Q1 2023 Brookfield Infrastructure Partners L.P. Earnings Call

Speaker 2: Thank you for standing by and welcome to the Brookfield Infrastructure Partners first quarter 2023 results conference call and webcast. At this time all participants are in listen only mode. After the speakers presentation there will be a question and answer session.

Speaker 2: To ask a question during this session, you'll need to press star 1 1 on your telephone. If you'd like to remove yourself from the queue, simply press star 1 1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. David Krant, Chief Financial Officer. Please go ahead, sir.

Speaker 3: Thank you operator and good morning everyone. Welcome to Brookfield Infrastructure Partners First Quarter 2023 earnings conference call. My name is David Crant and I am the Chief Financial Officer of Brookfield Infrastructure Partners.

Speaker 3: partner on our investments team focused on global transport opportunities.

Speaker 3: I'll begin with the discussion of our first quarter financial and operating results, as well as our balance sheet strength and liquidity position.

Speaker 3: I'll then turn the call over to Dave who will discuss global supply chain investment opportunities.

Speaker 3: Finally, SAM will provide an update on our strategic initiatives and priorities for the balance of the year.

Speaker 3: Following our commentary, we'll be joined by Ben Vaughn, our Chief Operating Officer, for our question and answer period.

Speaker 3: 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 our known risk factors, I would encourage you to review our annual report on Form 20F, which is available on our website.

Speaker 3: Now with that, during the first quarter of 2023, we generated strong financial and operational results. Our regulated and contracted business generated funds from operations, or SFO, of $554 million, or 70 cents per unit, both increasing 12% over the prior year.

Speaker 3: Organic growth was strong at 9%, which is the high end of our annual target, reflecting the benefits of elevated levels of inflation on our tariffs, strong volumes across our transport networks, and the commissioning of approximately $1 billion in new capital projects over the last 12 months. Results were further supported by the contribution of approximately $2.4 billion in 2018.

Speaker 3: Diving deeper into our segments, starting with utilities, we generated FFO of $208 million, an increase of 25% from the same period last year.

Speaker 3: The current quarter benefited from the expansion of our residential decarbonization infrastructure platform in North America and Europe following the acquisition of HomeServe that closed earlier in the quarter. Results also benefited from the strong organic growth of over 10% within our base business as well as the full quarter contribution from our Power)), Australian regulated utilities.

Speaker 3: American and European operations to facilitate integration into our existing regional operations.

Speaker 3: We have begun to unlock synergies including enhanced procurement opportunities, as well as driving higher sales through cross-selling our multi-product offerings.

Speaker 3: Our global footprint is comprised of operations in six countries with over 260,000 installations completed annually.

Speaker 3: Moving to our transport segment where FFO for the first quarter was $192 million and increased 11% on a same store basis.

Speaker 3: As a result of strong customer demand and activity levels, we continue to benefit from higher flows across our networks and increase rates that are generally in line with inflation in the countries we operate in.

Speaker 3: Specifically, our global toll road portfolio saw traffic levels increase 3%, our rail networks transported 11% more volumes, and our global ports business moved 5% more cargo relative to the prior year.

Speaker 3: Our midstream segment generated an FSO of $198 million, consistent with the prior year. Our base business continues to benefit from strong utilization due to increased long-term contracting and strategic capital projects designed to enhance the accessibility of our infrastructure. For more information, visit www.fosu.com

Speaker 3: At our diversified Canadian midstream operation, volumes on our conventional systems increased 66% from the same period in the prior year.

Speaker 3: Utilization at our Western Canadian Natural Gas Gathering and Processing operation increased to record highs, and our U.S. gas pipeline has fully contracted its storage services, while transportation throughput increased 11% over the prior year.

Speaker 3: Strong performance at our North American Gas Storage business continued from the fourth quarter, offsetting the normalization of market-sensitive revenues at our US gas pipeline and diversified Canadian midstream business.

Speaker 3: Finally, our data segment generated an FFO of $70 million, an increase of 21% from the same period last year.

Speaker 3: Organic growth for the segment was 9%, resulting from additional points of presence and inflationary tariff escalators across the portfolio.

Speaker 3: Our integrated data distribution business in New Zealand benefited from a recovery and roaming revenue due to an uptake in international travel, as well as fiber connectivity requirements from the commissioning of new third-party data centers connected to our network.

Speaker 3: Current quarter results also benefited from the acquisition of a European Telecom Tower business in February and the contribution from an Australian fiber operation acquired in August of last year. In addition to the strong financial and operational start to the year, our balance sheet is in excellent shape.

Speaker 3: Despite capital market volatility driven by monetary policy and isolated banking failures during the quarter, we are confident in the strength of our balance sheet. This strength was recently validated by S&P who reaffirmed our triple B plus credit rating, as well as a newly secured investment grade credit rating of triple B plus from Fitch.

Speaker 3: The second rating will help us further expand our access to capital and highlight the positive evolution of our credit over time.

Speaker 3: Our ability to source capital has been proven through cycles and is underpinned by the stable and predictable cash flows generally associated with infrastructure assets. Over the last few months, we raised over $5 billion of capital from nine relationship banks across North America, Europe and Asia to backstop and support our recently secured transactions.

Speaker 3: We ended the first quarter with total corporate liquidity of $2.4 billion, which will further be enhanced by proceeds expected from our capital recycling program that Sam will touch on shortly.

Speaker 3: Now before that, I would like to thank you all for your time this morning, and I will now pass the call over to Dave Joint to further discuss our transport business and supply chain investments.

Speaker 4: Thank you, David, and good morning, everyone. This is Dave Joint speaking, and I'm pleased to join today's call to discuss the investment outlook for infrastructure assets that underpin global supply chains.

Speaker 4: Our operations form a critical backbone for global supply chains and are highly utilized or contracted to provide predictable and increasing cash flows benefiting from economic growth.

Speaker 4: Today, we own and operate a transportation network with over $25 billion of assets under management serving a large and diversified group of customers across the globe.

Speaker 4: In recent years, geopolitical tensions and the COVID-19 pandemic have caused substantial disruptions, forcing companies to rethink their global supply chains.

Speaker 4: On one hand, we are witnessing a wave of onshore projects associated with high-tech and strategic components such as semiconductors, medical essentials, and EV batteries.

Speaker 4: We are finding that these de-globalization initiatives are creating significant investment opportunities for us.

Speaker 4: On the other hand though, lower value goods such as apparel, furniture, or household items continue to be manufactured in low-cost jurisdictions, primarily in Asia. Rather than reshoring, companies are instead looking to geographically diversify their supplier base, reducing their reliance on any one location or supplier.

Speaker 4: and what many are terming a China plus one strategy.

Speaker 4: In aggregate, we expect that these diversification efforts will increase the total distance goods travel in global supply chains.

Speaker 4: and will therefore result in higher demand for container-based transportation.

Speaker 4: These trends are tied to a greater desire for supply chain resilience and support the value of our in-place asset base, as well as create new and exciting investment opportunities within our transport segment.

Speaker 4: Most recently, we announced our intention to acquire Trident International in a $13.3 billion take private transaction.

Speaker 4: which will further enhance our infrastructure footprint underpinning global supply chains. Triton is the world's largest owner and less aware of intramodal containers and is a critical provider of global transport logistics infrastructure. The size and scale of Triton's global network differentiates it from competitors.

Speaker 4: utilization and margins. We were attracted to Triton's highly contracted asset base with approximately 90% of its fleet under long-term contract and limited recontracting exposure.

Speaker 4: In the context of our broader transportation franchise, we expect the acquisition will improve customer relationships and create new organic growth opportunities across our portfolio.

Speaker 4: Adding Triton to our global rail, port, and logistics businesses will make us one of the most integrated providers of freight transportation services in the world, allowing us to unlock new efficiencies for our customers.

Speaker 4: More strategically, Triton is uniquely positioned to provide valuable insight into global trade flows.

Speaker 4: Its size allows it to be one of the first companies to observe real-time changes in market demand, which can be inferred by the ratio of newly-subridged nation to fleet returns.

Speaker 4: This is implications for Triton's ability to react quickly to market changes, but also benefits the commercial positioning of our broader portfolio and improves our intelligence and capital allocation. Our investment in Triton is just one example of a large opportunity set we anticipate stemming from the ongoing changes to global supply chains.

Speaker 4: In closing, I also want to note that even as we enter a period of slowing economic growth, it is important to remember the long-term resilience and durability of our transport businesses.

Speaker 4: Our global rail franchise provides cost-effective, low emission, and highly efficient transportation for the inputs of everyday life. Our Port and both terminal assets act as critical gateways for the import and export of essential goods and commodities. Meanwhile, TRIED provides the containers that are necessary for the movement of goods amongst global port, rail, and road networks. That concludes my remarks. I will now pass the call over to Sam.

Speaker 4: Okay, thank you Dave and good morning everyone. For my remarks today, I'll provide an update on our strategic initiatives and conclude with our priorities for the business in 2023. We believe that our achievements over the last quarter demonstrate our resilience and ability to create shareholder value through market cycles.

Speaker 5: As you've heard from David Kretz, we had a successful start to the year.

Speaker 5: As you've heard from David Crant, we have successful start to the year. In addition to our solid results.

Speaker 5: From a capital deployment perspective, we have already secured our new investment targets for the year. In April , we agreed to acquire a premier European data center platform and also agreed terms on the privatization of Trident International.

Speaker 5: Our capital recycling initiatives are also advancing well and are expected to generate $2 billion in proceeds. More recently, we completed the sale of two US gas storage facilities at attractive valuations and have now sold a total of seven businesses in the last 12 months.

Speaker 5: We are also issuing over 900 million of BIPC shares as part of the Trident privatization, which provides us with significant financial flexibility to consider attractive investment opportunities.

Speaker 5: Now since Dave Joint described the trading transaction in his remarks, I wonít spend much further time on it. But I would like to reiterate that we are excited about the investment because itís a highly cash-generate business and the global supply chain insight that it provides to our larger transportation networks will be valuable. Our record commitment is expected to be approximately $1 billion at close.

Speaker 5: We anticipate the closing to take place in the fourth quarter, subject to customary closing conditions and Trident shareholder approval.

Speaker 5: The other significant accomplishment this quarter was the agreement to acquire Data4, a premier hyperscale data center platform in Europe .

Speaker 5: The business has approximately 100 megawatts of in-place capacity, currently generating revenue.

Speaker 5: with a plan to add 400 megawatts of capacity. A significant proportion of this incremental growth has already been contracted or reserved, which provides a high degree of certainty for the first five years of our development plan.

Speaker 5: The entire growth profile of the business has been further de-risked with all the required land already owned and power secured to support the expansions.

Speaker 5: We believe data for is an attractive business due to highly contracted revenue base and regional tailwinds. We're focused on Europe due to its land and power constraints, lagging build-out, completed relative to the U.S., and more restrictive data softening laws that require data to be warehouse-wors created.

Speaker 5: Additionally, Data4 fills a geographical gap in our Global Data Center footprint.

Speaker 5: as it will complement our existing Greenfield Development Platform investments in North and South America, Australia, New Zealand, India and Korea. This transaction is expected to close in the third quarter.

Speaker 5: with an equity investment of approximately $600 million. Having looked at several similar businesses over the past few years, we feel our patience and capital dissonance paid off. We were able to acquire this platform and an attractive entry multiple that will several turns below recent comparable turns at.

Speaker 5: As I mentioned earlier, we have been active on our ongoing asset sale program. Since interest rates began rising in March of 2022, we have successfully secured seven asset sales, six of which have already closed, with the remaining Indian Toll Road portfolio sales scheduled to close in the second quarter. These sales have been to core and strategic buyers at values in line.

Speaker 5: facility in Oklahoma.

Speaker 5: We realize attractive transaction multiples for these assets of approximately 21 times to 15 times EBITDA respectively.

Speaker 5: Both storage assets and the previously announced sale of Geelong Port closed in April . As we move forward, we remain committed to our 2023 capital recycling objective of approximately $2 billion and continuously strong interest for our assets from potential buyers.

Speaker 5: Now I'm closing and I'll make a couple of observations.

Speaker 5: First, we believe that the long-term positive outlook for the infrastructure sector in conjunction with our full-cycle investment strategy.

Speaker 5: will allow us to continue to create significant value for investors.

Speaker 5: Our strategy is grounded in a deep understanding of the sector and various market forces that drive it. In that regard, we've made significant progress during the quarter adding valuable pieces to our long-term growth plans with Data4 and Triton.

Speaker 5: and both investments are expected to generate strong cash flow for unit holders. We also believe that our ability to look through near-term headlines and overreactions to invest in high-quality businesses that have long-term growth potential will differentiate us during this current market cycle.

Speaker 5: Now our priorities for the balance of the year will be the integration of our recently secured investments and the execution of our current capital recycling program.

Speaker 5: We're also focused on continuing to deliver excellent financial results.

Speaker 5: which are expected to benefit from the full run rate contribution of the Heartland Petrochemical Complex, the commissioning of new projects that we have in our capital backlog, and obviously the closing of data for and trying to acquisition.

Speaker 5: That concludes my remarks for today and I'll pass it back to the operator to open the line for questions.

Speaker 2: Certainly. Thank you one moment for our first question.

Speaker 2: And our first question comes from the line of Robert Hope from Scotiabank. Your question please.

Speaker 3: First off is on the investment pipeline. You've been very successful as you highlighted in April with the two transactions. You know, as we look forward through the year, you know, what does the pipeline look like and is the expectation now that more will be focused on the 2024 closing date.

Speaker 5: Hi Robert, this is Sam, I'll take that question.

Speaker 5: Today, I'd say our pipeline is still quite robust.

Speaker 5: We're taking this time to be selective in what we look at. Given that with the success we've had in the last couple of years in deploying capital and the fact that we've secured two attractive acquisitions this year, we're obviously well placed as far as meeting our deployment goals.

Speaker 5: But we have lots of flexibility and capacity to look at high value opportunities that are out there today. So we continue to monitor a couple situations and to the extent that we think they can be additive to our business.

Speaker 6: look to pursue something over the next couple of months. I appreciate the color there. And then maybe just as a follow-up, just in terms of capacity. On the financial side of the capacity, you know, it does appear that you've been very successful in securing maybe some incremental investments, the asset sale target remains at $2 billion.

Speaker 6: as you look forward, if we do capitalize on additional investments there, could we see that asset sale target move up? Or consequently, is BPSI looking like an attractive funding mechanism right now?

Speaker 5: So look, I think the one of our strengths is the fact that we have multiple channels to create liquidity, both through capital recycling and through the use of stock.

Speaker 5: the fact that we were able to utilize BIPC for the trade and transaction has obviously given us additional flexibility to continue to pursue opportunities. We'll manage our deployment to our capital availability, so obviously that's something that we very much keep in mind. And I just say that as far as, um,

Speaker 5: the level of capital recycling, it is a continuous process. So each year we always have businesses that are maturing and that are ready for sale. And so once we've completed this year's targeted.

Speaker 5: you know, capital recycling. I expect that next year we will have other businesses that you know, will bring to market as well and continue the process.

Speaker 7: Thank you for that.

Speaker 2: the line of Devon Dodge from BMO. Your question, please.

Speaker 6: Thanks, good morning. I wanted to start with your Indian telecom tower business. So look, a two part question. You know, first, can you give an update on how the business has been performing and then secondly, you know, it appears that there may be some consolidation opportunities available, but when you're already one of the largest owners of towers in the country, just can you speak to that?

Speaker 8: the largest portfolio of towers in the country by the end of this year will be up to about 175,000 towers and that would make this one of the largest portfolios in the world. It's very well positioned because it's a national footprint across India and these are very modern towers built in the last several years.

Speaker 8: So it's sort of a 5G-ready national footprint of towers. What's great about the business is it's underpinned by a 30-year contract with a highly capable and credit worthy counter-party. And when we acquired the business, it really had a single tenant. So we had one tenant on the towers.

Speaker 8: We now have agreements with the two other MNOs as well as a handful of smaller competitors that also want space on our towers. So we continue to bring our colocation rate up and get those additional tenants on our towers.

Speaker 8: and we're very happy with the progress that we've made so far and very happy with the investment overall. And you know, in terms of India in general, maybe I'll just make a couple of comments before speaking about consolidation. You know, we're really quite excited about the potential to continue to grow this business in India. India has.

Speaker 8: a very young, talented and capable workforce, and a very strong culture of meritocracy. As a good example, in the post-COVID period, India was the first country that we saw get back to work five plus days a week in the office. So a very strong culture of moving forward.

Speaker 8: and getting busy and so we're excited about the future growth of this business because not only does it have all the tailwinds of 5G adoption and increased data consumption but also is just in a tremendous location in terms of its growth platform. And maybe in terms of further consolidation in the industry I guess as always.

Speaker 8: You know, we would look to be opportunistic as we always wouldn't to the extent we could add further towers to the portfolio and they were attractive in terms of their location relative to our current portfolio and our ability to drive future value. We would look to do that.

Speaker 6: if it made sense for us at the time. Okay, thanks for that good color. Okay, maybe just switching over on the capital recycling front. Just wondering, have you seen less interest from say pension fund or traditional kind of fixed income type buyers for your mature businesses just given.

Speaker 6: the rise in bond yields and if you have, as that had much of an impact on what type of assets that you're looking to sell in the near term.

Speaker 6: you have, has that had much of an impact on what type of assets that you're looking to sell in the near term?

Speaker 5: Maybe I'll take that question.

Speaker 5: I guess the answer that's a little bit nuanced. First, I would say that the buyer universe today is a bit narrower than in the past.

Speaker 5: But...

Speaker 5: Most of the investors across the universe of infrastructure buyers, whether that's strategic, sovereigns, pension plans, are still looking for select opportunities. So they are still in the market. There's no particular buyer that I would say is...

Speaker 5: I was a market that just may be not as growing as quickly today just for a number of factors. But we see them for our assets which we think are among the best in the world. We still see a broad base of all those types of buyers. And our expectation is that once...

Speaker 5: The current market environment has progressed and normalized that we'll see the stronger activity levels that we've seen in the past. But as far as your question of, is there any particular buyer that pulled back, I'd say....

Speaker 5: No, they're all still there and they're all still very attracted to infrastructure. It's just the level activity has obviously decreased.

Speaker 5: as far as sectors and areas where there's interest.

Speaker 5: sectors and areas where there's interest. I think...

Speaker 5: The deal activity we see from a regional perspective hasn't really evolved that much. There may be less activity in South America today from institutions.

Speaker 5: But from strategic, it's still quite important for them.

Speaker 5: I think the data sector, businesses related to transition or decarbonization are still very strong. And obviously, we think that there's great opportunities in de-globalization and supply chains.

Speaker 2: I think we'll see a movement into those assets. I think we're maybe at the forefront of that, but often people follow us and see what we're doing. And so I wouldn't be surprised to that accept as well. Okay, thanks for that. I'll turn it over. Thank you one moment for our next question. And our next question.

Speaker 2: Comes from the line of Robert Kwan from RBC. Your question, please.

Speaker 9: Hi, Robert go ahead.

Speaker 8: So you're now talking about approximately $2 billion. On the last call, you were talking about being over $2 billion. So is that just valuations that you're seeing as maybe moderating or is there something else going on in the market, whether that's just you're expecting to sell fewer assets or some other dynamic? That's how you estimate, right?

Speaker 5: So, Robert, we missed a little bit of the first part of your question, but I think I got the gist of it. I think your question was just in some of our commentary we might have referenced.

Speaker 5: more than 2 billion and now we're just referring to 2 billion. I think you might be reading more into the comments than was intended. We haven't really changed our views. We haven't reduced our expectations on values. I think

Speaker 5: and now we're just referring to 2 billion. Yeah, that's it. I think you might be reading more into the comments than was intended. We haven't really changed our views. We haven't reduced our expectations on values. But I think that if they primook their families and they tanked themselves tohai something that they hadmilitary

the market is still relatively strong for high quality businesses. You know, one of the benefits that we have is the fact that we have a diverse portfolio of businesses across sectors and regions. So we do have the ability to...

As I mentioned earlier on one of the questions, we...

We have lots of capacity to pivot and to move different businesses to the forefront depending on marketing vision.

So, no, we haven't changed our capital recycling plans this quarter, it's the same. And we'll look to continue, it's a continuous process and once we're done with certain businesses that we have in mind today, we'll start.

with some of the longer shipping distances more time on the water. So you think about Triton specifically.

Presumably that also means you're seeing a need, an increased need for container inventory. So how much of that type of thing would be in your base plan? And I don't know if you can break it out, but what type of, say, outsize growth related to needing to secure more containers.

for that would be contributing to the IRR. Hey, Robert. I'm going to ask Dave to give you some thoughts on the sector and our views, but the one thing I'll just caveat is that given that the transaction is still in process and we have the

shareholder approvals and different approvals to obtain. There's only so much we can comment at this time. And so I'm going to caution Dave to not get into too much of those assumptions at this moment within our plans, but he can talk more generally about...

what we see more broadly in the sector and why we're positive.

Yeah, sure. Hey, this is Dave here. I'm maybe starting more broadly with the sector in the New England on Triton a little bit and how it fits into the overall macro picture. Okay, at a macro level, I think we find that supply chains have been under-invested for really decades.

And as people start to change the way their supply chains actually work, you know, based on some of the things that you had even mentioned, that's going to require significant capital. And I think that creates a lot of opportunity for us, not only for, you know, Trite specifically, but just as a business, it creates a lot of, you know, opportunities for us. And so as that supply chain resilience gets pursued,

you see people taking decisions they wouldn't have taken five years ago, right? And whilst the pandemic had unique and specific disruptions, it also really pulled back the curtain on the fragility of the overall supply chain network that exists today and needs to get rebuilt over the coming decades.

So with that kind of as a macro backdrop, we see Triton as very, very well positioned in that new world. This is a great franchise, you know, the world's largest owner and lesser of containers. And more specifically, its business model is highly cashflow generative, strong contracted profile with...

customers that have frankly probably never had better balance sheets and credit positions. And then if you take a further step back, this fits really well into our overall franchise. It provides tremendous insights into the way that goods are being moved globally, reacting very quickly to changes in how goods are being moved and in what volumes.

But also sets us up as one of not the largest provider of end-to-end sort of transportation services on the planet and being able to work with customers on really unique and new offerings. So I think those are the things we're kind of excited about. And as Sam mentioned, with the past of time and getting through these approvals, we look forward to kind of talking more about the business. So in the next episode, we're in a state of interest.

Understood. If I can just finish with a quick cleanup question. Just on Heartland, you noted minimal contribution in the quarter. I'm just wondering what quarter do you expect to start receiving and booking the Alberta Petrochemicals Incentive Program Grant?

I'm begging just to finish with a quick cleanup question. Just on a heart-length, you noted minimal contribution in the quarter. I'm just wondering what quarter do you expect to start receiving and booking the Alberta Patrick chemicals incentive program grant? I can jump in, Robert.

So the business as a reminder, so the grant you referred to is when it was operational and we put it into service, you know, mid to late January . So it begun contributing in February , I think it was. So, you know, on a net to bid basis, though, it's pretty small in the grand scheme of things. And I think that's kind of what we're alluding to. The contribution was quite minimal.

The facility or the grant itself? The grant metats are quite minimal. Okay, thank you. Thank you one moment for our next question.

And our next question comes from the line of Robert Catilier from CIBC. Your question, please.

Hey, good morning, everyone. You've answered most of my questions at this point, so just a couple of follow-ups on Triton. Specifically, we're used to seeing investments in more fixed assets that are more fixed in nature, and it looks like Triton's got maybe a larger component of mobile assets here. So do you see a... Triton.

a fundamental difference here in how the risk reward there is managed on more mobile assets compared to your fixed infrastructure. The second part of the question is, I'm just curious to the extent you can, given the transaction stone progress.

Can you maybe elaborate a little bit more on the interplay with the existing assets beyond just the insights that Trent will provide for you other?

and transportation assets. Hi Robert, I'll take that first one and then maybe Dave you can talk with Aaron and play a little bit.

So, you know, I guess what I would say is that, you know, the

you know, maybe draw your attention to and flag is the fact that, you know, a lot of our businesses.

particularly the utility businesses in more specifically, you'll have, I'd say this concept of a RAP, a regulated asset base or a contracted cash flow base. And sometimes those businesses have,

transmission networks or other distribution networks and other times we've got our residential decarbonization businesses backstopping them. We see this leasing business very similar in the sense that we have a highly contracted cash flowing.

book of income streams that we are continuously adding to and rejuvenating through a business that is critical to the infrastructure universe, in particular the supply chain. And so we very much just see it as a...

taking part in infrastructure activities, creating a RAB base that we can then benefit from. And so in our mind it's very much similar to our utility type businesses just related to transportation.

And so we look for these type of businesses regularly. And the main factor that's important is does it have a franchise where you can sustain and grow that book of contracted cash flows. And this business clearly has that and has been doing it for many, many years. So that's what I think.

attracts us to it, and as opposed to whether they're mobile assets or other type of assets. It's still very much infrastructure related. So with that, maybe I'll just turn it over to the interplay question. Yeah, hey, this is Dave here. I'll be a little bit cautious just given the status of the overall transaction, but I think what I.

I think we see this as an ability and opportunity to be more relevant in all of these large movers of goods, global supply chains, being able to offer them an integrated suite of rail, port, logistics, container services. We see a lot of opportunity in what we can do with the platform, but again, I need to be a little bit cautious at this stage given where we are in the transaction.

Yeah, that was a good call. That was what I was looking for. Thanks, everyone. Thanks. Thank you.

Thank you one moment for our next question. Thank you one moment for our next question.

comes from the line of Najib Eydan from IA Capital Markets. Your question, please.

Hi, good morning. Just a quick question on Triton. You explained kind of your investment basis in the company. And I just wanted to see if you can provide a bit more color on how you're thinking about the capital intensity of the business, maybe relative to your other existing transportation assets. Thanks.

Could you repeat that a little bit? I didn't quite understand it. The question is about the level of capital.

Can you repeat that a little bit? I didn't quite understand. The question is about the level of capital? Capital testing. Correct.

Dave, do you want to comment? Yeah, I mean I guess what I would say attracts us to this business is this is an asset heavy business and as a result, you know, has 90% plus EBITDA margins, which is sort of reflective of the capital nature of it. I think if you look across our portfolio, we tend to be very attracted to…

Hopefully that answers the question you were asking. Maybe just comment on the maintenance capex as relative to the model. Yeah, I think just an important point Sam's making is that the maintenance capex and the maintenance themselves is borne by the customers.

not borne by Triton itself. And so the capital intensity of the business on an ongoing basis is very, very low. And so the cash flow really flows from EBITDA right to the AFFO line.

Okay, that was very helpful. Thank you. And just one last question on Australia. I know maybe there's not much you can say at the moment, it might be too early, but it seems like Ausmatt is close and the other country, so what would that look like in fact? Great…

I'm just wondering with Brookfield looking to increase their investments in the energy space in Australia with Origin, what kind of opportunities do you see for a bit to maybe accelerate transmission investments via AHS

Yeah, this is Ben again. We see tremendous opportunity, especially in the OZNET footprint, to develop new transmission specifically for renewables, but also for...

you know, just other large load clients. And so far with OZNET, we are seeing the kinds of growth projects that we expected in underwriting on that front. So it was an important part of the underwriting and we do see it playing out.

So we expect to be building new lines to connect new renewables to the network consistently over the coming probably decade to two decades. And we're off to a good start in terms of tangible projects and things getting built on the ground. So that was absolutely part of the thesis.

and we are seeing it play out. I guess Brookfield's potential investment in Origin is sort of, I don't know if the right word was expected, but it doesn't really, I guess, add a lot of incremental growth to what you were already underwriting in Osmem. I think that would be fair, Najeev. I think.

Australia has a net zero target by 2050, and that's what we underwrote, regardless of whether who owns the power generation. This may accelerate the transition for certain assets a bit quicker than originally contemplated, but we knew the end game, and we knew the end goal for the country, and that's kind of what we looked at when looking at this regulated transmission business. Okay, so thank you.

Thank you one moment for our next question.

And our next question comes from the line of Andrew Cuska from Credit Suisse. Your question, please.

Thanks, good morning. You've got a number of businesses like Water Heater Rentles, Smart Meaters, and the arguably part of Trident that are effectively financing those businesses.

I guess to what extent and I guess what proportion of the balance sheet overall do you see being allocated towards these kinds of businesses in the future? Hi Andrew, I don't think we have any particular target to be honest.

I think these were, each one of them, smart meters, the residential infrastructure business, this business, we're all optimistic. I think they're...

We thought they're all great franchises. And I think over time, as we buy and sell businesses, the percentage of more financially oriented infrastructure businesses will ebb and flow. But there's no percentage that we have in mind.

So, I wouldn't draw any conclusions based off of this acquisition or any others.

Okay, appreciate that. And then I guess maybe just as a natural extension. So there's no aspiration to be involved in railcar leasing, aircraft leasing, as a sort of standalone businesses unless there's an opportunity on an opportunistic basis that presented itself.

Yeah, look, we've looked at, I'd say, rail car leasing in the past. There's some good businesses out there. We've not really done much on the aircraft leasing side, to be honest, or looked at that.

It's not to say that we wouldn't. We think that what we bought is better than any of those other types of businesses. So I think we ended up with the cream of the crop.

So today, none of them are a focus for us, but I would never say never if something interesting came along. Okay, I appreciate that. And then maybe just a bigger picture question and comes down to just dislocations around the world. And you're seeing interest rates move at sort of different paces and different levels of recovery around the world. I guess just high level, you know, what.

What are you finding more interesting from a geographic basis?

right now what's taking a lot of your time and what's sort of less interesting. So look I think what's interesting at the moment.

right now what's taking a lot of your time and what's sort of less interesting. So, look I think what's interesting at the moment is that

were able to buy great businesses for value in the highest quality markets, namely North America and Europe . And so obviously, the benefit of having a global business is that we can move capital.

If you're asking what excites me is the fact that we are able to invest very close to our core markets in great, great businesses.

If you're asking what excites me is the fact that we are able to invest very close to our core markets and great, great businesses. Okay, that's helpful. Thank you.

Thank you. One moment for our next question. And our next question comes from the line of Ryan Levine from Citi. Your question, please. Hi, everybody. A couple questions on the gas storage sale. Congratulations on the exit there.

What was the cash on cash return that you received or any color you could provide given the series of transactions that have been completed since you bought some of these assets?

Hi Ryan, so I think it's first of all the assets we sold were part of a broader portfolio. One of the decisions we decided was that

we could get better value by selling the business in pieces. And so we sold two of those assets to different buyers and we have two other groups of assets still left, our Alberta aco assets as well as our California assets.

You know, we bought the businesses, you know, 2016 was it? You know, I think pretty attractive valuations. Our targeted returns for the whole portfolio would be in the 13 to 15% range and I think we feel pretty good about.

achieving those IRRs from the business. And hopefully you're doing better, but at the same distance, that's what we would hope to achieve.

those IRRs for the business. You know, and hopefully you're doing better, but I'd say at this stage, that's what we would hope to achieve. okay

or should we just stick to the IRR threshold of the target?

Well, we would have now gotten almost all our money back from the initial investments.

But we would have now gotten almost all our money back from the initial investments.

So we've had very strong annual cash flows, as well as a couple of years where we did extremely well. This year was a pretty good year, with I think returns in California particularly strong. We've had other years where our salt plains assets did really well. Probably the business that,

will likely do well in the coming years that has maybe been less so, has been the Alberta assets because of some maintenance issues that have existed with the Trans-Canada line. But those are I think nearing completion and with the LNG facility coming online, LNG Canada, we think our storage is going to be hugely valuable in that market.

those assets, you know, maybe have not done as well as some of the other ones, but will do very well, I think, going forward. Okay, and then in terms of future acquisition funding mechanisms, we highlighted a number of tools that you have to pursue targets. In terms of issuing equity, I think the comment was around issuing stock. Should we view the preferred...

issuance tool, the BPSI stock over BIP units from an equity funding, given the types of targets that you're looking at? Yes, I would say today, BPSI would be our preferred.

security to issue. We utilize the capital markets more broadly. Often we may tap the MTN market when that's open and we do that periodically. We have in the past accessed the preferred market in Canada on occasion.

And more recently with the strong performance of the BIPC share, we've utilized that security as well.

Appreciate the car. Thank you.

We should be going. Thank you. Great, thank you very much.

Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Samuel Pollack for any further remarks.

Thank you operator and thank you to everyone for joining today's call. We're obviously excited to share our accomplishments and our objectives and look forward to speaking to you again next quarter. Thank you again for your support and operator you may close the call.

Thank you, and thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.