Q4 2024 Brookfield Infrastructure Partners LP Earnings Call
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Speaker Change: I would now like to hand, the conference over to David Cramped Chief Financial Officer. Please go ahead.
Thank you Liz and good morning, everyone.
Speaker Change: Welcome to Brookfield infrastructure Partners' fourth quarter 2024 earnings conference call.
David Kratz: As introduced my name is David Kratz, and I'm, the Chief financial Officer of Brookfield infrastructure.
David Kratz: I'm joined today by our Chief Executive Officer, Sam Pollock.
Speaker Change: And joining us for the Q&A portion of the call is our chief operating officer.
Speaker Change: I'll begin the call today by highlighting our financial and operating results for the past year.
Speaker Change: Followed by some brief remarks on our base business and a solid foundation.
Speaker Change: I'll, then turn the call over to Sam who will provide an update on our capital recycling initiatives before concluding with an outlook for the business.
Speaker Change: At this time I would like to remind you that our remarks today, we may make forward looking statements.
Speaker Change: These statements are subject to known and unknown risks and future results may differ materially.
Speaker Change: For further information on known risk factors I would encourage you to review our latest annual report on form 20-F, which is available on our website.
Speaker Change: 2024 was another excellent year for Brookfield infrastructure.
Speaker Change: Some of our key accomplishments include delivering on our capital recycling target.
Supplying over $1 1 billion of equity into growth initiatives.
Speaker Change: Adding approximately $1 8 billion of new projects to our capital backlog.
Speaker Change: And completing approximately $10 billion of Fanapt.
Speaker Change: Which makes it our most active year in the capital markets.
Speaker Change: I am pleased to report that we ended the year with funds from operations or <unk> of $3 12 per unit, representing a 6% increase compared to 2023.
Speaker Change: When normalizing for the impact of foreign exchange <unk> per unit was up 10% versus the prior year. This would be in line with our target and better reflects the current operational performance and strength of our business.
Speaker Change: Considering our conservative payout ratio ended the year at 67% and a favorable outlook for 2025, which Sam will speak to you soon.
Speaker Change: Our board of directors have approved a quarterly distribution increase of 6% to $1 72 per unit or share on an annualized basis.
Speaker Change: This marks the 16th consecutive year of distribution increases within or above our target range.
Speaker Change: I'll now go through our annual results and discuss our business segments in more detail.
Speaker Change: <unk> in 2024 totaled $2 5 billion, an increase of 8% compared to 2023.
Speaker Change: Organic growth for the year was 7% driven by elevated levels of inflation in the countries, where we operate stronger volumes across our critical infrastructure networks and the commissioning of over $1 billion of new capital projects from our backlog.
Speaker Change: In addition, we deployed over $2 billion into new investments during the second half of 2023 and completed three accretive tuck in acquisition. This year, which are all fully contributing to earnings.
Speaker Change: Taking a closer look at our results by segment, starting with utilities, we generated <unk> of $760 million, which is up 7% year over year on a comparable basis.
Speaker Change: After taking into account asset sales and currency and compares to $879 million in the prior year.
Speaker Change: The reduction was primarily attributable to capital recycling activity, which included the sale of our Australian utility business in the third quarter of 2023, and a recapitalization of our Brazilian gas transmission business in the first quarter.
Speaker Change: The base business continued to perform well during the year driven by inflation indexation and the contribution from nearly $470 million of capital commissioned into rate base.
Moving onto our transport segment <unk> was $1 2 billion, representing a step change increase of nearly 40% from the prior year.
Speaker Change: This was primarily attributable to the acquisition of our global intermodal logistics company in the third quarter of 2023.
Speaker Change: An incremental 10% stake in our Brazilian integrated rail and logistics operation in the first quarter of this year.
Speaker Change: We generated strong results.
Speaker Change: Crop remaining businesses driven by higher volumes.
Speaker Change: On average tariff increases of 7% across our rail networks and 6% across our portfolio.
Speaker Change: Our midstream segment generated <unk> of $625 million, which on a comparable basis have grown 11% versus the prior year.
Speaker Change: The growth reflects higher volume increases across our midstream asset due to robust customer activity levels, particularly at our north American gas storage business.
When considering the impact of asset sales and foreign exchange. The total <unk> decreased from $684 million in the prior year, primarily related to capital recycling activities at our U S gas pipeline.
Speaker Change: Lastly, <unk> from our data segment was $333 million, representing a 21% increase over the prior year.
Speaker Change: The increase is attributable to strong organic growth and the contribution of several new investments completed over the last 12 months, including three data center platforms and our power portfolio in India.
Speaker Change: Taking a closer look at our data storage numbers, we've invested over $9 billion of capital across three primary three primary digital infrastructure verticals, namely data centers fiber networks and telecom towers.
Speaker Change: Data centers are one of the most significant areas of investment with over $3 6 billion of capital invested in the last six years alone.
Speaker Change: Putting aside our investment in our U S retail co location business, we have approximately $2 $8 billion invested in high growth Global Hyperscale data center platforms.
Speaker Change: The organic growth backlog in these benefit is approximately $1 $4 billion at our share and is anchored by long term availability based contracts with highly credit worthy counterparties.
Speaker Change: As we execute our backlog of growth, we're very focused on maintaining our project level returns, we will not pursue growth at all costs and have maintained our yield on cost on new development.
Speaker Change: We anticipate being able to enhance returns in the years ahead as we execute our strategy to sell fully contracted sites as they are built this will create liquidity to fund future growth as well as crystallized significant developer developer profit.
Speaker Change: Before turning it over to Sam I'd like to briefly touch on the macroeconomic backdrop and the strong positioning of our base business.
Speaker Change: There has been a focus on a change in the government in the U S and the resulting shift in policy, including the timing and magnitude of potential tariffs on foreign imports.
Speaker Change: Simultaneously the U S economy is showing strength in employment levels remained robust.
Speaker Change: Long term interest rates have increased recently and remain at elevated levels as investors temper their expectations around future interest rate cut and anticipate a prolonged period of higher inflation.
Speaker Change: As we've demonstrated we are well positioned to benefit from higher inflation in our business.
Speaker Change: Our businesses provide essential services with regulated or contracted revenue streams, many of which are indexed to inflation.
Speaker Change: During the past three years inflation has contributed meaningfully to our <unk> growth averaging more than a 5% annual compound growth rate.
Today, our business remains highly indexed to inflation, which we expect will continue to drive organic growth into 2025.
Speaker Change: At the same time, we have been proactive in managing our capital structures and mitigating risks relating to interest rates at both the corporate and portfolio company levels.
Speaker Change: We completed over $9 billion of nonrecourse asset level financings during the past year.
Speaker Change: And today, our weighted average debt maturity of eight years of which 90% of our debt is fixed rate debt.
Speaker Change: This strong position not only mitigate the risk but allowed the benefits of inflation to compound in our results with limited impact from rising interest rates.
Speaker Change: But very simply increased revenue from inflation indexation and fixed interest cost equal to greater bottom line cash flow overtime.
Sam Pollock: That concludes my remarks for this morning, and I'll now turn the call over to Sam.
Sam Pollock: Thank you David Thats, great and good morning, everyone.
Speaker Change: For my remarks today, I'm going to discuss our capital recycling initiatives and then conclude with an outlook for the year ahead.
Speaker Change: In 2024, we achieved our targeted $2 billion of capital recycling proceeds and a challenging but improving asset sale environment.
Speaker Change: As we ended the year, we were seeing greater investor interest in high quality infrastructure assets and a larger universe of buyers able to transact.
Speaker Change: This momentum has accelerated into 2025 and I am pleased to announce that we've already secured approximately 200 million and proceeds from asset sales just one month into the new year.
Speaker Change: At our global intermodal logistics operation, we agreed to sell a minority equity interest in a portfolio of fully contracted containers and.
Speaker Change: In total the total we expect to receive over $120 million with closing expected in the first half of 2025.
Speaker Change: This inaugural sale provides the structure and framework for us to further monetize derisked and contracted assets, which will generate meaningful liquidity at attractive returns.
Speaker Change: At our North American Hyperscale data center platform.
Speaker Change: We secured the sale of a noncore site to a technology company.
Speaker Change: Sale of transacted at an attractive capitalization rate and will generate gross proceeds of over $1 billion.
Speaker Change: And crystallized developer profit approximately $350 million.
Speaker Change: Proceeds after debt repayment and transaction costs will be about $400 million, resulting in net proceeds to bip of over $60 million with closing expected later this year.
Speaker Change: We believe the level of asset sale activity, we've experienced so far in 2025 will be indicative of the year ahead.
Speaker Change: We have several advanced transactions that should be signed in the first half of the year and we are very confident in our ability to deliver the $5 6 billion.
Speaker Change: And asset sale proceeds that we've guided to over the next two years.
Speaker Change: Supporting this confidence is the return of buyers for core assets, which many of our mature businesses target from a risk return perspective on exit.
Speaker Change: We've seen this activity firsthand in Brookfield owned Super core infrastructure fund, which has been experiencing an influx of capital at fund raising increased to the highest levels in almost three years at the end of 2024 and this has continued into 2025.
Speaker Change: With respect to the outlook for growth, we feel very positive.
Speaker Change: As David mentioned in his remarks much of our data segments value is not yet reflected in our current financial results given its development focused profile.
Speaker Change: However, as projects come online, we expect them to contribute meaningfully to earnings and drive overall growth in the coming years.
Speaker Change: In terms of new development, we've entered 2025 with a pipeline of early stage capital deployment opportunities as the deepest has been in years.
Speaker Change: Activity levels continue to improve and the need for private capital to invest in critical infrastructure globally continues to rise.
Speaker Change: This creates ample opportunities for large scale, well capitalized global infrastructure owners and operators like us.
Speaker Change: Digitization remains a key driver of our current deal flow with the data sector accounting for over 40% of our anticipated capital deployment.
Speaker Change: We expect growth in this sector to persist outpacing all other areas of our business and positioning it to become our largest sector within five years.
Speaker Change: We are also excited by the deployment opportunities in other segments of our portfolio that are benefiting from digitization, such as our midstream and utility sectors.
Speaker Change: Both of which we expect to be actively deploying capital in the years ahead.
Speaker Change: So that concludes my remarks.
Speaker Change: But before we go into our form of Q&A.
Speaker Change: We thought we would call an audible and have someone from our team addressed the news that came out this week regarding deep seek.
Speaker Change: And so in that regard I would like to.
Speaker Change: Welcome.
Speaker Change: <unk>, Mark <unk>, who is the head of our.
Mark: Telecom business here in North America.
Speaker Change: And I thought I'd just pose a question to them, that's probably on a lot of People's minds, and Rob I guess the simple question is.
Mark: <unk>.
Mark: What happened this week what is the.
Mark: The news regarding deep seek and what what they did.
Mark: And how does that impact our business going forward.
Speaker Change: Great. Thank you Sam and good morning, everyone.
Speaker Change: So as Sam said earlier this week deep seek which is a Chinese based artificial intelligence company.
Speaker Change: The training of our new large language model, which effectively is capable of achieving the same performance of some of the current industry leading models.
Speaker Change: If we kind of take a step back.
Speaker Change: That announcement in of itself is not.
Speaker Change: But the focus is people always thought there was going to be increased competition, but what was interesting about the announcement is that deep sea was able to drive significant optimization and.
Speaker Change: And train its model for only $6 million in less than two months, we will using approximately 2000.
Speaker Change: Older generation Nvidia chips.
Speaker Change: So relative to the approach that's been used historically.
Speaker Change: This was quite novel and.
Speaker Change: Ultimately has raised a number of questions around whether less hardware less servers less power less data centers would be required to kind of propel AI forward and reach artificial general intelligence and ultimately beyond.
Speaker Change: Faced with that uncertainty obviously, the stock market reacted quite quickly.
Speaker Change: And effectively erased hundreds of billions of dollars of market cap value from companies. There are a number of different sectors that benefited from the enthusiasm related to AI.
Speaker Change: And so from our perspective, while this may be true in the short term.
Speaker Change: We never really expected that demand for compute with scale.
Speaker Change: On a straight line basis, our expectation and as we've seen a number of other technologies is that we would always see a level of continuous improvement whether it's at the server hardware level of practice or software and in those improvements would ultimately be offset by new use cases and in most cases more complex use cases, whether it's things like robotics.
Speaker Change: You ultimately more compute.
Speaker Change: You actually have those.
Speaker Change: Robots running so the deep seek announcements from our perspective is really just piece of that improvement puzzle and we expect more advancements to come as we are still very early in the.
Speaker Change: Very early innings of this technology cycle.
Speaker Change: So over the long term I would say our positive outlook Hasnt changed for data center demand growth.
Speaker Change: And we're actually very excited by the prospect of having a more cost effective.
Speaker Change: <unk>, which should accelerate innovation increase overall demand for AI in their applications and ultimately make the technology.
Speaker Change: More widely accessible to everyone.
Speaker Change: So when we kind of dig into our business.
Speaker Change: Don't see any material impacts over the long term.
Speaker Change: With respect to the two most recent data center investments that we made in the U S and Europe, we are actually already surpassed our underwriting expectations in terms of the overall pace of lease up across our existing land bank.
Speaker Change: Our platform benefits from significant contracted growth, which is underpinned by some of the most creditworthy counterparties in the world on their long term availability base contractual frameworks and the next point I think is actually very important we have we took a very purposeful approach and today over 90% of our development are set.
Speaker Change: <unk> homebuilding capacity in tier one data center locations.
Speaker Change: Which are in close proximity to GDP and population centers and therefore afford maximum flexibility as these facilities can support multiple use cases, such as cloud training influences and content given that the benefit from the lowest latency.
Speaker Change: We continue to expect strong data center growth with upside from emerging new use cases and future use cases that are yet to be developed.
Sam Pollock: The capital required to support digitalization is staggering and we will continue to create demand for large scale and flexible capital from infrastructure investors like us and with that I'll hand, the call back to Sam.
Sam Pollock: Okay, well, thanks, Rob and.
Speaker Change: Hopefully that was a good warm up to the Q&A session.
Speaker Change: So operator, maybe I'll turn it back over to you and we'd be pleased to open up the line now for questions.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Sharon Radbourne.
Speaker Change: With TD Cowen.
Speaker Change: Okay.
Speaker Change: Thanks, very much and good morning.
Speaker Change: Maybe sticking with the data steam for a second and thank you for those comments on deep seek.
Speaker Change: We've been hearing anecdotally that development premiums.
Speaker Change: For Hyperscale centers have started to compress to some degree which I guess is not totally surprising given the level of activity. In this sector can you give some perspective on that comment as it relates to your own development backlog.
Speaker Change: Well, maybe I'll start and since we have Rob here, you can always jump in but.
Speaker Change: I <unk>.
Speaker Change: As David alluded to in some of his remarks cherilyn.
Speaker Change: At the moment, we've been quite successful in holding our yield to cost on our projects.
There is two elements to it one is.
Speaker Change: What we can contract that and over the last year and a bit.
Speaker Change: We've seen rates in fact increase.
Speaker Change: And it's been a good market from that perspective.
Speaker Change: <unk>.
Speaker Change: The second component is.
Speaker Change: Our ability to control costs and I'd say for the most part obviously there is always in a large portfolio there'll be some where they don't go entirely according to plan, but I would say on our large projects.
Speaker Change: We've been able to bringing projects in on time on budget and.
Speaker Change: In fact.
Speaker Change: Given we're doing a lot of large campus style projects.
Speaker Change: With the learnings, we have and some of the initial.
Speaker Change: Deployments, we are in fact bring costs down over time so.
Speaker Change: All in all.
Speaker Change: Long winded way of saying.
Speaker Change: <unk> that.
Speaker Change: We're not losing our premiums.
Speaker Change: That's not to say.
Speaker Change: Down the road competition won't tighten things a little bit but today, that's not the case.
Speaker Change: <unk>.
Speaker Change: I would agree I get I think it goes back to our tier one focus where I think a lot of the power bottlenecks have occurred and so there's a premium for that scarcity.
Speaker Change: Cherilyn usually have two questions do you have another one.
Speaker Change: Yes.
Speaker Change: Much more sort of macro.
Speaker Change: With respect to a stronger U S. Dollar just curious whether that impacts where youre seeing the best opportunities to invest for value.
Speaker Change: And likewise does that have an impact on your capital recycling lineup for the year.
Speaker Change: Okay.
Speaker Change: Tackle that one again.
Yes.
Speaker Change: I guess.
Speaker Change: As far as a.
Speaker Change: An initial or direct impact on.
Speaker Change: On where we would invest I would say.
Speaker Change: FX.
Plays directly but it is a sign of capital flows.
Speaker Change: And obviously I think a lot of strength in the U S dollar as a result of.
Speaker Change: Just a huge capital.
Speaker Change: <unk> boom going on in the U S and obviously that drives.
Speaker Change: The need for capital and as a result, we are probably investing more in the U S.
Speaker Change: Historically, we may have just because of that dynamic so.
Speaker Change: It isn't so much of an FX thing but.
Speaker Change: Things are obviously all enter into.
Speaker Change: Interrelated.
Speaker Change: And as it relates to sales.
Speaker Change: Most of our businesses are for the most part hedged to a large degree and so.
Speaker Change: We're not sort of.
Speaker Change: Taking into account FX in determining whether or not a business is ready for sale typically we look at where we are in the business plan and.
Speaker Change: Do we think the.
Speaker Change: Business will attract an attractive value on a local basis. So.
Speaker Change: It gets short answer is no we're not taking that into account.
Speaker Change: That's all from me. Thank you. Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from Devin Dodge with BMO capital markets.
Speaker Change: Yeah. Thanks, Good morning, I Wonder if that was a question on Triton.
Speaker Change: I'm just wondering if you could provide a bit more color.
Speaker Change: On the sales of the minority interest in a portfolio of containers that you talked about in your opening remarks, there Im just trying to get a sense for how much of that.
Speaker Change: How much of the fleet. This includes.
Speaker Change: Is this like a perpetual investments that roll off containers or hand, it back and what that implied equity value translate in terms of implied <unk> yield or some other valuation metrics.
Speaker Change: Okay, Thanks, Devin and <unk>.
Speaker Change: Turns out we have.
Speaker Change: Dave joined here, who.
Speaker Change: Is responsible for that transaction, we havent expect him to speak but since it's a direct question on trade and probably a good win for him to answer so Dave do you want to tackle that one.
Speaker Change: Hey, good morning, Kevin.
Speaker Change: Just with respect to the transaction itself.
Speaker Change: I guess my comment on this is what we have done is we have taken a pool of leased up containers and we've sold out in minority interests in that pool itself, which has standalone financing and the strategy behind all of this is that.
Speaker Change: Triton is a.
Speaker Change: Business that has tremendous unit economics on the deployment of capital.
Speaker Change: But the real magic comes into leasing is that putting them on long term leases for people and I think we've found is that there is a pool of buyers that have interest in buying into a yield oriented vehicle.
Speaker Change: That runs off over time over the life of the containers, which as you might know is sort of on average about 15 years and then in terms of your question around valuation I guess, all I'm, probably at Liberty to say here is that.
Speaker Change: Given the nature of what we saw which is a derisked.
Speaker Change: Long term cash flowing.
Speaker Change: Portfolio.
Speaker Change: This is done at a lower cost of capital than we would have in the market.
Speaker Change: And David makes up about 10% of the portfolio.
Speaker Change: Net to the business basis is about 6% 6%.
Speaker Change: Okay. Okay. Thanks.
Speaker Change: Thanks, a lot good good color there.
Speaker Change: And then just second question, just maybe sticking with capital recycling again.
Speaker Change: You guys were talking about.
Speaker Change: The sale of one noncore data center being sold but can you just provide a bit of a broader update on the self funding model for your data center platform in what form thats likely to take.
Devin Dodge: Yes, Hi, Devin.
Devin Dodge: Yes, I would expect there'll be a lot more.
Devin Dodge: News.
Devin Dodge: In the next couple of quarters regarding.
Devin Dodge: Our capital recycling program for the data centers.
Devin Dodge: Ongoing exercise as new facilities.
Devin Dodge: Come on stream we.
Devin Dodge: We do have a program of <unk>.
Devin Dodge: Setting up our stabilized pool.
Devin Dodge: Pools of data centers, and bringing in institutional investors to invest in those stabilized assets and so we have I think we are pretty advanced in both the north American and European pool of assets and we hope to have news for you in our share of shareholders in the coming quarters on our success.
Devin Dodge: In that regard.
Speaker Change: Okay excellent. Thank you I'll turn it over okay. Thanks, Kevin.
Speaker Change: Our next.
Speaker Change: Western comes from Maurice Choy with RBC capital markets.
Maurice Choy: Thank you and good morning, maybe sticking with the capital recycling theme I think you mentioned that data center is positioned to be the largest sector within five years by ethical transport is currently our largest sector being about three to four times larger than data.
Maurice Choy: If you've already mentioned that you've got good growth for new capital.
Maurice Choy: But theres also self funding a recycling program for data so.
Maurice Choy: Should we think about transport is being <unk>.
Maurice Choy: Yeah, a large part of your medium term asset sales.
Maurice Choy: So what about transport trends are you seeing that motivates the strategy.
Mary: Hi, Mary.
Mary: That's a good question I guess.
Mary:
Mary: There's lots of moving parts, there, though that I think maybe that might be adding to some of the confusion I think the.
Mary: The first thing is.
Mary: Sure.
Mary: Yes.
Speaker Change: The data sector its not all data centers. So in the data center component of it we are probably managing.
Speaker Change: The total capital and that component, but it will still grow it even though we're recycling I would still expect it to grow but we're investing in.
Speaker Change: Lots of other areas of the.
Speaker Change: Data sector.
Speaker Change: Complex, whether it be towers.
Speaker Change: Fiber optic systems.
Speaker Change: And does.
Speaker Change: We will continue to grow and don't have the same.
Speaker Change: Capital recycling profile that the Datacenters do.
Speaker Change: In relation to the.
Speaker Change: The divestiture of our.
Speaker Change: Transport assets.
Speaker Change: There is no real.
Speaker Change: The pace of divestiture that.
Speaker Change: Different than any other sector, it's all driven by where they are in their lifecycle.
Speaker Change: And.
Speaker Change: Sure.
Speaker Change: And.
Speaker Change: And whether or not we think we can get the appropriate value for them and.
Speaker Change: There are probably a few.
Speaker Change: For assets that we've held for a long period of time that.
Speaker Change: Are probably coming up for sale, but that's not indicative of any view that we have regarding transportation or our ability and desire to invest in new transportation assets. We will always have a diversified pool of investments across all our sectors.
Speaker Change: And there'll be periods of time when.
Speaker Change: We will deploy more in one sector than other I think all we want to do.
Speaker Change: In our comments.
Speaker Change: <unk>.
Speaker Change: Earlier was just to highlight that today our deal flow is more centered around the digitalization theme.
Speaker Change: Thus.
Speaker Change: Those sectors that are impacted by that theme, which is obviously the data sector as well as the midstream sector.
Speaker Change: Is probably where you'll see most of the capital in the near term goal.
Speaker Change: Hopefully that clarifies.
Speaker Change: Our comments, yes, absolutely.
Speaker Change: And just to finish off.
I Couldnt help it to notice a relatively favorable update.
Speaker Change: The midstream segment loss for having new G&P expansions under take or pay you got additional pipeline connections to pipelines. So can I just get your take on how you think your thesis for these two businesses are playing out.
Speaker Change: Some of the initiatives, we should be watching out for this year such as the NBC connector.
Speaker Change: Great Mark.
Speaker Change: We're pleased to talk about that and in fact, I'm going to pass it over to <unk> to talk a bit about.
Speaker Change: Our enthusiasm for what's going on in that sector.
Speaker Change: Alright, thanks for the question.
Speaker Change: You mentioned the <unk> connector.
Speaker Change: That's one great opportunity that we have in the western.
Speaker Change: Canadian region with our assets, but it's only one of many and really what we're what we're seeing.
Speaker Change: Across the board in Western Canada, as our fleet of assets.
Being in becoming fully utilized and then the market calling on us to expand our capacity and so we have about $1 billion of backlog of projects today, we see another potential for $2 billion to $3 billion of very attractive.
Speaker Change: Growth projects and with the current sentiment of needing more of that energy.
Speaker Change: Excited about the projects they're generally.
Speaker Change: Very straight forward in nature.
Speaker Change: I would describe them as relatively.
Speaker Change: Bite sized given the size of the overall assets and relatively low risk in terms of their execution. So we just have a lot of additional projects to provide our clients with access to our either processing systems or our transportation networks and so in general the connectors one of <unk>.
Speaker Change: Many projects and we see.
Speaker Change: This is part of our midstream growth wedge for the coming years as being pretty strong.
Ben: And maybe just to add to that Ben.
Speaker Change: I guess, we would say.
Speaker Change: Pretty much all brownfield expansions.
Speaker Change: <unk>, two pipelines or expanding plants and the build multiples.
Speaker Change: For these expansions are very very attractive and thats, probably what gets us really excited.
Speaker Change: Particularly.
Speaker Change: Given that many of them are contracted out of the gate.
Speaker Change: So maybe I'll leave it there, but hopefully that gives you a sense of why we are very enthusiastic about the midstream sector at the moment.
Speaker Change: No that's great. Thank you very much for the commentary.
Speaker Change: Our next question comes from Robert Hope with Scotiabank.
Speaker Change: Good morning, everyone.
Speaker Change: Wanted to circle back on the data center commentary.
Speaker Change: Can you speak about the data sector accounting for about 40% of the anticipated capital deployment.
Speaker Change: Wanted to ask some clarification there is that 40% of the expected deal flow that you expect to see over the next let's say coming years and then when you take a look at your organic backlog would that be kind of secondary to that just given the fact that you do have.
Speaker Change: Quite a lot of wood to chop there as well.
Speaker Change: Yeah look I can if Dave here Hi, Rob.
Speaker Change: So on the first point I think what we're referring to on the 40% was our pipeline today is highly comprise.
The investment opportunity in the digital space. So that's currently what we see.
Speaker Change: <unk>.
Speaker Change: Ahead of us for the near term.
Speaker Change: Youre right. In addition, the other thing worth highlighting is we have highlighted in previous calls that our backlog is at a record level of nearly $8 billion over the next three years and if you were to look at web factor that primarily driven by it going to be over 70% in the data side as well and Thats that Sam alluded to not just data centers, but also.
Speaker Change: Our partnership on the foundry side as well as the build out.
Speaker Change: <unk> and build to suit towers in Germany, and France. So I'd say, it's broad based and that will continue to drive our positive outlook for the organic growth profile, rather than the EBIT new deployments. So those two together are what give us the belief that data will continue to be an increasing increasingly meaningful part of our business.
Speaker Change: Alright.
Speaker Change: Thanks for that and then maybe just going back to kind of maurice's comments or questions regarding data center data being the largest sector in five years.
Speaker Change: Transport does have a $900 million of asphalt so head start here. So back of the envelope math doesn't imply significant amount of capital that's kind of not in the backlog to get there.
Speaker Change: Can you maybe just help us frame the roadmap of how data gets the largest contributor to cash flow.
Robert: Yes, Hi, Robert.
Speaker Change: I think the short answer is there is.
Speaker Change: New investments and divestitures so youll.
Speaker Change: It's kind of a general directional comment from our part but.
Speaker Change: How you get there is some assets will be sold that will reduce that and then.
Speaker Change: Youll have just more investments on the data side and obviously, we may be wrong.
Speaker Change: Where it ends up it was.
Speaker Change: But it was just to give a sense of.
Speaker Change: Direction, where we think things are going.
Speaker Change: Alright, thank you.
Speaker Change: Our next question comes from Robert <unk> with CIBC capital markets.
Speaker Change: Hey, good morning, everyone I just wanted to go back to the.
Comments again.
Speaker Change: First of all thank you for addressing the deep Sea news right at the front.
Speaker Change: But I take it from your comments that.
Okay.
Speaker Change: There is still rather bullish on the on the outlook for for data in general data centers as well.
Speaker Change: I was just wondering how this week's news may influence your approach to making new investments in data for example.
Speaker Change: Will you shift your your.
Speaker Change: Your investment a bit to some of the other verticals that you mentioned like the towers.
Speaker Change: And then if not how are you going to manage your commercial approach to.
Speaker Change: Data centers to mitigate any emerging risk that you might see from the D C.
Speaker Change: <unk>.
Speaker Change: Yes, hi.
Speaker Change: Hi, Rob Thanks for that for that question and.
Speaker Change: I guess I would.
Speaker Change: Make two comments in that regard first.
Speaker Change: We.
Speaker Change: When we evaluate any new opportunities.
Speaker Change: It's always on a risk adjusted basis, and so to extent that.
Speaker Change: We can buy towers at a better risk adjusted return than than new investments into data centers, and we will do that and we always have done that and that will continue to be our.
Speaker Change: Playbook going forward.
Speaker Change: As it relates to managing.
Speaker Change: Our.
Development activities with our existing platforms in data centers.
Speaker Change: We.
Speaker Change: We don't really build anything.
Speaker Change: <unk> of a particular size on spec, there's always nuances to what I. Just said there we do need to buy land and we control the amount of land that we have in inventory at any one moment in time, so that we're not overexposed to slowdowns in leasing activity.
Speaker Change: And obviously, we try to mitigate that by giving them options on land and things like that.
Speaker Change: And then.
Speaker Change: The.
Speaker Change: The extent, we think it makes sense to to improve the land a little bit too.
Speaker Change: Speed up the delivery.
Speaker Change: For clients when they can.
Speaker Change: <unk> Commission it.
Speaker Change: Again, we manage how much capital we ever have that risk in that regard so.
Speaker Change: There is.
Speaker Change: A lot of analysis that goes on with that but suffice it to say.
Speaker Change: Our overall.
Speaker Change: <unk> is building.
Speaker Change: New facilities with contracts in hand, and with certainty around.
Speaker Change: Commercial applications, and we don't really do things on spec.
Speaker Change: With with all of those nuances that I mentioned there.
Speaker Change: Rob anything you want.
Speaker Change: Okay.
Speaker Change: Hopefully it looks great.
Speaker Change: Absolutely. Thank you and thanks again for addressing this issue right upfront in an open manner.
Speaker Change: So my next question is do you have a comment on the unit holder letter about interest rates and investor sentiment impacting the price towards the end of last year.
Speaker Change: And at the same time, we have a very strong organic backlog. So it makes me wonder what's that background. What your current view might be on unit price repurchases before.
Speaker Change: Making new investments in the current environment, particularly.
Speaker Change: Maybe there is some uncertainty and some things like deep seek or the change in U S Presidential administration.
Speaker Change: Yes, sure it's David good to hear thanks.
Speaker Change: Thanks, Rob I think where youre getting it and happy to.
Speaker Change: Is around just in our capital allocation approach and whether we see it more attractive to be buying units rather than deploy capital on and I think as you would've seen in our later in her on this call we feel pretty pretty good about the investment environment, it's quite balanced.
Speaker Change: Excited about be the pace of our asset sale program, but also believe that those proceeds.
Speaker Change: You can find really attractive investment opportunities to compound returns over long periods of time, so as we've said in the past.
Speaker Change: We are going to affect the relative risk adjusted returns on buying units back depending on the price and the investment pipeline, we have in front of us at any given time. So today I think we're in a good position as you would've seen in our letter.
Speaker Change: Okay. Thanks, everyone.
Speaker Change: Okay. Thank you.
Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one one on your Touchtone phone.
Speaker Change: Our next question comes from Frederic Bastien with Raymond James.
Speaker Change: Okay.
Speaker Change: Good morning, guys. So one platform, we haven't talked much about is utilities.
Speaker Change: And it's conspicuously absent from your recycling efforts.
Speaker Change: So far this year, so I'm sure, it's simply a function of timing but.
Speaker Change: Hoping you can provide a bit of color here.
Brett: Hey, Brett.
Brett: Yes, I guess.
Brett: You probably.
Brett: Answered your own question there.
Brett: We.
Brett: For the most part our larger utilities.
Brett: Have significant growth ahead of them and so we're not looking to monetize them at this point in time.
Brett: There is though.
Brett: A number of businesses that.
Brett: Either we have in that sector, which we have sold like loss from bonus.
Brett: Which is more recent and then.
Brett: We've telegraphed that we'd be looking to monetize a portion of our Brazilian.
Brett: Electricity transmission business in the coming years as well and so there always is that maybe it's not as meaningful as some of the other sectors.
Brett: Maybe we don't.
Brett: Talk about them enough.
Brett: They've been great investments for us our returns on loss from owners or over 20% our returns.
Brett: U S dollar for the.
Brett: Brazilian transmission business will be well into the twenty's in local currency as well in the <unk> and so.
Brett: Yes.
Speaker Change: You are right to point out that we probably should.
Speaker Change: Mentioned those assets more than the success we have so.
Speaker Change: Looking for new opportunities in utilities, and we will be monetizing some of the existing assets.
Speaker Change: As they.
Speaker Change: Mature.
Speaker Change: Thanks, Tom that's helpful.
Speaker Change: I'm wondering also.
Speaker Change: Maybe it hasnt been asked directly but is this new U S administration positive.
For your business.
Speaker Change: Hi.
So without.
Speaker Change: They are taking any.
Speaker Change: Any views one way or another from a political.
Perspective.
Speaker Change: Look I think.
Speaker Change: We view as positive any.
Speaker Change: Steps that reduce.
Speaker Change: Regulatory burden and encourage growth and I think we've seen a lot of positive steps being taken in that regard.
Speaker Change: I think as an infrastructure owner of those can only be helpful to our business.
Speaker Change: We can't comment on all the other.
Speaker Change: The things that might go on tariffs or whatnot, that's more complicated.
I don't think tariffs.
Speaker Change: No.
Speaker Change: Will affect us in a direct way.
Speaker Change: Negatively obviously it does have impacts that we need to manage from a capex perspective might impact some of our clients, which could have a longer term impact, but obviously inflation if it has a.
Speaker Change: Uptick on inflation, that's good for us as well so.
Speaker Change: Look I'll kind of leave it at that any reduction in regulatory burden and increase in growth is good for us and at the moment that seems to be the direction that the new administration is taking.
Speaker Change: That's very good color. Thanks, so much.
Speaker Change: Our next question comes from Ryan Levine with Citi.
Ryan Levine: Hi, everybody.
Ryan Levine: In terms of the recent announcement around Stargate in Abilene, Texas, given your strategic position in that region can you speak to the impact to both data and data center development that it may have for Brookfield.
Ryan Levine: Sure.
Ryan Levine: Obviously, it's.
Ryan Levine: It's all very new and.
Ryan Levine: And the good news is.
Ryan Levine: We are in discussions with all the different stakeholders related to two stargate on many different levels.
Ryan Levine: So we're close to what those people are doing and I think we will have a role to play in and any major developments in the U S in that regard.
Ryan Levine: But.
Ryan Levine: Sure.
Speaker Change: It's kind of at the macro level on the micro level of what it means to any of our existing investments today, Rob maybe you can address that but yeah.
Ryan Levine: Yes sure.
Rob: I think the impact is limited for us in the Texas market.
Rob: We have one large campus.
Rob: But 360 megawatts gets fully leased and under construction. So it's going to be leased on a 15 year basis.
Rob: So we don't think that necessarily has implications to what we have today.
Rob: Obviously, theres lots of land development being being pursued across the country and again I think.
Rob: From our perspective, we.
Rob: Targeted the tier one data center markets and we're seeing great demand, where again, we see a lot of scarcity of power.
Rob: And if we decide to look at other markets, we will be focused on ensuring we get the right contractual protections.
Speaker Change: Thanks, and then in terms of the uncertainty surrounding deep sea.
Rob: Demand for infrastructure.
Rob: Does that give you pause around developing new assets and you mentioned <unk>.
Rob: <unk> pipeline is tied to that opportunity.
Rob: Are you expecting to see a slowdown in that deal flow.
Or pace of those transactions.
Rob: So at a high level across all of our data center platforms were largely.
Rob:
Rob: Sold out from a development and capacity perspective over the next three or four years. So we don't see a slowdown in terms of our own build out and then I think as Sam alluded to earlier in the call.
Rob: We obviously have been very selective in terms of our land banking approach and we've taken a call. It like a ladder approach, where we're buying land at different stages of development that we think will.
Rob: Tied to when that capacity will be required, but ultimately speaking I mean, we don't have a ton of excess land bank today and so we can do.
Rob: Throttle up and down how much land, we want to buy and develop it. So in the short term, we don't see any impacts to our business and long term as I said in my remarks earlier I think we're very bullish on on bringing the cost of.
Rob: AI applications down and I think that will just drive more demand for the product which will.
Rob: Ultimately take training or inferencing to actually be able to deliver to the customer and so we think there may be bumps along the way in the short to medium term to long term, we're bullish in terms of the compute requirement.
Rob: And look I would say too.
Rob: As Rob mentioned.
Speaker Change: Growth isn't going to be linear for for data centers, but.
Speaker Change: We expect growth to remain robust what we have is the leading developers in pretty much every market in the world in the U S. We have campus, which is one of the best and we think if not the best developer data for in Europe.
<unk> down in South America, and then we got.
Speaker Change: Smaller, but growing businesses in Asia, and so to extent that there is going to be.
Speaker Change: Data other data center development, we're going to get our market share because the large technology companies are going to want to use the best developers and added on top of that is our relationship with our renewable power group, which is helping source.
Speaker Change: New renewable sites in a market that's quite constrained and so the Brookdale complex has obviously the best ingredients of any group to play a big role in Digitization.
Speaker Change: No.
Speaker Change: Yes, let me get that advertising out there but.
Speaker Change: Nothing has really changed as far as.
Speaker Change: Our views and the opportunity ahead.
Speaker Change: Okay and then just last question just to clarify in terms of the contractual protections that were just highlighted.
Speaker Change: Do you feel comfortable that if demand for load is materially less than what the industry is forecasting you have legal.
Speaker Change: <unk> two to de risk the opportunity for investors and other stakeholders.
Speaker Change: Yes, we do.
Speaker Change: Can I, just take or pay contracts yes.
Speaker Change: Big thing is we don't have terms in our contracts where people can can't support convenience that that is probably the the biggest risk some.
Speaker Change: Developers might have as they might agree to some of those terms, we do not agree to those terms.
Speaker Change: Alright, thank you.
Speaker Change: That concludes today's question and answer session I would like to turn the call back to Sam Pollock for closing remarks.
Speaker Change: Alright.
Sam Pollock: Listen thank you very much for.
Sam Pollock: For helping us with the call and we'd like to thank everyone, who joined US. This morning, we hope it's Ben.
Sam Pollock: Sure.
Sam Pollock: Useful for everyone, particularly on the deep seek conversation and.
Sam Pollock: And we just again reiterate that we've had a great start to the year and look forward to providing our first quarter results at the end of April.
Sam Pollock: Goodbye.
Sam Pollock: This concludes today's conference call. Thank you for participating you may now disconnect.
Sam Pollock: Yeah.
Sam Pollock: Okay.
Sam Pollock: [music].
Sam Pollock: Okay.
Sam Pollock: Yes.