclude my remarks with a few comments regarding our positive outlook for the business.
From a macro perspective, we.
We are seeing central banks make a concerted effort to tackle high inflation through substantial interest rate hikes.
Although these actions have increased the probability of recessionary conditions in may the markets in which we operate.
The highly contracted regulatory nature of our revenue should cushion effects on our businesses.
Nonetheless, we will continue to operate prudently by monitoring inflationary cost pressures within our businesses and maintaining high levels of liquidity.
From a deal flow perspective, we may be entering a period, where we can buy businesses for value.
Generally we expect that infrastructure assets will hold their value through recessionary conditions, given the resilient nature. However should.
Liquidity in the market become tighter certain owners of high quality assets may become over extended which will allow us to use our liquidity and access to capital to make investments at attractive entry points.
For the remainder of the year, our priority will be to complete the investments and asset sales that we have secured or in the process of securing.
Once again, we expect to exceed our annual investment deployment target and that our financial results should remain strong and well ahead of last year.
Finally, im pleased to announce that we just published our second annual ESG report, which summarizes our approach and continued commitment to sustainability across our businesses.
As you've heard from Matt de Carbonization is a key topic of focus for Brookfield infrastructure is expected to drive future investment opportunities a.
A copy of the report can be found on the responsibility page of our website.
That concludes my remarks for today I'll now pass the call back over to operator for questions.
I'm the analyst.
As a reminder to ask a question you will need to press star one one on your telephone please.
Please standby, while we compile the Q&A roster.
Our first question comes.
From the line of Robert Hope of Scotiabank, Rob.
Robert Hope your line is open good morning, everyone.
First question as I can as economic conditions soften does it change where you're focusing.
Your timing for new investments or maybe to put this another way do you think that softening conditions could yield opportunities in verticals, where you're feeling a little bit more quiet in recent years something like transport.
Hi, Robert maybe I'll tackle that one this is Sam.
I would guess.
That.
Yes.
Maybe I'll start by saying, yes at the moment, we're at the early stages of any.
No real impact from the rising rates.
So I think the.
Potential opportunities are probably in the quarters ahead of us.
Yes, we do expect that.
Valuations for the most part as I mentioned in my remarks in the interest for infrastructure assets should should hold.
Many investors are.
Looking past.
<unk> term conditions and the compounding impact of inflation will support valuations.
But but as we also said and as you alluded to that there will be some groups.
And investors, who have taken on too much leverage and.
And as a result could face liquidity and so we.
We think the opportunities could arise and.
The assets that typically are most affected are the ones you highlighted which are trends transportation assets and thats because they tend to be more GDP focused and arent as contracted so they.
They will be.
The ones, where we will see some some pressure.
At the moment, we haven't.
Seen.
Seen any particular opportunities arise in that front, but.
I think over the coming quarters thats were likely the opportunities could arise.
Alright, I appreciate that and then just as a follow up just looking at your own liquidity pro forma the asset sales and the pending acquisitions Youre kind of where you are right now could we see you further bolstering our liquidity or even accelerate additional asset sales to further bolster the balance sheet.
We do enter and recessionary conditions that could yield some incremental opportunities for you or for yourself.
I'll talk a little bit Dave might add some comments as well.
For the most part.
We have a.
Our five year plan on when we think.
We think it's appropriate time too.
Dispose of our businesses.
Based on where we think.
They are in their lifecycle and where we are.
Achieved most of the.
The operating plans that we've set up for them.
We do take into account each year changes that have taken place within those assets and.
And market conditions, but for the most part.
We have so many.
Ways to access capital.
We tend not to look to accelerate asset sales, so I guess in short.
Yes, we probably wouldn't do that we probably wouldn't change our.
Our timing on asset sales.
We would utilize.
<unk> forms of capital that we have.
But the only thing I would also add is.
Every year.
Given the scale of our business we have a.
A number of large businesses that we intend to sell and so we have a continuous source of capital from.
Recycling activities that are available to deploy in new opportunities.
Thank you.
Okay great.
Thank you. Our next question comes from the line of Maurice Choy of RBC capital markets. Maurice Choy. Please go ahead.
Good morning.
A follow up on that question about the investments you mentioned that infrastructure assets.
And to hold their value through recessionary conditions.
At least until the sellers have liquidity issues as you say.
Hey.
Therefore, seeing more opportunities to buy assets at a lower going you rates, but with greater organic growth versus buying assets at a good a deep value, which has been the hallmark of what fuel over.
Recent recent years.
Hi.
I think I didn't quite get the.
The full question I think let me just paraphrase and tell me if I got this right.
Think the question was.
In this market condition will we have an opportunity to.
Buy it at lower multiples, reflecting maybe.
Lower <unk>.
Platform value or goodwill.
Or not reflecting as much growth in the in the business.
No.
Yes.
I was trying to understand the mix between buying assets at deep value.
Versus buying assets.
Lower going in yield.
Creative platform opportunity.
Especially given the sellers are not selling or lowering the price in the face of.
I guess, a lack of created issues on their side.
Okay.
Sure.
So.
I think the other.
I don't think today the opportunity for some of those deep distressed acquisitions exists I don't think.
That's the market we're in so I don't see this is not.
Okay.
The financial crisis type conditions, nor the conditions we saw.
In Brazil back in 2015, 2016, where we had some really deep value opportunities thats not to say they might not or they could arise, but it's not here today that's for sure.
But I do think that.
The opportunity to buy.
Growth platforms at lower valuations, yes, I think that is definitely.
The market environment, where we are in and what we would look to do.
Okay that makes sense.
Thank you for that.
My second question is about midstream you, obviously have some exposure primarily through your midstream segment, but also through some of the assets of the segments include.
Including in transport, how do you broadly view your exposure to the sub sector.
Whether it is this related to the IPO of assets or not do you see the potential to add more exposure or even find options to monetize some of these assets in the near term.
Okay.
The.
So I think what we've.
Mentioned in the past and would reiterate today is that.
We think midstream investments are a key component of our.
Portfolio mix and.
And what we think are very attractive assets and critical too.
The world economy.
And we recognize that.
Midstream assets will evolve and transition.
Into different fuels over time, but for the most part.
They are going to be critical.
Critical for the next couple of decades.
As far as.
Quantum or our web portal.
Percentage.
We would have within our broader portfolio.
That will always evolve because we are constantly.
<unk> and selling assets depending on their.
Our maturity profile.
And.
That will.
We have a specific targeted minded with the right amount is I think our goal is always to have a diversified portfolio across sectors and regions. So that.
We have.
Minimal exposure to changes in political regulatory our sector dynamics that might take place from time to time.
So other than trying to balance that diversity requirement.
We don't really have a.
Our percentage in mind.
Great. Thank you very much.
Thank you. Our next question comes from the line of.
Robert <unk> of CIBC, Robert Kelly. Your line is open thanks, and good morning, everyone I'd like to start with.
Comments on de Carbonization, and maybe you can discuss what ways you are most likely to leverage your sister companies and their renewable and transition platforms to secure new opportunities.
Hi, Robert maybe I'll tackle that one.
I guess the the first thing I would mention is that.
While we have them.
Different investment groups.
Deploy capital within the various funds, we're all one team and so we work very closely with the renewable and transition group and so it is something it is very seamless as to how we exchange information and ideas and philosophies.
The.
Yes.
We very much.
Compare notes on opportunities and particularly.
I think what we try to achieve is.
Within our existing franchises that we already own.
Take the learnings from the various groups to drive value within those businesses and I think some of the.
The ideas that we talked about on the.
Hello.
Ladies and gentlemen, please standby.
Again, thank you, ladies and gentlemen for your participation. Please standby.
No.
Ladies and gentlemen, please standby we are experiencing technical difficulty.
Your lines.
Again, ladies and gentlemen, we are experiencing technical difficulties. Please remain on your line.
Thank you for your patience.
Please remain in line your conference will resume momentarily again placement of your line your conference will resume momentarily.
Ladies and gentlemen, please many line your conference will resume momentarily. Please minimum align your conference will resume momentarily.
Ladies and gentlemen.
These men and align your conference will resume momentarily we are experiencing technical difficulty again, please minimum align your conference will resume momentarily.
Ladies and gentlemen, Cleveland in line is speakers will resume momentarily. Please remember your line.
Conference will resume momentarily. Thank you for your patience.
Alright.
Okay.
Sure.
Ladies and gentlemen, Cleveland in line and your conference will resume shortly again please limit your line.
Thank you for your patience.
Okay.
Hi, operator can you hear us.
Our cancer.
Okay are we on the line now.
We are Sir and Robert <unk> line is still open as well.
Okay. Thank you.
Were dropped off I think as you were talking about within existing franchises, you take the learnings and drive value.
Yes, yes, so first of all let me just apologize for the the lines dropping and.
Clearly we need to make.
Data investment in that country.
But.
Just coming back to the the lessons learned yes, we.
We got we worked very closely with the renewables transition group on our strategies.
Sure.
Not only best practice, but just the learnings from our various investments.
And.
We yeah, we collectively thank from a Brookfield perspective to that.
Yes, the de carbonization trends.
Represent an opportunity to invest many billions of dollars over the next couple of decades.
And in particular, not only on new investments, but on investments in franchise that we have today and obviously the residential infrastructure business, where we're tackling the demand side equation.
We think is particularly large.
And.
And so we have benefited.
From the.
The assistance of the renewables group so in charge.
Yes, we are working closer together and that will continue to do so.
Okay I just wanted to follow up on.
HBC polypropylene plant start up a bit.
Just a little bit more color on how that sort of process is going and others.
It takes time and there you can't rush it but is the product on spec.
To call on any contractors to perform any weren't warranty work or anything like that and then other than startup with a facility 70% contracted is there anything more.
Required to de risk.
That asset and consider other options, such as partnering or perhaps divesting mistake.
Okay.
Sure Robert It's Ben speaking, maybe I'll handle the first part of that question.
And maybe just to remind everyone since we took over IPL.
The first phase of getting Heartland up and running was to complete construction and so we've now that is behind us and the startup. It was planned to occur in three phases. The first was to get the central utility block up and running.
The second was to operate the polypropylene plant and then the third is to start the PTH side of the facility. So in the spring of this year, we successfully commissioned the central utility block and there werent any major warranty claims or any material issues Robert in that store.
We we got it running with what I would describe as normal course startup challenges but.
Got it up and running in July this year, we commissioned the polypropylene plant and maybe just to add a bit of color to what Dave mentioned in his speaking notes.
We were able to achieve full output.
From the extruder and achieve full capacity on a daily basis for rail car loading.
So the polypropylene ended the plant is up and running well and once again there were no major.
A few learnings along the way that I would describe once again is completely normal course.
For the startup of a plant like that but no major claims or issues.
And then we're excited because during August and September were starting up the PTH side.
And so once we get the PTH side up and running we do expect to complete the ramp up to full production at the plant.
In the fall and towards the end of this year, so so far no major issues and.
And the commissioning and operations of the plant is progressing as we had.
As we had initially planned.
So hopefully that's a little bit of extra color and may be ill.
In terms of Derisking heartland going forward.
We have been able to make the spec of product that we were targeting for the commissioning we have a bit of a wider spec menu that we expect to make as the plant reaches full operation and as we make that we will we will.
Look to continue to just de risk.
E D.
Derisk the revenue side of the plant as you mentioned at 70% contracted today and.
As we move our product into the market will look too.
Yeah.
Cheap more contracts, where it's practicable to do so and continue to derisk the revenue side as we bed down the operations.
And with that maybe I'll leave the more strategic question about the point for either Sam or Dave to comment on.
Okay.
Okay.
Thanks Ben.
I guess, the only thing I'd add I guess.
Regarding your question was are we looking to bring in a partners.
Which at this point in time, we're not looking to bring any partners, but that's obviously a.
An opportunity that we can consider down the road.
Okay that was great color. Thank you.
Okay. Thank you.
Thank you. Our next question comes from the line of Devin Dodge of BMO capital markets Devin Dodge Your line is open thanks.
Good morning.
I wanted to ask about.
Brazil, and the level of at least the general level of Investor interest out there.
Are you still expecting to be a net seller in Brazil or are you seeing improved prospects for.
New investments that could see bip redeploy any recycled capital back into the country.
Hi, Devin.
We look we are always.
Looking for opportunities within the country.
It's been in a.
An area of focus for us given our long history in the country.
Given the.
Significant.
Asset base that we currently have we are we have.
Investments in most of if not all of the key segments of the.
The infrastructure sector and in Brazil, there hasn't been too much.
For us to look at more recently.
Most of our investments have been.
Add ons to our existing business, whether it's growing.
Our transmission are growing are.
Datacenter business or even adding onto our gas transmission business. So I'd say, it's mostly been organic growth.
I think likely that that's.
Going to be our investment posture for at least the next little while.
And and possibly there will be some exits.
As the number of the businesses are becoming more mature so it's probably I hate to say that we're a net seller.
More negative but.
But just from the the lifecycle of our businesses that may be the case.
But to the extent they.
Another opportunity arises.
That's great value, we are definitely we would definitely look at it.
Thank you.
Okay. Thanks for that it's good color.
Second question I was going to ask about the Vodafone New Zealand.
With the towers carved out.
There really isn't much what we would consider to be kind of infrastructure remaining in the business can you give an update on your plans for the remainder of the company and are there other candidates out there where you think there are opportunities to acquire the towers that are integrated with the retail operations.
So maybe.
Maybe just the first part I would say, we still think that the Vodafone business. It does have significant.
Restructure.
Remaining it has a very substantial wireline business.
That.
Provide significant.
Internet and other services too.
To the country and so we we would actually say it does have a tremendous.
Infrastructure.
But wants to it so I think we still like the business.
And.
Whether or not we.
Decide to to operate on a holistic basis today or are further separate the operating business from data that remaining infrastructure upon as something to consider but.
Yes, we're very happy with the with the the.
A business that we have and we think there's lots of <unk> to generate.
I guess on your second.
Question are there similar type opportunities to buy these.
Fully integrated telecom utilities and separate out some of the.
Infrastructure assets, Yes, I think there still are a number around the world that we can look at.
And given the success of this transaction.
One came up a bit.
That made sense from a value perspective, we would we would definitely consider it.
Okay. That's helpful. Thanks, I'll turn it over.
Thank you.
Thank you. Our next question comes from the line.
Frederick.
Bastion of Raymond James.
Bastian. Your line is open good morning, guys. Good result.
Thank you.
I was wondering if you could provide your views on the chips Act and whether you see it as a positive catalyst for that.
From what I gather this could bode well for your joint venture with.
Digital bridge, but since I'm no expert in that space was hoping you could add a bit of color here.
Great.
So.
The.
Maybe just to clarify I guess.
<unk>.
The JV, we have a digital bridges on the Deutsche Telecom Biz.
Business in Germany, and I think.
We're excited about that opportunity.
I don't know if the I don't think the chips act will impact that business.
But the.
It is related to.
The re onshoring of semiconductor facilities into the U S, which has been an area of focus for us.
And.
Yes, we do think that.
It will provide the.
The impetus and the.
The additional source of capital to make those chip facilities.
More viable and profitable.
And probably encouraged a number of.
Of the semiconductor businesses too to proceed.
And we are in discussions.
To help facilitate the development of those <unk>.
Businesses and so.
I think we hope that that will in the not too distant future helped us secure a transaction.
And.
Hopefully in future quarters, we can talk about that.
Okay, sorry for the confusion, but it does sound like it's an under appreciated part of your story here.
That's all I have actually ill pass it on to others. Thanks Craig.
Sure.
Thank you. Our next question comes from the line.
Of Andrew <unk> of credit Suisse.
Andrew Koski. Your line is open thanks, good morning.
Maybe just in the context of a D carb opportunity that you've highlighted on this call and in the letter.
Obviously buildings was one of the biggest culprits from an emission standpoint, industrials and autos gets a lot of focus but buildings is a big issue. How do you see the interplay of bip. The flagship funds and then just a broader transition fund houses all sort of work together in the context of the investment potential for bip.
Hi, Andrew.
D.
I didn't quite.
Maybe I'll just make sure I answer your question properly.
Do you want me to.
Bring it back to buildings in particular on the real estate side or just to where I think fit.
In particular will play a focus on it I think.
Maybe just clarify the first part of your question yes.
Yeah in fairness is probably a bit of both is you've got your residential strategy, which is very bim centric, but you've also got buckets and the bigger broader Brookfield family of.
Office exposure residential exposure, so theres, a bunch of different levers and then from a capital deployment standpoint, you've got a bunch of buckets of capital from different sources, but you can effectively spend or invest so just sort of curious on how you think about that broadly and then more specific later burp.
Okay.
Okay. So <unk>.
Robley.
Okay.
Go on the safe side, and maybe leave somebody.
Real estate related.
The answers to Brian or Bruce on a later call because that probably won't probably answered answer it properly.
On the real estate side, where it relates to our business is mostly on the metering side, where we think.
There is a huge opportunity to deploy capital and grow our.
Our metering businesses both in.
North America as well as Australia. So that's that's primary focus and to the extent that we can.
Expand those businesses to other geographies, we will definitely do that and we think that's an important component a component of that.
Improving the efficiency of the.
Real estate, both residential and.
Industrial.
But I think where we have the most immediate and largest potential in our business.
Yes really is on the residential.
Side of the business.
Particularly as it relates to driving.
Yes.
Deployment of new rental products through and occur and are now leveraging the benefit of home search and rigid growing the number of products that we provide to customers and.
Assisting them in financing notes and today, we've expanded the products too.
Yes.
Generators rooftop solar as well as the HVAC.
Different types of H back and heat pumps.
So I think the array of products has grown dramatically and I think over the coming decade.
The number of products will grow even more and become.
Yes, more relevant in the sense of that become more expensive and more sophisticated and so.
People will need our services that much more so I think the.
Market opportunity is truly in the billions of dollars and.
We think we're well positioned to be leaders in building that business.
I appreciate that color and then maybe just a follow up.
When you think about securitizing, those cash flow streams and effectively repackaging them are there certain markets like I say, the U S market and to a certain degree of the Canadian market, where it's a well established that that can be done.
Does that mean those areas grow at a faster rate than maybe some areas where securitization could just be a bit more difficult because there's not as many examples are precedents, where that's been done.
Yes look I think the.
Okay.
I think theres lots of pools of capital to grow this business not.
Even outside of North America.
Whether it's Australia or Europe .
It's pretty theres lots of deep pools of capital and debt.
And low cost capital.
We'll still.
Make it a.
An attractive value proposition for our customers, obviously to the extent that we have the securitization that's the.
That's the gold standard as far as driving down cost of capital and particularly in this type of business and so North America I think is the best suited but.
Look I think there are lots of pools of capital that we can tap into to grow the business elsewhere.
Okay very much appreciate it thank you.
Okay. Thank you.
Sure.
Yes.
Thank you our final question comes from the line of.
<unk> of industrial Alliance nausea.
<unk> Your line is open.
Okay.
Apologies <unk>. Your line is open topic of discussion in the previous quarter, but just wanted to see if you can provide more details on absolute Q2.
Jewelry.
Sorry, Nigel can you repeat that we just missed the first part of that.
I'm just wondering if you can break down the components of organic growth in the quarter.
The 10% that you that you posted.
Yeah, Hey, Matt David here I can tackle that one.
So if we look if we look a little deeper into the 10% for the quarter I did a primary driver is going to be the outsized inflation that we're benefiting from today and you'll recall that benefits all four of our segments, most notably it would be across utilities transport and data that youre seeing those benefits.
And the upwards of 80% to 95% of those businesses. So I'd say on average of the 10% 6% of it to almost 7% from the inflation indexation.
<unk> overall were pretty resilient I'd say, they're pretty flat when youre looking year over year in terms of total trend and on the other key driver would be the commissioning of that of capital projects. We will have our normal course additions to rate base B U K for example, but I would say the larger chunkier ones that youre seeing in this quarter would be.
The six train at Sabine.
In our transport sector, and then one of the lines.
With him quantum our Brazilian electricity transmission project was commissioned in the first quarter, that's now fully <unk>.
Contributing to revenues relative to the prior year. So those would be the two so on the utilities on the transport side, where you're seeing outsized capex in this current quarter, but those would be the two biggest drivers looking year over year.
Okay.
What sort of color on I think.
Initially when you started to see some of this higher inflation dynamics sure.
Maybe pointing.
The ability to hit the high end of your organic growth targets I know I know, there's some of that language is no longer than the supplemental but do you still see sort of a lag.
Terms of inflation impacting results and still being able to potentially hit the upper end of organic will targets, let's say this year and the next one.
Definitely for the back half of this year nausea, and I wouldn't read into just not touching on it in the current quarter, we had a ton of.
Strategic initiatives the highlights I wouldn't read too much into that I would say for the back half of this year inflation still runs well above our target range and all of the markets in which we're operating so we will look to capture that it continued to benefit from that and to your point, we do have a number of our regulated utilities in Australia, and the UK that do have a bit of a lag between the risk free rate and.
When you pass through current inflation, so we should see.
Incremental benefits looking ahead to 2023, and our lifestyle expect next year to be above our target range as well based on the current environment.
Okay fantastic. Thank you.
Thank you at this time I would like to turn the call back over to Sam Pollock CEO for closing remarks, Sir.
Okay. Thank you operator, and thank you everyone for joining the call. This morning, we do apologize for the technical difficulties that we had and I appreciate you bearing with us.
More important we thank you for your support and.
Look forward to speaking to you.
Our next quarter, but also at our Investor Day presentation, which is on September 29.
Details of that are.
Available on our website.
Thank you very much and enjoy the rest of your summer.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise Johan.
During Q&A you can dial star one one.
[music].
Sure.
Okay.
[music].
Thank you.
[music].
Yes.
Yes.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
The conference will begin shortly.
Raise your hand during Q&A, you can dial star one one.
[music] okay.
Okay.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Thanks.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music] okay.