Q2 2024 Brookfield Infrastructure Partners LP Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners' second quarter 2024 results conference call. At this time, all participants are in a listen-only mode.

Good day and thank you for standing by welcome to the Brookfield infrastructure Partners second quarter 2024 results conference call.

Speaker Change: At this time all participants are in a listen only mode.

Operator: After this speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star-1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-1-1 again.

After the speaker's presentation, there will be a question and answer session.

Operator: To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised.

Ask a question during the session you will need to press star one one on your telephone you.

You will then hear an automated message advising your hand is raised.

Operator: To withdraw your question, please press star 1 once again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to David Krant, Chief Financial Officer. Please go ahead. Thank you.

To withdraw your question. Please press star one one again.

Operator: Please be advised that today's conference is being recorded.

Speaker Change: Please be advised that today's conference is being recorded.

Operator: I would now like to hand the conference over to David Krant, Chief Financial Officer. Please go ahead.

I would now like to hand, the conference over to David Grant Chief Financial Officer. Please go ahead.

David Krant: Thank you, Liz, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' second quarter, 2024, earnings conference call. I've 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 our Chief Operating Officer, Ben Vaughn. I'll begin the call today with the summary of our second quarter, 2024 financial operating results, followed by a discussion of our recent capital markets activities.

David Grant: Thank you Liz and good morning, everyone.

David Grant: Welcome to Brookfield infrastructure Partners' second quarter 2024 earnings conference call.

David Krant: I'm joined today by our Chief Executive Officer, Sam Pollock, and our Chief Operating Officer, Ben Vaughan. I'll begin the call today with a summary of our second quarter 2024 financial and operating results, followed by a discussion of our recent capital markets activity. At this time, I would like to remind you that in our remarks today, we may make forward-looking statements. For further information on known and unknown risk factors, I would encourage you to review our annual report on Form 20-F, which is available on our website.

David Krant: During the second quarter, Brookfield Infrastructure generated strong financial and operating results, while also advancing our strategic initiatives. The current quarter benefited from organic growth that was at the midpoint of our target range, as well as recent acquisitions that significantly contributed to results. This included a continuation of the strong performance at our global intermodal logistics operation, higher contributions from our increased stake in a Brazilian integrated rail and logistics provider, and three data center platforms. However, these positive drivers were partially offset by the impact of capital recycling, higher interest costs, and the impact of foreign exchange.

David Krant: I'll then turn the call over to Sam, who will provide an update on our strategic initiatives before concluding with our look for the 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 unknown and known risk factors, I would encourage you to review our annual report on Form 20-F, which is available on our website. During the second quarter, Brookfield Infrastructure generated strong financial and operating results, while also advancing our strategic initiatives.

David Krant: For the three-month ended June 30, 2024, we generated funds from operations, or SFO, of $608 million, an increase of 10 percent over the prior year period. The current quarter benefited from organic growth that was at the midpoint of our target range, as well as recent acquisitions that significantly contributed to results. This included a continuation of the strong performance at our global intermodal logistic operation, higher contributions from our increased stake in a Brazilian integrated rail and logistics provider, and three data center platform investments. These positive drivers were partially offset by the impact of capital recycling, higher interest costs, and the impact of foreign exchange.

Speaker Change: We offset by the impact of capital recycling higher interest costs and the impact of foreign exchange.

David Krant: Looking at our results by operating segment, starting with the utilities, we generated SFO of $180 million, compared to $224 million in the same period last year. Did it climb as due to capital recycling activity, including the sale of our interest in an Australian regulated utility business, and additional interest costs associated with the financing completed at our Brazilian regulated gas transmission business during the first quarter. After removing these impacts, the base business grew organically as a result of inflation indexation and the contribution associated with $450 million of capital commissioned into the rate base over the last 12 months.

David Krant: Looking at our results by operating segment, starting with utilities, we generated FFO of $180 million, compared to $224 million in the same period last year. The decline is due to capital recycling activity, including the sale of our interest in an Australian regulated utility business and additional interest costs associated with the financing completed at our Brazilian regulated gas transmission business during the first quarter. After removing these impacts, the base business grew organically as a result of inflation indexation and the contribution associated with $450 million of capital commissioned into the rate base over the last 12 months.

Speaker Change: Looking at our results by operating segment, starting with the utilities, we generated <unk> of $180 million compared to $224 million in the same period last year.

The decline is due to capital recycling activity, including the sale of our interest in an Australian regulated utility business and additional interest costs associated with the financing completed at our Brazilian regulated gas transmission business during the first quarter.

After removing these impacts the base business grew organically as a result of inflation indexation and the contribution associated with $450 million of capital commissioned into the rate base over the last 12 months.

David Krant: Moving to our transport segment, SFO was $319 million, representing a 60% increase over the same period in the prior year. The increase is primarily attributable to our acquisition of a global intermodal logistic operation, which continues to perform ahead of expectations, as well as the incremental stake in our Brazilian integrated rail and logistics operation that delivered strong performances this quarter, as Charis increased by more than 15%. The reigning businesses also perform well, achieving organic growth of 9%, which is primarily driven by inflationary tariff increases across the portfolio. Our midstream segment generated an FFO of $143 million, which is ahead of the prior year after excluding the impact of capital recycling.

David Krant: Moving to our transport segment, FFO was $319 million, representing a 60% increase over the same period in the prior year. The increase is primarily attributable to our acquisition of a global intermodal logistics operation, which continues to perform ahead of expectations, as well as the incremental stake in our Brazilian integrated rail and logistics operation that delivered strong performance this quarter, a tariff increase by more than 15 percent. The remaining businesses also performed well, achieving organic growth of 9%, which was primarily driven by inflationary tariff increases across the portfolio.

Speaker Change: Moving to our transport segment, <unk> was $319 million, representing a 60% increase over the same period in the prior year.

David Krant: Our midstream segment generated FFO of $143 million, which is ahead of the prior year after excluding the impact of capital recycling. The unprecedented growth in North American power demand has created further opportunities for our critical midstream players.

David Krant: Strong demand and customer activity levels continue to benefit results, most prevalent at our North American gas storage business where we continue to add contracturation at higher rates compared to prior years. Non-president growth in North American power demand has created further opportunities for our critical midstream asset. During the quarter, our businesses capitalize on the favorable market environment by securing several accretive commercial agreements and both on capital projects to meet growing customer demand. Lastly, FFO from our data segment was $78 million, representing an 8% increase over the same period last year. This result reflects the contribution from recently completed acquisitions, including the purchase of 40 retail co-location sites and two marquee hyperscale data center platforms. Across our global data center platform overall, we continue to see strong momentum in leasing activity on the tail of artificial intelligence investment and our customers' need for more processing and storage capacity.

David Krant: Across our global data center platform, we continue to see strong momentum in leasing activity on the tail of artificial intelligence investment and our customers' need for more processing and storage capacity. In the last nine months, we have generated approximately $1.4 billion of proceeds, of which $1.1 billion reflects capital recycling activity. The second category is maturities expenses. We have proactively refinanced $3.4 billion in maturities occurring over the next several years. Across these transactions, the combined average rate increase was only 50 basis points.

David Krant: Moving on from our financial and operating performance, I would now like to highlight some of our recent capital market activity. In addition to replenishing our investment pipeline and progressing our asset cell plans, which Sam will speak to soon, our primary focus is quarter with capitalizing on very attractive debt capital markets to further de-risk our asset level balance sheets. Within our businesses, we completed approximately $5 billion of non-recourse financing during the quarter, and our activity can be broadly bucketed into three categories. The first category is right sizing capital structures. As our businesses grow their underlying cash flows, we can raise additional debt while preserving the existing capital structure.

David Krant: In the last nine months, we've generated approximately $1.4 billion of proceeds, of which $1.1 billion reflects capital recycling activity. This is in specific instances where we are within 24 months of an expected sale, and the new capital structure allows us to reduce the equity required by a future buyer and pull forward future sale proceeds. The second category is maturity extensions. We have proactively refinanced $3.4 billion in maturity is occurring over the next several years. Across these transactions, the combined average rate increase was only 50 basis points. The benefit of pushing out maturity is greatly outweighed the modest increase in financing costs, which is also more than offset by the inflationary revenue increases we've experienced over the last several years.

Speaker Change: We are.

Speaker Change: <unk> refinanced $3 4 billion in maturities occurring over the next several years across these transactions. The combined average rate increase was only 50 basis points the benefit of pushing out maturities greatly outweighs the modest increase in financing cost, which is also more than offset by the inflationary revenue increases we've experienced over the last several years.

David Krant: The benefit of pushing out maturities greatly outweighs the modest increase in financing costs, which is also more than offset by the inflationary revenue increases we've experienced over the last several years. In July, we completed a $720 million eight-year bond issuance with the proceeds used to repay a 2026 maturity. The newly issued bonds allowed us to fully de-risk the maturity profile and extend the average duration of debt outstanding by two years. In addition, the new bonds were priced very competitively at a coupon in line with the debt being refinanced.

David Krant: A great example of where we were able to achieve a term extension and a tract of price was at our Western Canadian natural gas gathering and processing operation. In July, we completed a $720 million dollar eight-year bond issuance, with a proceeds used to repay at 2026 maturity. The newly-issue bonds allowed us to fully de-risk the maturity profile and extend the average duration of debt outstanding by two years. In addition, the new bonds were priced very competitively at a coupon in line with the debt being refinanced. The third and final category is opportunistic repricings. We took advantage of the strong spread environment and completed approximately $1 billion of loan repricings across three of our businesses during the second quarter.

Speaker Change: <unk>.

Speaker Change: A great example of where we were able to achieve a term extension and an attractive price was at our western Canadian natural gas gathering and processing operation and.

Speaker Change: In July we completed a $720 million eight year bond issuance with the proceeds used to repay a 2026 maturity.

Speaker Change: The newly issued bonds allowed us to fully de risked the maturity profile and extend the average duration of debt outstanding by two years and.

Speaker Change: In addition, the new bonds were priced at a very competitive very competitively at a coupon in line with the debt being refinanced.

David Krant: These activities reduce our cost of financing by over $7 million annually net-to-BIP. These repricing transactions are a unique feature of a floating rate loan market and allow the issuer to reduce the credit spread of a previously issued loan while keeping the existing capital structure in place. Our balance sheet position was strong to begin the year and has been further bolstered by this activity. Over the next 12 months, only 1% of our asset level debt is maturing, and we have no corporate maturities until 2027. In addition, we maintain significant corporate liquidity of $1.9 billion and remain well positioned to support growth initiatives.

David Krant: These activities reduced our cost of financing by over $7 million annually, net to business. These repricing transactions are a unique feature of the floating rate loan market and allow the issuer to reduce the credit spread of a previously-issued loan while keeping the existing capital structure in place. Our balance sheet position was strong to begin the year and has been further bolstered by this activity. Over the next 12 months, only 1% of our asset-level debt is maturing, and we have no corporate maturities until 2027.

David Krant: That concludes my remarks for this morning.

Sam Pollock: I'll now turn the call over to Sam. Thank you, David, and good morning everyone. For my remarks today, I'm going to provide an update on our strategic initiatives, and then I'll conclude with a business outlook. In relation to our strategic initiatives, both public and private infrastructure deal flow has been a little slower start the year. However, one of the benefits of our business is that we have many avenues to deploy capital. In periods where large-scale M&A activities lower, we focus heavily on tuck-in and organic growth opportunities embedded in our portfolio. In 2020, for a loan, we secured or completed 7th follow-on acquisitions comprising nearly $4 billion of enterprise value.

Samuel J. B. Pollock: Thank you, David, and good morning, everyone. In my remarks today, I'm going to provide an update on our strategic initiatives, and then I'll conclude with a business outlook. In relation to our strategic initiatives, both public and private infrastructure deal flow has been a little slower to start the year. However, we were able to complete the acquisition of 40 data center sites due to a previous owner mismanaging their capital structure and ending up in bankruptcy.

Samuel J. B. Pollock: The quarter also included the follow-on acquisition of a 10% stake in our Brazilian integrated rail and port logistics business. And earlier in the year, we signed the bolt-on acquisition of a tower portfolio in India, which remains on track to close early in the fourth quarter or sooner, which will generate over $140 million in EBITDA and will fully contribute to results over the next two years. In addition, we are supporting their growth ambitions through strategic land acquisitions in Athens, Chicago, Frankfurt, Milan, and Phoenix.

Sam Pollock: Most significantly, we were able to complete the acquisition of 40 data center sites due to a previous owner's mismanaging, their capital structure, and ending up in bankruptcy. The quarter also included the fall on acquisition of a 10% stake in our Brazilian integrated rail on the report's statistics business. In early in the year, we signed the bolt-on acquisition of a tower portfolio in India, which remains on track to close early in the fourth quarter or sooner. We also maintain a large project backlog, which is increased by 15% from this time last year to approximately $7.7 billion.

Speaker Change: Most significantly we were able to complete the acquisition of 40 data centers sites due to a previous owners mismanaging their capital structure and ending up in bankruptcy.

Speaker Change: The quarter also include the follow on acquisition of a 10% stake in our Brazilian integrated rail ports logistic business and.

Speaker Change: And earlier in the year, we signed the bolt on acquisition of a tower portfolio in India, which remains on track to close early in the fourth quarter or sooner.

Speaker Change: We also maintain a large project backlog, which has increased by 15% from this time last year to approximately $77 7 billion.

Sam Pollock: In the mainstream sector, we were supporting increased producer activity through contracted facility and pipeline expansions. In total, these projects represent almost $800 million in capital, which will generate over $140 million in EBITDA and will fully contribute to results over the next two years. In our data segment, we are commercializing our existing land bank and investing over $1 billion in near-term growth capital to build data centers for our hyper-scale customers. In addition, we are supporting their growth and business through strategic land acquisitions in Athens, Chicago, Frankfurt, Milan, and Phoenix. With respect to new investments, market conditions are trending positively.

Speaker Change: In the midstream sector, we're supporting increased producer activity through contracted facility and pipeline expansions.

Speaker Change: In total these projects represent almost $800 million in capital, which will generate over $140 million in EBITDA and will fully contribute to results over the next two years.

Samuel J. B. Pollock: With respect to new investments, market conditions are trending positively. As a result, we expect the back half of 2024 to be active for M&A. Additionally, large industry tailwinds such as AI are creating opportunities for well-capitalized businesses like ours. We are extremely active and have three advanced processes in a number of areas. Recent market developments have provided an encouraging backdrop. Our strong alignment with the global megatrends offers an exciting and underappreciated growth opportunity for our business. Several years ago, we coined the term 3Ds.

Sam Pollock: As a result, we expect a back half of 2024 to be active for M&A. Much of this is driven by the improved interest rate environment as the Bank of Canada and the European Central Bank are leading the way with the loosening of their monetary policies. Additionally, the large industry tailwinds such as AI are creating opportunities for well-capitalized businesses like ours, where we are an obvious partner of choice for technology companies that are seeking alternative access to private capital. Our novel transaction with Intel several years ago is providing the blueprint for similar large-scale opportunities, which are gaining momentum.

Sam Pollock: In relation to capital recycling, we are extremely active and have three advanced processes in a number of areas. We have six further asset sales progressing that are expected to generate almost 2.5 billion in proceeds when combined with our three advanced processes. This quarter, we monetized assets totaling approximately $210 million, bringing our total capital recycling for the year to about $1.4 billion. In terms of our business outlook, recent market developments have provided an encouraging backdrop. Equal indices have reached historic highs, as I previously mentioned. G7 nations have initiated monetary easing measures that should reinvigorate large-scale mining activity.

Speaker Change: <unk> be great large scale M&A activity.

Sam Pollock: Our strong alignment with the global megatrends offers an exciting and under-appreciated growth opportunity for our business. Several years ago, we coined the terms 3Ds, which namely, Disclization, Decarbonization, and Declization, to describe these themes. While our business spans all three, we are particularly significantly levered towards digitalization and decarbonization. We are in active discussions with several blue chip technology companies that are interested in leveraging virtual infrastructure's market-leading scale and expertise. The tailwinds created from AI adoption supports exponential growth in our global data center platforms that serve as a large type of scalers, as well as our electric utilities and natural gas infrastructure.

Speaker Change: Our strong alignment with the global Mega trends offers an exciting and underappreciated growth opportunity for our business.

Speaker Change: Several years ago, we coined the term the three DS.

Speaker Change: Namely digitalization decarbonization and de globalization.

Speaker Change: To describe these themes.

Speaker Change: While our business spans all three.

Samuel J. B. Pollock: We are particularly significantly levered towards digitalization and decarbonization. We are in active discussions with several blue-chip technology companies that are interested in leveraging Brookfield Infrastructure's market-leading scale and expertise. Although we've been very active pursuing growth through both acquisitions and organic capital projects during the past few quarters, this, combined with our connectivity to global transaction activity and our ability to move quickly, should continue to create attractive investment opportunities for our business. This concludes my remarks, and I'll now pass it over to Liz for some Q&A.

Speaker Change: We are particularly significantly levered towards digitalization and de carbonization.

Speaker Change: We are in active discussions with several blue chip technology companies that are interested in leveraging Brookfield infrastructure's market, leading scale and expertise.

Speaker Change: The tailwind is created from AI adoption supports exponential growth in our global data center platforms that service the large hyperscale as.

Speaker Change: As well as our electric utilities and natural gas infrastructure.

Sam Pollock: Although we did very active pursuing growth through both on acquisitions and organic capital projects during the past few quarters, we are experiencing significant improvement in our business to achieve our 2024 capital recycling and deployment targets. It's a good experience to our financial car growth has resulted in a strong balance sheet and liquidity position, with tremendous access to large-scale capital. Discombined our connectivity into global transaction activity, and our ability to move quickly should continue to create attractive investment opportunities for our business.

Speaker Change: Although we've been very active pursuing growth through bolt on acquisitions and organic capital projects during the past few quarters.

Operator: This concludes my remarks, and I'll pass it over to Liz for some Q&A. As a reminder, if you'd like to ask a question at this time, please press star 111 on your touchtone telephone and wait for your name to be announced. To withdraw your question, please press star 111 again.

Operator: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your touchtone telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Operator: Please stand by while we compile the Q&A roster.

Cherilyn Radbourne: Our first question will come from a line of Sheryl and Radborne with TD Cowan. Thanks very much, and good morning. I wanted to pick up on the comments in the letter regarding capital deployment opportunities tied to AI across data, utility, and midstream.

Robert Catellier: I wanted to pick up on the comment in the letter regarding capital deployment opportunities tied to AI across data utility and midstream. I think the opportunities in data are fairly self-explanatory, but maybe you could spend some time to add color on where you're seeing leverage in the utilities and natural gas sector.

Sam Pollock: I think the opportunities in data are fairly self-explanatory, but maybe you could spend some time to add color on where you're seeing leverage in the utilities and natural gas vectors. Okay, thanks, Cherilyn. Yeah, so I guess the term that's probably going to get coined in the next little while will be AI infrastructure, and that will be the whole ecosystem around building large-scale AI data centers. This will include not only data centers themselves, but also the equipment that goes inside them, as well as the power, the transmission, you know, that will support those facilities. And obviously, you know, the power side is large; you're going to be served by companies like BEPP, you know, who have many relationships with the hyperscale is already. But in addition to building a power facility, you also have to connect it to build the transformers and connect it to the grid, and so a lot of our businesses are tied to that type of activity.

Samuel J. B. Pollock: Yeah, so. [inaudible] We'll need to be utilized to provide the power, and so that's creating opportunities for us to invest across our natural gas complex to facilitate the movement of gas and storage of gas to serve that whole ecosystem. So it's probably a little bit more complicated to get into for each type of situation, but I would just say that all our natural gas complexes are in this discussion, with a number of hyperscale.

Sam Pollock: In addition to that, I think it's recognized that renewables probably can't be built quick enough to surface all the power needs that will be available for these, you know, large gigawatt size data centers that are being talked about, and so natural gas, in our view, as well as possibly nuclear, but in the short term it will be natural gas, you know, will need to be utilized to provide the power, and so that's creating, you know, opportunities for us to invest across our natural gas complex to facilitate the movement of gas and storage of gas, you know, to, you know, to serve that whole ecosystem.

Cherilyn Radbourne: So, it's probably a little bit more complicated to get into a breach type of situation, but I would just say that all our natural gas complexes are in this discussion with a number of hyperscalers. Okay, that's helpful.

Sam Pollock: And then on the opportunities that are progressing based on the Intel Blueprints, can you talk about how much capital you have the appetite and capacity to deploy to those opportunities and just what some of the guardrails are in negotiating that type of deal? Sure. So, as far as amount of capital, I'd say, you know, given the interest we have from our global P-base to participate in those types of deals, I think it's unlimited. I think we could source, you know, tens of billions of dollars for similar type transactions, you know, whether it's for chip facilities or, you know, to provide the capital to go inside, as I mentioned, a lot of these, you know, future AI data centers.

Speaker Change: We have from.

Speaker Change: Our global LP base to participate in those types of deals I think it's unlimited.

Speaker Change: <unk>.

Speaker Change: I think we could.

Samuel J. B. Pollock: Source, you know, tens of billions of dollars for similar-type transactions, you know, whether it's for chip facilities or, you know, to provide the capital to go inside, as I mentioned, a lot of these future AI data centers. As far as, you know, I think... structure wise or what some of the limiting factors will be, probably the most important one will be the counterparty that we need to have stand behind a lot of the commercial elements of the transaction.

Speaker Change: Source tens of billions of dollars for <unk>.

Speaker Change: Similar type transactions, whether it's.

Speaker Change: For <unk>.

Speaker Change: <unk> facilities or.

Speaker Change: To provide the capital to go inside as I mentioned a lot of these.

Speaker Change: Future AI data centers.

Sam Pollock: As far as I think, I think, structure wise or what some of the limiting factors, you know, probably the most important one will be the counter party that we need to have stand behind a lot of commercial elements of the transactions. So Intel was obviously a very strong credit for that particular situation. You know, I think any of the hyperscalers or some of the other large chip manufacturers would be great counter parties as well. In some cases, it may be governments, as governments are now stepping into this area. So I think the opportunity set is huge, and we expect to be a leader in this area.

Speaker Change: As far as I think.

Speaker Change: Structure wise or what some of the limiting factors.

Speaker Change: Probably the most important one will be the counter party that we need to have stand behind a lot of the commercial elements of the transaction. So Intel was.

Samuel J. B. Pollock: So Intel was obviously a very strong credit for that particular situation. You know, I think any of the hyperscalers or some of the other large chip manufacturers would be great counterparties as well. In some cases, they may even be governments, as governments are now stepping into this area.

Speaker Change: Obviously, a very strong credit for that particular situation.

Speaker Change: I think any of the hyperscale or <unk> or some of the other large chip manufacturers would be great counterparties as well in some cases it may be governments.

Speaker Change: Governments are now stepping into this area.

Speaker Change: So I think.

Sam Pollock: And if I could check on one quick follow-on, are all of those technologies in the technology space, or is there anything that will be analogous outside of tech? So that's a very good question. You know, I think the structure that we have come up with, elements of it are being used in areas that relate to hydrogen and other decarbonization type of facilities that are large. Some of those will be done by our sister company, but some also touch us and to the extent that it relates to industrial gases. So I would say the type of approach that we use for Intel does have many opportunities outside of just AI technology. You know, batteries being another area where I guess we've had a lot of conversations.

Samuel J. B. Pollock: Yeah, I think the in areas that you know relate to hydrogen and other decarbonization type of facilities that are large, some of those will be done.

Cherilyn Radbourne: That's all for me. Thank you. Okay. Thank you.

Operator: That's all from me. Thank you.

Robert Catellier: Okay, thank you.

Speaker Change: Thank you.

Robert Kwan: Our next question.

Robert Kwan: Welcome from the line of Robert Kwan with RBC Capital Markets. Thank you. Good morning. If I can just as follow on, start with the comments around similar deals like the Intel that you're seeing out of your private investors and that demand. Can you just talk about, you know, having gone through the Intel and getting a feedback from kind of the publicly and the investors and the public funds. Just the thoughts on whether you think that the de-risking you've done on something like that is being appreciated versus the relatively low return out of that deal and then especially just the multi-year or just the lag between capital out the door before it shows up in cash flow and just how you would expect that to participate in any of these types of deals going forward.

Speaker Change: Our next question will come from the line of Robert Kwan with RBC capital markets.

Robert Kwan: Thank you good morning, if I can just kind of as a follow on to start with the <unk>.

Samuel J. B. Pollock: The comments around similar deals like the Intel deal and what you're seeing out of your your private investors and that demand, can you just talk about, you know, having gone through, you know, the Intel and getting the feedback from from kind of the publicly

Speaker Change: Comments around Sim.

Robert Kwan: Similar deals like the Intel deal on what Youre seeing out of your your private investors in that demand can you just talk about you know having gone through.

Speaker Change: The Intel and getting feedback from from kind of the publicly.

Speaker Change: The investors in the public funds just the thoughts on whether you think that the derisking you've done on something like that is being appreciated versus the relatively low return out of that deal and then, especially just some multiyear or it's just the lag between capital out the door before it shows up in cash flow and just how you would expect that to.

Speaker Change: Participate in any of these types of deals going forward.

Sam Pollock: Thank you, Robert. So, we'll look back. That could be a long conversation because you touched on a lot of elements there, so I'll try to keep it somewhat brief. But obviously, there is a different level of patience, for lack of a better expression, between private investors and public investors who are maybe more a bit quarter to quarter. And so it's easier for us to do those types of transactions, those long lead development type deals in private funds. And obviously, that's a little bit the rationale behind the private equity industry. However, I think the benefit of Brookfield Infrastructure is the fact that we are a large, diversified business.

Samuel J. B. Pollock: Hey, Robert. So, I think that could be a long conversation because you touched on a lot of things there. So I'll try to keep it somewhat brief. But obviously, you know, there is a different level of patience, for lack of a better expression, between private investors and public investors who are maybe more a bit quarter to quarter. And so, you know.

Robert: Hey, Robert.

Speaker Change: So.

Speaker Change:

Robert Kwan: That could be a long conversation because you touched on a lot of elements there.

Robert Kwan: I'll try to keep it somewhat brief.

Speaker Change: But obviously there is a.

Speaker Change: A different level up patients for lack of a better expression between private investors.

Samuel J. B. Pollock: It's easier for us to do those types of transactions, those long-lead development-type deals in private funds, and obviously, that's the rationale behind the private equity industry. However, I think the benefit of Brookfield Infrastructure is the fact that we are a large, diversified business, and so we have many businesses at all stages of... & Co. & Co. & Co. & Co. & Co. & Co. & Co. & Co. & Co. & Co. & Co. & Co. & Co. & Co. & Co. & Co.

Sam Pollock: And so we have many businesses at all stages of maturity. And so we have lots of businesses that are generating significant amounts of cash flow. And then we have these platform businesses that we talked about in the past that generate high IRRs over the long run but maybe a little less cash flow in the short run. And so our investors for BIP, for instance, get the benefit of that whole suite of assets. And I think that's very attractive. I appreciate it would be great if everything we could buy would be generating cash flow day one, but then again, I think our returns would be lower.

Sam Pollock: I think to get the higher returns that people want, we need to have some of these businesses that have a bit of a growth wedge to them. I think in the Intel transaction, in the end, we're going to find that's going to be a very high returning opportunity. The situation today, though, is we still have a couple of years to wait before we truly see the benefits of that. But I think, hopefully, having the long history that we do, our shareholders are generally patient. And like the dividend growth that we have and, you know, have the same sort of patience that many of our private fund investors do.

Samuel J. B. Pollock: I think in the Intel transaction, in the end, we're going to find that it's going to be a very high-returning opportunity. The situation today, though, is that we still have a couple of years to wait before we truly see the benefits of that. I think, hopefully, having the long history that we do, our shareholders are generally patient and like the dividend growth that we have.

Operator: [inaudible]

Robert Kwan: So I rise at the long-winded answer. I apologize for it, but it was a little bit tough to tackle all things you mentioned. Yeah. I appreciate the colors and multifaceted question.

Robert Kwan: Just if I can turn to your comment and the letters around the M&A market heating up, then there's both sides of it. So I'll try to touch on both. But just some thoughts on how the up to two and a half billion dollars of assets they all proceeds. You might intend to use that. Do you, would you expect that fully back into acquisitions? Would you look to maybe create some drive powder by paying down some of the whole co lines? Or even on the other side, would you expect acquisition activity to exceed the two-and-a-half billion dollar figure?

Samuel J. B. Pollock: Again, so... The intention, as always, is to redeploy that into higher-earning investments. So I think to continue the cycle of buying high-quality assets with returns in the plus or minus 15% range, we've done a little better in the last couple of years, but maybe that trend will go back down a little bit as rates come down, but in that range historically, and then add value, invest in them, fix them up, and then sell them at returns probably closer to $10, $11 billion. We'll continue to do so.

Sam Pollock: Again, so it's a little difficult to look into the crystal ball as to, you know, exactly what the proceeds could be. I think today we feel confident about two and a half, but it could be more. In relation to some of the whole co facilities, obviously, to the extent that they're related to those asset sales and most of them are, they would just be paid off when they go with the asset. You know, we don't have too many other hotel facilities in the structure, I'd say, and the intention, as always, is to redeploy that into higher earning investments.

Sam Pollock: So I think to continue the cycle of buying high quality assets with returns in the plus or minus 15% range. We've done a little better in the last couple of years, but maybe that trends back down a little bit. It's rates come down, but in that range historically, and then add value, invest in them, fix them off, and then sell them at returns probably closer to 10-11%. So we'll continue to do that.

Speaker Change: Buying high quality assets with returns in the plus or minus 15% range, we've done a little better in the last couple of years.

Speaker Change: But maybe that trend back down a little bit.

Speaker Change: Rates.

Speaker Change: Come down but in that range historically and then.

Speaker Change: Add value invest in them fix them up and then sell them at returns probably closer to 10 or 11%.

Speaker Change: So.

Speaker Change: We'll continue to do that.

Robert Kwan: In fact, you just finished. What geography is in for subclasses, are you seeing as having the strongest valuations for the investiture side, and just where you seeing the more attractive valuations on the acquisition side? So this will sound a bit like a broken record. On the opportunity side, we see them everywhere. We have a pretty balanced pipeline across AsiaPak, where I think we had the most advanced deals earlier in the year, and probably some of those got pushed a little bit, but we think they are still coming, and gives us a lot of confidence about some of the activity we have for later in the year.

Speaker Change: And if I can just finish like what geographies and for sub classes are you seeing as having the strongest evaluations for the divestiture side, and then just where you're seeing the more attractive valuations on the acquisition side.

Speaker Change: So.

Speaker Change: This will sound a bit like a broken record I think the on the opportunity side, we see them everywhere, we have a pretty balanced.

Samuel J. B. Pollock: pipeline across Asia-Pacific. Asia-Pacific was where I think we had the most advanced deals earlier in the year, and probably some of those got pushed a little bit, but we think they are still coming, and it gives us a lot of confidence about some of the activity we have for later in the year. But the pipelines in North America and Europe have definitely filled up as well, so I think we're seeing good opportunities there. We're probably maybe less active in South America, but, you know, that's a market that I think that we're seeing. And on the sort of stealth side... [inaudible]

Speaker Change:

Speaker Change: Pipeline across Asia Pac.

Speaker Change: <unk> is where I think we had the most advanced deals earlier in the year and probably some of those got pushed a little bit, but we think there they are still coming in.

Speaker Change: And gives us a lot of confidence about some of the activity. We have for later in the year.

Robert Kwan: But the pipelines in North America and Europe have definitely filled up as well. So I think we're seeing good opportunities there. We're probably maybe less active in South America, but that's a market that I think we're seeing, particularly in Brazil, some good improvements in sentiment. And so I think there could be more activity there as well. And on the sort of stealth side, look, the deepest market will always be the US market; that goes without saying. And then after that, probably Europe. So, unfortunately, I don't have any real shockers for you there. It's the same as usual.

Speaker Change: But the pipelines in North America, and Europe definitely.

Speaker Change: Filled up as well so I think we're seeing good opportunities there were probably.

Speaker Change: May be less active in South America.

Speaker Change: But that's a market that I think that we're seeing.

Speaker Change: Particularly in Brazil, some good.

Speaker Change: Improvements in sentiment and so I think there could be more activity there as well.

Speaker Change: And on the sell side.

Speaker Change:

Speaker Change: Look.

Speaker Change: Yes.

Speaker Change: The deepest market will always be the U S market that goes without saying.

Speaker Change:

Speaker Change: And.

Speaker Change: And then after that probably Europe.

Speaker Change: No.

Speaker Change: I don't think unfortunate I don't have any real.

Robert Kwan: Okay, appreciate it. Thank you very much. Thank you.

Operator: As a reminder, if you'd like to ask a question at this time, please press star 11 on your touchdown telephone.

Operator: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your touchtone telephone.

Devin Dodge: Our next question will come from the line of Devon Dodge with BMO Capital Markets. Thank you. Good morning.

Sam Pollock: There seems to be a bit more M&A activity lately in the mystery sector. You're a well-known contrarian investor. Just wondering if you're, or we should expect you to be leading into that increased demand, pretty types of assets. And, you know, whether we could see one or more of your mature investments sold in the near term. And maybe just, and if the answer is yes, just what types of assets within the streamer are getting the most potential or most interest from potential buyers. So, I would concur. I think the midstream sector is a very interesting place.

Samuel J. B. Pollock: I would concur. I think the midstream sector is a very interesting place. A lot of buyers have returned there over the last couple of years, and it's been, from an operational perspective, one of our best segments, for sure, for the last while, and we foresee that to continue for definitely the medium term, short and medium term. You know, we see lots of opportunities. I'd say, you know, today, we've got businesses that are doing exceptionally well. I think it's well recognized today as being critical, particularly in a number of markets for balancing.

Sam Pollock: A lot of buyers have returned there of the last couple of years, and it's been from an operational perspective, one of our best segments for sure, for the last while, and we foresee that to continue for the medium term, short and medium term. We see lots of opportunities. I'd say today we've got businesses across the number of geographies, and so a lot of the M&A slash deployment is being done through those platforms. And so we are looking for new investments as well, but I would say much of it is being done at that subsidiary level, and that deployment is significantly high. And I think we'll take advantage of all those opportunities.

Speaker Change: And.

Speaker Change: It's been from an operational perspective.

Speaker Change: Well.

Speaker Change: One of our best segment for sure for the last while and we.

Speaker Change: Foresee that to continue for the.

Speaker Change: Definitely the medium term.

Speaker Change: Short and medium term.

Speaker Change:

Speaker Change: We see lots of.

Speaker Change: Opportunities I'd say today, we've got businesses.

Speaker Change: Across a number of geographies.

Speaker Change: And so.

Speaker Change: A lot of the let's call it M&A slash.

Speaker Change: Deployment is being done through those platforms and so we.

Speaker Change: We're looking for.

Speaker Change: New investments as well, but I would say much of it is being done.

Speaker Change: At that.

Speaker Change: Subsidiary level.

Speaker Change: The deployment is significantly high.

Speaker Change: And.

Speaker Change: I think we will take advantage of all those and those opportunities.

Sam Pollock: As far as capital recycling, we look across our businesses. The one that I think we've talked about in the past that it's probably the most mature we've done a lot to it and I think is incredibly well positioned is our natural gas storage business. That may be one that we look to bring in partners or sell down pieces. It's doing exceptionally well. I think it's well-recognized today as being critical, particularly in a number of markets for balancing loads, particularly related to LNG. If I think of one of our best positions, assets today, it probably has to be that asset.

Speaker Change: As far as capital recycling.

Speaker Change: Look across our businesses.

Speaker Change: The one that.

Speaker Change: I think we've talked about in the past that.

Speaker Change: It is probably the most mature we've done a lot to it and I think as <unk>.

Speaker Change: Credibly well positioned as our natural gas storage business that may be one that we.

Speaker Change: We look to bring in partners or.

Speaker Change: Or sell down pieces.

Speaker Change: It's doing exceptionally well.

Speaker Change: I think it's well recognized.

Speaker Change: Today as being critical.

Speaker Change: Particularly a number of markets for balancing.

Speaker Change: Loads, particularly relate to LNG.

Speaker Change: And.

Speaker Change: Yeah.

Speaker Change: If I think of one of <unk>.

Speaker Change: Our best positioned assets today, it probably has to be that asset.

Devin Dodge: Okay, okay, make sense. Thanks for that.

Speaker Change: Okay, Alright makes sense, thanks for that and then data centers.

Sam Pollock: And then data centers, there was some discussion in the letter about it. Just wondering if you could provide a bit of an update on the development pipeline and when we could start to see that self-funding strategy start to ramp up. Okay, on the development side, I think we've gotten a lot of information earlier on the call just on new areas we've gone into to add to our land bank, and today we're just building out the existing facilities that are contracted. For those relatively few pieces of land that where we have power, we're very close to having those under contract as well.

Speaker Change: There was some discussion in the letter about it.

Speaker Change: If you could provide a bit of an update on the development pipeline and when we could start to see that self funding strategy start to wrap up.

Speaker Change: Okay.

Speaker Change: On the.

Speaker Change: Development side, I think we've given a lot of.

Samuel J. B. Pollock: information earlier on the call, just on new areas we've gone into to add to our land bank, and today, we're just building out the existing facilities that are contracted, and for those relatively few pieces of land where we have power, we're very close to having those under contract as well. You know, as far as You know, we are well advanced in a number of situations. We have a number of clients across the world, and data centers are attracted to many of them today. A lot of them don't have them in their portfolio and are looking to get exposure.

Speaker Change:

Speaker Change: Information earlier on the call just on.

Sam Pollock: And you know, it takes this and, you know, whether it's South America, you know, in Brazil and Chile, in the US, you know, in Phoenix and Chicago. You know, we've got obviously Europe, Germany, France and Spain as well as Greece. All of them are active at the moment, and then, you know, we've got activities going on in Chennai and Mumbai in India, and then Korea and New Zealand and Australia. So, you know, literally, you know, I've probably missed a few places, so we've got a lot of things going on in all those areas. Every one of those places has construction activity underway.

Sam Pollock: You know, as far as the capital recycling, you know, we are well advanced on a number of situations. I think, you know, the goal here is to, you know, not only do one-off, so we will do some one-off transactions, but in addition to that, to have something that's probably more programmatic, where we have a series of investors who will look to, you know, have, you know, repeatedly by completed properties. And so, those initiatives are underway; we're quite encouraged. Obviously, we have the benefit of being able to take advantage of our several thousand, you know, a number of clients across the world, and data centers are attracted to many of them today.

Speaker Change: The goal here is to.

Speaker Change: Not only do one offs, which we will do some one off transactions, but in addition to that to have something that's probably more programmatic, where we have a series of investors who will look to.

Speaker Change: Yes.

Speaker Change: Repeatedly by completed.

Samuel J. B. Pollock: Completed properties.

Speaker Change: And so those initiatives are underway.

Speaker Change: We're quite encouraged obviously, we had the benefit of being able to take advantage of our.

Speaker Change: Several thousand.

Speaker Change: Yes.

Speaker Change: The number of clients across the world and.

Samuel J. B. Pollock: And data centers are attractive to many of them today, a lot of them don't have them in their portfolio and they are looking to get exposure.

Sam Pollock: A lot of them don't have them in their portfolio, and they're looking to get exposure. So, I'd say, stay tuned.

Samuel J. B. Pollock: I would say.

Devin Dodge: Hopefully, next quarter, we'll have some more updates, and if not next quarter, definitely the quarter after that. Okay, good color. I appreciate it.

Samuel J. B. Pollock: Stay tuned hopefully next quarter, we'll have some more updates.

Speaker Change: And if not next quarter definitely in the quarter after that.

Robert Catellier: Okay, good color. I appreciate it. I'll turn it over.

Operator: I'll turn it over.

Speaker Change: Okay. Good color I appreciate it I'll turn it over.

Speaker Change: Yeah.

Operator: That concludes today's question-and-answer session.

Samuel J. B. Pollock: That concludes today's question and answer session I would like to turn the call back to Sam Pollock for closing remarks.

Sam Pollock: I'd like to turn the call back to Sam Pollock. We're closing remarks. All right. Thank you. Thank you, Liz. I would appreciate your help, and thank you to everyone for joining the call this morning.

Speaker Change: Yeah.

Robert Catellier: Alright. Thank you. Thank you Liz I would appreciate your help and thank you to everyone for joining the call. This morning.

Sam Pollock: We hope everyone summer has been going well, and we look forward to providing an even more detailed update that are upcoming annual investor day event, which will be held in Toronto on September 24th. So thank you again, and take care.

Speaker Change: We hope everyone summer has been going well and we look forward to providing.

Speaker Change: I need a more detailed update at our upcoming annual Investor day event, which will be held in Toronto on September 24th.

Speaker Change: So thank you again and take.

Speaker Change: Take care.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Robert Catellier: Yeah.

Robert Catellier: Yeah.

Robert Catellier: Yeah.

Speaker Change: [music].