Q2 2023 Brookfield Infrastructure Partners LP Earnings Call
Operator: Hello. Thank you for standing by. Welcome to the Brookfield Infrastructure Partners Q2 2023 Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message stating that your hand has been raised. To lower your hand, press star one one again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Chief Financial Officer, David Krant.
Speaker 2: Hello, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners, 2nd quarter, 2023 Result Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message stating that your hand has been raised.
Speaker 2: To lower your hand, press star 11 again. Please be advised that today's conference is being recorded.
Speaker 2: It is now my pleasure to introduce Chief Financial Officer David Crane.
David Krant: Thank you, operator. Good morning, everyone. Welcome to Brookfield Infrastructure Partners' Q2 2023 Earnings Conference Call. As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure. I'm joined today by our Chief Executive Officer, Sam Pollock, and Udhay Mathialagan, a Managing Director and CEO of our Global Data Center platform. Uday is joining our call from Mexico, so if we encounter any technical difficulties, we also have Ben Vaughan with us in the room today. I'll begin with the discussion of our Q2 financial and operating results, as well as our liquidity position and the recent success of our capital recycling initiatives. I'll then turn the call over to Uday, who will expand upon one of the three Ds driving investment opportunities, digitalization, through the lens of our Global Data Center operations.
Speaker 3: Thank you operator and good morning everyone. Welcome to Brookfield Infrastructure Partners, second quarter, 2023 earnings conference call. As introduced, my name is David Krant and I am the Chief Financial Officer of Brookfield and...
Speaker 3: I'm joined today by our Chief Executive Officer Sam Pollock and Uday Massey-Alligan, a managing director and CEO of our Global Data Center Plot.
Speaker 3: Who is joining our call from Mexico? So if we encounter any technical difficulties, we also have Ben Vaughan with us in the room.
Speaker 3: I'll begin with the discussion of our second quarter financial and operating.
Speaker 3: as well as our liquidity position and the recent success of our capital recycling.
Speaker 3: I'll then turn the call over to Ude, who will expand upon one of the three D's driving investment opportunities, digitalization through the lens of our global data center opportunities.
David Krant: Finally, Sam will provide an update on our strategic initiatives and an outlook for our business. 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 20-F, which is available on our website. Beginning with our financial and operating results, we generated funds from operations, or FFO, of $552 million during the Q2, an increase of 8% over the comparable period last year. Results were supported by the contribution of approximately $2.1 billion of capital deployed in new acquisitions over the past year, partially offset by the impact of asset sales and borrowing costs associated with financing these new investments.
Speaker 3: Finally, Sam will provide an update on our strategic initiative and an outlook for our...
Speaker 3: At this time, I would like to remind you that in our remarks today, we may make forward-looking space.
Speaker 3: These statements are subject to known and unknown risks and future results may differ in materials.
Speaker 3: 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: Beginning with our financial and operating results, we generated funds from operations or FSO of $552 million during the second quarter, an increase of 8% over the comparable period
Speaker 3: Results were supported by the contribution of approximately $2.1 billion of capital deployed in new acquisitions over the past year. Partially offset by the impact of asset sales and borrowing costs associated with financing these new investments.
David Krant: Organic growth was near the high end of our target 6% to 9% range, reflecting the benefit of elevated inflation on tariff increases and the commissioning of approximately $1 billion in new capital projects during the last 12 months. Partially offsetting the strong underlying performance of our business was the normalization of market-sensitive revenues, as the prior year benefited from elevated commodity prices. Starting with our segments. In the utility segment, we generated FFO of $224 million, an increase of 19% from the same period last year. Organic growth for utilities was 10%, reflecting the continued benefit of elevated inflation indexation and the commissioning of approximately $500 million of capital into our rate base during the last 12 months. Current quarter results also benefited from the expansion of our residential decarbonization infrastructure platform in North America and Europe, following the acquisition of HomeServe in January of this year.
Speaker 3: Organic growth is near the high end of our target, 69% range, reflecting the benefit of elevated inflation on chair-fincresses and the commissioning of approximately $1 billion in new capital projects during the last 12 months.
Speaker 3: Partially offsetting the strong underlying performance of our business was the normalization of market sensitive revenues as the prior year benefited from elevated commodity prices.
Speaker 3: In the utility segment we generated FFO of $224 million an increase of 19% from the same period last.
Speaker 3: Organic growth for utilities was 10 percent, reflecting the continued benefit of elevated inflation indexation and the commissioning of approximately $500 million of capital into our rate based during the last 12 months.
Speaker 3: Current-quarter results also benefited from the expansion of a residential decarbonization infrastructure platform in North America and Europe , following the acquisition of home-serve in January of...
David Krant: FFO for the transport segment was $199 million, an increase of 5% from the prior year, once excluding our US container terminal that was divested in Q2 of last year. Results continue to benefit from inflation and linked rate increases across our global portfolio. Compared to the prior period last year, our global toll road portfolio increased rates by 10%, and our rail networks passed through increases of 8%. Volumes have remained resilient, with traffic levels increasing 2% across our portfolio of roads, and our rail volumes were consistent with the prior year. Partially offsetting the strong operational results of our road and rail assets was a 1% reduction in port volumes and the normalization of commodity prices that provided an outsized contribution at our US LNG export terminal in the prior year.
Speaker 3: FFO for the transport segment was $199 million and increased of 5% from the prior year once excluding our US container terminal that was divested in the second quarter of last year.
Speaker 3: Results continue to benefit from inflation and it linked rate increases across our global portfolio.
Speaker 3: Compared to the prior period last year, our global toll road portfolio increased rates by 10%, and our rail networks passed through increases of...
Speaker 3: Volumes have remained resilient with traffic levels increasing 2% across our portfolio of roads and our rail violence were consistent with the prior year.
Speaker 3: Tarshted out setting the strong operational results of our road and rail assets was a 1% reduction in port volumes and the normalization of commodity prices that provided an outsized contribution at our US LNG export terminal in the price.
David Krant: The Midstream segment generated FFO of $161 million, a modest decrease compared with the prior year. Strong performance across our base business from increased utilization and higher contracted cash flows was offset by softer results at our Canadian diversified midstream business. Results were impacted by the normalization of market-sensitive revenues and the delay in meaningful contribution from the Heartland Petrochemical Complex, which underwent repairs and was offline for much of Q. During July, we successfully completed the restart and ramp-up of the complex, which is currently achieving high operating rates. Heartland is anticipated to partially contribute to results during Q3, while Q4 is expected to provide a full contribution. Lastly, FFO for the Data segment was $72 million, an increase of 20% from the same period last year.
Speaker 3: The mid-stream segment generated FFO of $161 million, a modest decrease compared to the prior year.
Speaker 3: Strong performance across our base business was from increased utilization and higher contracted cash loads was offset by software results at our Canadian diversified ministry.
Speaker 3: results were impacted by the normalization of market sensitive revenues and the delay in meaningful contribution from the Heartland Petrochemical Complex, which underwent repairs and was offline for much of the quarter.
Speaker 3: During July we successfully completed the restart and wrap up of the complex, which is currently achieving high operating.
Speaker 3: Partland is anticipated to partially contribute to results during the third quarter, while the fourth quarter is expected to provide a full cost.
Speaker 3: Lastly, FFO for the data segment with $72 million, an increase of 20% from the same period last year.
David Krant: Q2 reflects the benefit of the acquisition of a European telecom tower operation in February, as well as a contribution from our Australian fiber business acquired in August of last year. In addition to the strong financial and operational results I've described, our business is also well positioned to execute its financing plans with access to capital strong and a very robust liquidity position. We ended Q2 with $2.3 billion in corporate liquidity, which was supported by the significant progress achieved in our capital recycling initiatives. To date, in this calendar year, we have secured $1.9 billion of asset sale proceeds, of which $1.4 billion has already closed. Most notably during the quarter, we secured and closed the sale of our 50% interest in our New Zealand integrated data distribution business to our existing joint venture partner for net-to-BIP proceeds of approximately $275 million.
Speaker 3: Current quarter reflects the benefit of the acquisition of a European telecom tower operation in February , as well as the contribution from an Australian fiber business acquired in August of last year.
Speaker 3: In addition to the strong financial and operational results I've described, our business is also well-positioned to execute its financing plans with access to capital strong and a very robust liquidity.
Speaker 3: We ended the second quarter with $2.3 billion in corporate liquidity, which was supported by the significant progress achieved in our capital recycling.
Speaker 3: To date in this calendar year, we have secured $1.9 billion of asset sale proceeds of which $1.4 billion has already...
Speaker 3: Most notably during the quarter, we secured and closed the sale of our 50% interest in our New Zealand integrated data distribution business to our existing joint venture partner for net to-bit proceeds of approximately $275 million.
David Krant: When combined with the sale of the tower assets last year, we generated a US dollar IRR of 31%, which represented a 2.6x multiple of our capital over the four-year hold period. We also secured and closed the partial sale of a US gas pipeline to one of our existing partners for approximately $420 million. This implied an 18% IRR and a 2.8x multiple of our capital since the recapitalization of the business in 2015. Finally, we secured the sale of a portion of our financial asset portfolio and our 8% interest in our Australian regulated utility for total proceeds of approximately $840 million. Approximately $380 million has been received during the year, and with the remainder scheduled to close later this month.
Speaker 3: When combined with the sale of the tower assets we last year, we generated a US dollar IRR of 31%, which represented a 2.6 times multiple of our capital over the four year hold.
Speaker 3: We also secured and closed the partial sale of a US gas pipeline to one of our existing partners for approximately $420 million.
Speaker 3: This implied an 18% IRR and a 2.8 times multiple of our capital since the recapitalization of the business in 2000.
Speaker 3: Finally, we secured the sale of a portion of our financial asset portfolio and our 8% interest in our Australian regulated utility for total proceeds of approximately $840 million.
Speaker 3: The approximately $380 million has been received during the year, and with the remainder scheduled to close later this month.
David Krant: With our capital recycling objectives largely achieved, our organizational focus has shifted to the integration of our newly acquired businesses and the execution of their respective business plans. This includes the development of our global data center platform, which Udhay will discuss next. I would like to thank everyone for their time this morning, and I will now pass the call over to him.
Speaker 3: With our capital recycling objectives largely achieved, our organizational focus is shifted to the integration of our newly acquired businesses and the execution of their respective business.
Speaker 3: This includes the development of our Global Data Center platform, which you today will discuss next.
Speaker 3: I would like to thank everyone for the time this morning, and I will now pass the call over to him.
Udhay Mathialagan: Thank you, David, and good morning, everyone. I'm pleased to be joining today's call to discuss the digitalization investment team and the exponential need for data storage. Digitalization has been a strong tailwind driving our recent investment activity. It refers to large-scale capital that is required to support exponential increases in data consumption. We typically invest in several core data-focused areas, including fiber, telecom towers, indoor wireless systems, and data centers. The data storage and processing industry, in particular, is benefiting from sector tailwinds, including the rise of generative artificial intelligence, which is transforming industries by automating complex tasks and advanced analytics. We're also experiencing an exponential surge in data storage and processing requirements from enterprises migrating workloads and applications from on-premises to the cloud, as well as the widespread adoption of new use cases such as 5G technology.
Speaker 4: I'm pleased to be joining today's call to discuss the digitalization investment team and the exponential need for data storage.
Speaker 4: Digitalization has been a strong tailwind driving our recent investment activity. It refers to large scale capital that is required to support exponential increases in data.
Speaker 4: We typically invest in several core data-focused areas, including fiber, telecom towers, indoor wireless systems, and data systems.
Speaker 4: The data storage and processing industry in particular is benefiting from sector tail winds, including the rise of generative artificial intelligence, which is transforming industries by automating complex tasks and advanced analytics.
Speaker 4: We're also experiencing an exponential surge in data storage and processing requirements from enterprises migrating workloads and applications from on-premises to the cloud, as well as the widespread adoption of new use cases such as 5G.
Udhay Mathialagan: These trends are amplifying demand for robust, well-located, and scalable data infrastructure, including data centers. This year, we capitalized on these tailwinds and have significantly expanded our data center operations. We secured the acquisitions of two development platforms, Data4 and Compass, which meaningfully contribute to our operating capacity and expand our presence in Europe and North America, respectively. In fact, following the closing of both transactions, we will own and operate one of the largest global hyperscale data center platforms. Our operating capacity will increase to over 485MW, with an additional 775MW of capacity already contracted and reserved that will be built out over the next several years. Combined, we expect to have over 1.25GW of capacity over the next few years that is highly contracted to provide stable cash flow and is underpinned by major hyperscale customers.
Speaker 4: These trends are amplifying demand for robust, well-located, and scalable data infrastructure, including data.
Speaker 4: This year, we capitalize on these tailwinds and have significantly expanded our data center operations. We secure the acquisitions of two development platforms.
Speaker 4: which meaningfully contribute to our operating capacity and expand our presence in Europe and North America respectively. In fact, follow-
Speaker 4: We will own and operate one of the largest global hyper scale data center
Speaker 4: Our operating capacity will increase to over 485 MW.
Speaker 4: with an additional 775 MW capacity, already contracted and reserved, that will be built out over the next several.
Speaker 4: Combined, we expect to have over 1.25 gigawatts of capacity over the next few years, that is highly contracted to provide stable cash flow and is underpin by major hyper-scale cuts.
Udhay Mathialagan: These customers are of strong credit quality and represent industry-leading companies that are at the forefront of technological advancement, such as artificial intelligence. We believe our size, scale, and global portfolio will prove to be a competitive advantage going forward. Our operating footprint is across five continents, which can give our hyperscale customers a highly flexible and consistent offering in multiple geographies. These relationships will also provide critical and real-time information on the global market that should provide us with a competitive edge. Another differentiator for our data center offering is the ability to leverage Brookfield's ecosystem to provide a turnkey solution that includes renewable power connectivity and adjacent real estate development. Our near-term focus is on the execution of our large-scale and high-growth business plan.
Speaker 4: These customers are of strong credit quality and represent industry leading companies that are at the forefront of technological advancement. I still see the discussion property. I still see the discussion property.
Speaker 4: We believe our size, scale and global portfolio will prove to be a competitive advantage going forward. Our operating footprint...
Speaker 4: which can give our hyperscale customers a highly flexible and consistent offering in multiple jobs.
Speaker 4: These relationships will also provide critical and real-time information on the global market that should provide us with a competitive environment.
Speaker 4: Another different shierter for our data center offering is the ability to leverage Brookfield's ecosystem to provide a turnkey solution that includes renewable power connectivity and adjacent real estate developers.
Speaker 4: A new term focus is on the execution of a large scale and high growth business plan.
Udhay Mathialagan: The high degree of contracted capacity provides multi-year visibility to secure access to critical equipment, reliable labor, and priority procurement, with the pricing benefits of development at scale. We also expect to benefit from our modular and repeatable build design, as well as our permitted power-ready and owned land bank for all of our development plans. Additionally, to further support our customers' growth ambitions, we have an existing land bank in prime markets that has the potential to increase our total capacity to over 2 gigawatts. That concludes my remarks for this morning, I will now pass the call over to Sam.
Speaker 4: The high degree of contracted capacity provides multi-year visibility to secure access to critical equipment, reliable labour and priority procurement with the pricing benefits of development at scale.
Speaker 4: We also expect to benefit from our modular and repeatable build design as well as our permitted power ready and owned land bank for all of our development plans. Additionally, to further support...
Speaker 4: We have an existing land bank in prime markets that has a potential to increase our total capacity to over two giga.
Speaker 4: That concludes my remarks for this morning, and I will now pass call over to Sam. Thank you, woulde.
Sam Pollock: Thank you, Udhay, and good morning, everyone. For my remarks today, I'll provide an update on our strategic initiatives and conclude with an outlook for our business. As we highlighted in our letter to unit holders, we continue to find good opportunities to invest capital above our targeted return threshold. In that regard, for 2023, we have already exceeded our annual deployment objective, securing three new investments totaling nearly $2 billion. Beginning with the Triton privatization, I'm pleased to say that nearly all the required regulatory approvals have been received, and a shareholder vote has been set for 24 August. We currently expect to close the transaction shortly after receiving confirmation of shareholder support. As Udhay touched on just now, we recently accelerated our global data center growth strategy through the acquisition of two marquee development platforms in North America and Europe.
Speaker 3: For my remarks today, I'll provide an update on our strategic initiatives and conclude with an outlook for our business.
Speaker 3: As we highlighted in our letter to unit holders, we continue to find good opportunities to invest capital above our targeted return threats.
Speaker 3: In that regard, for 2023, we have already exceeded our annual deployment objective, securing three new investments to totaling their $2 billion. Now, at the beginning.
Speaker 3: I'm pleased to say that nearly all the required regulatory approvals have been received and a Sheerholder vote has been set for August 24.
Speaker 3: We currently expect a close to transactions, shortly after receiving confirmation of shareholder support.
Speaker 3: We recently accelerated our Global Data Center growth strategy through the acquisition of two marquee development platforms in North America and Europe .
Sam Pollock: These investments fill gaps in our existing portfolio, which was primarily focused on the South American and Asia Pacific regions. We now have development capabilities in all our core markets, including North America and Europe, and have become one of the largest developers in the world. Most recently, we entered into an agreement to acquire a co-controlling stake in Compass Datacenters, a leading North American hyperscale data center platform. The business has approximately 170 MW of operating capacity with a significantly de-risked capacity backlog of 565 MW to be developed on power-ready and owned land across several major campuses. We expect the transaction to close in the Q4. We also recently closed the previously announced acquisition of Data4, our European hyperscale data center platform. Since announcing the transaction, the business converted a 130 MW memorandum of understanding with a leading hyperscale client into firm contracted capacity.
Speaker 3: These investments, still gaps in our existing portfolio, which was primary focus on the South American and Asia Pacific Greek.
Speaker 3: We now have development capabilities in our core markets, including North America and Europe , and it become one of the largest developers in the world.
Speaker 3: Most recently, we entered into an agreement to acquire a co-catrolling stake in Compass Data Centers, a leading North American hyperscale.
Speaker 3: The business has approximately 170 megawatts of operating capacity.
Speaker 3: with a significantly de-risk capacity backlog of 565 make-wats to develop on power-ready and owned land across several major campuses. We expect to transact-
Speaker 3: We also recently closed the previously announced acquisition of data for our European HyperSkilled Data Center Plot.
Speaker 3: Since announcing the transaction, the business converted 130 megawatt Memoranda understanding with the leading hyperscale client into firm contract capacity.
Sam Pollock: This results in over 50% of our business plan growth profile of 400 MW being successfully contracted. For these recent data center investments, we expect to initially earn single-digit going-in yields that we expect will grow materially as we develop our highly visible and large-scale growth pipeline. We plan on developing almost 1 GW of capacity over the next 3 years, which we anticipate will increase last year's EBITDA by over 5 times. To finance this growth, we intend to utilize our capital recycling experience to create a self-funded structure, monetizing operating and contracted data centers to fund capital backlog. These investments are expected to generate high to mid-teen returns, which could be even higher depending on the success of our capital recycling. Looking forward at our business more broadly, we continue to demonstrate strong momentum in our financial operating strategic initiatives.
Speaker 3: This results in over 50% of our business plan growth profile of 400 megawatts being successfully contract.
Speaker 3: For these recent data center investments, we expect to initially earn single digit going and yields that we expect will grow materially as we develop our highly visible and large scale growth pipe.
Speaker 3: We plan on developing almost one gig water capacity over the next three years, which we anticipate will increase last year's EBITDA by over five times.
Speaker 3: And the finance is growth. We intend to utilize our capital recycling experience to create a self-funded structure, monetizing operating and contracted data centers to fund capital back.
Speaker 3: These investments are expected to generate high to mid-team returns, which could be even higher depending on the success of our capital recycling.
Speaker 3: We continue to demonstrate strong momentum in our financial operating strategic conditions.
Sam Pollock: The closing of Triton is expected to generate meaningful accretion to results in the second half of the year, and our data center investments will provide meaningful FFO growth in the years to come. In addition, our continued ability to pass through inflationary increases in our tariffs above headline rates should continue for the next several quarters. We continue to surface highly attractive opportunities to invest for value in this capital-scarce environment. While we've surpassed our capital deployment target for the year, we will continue to pursue new and follow-on opportunities, especially those that offer greater returns than our target levels. At the same time, while we've largely completed our capital recycling efforts for the year, we are evaluating further dispositions for 2024. We fully expect to achieve continued success in our capital recycling initiatives in the years ahead, given the quality and diversification of our asset base.
Speaker 3: The closing of the trident is expected to generate meaningful creation to results in the second half of the year, and our data center investments will provide meaningful FFVL growth in the years to come.
Speaker 3: In addition, our continuity of pass-through inflation increases in our tariffs above headline rates should continue
Speaker 3: We continue to surface highly attractive opportunities to invest for value in this capital scarce environment.
Speaker 3: Well, we have surpassed our capital deployment target for the year. We will continue to pursue new and follow on opportunity.
Speaker 3: Especially those that offer greater returns than our target level.
Speaker 3: At the same time, while we've largely completed our capital recycling efforts for the year, we are evaluating further dispositions for 2020.
Speaker 3: We fully expect a cheap, contained success in our capital recycling initiatives in the years ahead, given the quality and diversification of rats.
Sam Pollock: That concludes my remarks, and I'll now pass it back to the operator to open the line for questions.
Speaker 3: So that concludes my remarks and I'll pass it back to the operator to open a line for questions.
Operator: A reminder, to ask a question, you will need to press star one one on your telephone. Once again, to ask a question, please press star one one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from the line of Cherilyn Radbourne with TD Cowen.
Speaker 2: Under to ask a question you will need to press star 11 on your telephone.
Speaker 2: Once again to ask a question, please press star 11 on your telephone. Please stand by while we come.
Speaker 2: And our first question comes from the line of Sheryl and Radburn with TD Cow.
Cherilyn Radbourne: Thanks very much, and good morning. In terms of the very large-scale data center platform that you've now assembled, can you speak to the extent to which you can share best practices and generate synergies across it, just considering that in some cases you have partnerships with other investors?
Speaker 5: Thanks very much and good morning. In terms of the very large scale data center platform that you've now assembled, can you speak to the extent to which you can share best practices and generate synergy across it? Just considering that in some cases, you have partnerships with other investors.
Sam Pollock: Hi, Cherilyn. Maybe I'll start off and then let Udhay maybe chime in with a few comments for Mexico. Look, our goal is to extract as many synergies as possible from these transactions. I think for those businesses where we control or co-control, in particular the more recent ones, I think we'll have lots of opportunities to share best practices. In those businesses where we have partners who are quasi competitors, I guess, it'll be a little more challenging. Nonetheless, we have a great relationship with our partner, particularly in South America and India. I expect that we'll take advantage of those things where it's mutually beneficial. They've been a great partner to date. I don't doubt they'll continue to be a great partner. I don't know, Udhay, did you want to add anything to that?
Speaker 3: Hi, Sterling. Maybe I'll start off and then let the Ude, maybe chime in with two comments from Mexico. But our goal is to extract as many synergies as possible from these transactions. And I think.
Speaker 3: for those businesses where we control or control.
Speaker 3: particularly the more recent ones, I think we'll have lots of opportunities to share best practice.
Speaker 3: You know in those businesses where we have partners who are you know quasi competitors, I guess You know it will be a little more challenging But nonetheless, you know we have a great relationship
Speaker 3: you know, with our partner, particularly in South America and India, and I expect that you'll...
Speaker 3: We'll take advantage of those things where it's mutually beneficial and they've been a great partner to date and I don't doubt Bill can be a great partner. I don't know who it is.
Udhay Mathialagan: Probably just one more point, Sam, which is I think particularly in co-control situations, our interests are absolutely the same, and partners bring very specific inputs. In some of these arrangements, different parties are contracted to provide particular inputs. I think we have a very productive, collaborative approach to bringing best practices within those JVs that Sam alluded to. Of course, in the other businesses where we have 100% ownership, there is clearly more opportunity as well to share best practices and lessons from other markets.
Speaker 4: probably just one more point fan which is
Speaker 4: I think particularly in core control situations our interests are absolutely the same. And partners bring very specific inputs and in some of these arrangements.
Speaker 4: different parties are contracted to provide particular input. So I think we have a very productive collaborative approach to bringing best practices within those, you know, those JVs that tab.
Speaker 4: Sam alluded to and of course in the other businesses where we have 100% ownership There's clearly more opportunity as well to share best practices and lessons
Cherilyn Radbourne: Great. That's helpful. As it relates to the plan to self-fund the development pipeline by selling fully operating and contracted data centers, can you give us some color on the pool of buyers out there that would be looking to purchase, I guess, single facilities or perhaps smaller scale clusters of facilities?
Speaker 5: Great, that's helpful. And then as it relates to the plan to spell some of the development pipeline by spelling, fully operating and contracted data centers, can you give us some color on the pool of buyers out there that would be looking to purchase, I guess single facilities or perhaps smaller scale clusters of facilities?
Sam Pollock: Sure. Hi, Cherilyn. Today, we've seen a number of industry participants monetize stakes to individual investors both in Europe and in North America, and done so at cap rates that I think are very attractive. We've also seen some groups set up vehicles where they've dropped down assets and set up kind of private REITs. I think our plan will be to explore a whole range of different capital recycling alternatives, taking advantage of our knowledge of global LPs and their desires to deploy capital in these types of assets. I think there's very few players who have that same global reach and understanding of LP desires, and we'll do our best to match those buyers with the assets that we have in a structure that's appealing to them. That could be retail investors, institutional investors, and high net worth individuals.
Speaker 3: So today we've seen a number of energy participants monetize stakes.
Speaker 3: to individual investors, both in Europe and in North America, and done so at the cap rates, I think, are very attractive. We've also seen some groups set up vehicles where they drop down assets and set up kind of private.
Speaker 3: I think our plan will be to explore a whole range of different catharsis in alternatives.
Speaker 3: taking advantage of our knowledge of you know, global, you know.
Speaker 3: and their desires to deploy capital in these types of assets. So I think there's very few players who have that same global reach and understanding of LP desires and will do our best to match those buyers with the assets that we have in a structure that's appealing to them. So that could be retail investors and social investors and I know.
Sam Pollock: There's a whole host of capital out there that would like these types of assets and we plan on setting up those structures to access them in a very large way.
Speaker 3: of capital out there that would like these types of assets. And we plan on, you know, saying up those structures to access them in a...
Cherilyn Radbourne: That's my cue. Thank you for the time.
Operator: Thank you. One moment please, for our next question. Our next question comes from the line of Robert Hope with Scotiabank.
Speaker 2: Thank you. Well, when please for our next question.
Speaker 2: And our next question comes from the line of Robert Hull with Scotiabane.
Robert Hope: Good morning, everyone. Want to stay on the theme of the hyperscale and data business. With now that you have platforms on five continents, how does the focus for growth shift? Will you move away from large platform M&A to smaller tuck-ins and focusing on the development pipeline, or could we continue to see what we'll characterize as platform acquisitions in this segment?
Speaker 6: Good morning, everyone. Wanna stay on the theme of the hyperscale and data business? With now that you have platforms on five continents, how does the focus for growth shift? Will you move away from large platform M&A to smaller tuck-ins and focusing on the development pipeline or could we continue to see what will characterize as platform acquisition to this segment?
Sam Pollock: Yeah. Hi, Robert. I'll start and then maybe, again, ask Uday to talk about our organic growth opportunities. I think it's unlikely that we'll pursue any more platform investment opportunities. I think we have operations in all the regions where we want to be. That's not to say there might not be some small investment somewhere, in a region, maybe the Middle East to where we have relatively modest activities today. I think we have most of the regions where we want to deploy capital well covered. I think the focus will be on just organic growth, acquiring land and building more campuses, and just executing the business plans that each of our businesses has in front of them. Maybe just with that, I'll turn it over to Uday to expand on that.
Speaker 3: I'll start and then maybe again ask good day to talk about our
Speaker 3: I think it's unlikely that we'll pursue any more platform investment.
Speaker 3: We have operations in all the regions where we want to be. That's not to say there might be some small investment somewhere in a region.
Speaker 3: maybe the Middle East where we have relatively modest activities today. But I think we have most of...
Speaker 3: of the regions where we wanted the boy capital well covered. And so I think the focus will be on, you know,
Speaker 3: organic growth, acquiring land and building more campuses and just executing the business plan that each of our businesses has in front of them. And maybe just with that I'll turn it over to Ude to expand.
Udhay Mathialagan: Probably just building on that, Sam. Exactly. I think, we've got, I touched on it a bit earlier, there's a huge pipeline in front of us in terms of customer opportunities, and that's probably, we're definitely noticing a bit of an uptick as well with hyperscalers in particular, and others looking at applications like AI and probably seeking to secure supply. I think a lot of the focus will be just building out on the land banks we've got and perhaps some smart sort of extensions into new locations from each of the platform companies. They serve some very natural geographies which could be expanded into. That probably will be the main focus for the next little while.
Speaker 4: probably just building on that same, exactly, I think, you know, we've got, I touched on it a bit earlier, there's a huge pipeline in front of us in terms of customer opportunities. And that's probably we definitely noticing a bit of a nup tick as well with, you know, with hyperscalers in particular and others looking at applications like AI and probably, you know,
Speaker 4: seeking to secure supplies. So I think a lot of the focus will be just building out on the land banks we've got and perhaps some smart sort of extensions into new location.
Speaker 4: from each of the platform companies, you know, they serve some very natural geographies, which could be expanded into. So that's probably will be the main focus for the...
Robert Hope: Appreciate that. As a follow-up, in the letter, you commented that buyers are having less access to capital. How is this impacting your pipeline of potential M&A opportunities? How much valuation compression have you seen, or some sellers balking at pricing and shelving processes?
Speaker 6: Appreciate that. As a follow up, in the letter you commented that buyers are having less access to capital. How is this impacting your pipeline of potential M&A opportunities? How much valuation compression have you seen or some sellers bolting at pricing and shelving processes?
Sam Pollock: Robert, I think all those things are dynamics taking place today. I think capital, while becoming less scarce, I do see an improvement in the market and definitely the access to capital is improved. I also think that seller expectations have moderated, and so I think that's also helped to improve deal activity. I think it's safe to say that in this market as a whole, and I'm always wary of generalizing too much because there are some sectors that are still in high demand. For the most part, this is a buyer's market. I do see the shift taking place, more capital coming back. Fundraising for our business remains strong, and I think we're seeing a number of our peers go to the market to raise new funds, and so that will create dry powder for acquisitions.
Speaker 3: All those things, you know, are, I guess...
Speaker 3: dynamics taking place today. I think capital while becoming less scarce, I do see an improvement in the market and definitely the access to capital is improved.
Speaker 3: I also think that buyio expert to sell er experts.
Speaker 3: have moderated and so I think that's also helped to improve the activity but I think it's safe to say that in this market as a whole and that's not you know I'm always you know
Speaker 3: wary of, of generalizing too much because there are some sectors that are still in high demand, but for the most part this is a buyer's
Speaker 3: But, you know, I do see the shift taking place, more capital coming back. and
Speaker 3: You know, fundraising for our business remains strong and I think we're seeing a number of our peers Go to the market to raise new funds and so that will you know create dry powder for our
Sam Pollock: I think the market is definitely picking up, but I think for the next little while, we still see an opportunity to invest in very high returning situations that, particularly those that tuck into our existing operations. I think that's where the real opportunity lies today.
Speaker 3: So I think the market is definitely picking up, but I think for the next little while, we still see an opportunity to invest in very high returning situations that particularly those that talk into our existing operations. I think that's where the real opportunity lies today.
Robert Hope: Thank you.
Operator: Thank you. One moment please, for our next question. Our next question comes from the line of Robert Kwan with RBC Capital Markets.
Speaker 2: Our next question comes from the line of Robert Kwan with RBC Capital Mark.
Robert Kwan: Great. Good morning. If I can just continue on the statement you made around buyers having less access to capital and the other statement just for you investing in a capital scarce environment. Sam, you touched a little bit on it with the last answer, but can you just talk about what all of this means in terms of the attractiveness both or opportunities for acquisitions and divestitures just across the different asset classes and geographies that you're targeting?
Speaker 7: Good morning, if I can, them just continue on on...
Speaker 7: statement you made around buyers having LFACS access to capital and the other statement just for you investing in a capital scarce environment. Sam, you touched a little bit on it with the last answer, but can you just talk about what all of this means in terms of the attractiveness both or opportunities for acquisitions and divestitures just across the different asset classes and geographies that you're targeting?
Sam Pollock: Hi, Robert. Let me rephrase your question and make sure I understood it. I think you're asking me just to give the investment outlook, for lack of a better expression, across different regions in the world and different sectors. Is that what the question was?
Speaker 3: Let me rephrase your question and make sure I understand it. I think you're asking me just to give the investment.
Speaker 3: relax with better expression across different regions in the world and different sectors? Is that what the question was? Yeah, especially just with your comments here around capital scarcity and just the moderating valuations. Yeah, so look, I...
Robert Kwan: Yeah, especially just with your comments here around capital scarcity and just the moderating valuations.
Sam Pollock: Yeah. Look, I think the investment climate is pretty consistent in all markets. Today, I don't see any market, which is unusual, because usually there's always one place that has no capital, another place that has a lot of capital. Today, it's actually pretty consistent across the globe as far as capital availability. Typically, we would expect that the North American capital markets would come back probably the soonest, would usually be my expectation. I think that probably still will be the case with the other markets falling behind a little bit. We're seeing good opportunities, I guess just to sum up, in all markets today. In each of our regions, we are looking at tuck-in acquisitions that are above our traditional return expectations. As far as sectors go, the digital sector remains very attractive for investors.
Speaker 3: the investment climate is pretty consistent.
Speaker 3: in all markets. I got today. I don't see any market and which is unusual because usually you know there's always one place that has no capital and other place that has a lot of capital. Today is actually pretty consistent across the globe as far as capital availability. You know typically we would expect
Speaker 3: that the North American capital markets would come back. Probably the soonest would usually be my expectation.
Speaker 3: And I think that probably still will be the case with the other markets falling behind a little bit.
Speaker 3: But we're seeing good opportunities, gets just to sum up in all markets today. So in each of our regions, we are looking at tucking acquisitions that are above our traditional return expectations. As far as...
Speaker 3: The sector's go. The digital sector remains very attractive for investors. There's still a lot of...
Sam Pollock: There's still a lot of people who want to gain exposure to it. There are parts of the data sector that are not as attractive as others, and so people are maybe a little more wary. In particular, some of the wholesale fiber, enterprise fiber-type businesses are a little bit more distressed. We still see lots of capital for towers and data centers, and the demand from customers is extremely strong, supporting those businesses. Similarly, we see a lot of interest from us and from our clients for utilities, particularly electric utilities. Maybe less so for gas or fossil fuel-related utilities. Electric utilities are very much in demand, and I think we'll see that for the long term.
Speaker 3: gain exposure to it. There are parts of the data sector that are not as...
Speaker 3: attractive as others and so you know people are maybe a little more wary you know in particular some of the wholesale fiber you know enterprise fiber type businesses you know are a little bit
Speaker 3: But we still see lots of capital for towers and data centers and
Speaker 3: that demand from customers is extremely strong supporting those businesses.
Speaker 3: Similarly, we see a lot of interest from us and from our clients for utilities, particularly electric utilities, maybe less so for...
Speaker 3: But electric utilities are very much in demand and I think we'll see that.
Sam Pollock: Maybe from a thematic perspective, the three Ds that we've talked about the last year and a bit, are still very relevant and driving a lot of the capital needs as well as investor desires to get in front of decarbonization, digitalization, and some of these de-globalization trends that we see.
Speaker 3: the long term. So, you may be from a...
Speaker 3: from a somatic perspective, the 3D that we've talked about the last year, year and a bit, are still very relevant and driving a lot of...
Speaker 3: the capital needs as well as investor desires to get in front of decarbonization.
Speaker 3: and some of these de-globalization trends.
Robert Kwan: That's great. If I can just follow up on a specific sector that you didn't touch on as much, just midstream. We've seen M&A valuations moderate there. Does that make it more attractive to you from the perspective of acquiring, or is it less attractive just in terms of whether it's how industry dynamics have played out, where the market is and I don't know if there's any comments you can make as a read-through to your own assets?
Speaker 7: That's great. If I can just follow up on a specific sector that you didn't touch on as much, just midstream, you've seen M&A valuations moderate there. Does that make...
Speaker 7: It's more attractive to you from the perspective of acquiring or is it less attractive?
Speaker 7: in terms of whether it's how industry dynamics are played out where the market is and I don't know if there's any comments you can make as a re-true to your own assets.
Sam Pollock: Yeah, look, we are still very enthusiastic about midstream and our midstream assets. We think today our assets are highly cash generative and generate very robust, sustainable cash flow. Any business that you can have that generates those types of attributes, then we think they are great businesses. I think the only caveat is obviously we are into an environment where there is less buyers for some of those types of assets, terminal value is something that everyone is mindful of. Everyone takes a view of the longevity of certain types of assets, that requires a lot of diligence. For us, we will continue to invest in high quality and scarce midstream businesses and ones that provide a relatively quick return of capital. That has always been our investment focus and thesis for the last number of years, we will continue with that approach.
Speaker 3: We are still very enthusiastic about midstream and our midstream assets.
Speaker 3: Today our assets are highly cash-generative. And...
Speaker 3: January , very robust, sustainable cash flow. So any business that you can have that generates those types of attributes, then we think they're great businesses. I think the only caveat is
Speaker 3: Obviously, we're into an environment where there's less buyers for some of those types of asses.
Speaker 3: So Terminal Value is something that everyone's mindful of, and everyone takes a view of...
Speaker 3: the longevity of certain types of acids. And so that requires a lot of diligence.
Speaker 3: And for us, we will continue to invest in high quality and scarce midstream businesses and ones that provide a relatively quick return of capital.
Speaker 3: And that's always been our investment focus and thesis for the last number of years.
Sam Pollock: We like the sector. We think valuations are actually okay. We've been on the buy and sell side the last couple of years. I think they're fairly constructive.
Speaker 3: But we like to sector, you know, we think valuations are, are, are, are,
Speaker 3: been on the buying cell side the last couple of years and I think they're fairly constructive. That's great.
Robert Kwan: That's great. Thank you.
Operator: Thank you. One moment please for our next question. Our next question comes from the line of Devin Dodge with BMO Capital Markets.
Speaker 2: Our next question comes from the line of Devon Dodge with VMO Capital Mart.
Devin Dodge: Thanks. Good morning. I wanted to start with a question on a toll road business in Brazil. We haven't seen Arteris do many or bid on many new concessions recently. There's been some focus in the Brazilian media that Arteris' leverage is too high, which they're attributing as a factor behind that lack of growth. They're even suggesting that the business may need a capital injection from Brookfield and its partners. I'm not sure if you want to respond to that directly, but I'm just trying to get a sense for how BIP views the Arteris business and its capacity for pursuing growth.
Speaker 8: Good morning. So I wanted to start with a question with the on a total business in Brazil. You know, we haven't seen our terrorists do many or been on many new possessions recently.
Speaker 8: There's been some focus in the Brazilian media that our terrorist is leveraged is too high, which
Speaker 8: There can there are attributing as a factor behind that lack of growth and they're even suggesting that the business mandate a Capital injection from Brooklyn and its partner so I'm not sure if you want to respond to that directly But I'm just trying to get a sense for how BIP views the oteris business and its capacity for pursuing growth
Ben Vaughan: Yeah, Devin, it's Ben here. I guess Arteris and our Brazil toll road operations. Operating conditions have been a bit challenging over the last several years in Brazil and mostly due to just the broad economic challenges impacting the country overall. As we always do, we're very focused on evaluating our capital allocation into the business and need to make sure we're earning a proper return. That's our main area of strategic focus with Arteris at this time. We will weigh all that very carefully as we consider adding further concessions to the platform in the coming years.
Speaker 9: Yeah, it's been here. You know, I guess our terrorists and our Brazil Toro operations, you know, operating conditions have been a bit challenging over the last several years in Brazil. And mostly due to just the broad economic challenges impacting the country overall.
Speaker 9: And as we always do, we're very focused on evaluating our capital allocation into the business.
Speaker 9: we're earning a proper return and so that's our main area of strategic folks.
Speaker 3: And we will weigh all that very carefully as we consider adding further concessions to the plan.
Devin Dodge: Okay. That's fair. I guess sticking in South America, but moving a bit further north to your toll road in Peru. I know this is a smaller investment, but there's been a lot of unrest and media coverage on the toll road in Lima. Can you provide an update on the situation there?
Speaker 8: Okay, okay, that's fair. And then, you know, I guess sticking in South America, but moving a bit further north to your Tolerotum Peru. Like, I know this is a smaller investment, but there's been a lot of unrest in media coverage on a Tolerot in Lima. Can you provide an update on the situation there? Yeah.
Ben Vaughan: Yeah. Of course. At this stage, Devin, I can't get into too many details. This is a road in Peru that we bought back in around 2016, and the road has a lot of really attractive characteristics. It's got a good growth profile, and an excellent concession contract. Since we've owned it, the operations have gone very well. What's happened here is earlier this year, the municipality, which is the counterparty on our concession contract, indicated that they'd like to go in a different direction with the road. We're now in discussions with the municipality on that, to see if we can accommodate their needs. Those discussions are underway.
Speaker 3: So at this stage, Devon, I can't get into too many details. But you know, this is a road in Peru that we bought. Back in around 2016, and the road has a lot of really attractive characters.
Speaker 3: It's got a good growth profile and an excellent concession contract. And since we've owned it, the operations have gone very well. And what's happened here is earlier this year, the municipality, which is the counter-party on our concession contract, indicated that they'd like to go in a different direction with the road. And so we're now in discussions with the municipality on that to see if we can accommodate their needs and those discussions are underway.
Devin Dodge: Okay. Thank you. I'll turn it over.
Ben Vaughan: Thanks.
Operator: Thank you. One moment, please, for our next question. Our next question comes from the line of Naji Hachem with iA Capital Markets.
Speaker 10: Thank you. Moment, please.
Speaker 2: Our next question comes from the line of Nasi Beidoum with I.A. Capital Mark.
Naji Hachem: Yeah. Good morning. Just wanted to go back to the topic of M&A. You sort of fully funded these acquisitions this year from asset sales and the BIPC issuances. I guess your comment about maybe some capital recycling initiatives taking a bit longer to execute or complete. Does that slow your appetite for acquisitions at all in the meantime, in terms of waiting for secure funding?
Speaker 4: Good morning. Just wanted to go back to the topic of M&A. You've sort of fully funded these acquisitions is here from asset sales and the best issuances. I guess your comment about maybe some capital recycling means just picking a bit longer, techs, acute or complete. Is that slower your appetite for acquisitions at all in the meantime? And I'm so much avoiding secure funding. Hi, Najee.
Ben Vaughan: Hi, Naji. Well, look. We always have to invest based on our available liquidity. That's obviously a consideration. I think what is unique about our business is that we have many sources of capital to fund growth. We'll evaluate all those different sources and, to the extent that we can raise capital in an accretive manner to fund high-returning opportunities, we'll do so. Obviously, if the source of the capital don't provide for accretive growth, then we will slow down the growth. Our history is that we've always been able to find these levers to continue to take advantage of opportunities, particularly in markets where you can buy for value. That would be my expectation, is that we will continue to be able to grow and find ways to finance that growth.
Speaker 11: We always have to invest based on our available liquidity. So that's obviously consideration. I think what is unique about our business is that we have many sources of capital to fund growth.
Speaker 11: and we'll evaluate all those different sources and to extend that we can raise capital in a creative manner to fund high returning opportunities. We'll do so. Obviously, if the source of the capital don't provide for a creative growth, then we will slow down the growth.
Speaker 11: But our history is that we've been always been able to find these levers to continue to take advantage of opportunities, particularly in markets.
Speaker 9: where you can buy for value. So, you know, that would be my expectation is that we will continue to be able to grow.
Naji Hachem: Okay. Understood. The comment that you made earlier about the utility market and the attractiveness maybe of certain assets over others. Can you maybe talk about your view on water utilities?
Speaker 4: Okay, understood. And the comment that you made earlier, but the utility market and the attractiveness maybe of certain assets of others, can you maybe talk about your view on water utilities?
Ben Vaughan: Okay. Water utilities. They come in different structures and different regions, so I'd have to talk about it based off each region. Probably the most well-known prominent water utility investments are in the UK. As is I think quite well-known, and particularly now with all the media that's being attributed to it. It's been a very challenging environment. For the most part because of probably mistakes with capital structures and how people financed those acquisitions as well as difficult operating and regulatory environments. They haven't performed particularly well. Again, there's probably a few that have done better than others, so I don't want to smear everyone with that same comment because there are some that have done okay, but for the most part, it's been a challenged sector. It's probably one that we would avoid, and not find particularly interesting from a risk-return perspective today.
Speaker 9: Okay, so what are you till these, you know, the...
Speaker 3: you know, that they come in different structures in different regions. So I'd have to talk about it. The base.
Speaker 3: You know, probably the most well-known prominent water utility investments are in the UK. And, you know, as is, you know, I think quite...
Speaker 3: well known and particularly now with all the media that's being attributed to it. It's been a very challenging environment.
Speaker 3: you know, for the most part, you know, because of...
Speaker 3: probably mistakes with capo structures and how people finance those act.
Speaker 3: well as difficult operating and and regulatory environments. They haven't performed particularly well. Again, there's probably a few that have done better than the other sort.
Speaker 3: and smear everyone with that same comment because there are some that have done okay, but for the most part it's been a challenge sector and it's probably one that we would avoid and not find particularly it.
Sam Pollock: In Europe, there's a few water utilities in Spain and other places, but for the most part, have not been actionable. In the US, there really hasn't been an ability to invest in the water utility sector in scale. Most of them have been small roll-ups, and so not really well-suited for us. They've also traded at extremely high valuations, driving lower returns. Again, that didn't really appeal to us. We haven't done much in the US, and I wouldn't expect that the opportunity set would be large there. In South America, there's a few water utility-type businesses in Chile and Brazil, and we've generally not focused on those. I guess you can get from my remarks that there's not too much for us to do in the water utility space.
Speaker 3: In Europe , there's a few water utilities in Spain and other places, but for the most part, have not been actionable.
Speaker 3: You know, there really hasn't been an ability to invest in the water utility.
Speaker 3: In scale, most of them have been small growl ups, and so not really well suited for us. They've also traded at extremely high high valuations driving lower returns. And again, that didn't really appeal to us.
Speaker 3: large there and then in South America there's a few water utility type businesses in Chile and
Speaker 3: Brazil and we generally, you know, not...
Speaker 3: So I guess we can say you can get from my remarks that there's not too much for us to do in the Wadi Tilly.
Naji Hachem: That's very clear and comprehensive answer. Thank you for that. Just maybe last question on the two more recent capital recycling initiatives, the US pipeline and AusNet. Any comments on valuations for those two would be helpful. Thanks.
Speaker 4: Very clear and comprehensive answer. Thank you for that. And just made the last question on the two more recent capital recycling initiatives, the US pipeline and and all that any comments on valuations for those two would be helpful.
Sam Pollock: Sorry, it was AusNet and what's the?
David Krant: NGPL.
Sam Pollock: NGPL?
Naji Hachem: NGPL, yeah.
Speaker 3: and NGPL. And NGPL? Yeah, so NGPL, look, we, you know, we sold down through two transactions, both to the same buyer.
Sam Pollock: Yeah. NGPL, look, we've sold down through two transactions, both to the same buyer. One was done a couple of years ago prior to the movement in rates and one afterwards. I think the takeaway is that the valuation for the business increased during that period of time. I think that says a lot to the quality of the asset and the fact that in spite of movement in rates, you can still achieve values that were present prior to this environment. I think that's a great example of that. On AusNet, we held it for a relatively short period of time. We sold it effectively at a return consistent to what we bought at. It would've accreted up in value over the period of time that we held it. The going in and going out valuations were very consistent.
Speaker 3: You know, one was done a couple years ago, you know, prior to the movement and rates and one afterwards and, you know, I think the takeaway is that, you know, the valuation for the business, you know, increased during that period of time. So I think, you know, that says a lot to the quality of the asset and the fact that, you know, in spite of, you know, movement and rates, you can still achieve values.
Speaker 3: that were you know present you know prior to this environment. So I think that's you know a great example of that on
Speaker 3: You know, we held it for a relatively short period of time. And, you know, we sold it effectively at a return consistent to what we bought at. So it would have created up in value over the period of time that we held it. But the going in and going out valuations were very consistent. OK.
Naji Hachem: Okay. Thank you for that.
Operator: Thank you. One moment please for our next question. Our next question comes from the line of Andrew Kuske with Credit Suisse.
Speaker 2: And our next question comes from the line of Andrew Kuski with Credit Suisse.
Andrew Kuske: Thanks. Good morning. I guess the question's targeted to Sam. Really, if you look at BIPC operations and the scale of them, maybe you could just give us some insight as to how you're managing data. Effectively, if you think of all the information you have, hydrocarbon flows, traffic numbers, connections, et cetera, across the whole portfolio, how are you managing that data to effectively generate proprietary insights, really at the top of the house, and then by way of extension, maybe across the broader Brookfield Group to help direct you in allocating capital?
Speaker 7: Thanks, good morning. I guess the question's targeted to Sam. And really, if you look at dips operations and the scale of them.
Speaker 7: You know, maybe you could just give us some insight as to how you're managing data. You know, effectively if you think of all the information you have, you know, hydrocarbon flows, traffic numbers, connections, et cetera, across the whole portfolio, how are you managing that data to effectively generate proprietary insights, really at the top of the house. And then by way of extension, maybe across the broader Brookfield group to help direct you in allocating capital.
Sam Pollock: Hi, Andrew. That's a very interesting question because it's topical given all the advances in AI and the ability to scrape and analyze databases that are not organized. That is one of the big uses for AI, and that's something that we are looking at very closely because as you rightly point out, within all our businesses, we have tremendous proprietary data. Historically, it's been done more, I'm not sure what the right word is, but maybe haphazardly where we would just get business leaders together and regularly compare notes and try to tie in opportunities. We've done that successfully, particularly between our renewable group and some of our businesses that are heavy power users. Data being a good example of that. Businesses where we would have the ability to leverage new solar technology and capabilities to replace some fossil fuel-type generation.
Speaker 3: That's a very interesting question because
Speaker 3: It's topical given all the advances in AI and the ability to scrape.
Speaker 3: databases that are not organized. That is one of the big uses for AI and that's something that we are looking at very close.
Speaker 3: as you rightly point out, you know, within all our businesses, you know, we have, you know, tremendous preparatory.
Speaker 3: data. Historically, you know, it's been...
Speaker 3: with the right worries, but maybe hazzardly where we would just get business leaders together and regularly compare notes and try to tie in opportunities.
Speaker 3: And we've done that successfully, particularly between our renewable group and some of our businesses that are heavy power users.
Speaker 3: and or businesses where we would have the ability to leverage new solar.
Speaker 3: technology capabilities to replace some fossil fuel types.
Sam Pollock: That's where I'd say we've done a really good job in the past, and I think we've done a reasonable job with the real estate group. Where we've been able to find synergies between many of our metering businesses in particular, and district energy businesses and the real estate group. What I think the next level is, though, and what you're touching on, is where we can take advantage of the 14.5 million customers we have in our demand decarbonization business and understand the buying patterns that exist within all those markets that they touch. Within our Triton investment, being able to take advantage of the movement of boxes and how that's going to be telegraphing trade flows in the future.
Speaker 3: generation. So that's where I say we've done a really good job in the past and I think we've done a reasonable job with
Speaker 3: real-state group, where we've been able to find synergies between many of our metering.
Speaker 3: tickular and district energy, business and the real estate.
Speaker 3: What I think the next level is, though, and what you're touching on is where we can take advantage of the 14.5 million customers we have in our demand decarbonization business.
Speaker 3: and understand the buying patterns that exist within all those markets that they touch and within our Trident Investors.
Speaker 3: being able to take advantage of the movement of boxes and how that's going to be telegraphing.
Sam Pollock: We are working on how we can institute some AI solutions to all that. I'd say it's early days, but hopefully that's something in the quarters and years ahead we'll be able to brag about and tell you more of what we're doing.
Speaker 3: So we are working on how we can institute some AI solutions to all that. But I say it's early days, but hopefully that's something in the quarters and years ahead we'll be able to brag about and tell you.
Andrew Kuske: Okay. I appreciate that color, and that's very helpful. I guess maybe just building upon that, with that potential informational advantage, along with the capital that you've managed to raise and then also recycle, I'd suggest, and nothing patronizing about it, but your partnership quality is probably the best it ever has been. When you have these kinds of strategic partners, does that allow you to better tilt and lean into organic growth on a longer term basis with increased competitive advantages? I'd just highlight just some of the activities with Reliance, given the fact that Udhay is also on the call.
Speaker 7: Okay, that's the, I appreciate that color. And that's that's very helpful. And I guess maybe just building upon that with that potential informational advantage along with the capital that you've managed to from race and then also recycle.
Speaker 7: I'd suggest nothing patronizing about it, but your partnership quality is probably the best as ever has been. And when you have these kinds of strategic partners, does that allow you to better tilt and lean into organic growth on a longer-term basis with increased competitive advantages? And I'd just highlight just some of the activities with reliance given the fact that Udi is also on the call.
Sam Pollock: The short answer is yes, because as I think you were telegraphing and what I would concur with is, we aim to be a partner of choice for strategics and help them invest in their businesses and where helpful to provide some of our strategic and operating knowledge. Sometimes we're just providing capital, other times it's a combination of those two things. Whether it's with the Vale or with the Reliances, with the Intels, I think we cover many different types of strategics and we are able to grow with them. Maybe just on the telecom side, I can turn it over to Udhay and he can provide maybe some additional examples, but I think he would concur that we do see lots of growth investing alongside our partners.
Speaker 3: The short answer is yes, because, you know, I...
Speaker 3: tele-grafting and what I would concur with is, you know, we aim to be a partner of choice for your strategic and help them, you know, invest in their businesses and we're helpful to provide some of our strategic and operating knowledge. Sometimes we're just providing a couple other times, it's a combination of those two things.
Speaker 3: you know, whether it's, you know, with the ballies or with the reliances.
Speaker 3: with the Intel, I think we have a, we cover many different types of strategic and we are able to grow with them.
Speaker 3: Maybe just on the telecom side, I can turn it over to Ude and he can provide maybe some additional examples, but I think he would concur that we do see lots of growth investing alongside our partners.
Udhay Mathialagan: I'll probably just add one more point, Sam. I'll probably draw the example of the Indian market where I think we took a view a couple of years ago that the runway in India is quite long in terms of just opportunities for data and just the quality of the infrastructure there just is amazing. New stuff needed to be built. As we progressed building this partnership, what's now happened is we've got three great partners bringing very complementary different skills. You're right, Andrew, to point out to Reliance particularly in that market. They're a large telecom operator, great sort of national infrastructure here, combined with our real estate and renewable capability and DLR's global access to customers and data center designs. I think it is just a very powerful combination.
Speaker 12: I probably just had one more point. I probably draw the example of the Indian market where I think we took a view a couple of years ago that, you know, the runway in India is quite long in terms of just opportunities for data and just the quality of the infrastructure there. It just is amazing. You know, the new stuff need to be built. And as we progressed, you know, building the partnerships. So what...
Speaker 12: Now, happened is we've got three great partners bringing very, very complimentary different skills. And you're right, Andrew, to point out to reliance particularly in that market. I mean, they, large telecom operator, great sort of national infrastructure, combined with our real estate and renewable capability, and DLRs, global access to customers and data-centered designs. I think it's just...
Speaker 12: very, very powerful combination. So that's one example, but I think we're obviously partnering in different places with different counter parties. That's great, I appreciate the time.
Udhay Mathialagan: That's one example, but I think we're obviously partnering in different places with different counterparties.
Andrew Kuske: Okay. That's great. Appreciate the time.
Operator: Thank you. One moment please for our next question. Our next question comes from the line of Will Gu with CIBC.
Speaker 2: Our next question comes from the line of Will Gool with CIBC.
Will Gu: Hi. Just wondering, how have the wildfires in Alberta impacted your midstream assets? If there are any impacts to the HPC ramp-ups that you can talk about?
Ben Vaughan: Yeah. Hi, Will. It's Ben here. I think the question was how are we impacted from the wildfires in Western Canada. We did have to take two facilities in one of our businesses down for a very brief period of time. It was immaterial from a financial perspective, and they're all back up and running today. There was no wildfire impact at all on the Heartland facility. I guess that's what happened with the wildfires in Western Canada.
Speaker 3: Yeah, I will. It's been here. I think the question was, how are we impacted from the wildfires in...
Speaker 3: And the head of, we did have to take two facilities in one of our businesses down for a very brief period of time. And it was immaterial from a financial perspective and they're all back up and running today. And there was no wildfire impact at all on the heartland facility. So that's, I guess that's the...
Will Gu: Okay. Thank you. One more if I could. I guess can you talk about the broad implications of AI on the growth trends and their growth trends on the data center business?
Sam Pollock: Okay. That's a great question just to throw over to Uday. Uday, do you want to respond to that?
Speaker 3: So, you know, that's a great question just to throw over Ude. And Ude, do you want to respond to this?
Udhay Mathialagan: Yeah, happy to, Sam. Thank you. Look, I think I touched on it briefly a bit earlier. AI is just creating some great new opportunities for our data center portfolio. Particularly when you look at the way the AI is breaking up data processing for the large learning modules and the way capacity can actually tolerate a bit more latency. In some cases, we're also noticing that the redundancy requirements for power could potentially be different to general cloud computing. What it means is, I think, one, the hyperscalers are accelerating securing capacity. Two, we're seeing some other new players potentially coming in, and it enables us to really leverage the land banks we have to create much larger campuses, which could be slightly away from the center, so lower land costs, and being able to combine our renewable energy capabilities and real estate development.
Speaker 12: Yeah, I'm happy to see them. Thank you. Look, I think I touched on it briefly a bit earlier. Yeah.
Speaker 12: AI is just creating some great new opportunities for our data set of portfolio. You know, particularly when you look at the, you know, the way the AI is breaking up data processing for, you know, the large learning modules and the way, you know, capacity can actually tolerate.
Speaker 12: a bit more latency and in some cases we're also noticing that that redundancy requirements for power could potentially be different to
Speaker 12: general cloud computing. What it means is I think, you know, one of the hyperscalers are accelerating securing capacity.
Speaker 12: two, we're seeing some other new players potentially coming in and it enables us to really leverage the land banks we have to create much larger campuses.
Speaker 12: could be slightly away from the center, so lower land costs and being able to combine our renewable energy capabilities and real estate development. So I think NetNet, you know, it is a real, an additional tailwind to the data center sector. And it also, particularly some of the more recent acquisitions of very well targeted, you know, benefiting from the AI capacity, uptick and changed sort of needs from customers.
Udhay Mathialagan: I think net net, it is a real, an additional tailwind to the data centers sector and also particularly some of the more recent acquisitions have very well targeted it, benefiting from the AI capacity uptick and changed sort of needs from customers.
Will Gu: Perfect. Thanks. That's all from me.
Operator: Thank you. I would now like to hand the call back over to CEO, Sam Pollock, for any closing remarks.
Speaker 2: Thank you. I would now like to hand the call back over to CEO , Sam Pollock, for any closing remarks.
Sam Pollock: Okay. Thank you, operator, and thank you to everyone who joined the call this morning. We look forward to sharing more details on our outlook and specific growth plans, particularly related to our global data center platform, at our upcoming Annual Investor Day event, which will be held in Toronto on 21 September. We look forward to seeing everyone there. If you can make it, please join us, and we look forward to, again, providing an update on our results next Q. We hope you enjoy the rest of your summer. Thank you.
Speaker 3: Okay, thank you operator and thank you to everyone who joined the call this morning.
Speaker 3: We look forward to sharing more details on our outlook and specific growth plans, particularly related to our global data center platform, at our upcoming annual investor day event, which will be held in Toronto on September 21st.
Speaker 3: We look forward to seeing everyone there. If you can make it, please join us. And we look forward to, again, providing an update on our results next quarter.
Operator: Ladies and gentlemen, this concludes today's conference call and webcast. Thank you for participating, and you may now disconnect.
Speaker 2: Ladies and gentlemen, this concludes today's conference call and webcast. Thank you for participating and you may now disconnect.
