Brookfield Infrastructure Partners LP

ladies and gentlemen, and welcome to the Brookfield Infrastructure Partners first quarter 2020 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require operator assistance, please press star, then zero on your touchtone telephone. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Bahir Manios. You may begin.

Thank you, Operator, and good morning, everyone. I hope you are all keeping well, and thank you for joining us for Brookfield Infrastructure Partners' first quarter earnings conference call for 2020. On the call with me today is Sam Pollock, our Chief Executive Officer, and Ben Vaughan, our Chief Operating Officer. Following our remarks, we look forward to taking your questions and comments. At this time, I'd like to remind you that in responding to questions and in talking about our growth initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on our known risk factors, I would encourage you to review our annual report on Form 20F, which is available on our website. So I'll be kicking off the call today with a review of our operating results and a quick update on our balance sheet and funding plan. After my remarks, Ben will provide some commentary on the impact of the COVID pandemic, and Sam will wrap up by providing an update on our recent strategic initiatives and provide an outlook for the rest of the year. So results for the quarter reflect organic growth and incremental earnings associated with our asset rotation strategy. On a per unit basis, FFO was 77 cents, which is equivalent to 86 cents prior to our unit split, which was in line with our prior year levels. And to be clear, there is no change in our dividend. We understand that some people may misinterpret these numbers differently, so we just thought we would clarify that on the call today. SSO growth was primarily driven by organic growth of 6% and earnings associated with $1.6 billion of capital deployed during the past year. These positive factors were partially offset by the sale of four businesses, some impacts related to the COVID situation and the depreciation of foreign currencies. Virus-related impacts were primarily experienced at our port and toll road operations. affecting results by $10 million, while the lower Brazilian real reduced results by $17 million. FFO from our utility segment totaled $146 million compared to $137 million in the prior year. The segment delivered organic growth of 8%, reflecting the robust nature of our contracted and regulated cash flows in this segment. This increase reflects inflation indexation and $310 million of capital commission into our rate base over the past 12 months. Results also benefited from the first full quarter contribution of our North American regulated natural gas transmission business acquired in October 2019. These increases were partly offset by the sale of our Colombian regulated electricity distribution operation, and the lower Brazilian real converted to U.S. dollars, which lowered our results by $9 million. Our transport segment delivered FFO of $120 million, down from $139 million in the prior year. Compared to the first quarter of 2019, results reflect the initial contribution from our North American rail operation, as well as good pricing across our rail and road networks. These positive impacts were more than offset by the loss of earnings associated with the sale of a European ports business and an interest in our Chilean toll road operation. When combined with the impact of a lower Brazilian real when converted to US dollars, these factors collectively reduced results by $18 million. Our North American and Australian container terminal operations were impacted by lower trade activity from China in the first quarter due to COVID-19. reducing volumes by 13% and FFO by 5 million relative to 2019 levels. The energy segment contributed FFO of 115 million compared to 107 million in the prior year. Results increased by 12% on a same store basis, excluding the contribution from our gas storage operations, which as a result of timing and weather, earned higher spreads and stored greater volumes in the first quarter of last year. Our North American residential infrastructure business benefited from the signing of 50,000 new customers and the ongoing success of our sales to rental strategy in the U.S. We closed the acquisition of the federally regulated portion of our Western Canadian midstream business in December 2019. with these operations fully contributing to results in the quarter. From our data infrastructure segment, FFO there totaled $42 million and an increase of almost 50% relative to the prior year. Our underlying business continues to perform well, with FFO from our French Tower operation increasing due to inflation indexation and new points of presence added to our network. Results also benefited from the contribution of our newly acquired data transmission and distribution operations in New Zealand and the United Kingdom and a data storage business in South America. Turning now to our balance sheet and liquidity position and starting off, it's worth highlighting that maintaining a disciplined and consistent approach to financing at both the corporate and asset level through the market cycles is the only way to be prepared for unexpected market downturns. We implement prudent, non-recourse financings at our business while maintaining a focus on liquidity and access to capital. We also take an active approach to managing our debt maturity profile. Throughout the extended period of strong credit markets over the past five years, we proactively refinance debt across our portfolio to extend our maturity profile and to minimize exposure to capital market disruptions. Excluding amortization payments and ordinary course working capital facility renewals, we have only 10% of our debt maturing in the next three years. So our maturity profile is very well laddered, and we're in great shape as a consequence of that. Our liquidity position is very strong as well, allowing us not only to support our our operating businesses, but also to opportunistically pursue new investments. We currently have approximately $4.3 billion of total liquidity, including $3.3 billion of that at the corporate level. We completed two financing transactions in April, which added approximately $1.3 billion to our resources. That included a $400 million bond issuance and the addition of of an incremental $1 billion to our revolving credit facility that can be used to fund new investment opportunities. Before I turn the call over to Ben, I wanted to spend a few minutes discussing the resiliency of our business, as it is a topic that we appreciate many investors are focused on during and following economic downturns. I'll start off by saying that trying to predict future results is always a precarious thing to do, especially during times that are truly unprecedented. However, we do now have a few months of experience operating through this new environment, which we now can reflect on. When we measure the resiliency of our business, we begin with our utilities, energy, and data infrastructure operations, which contribute roughly about 70% to 75% of our annual FFO. On a local currency basis, nearly all these businesses continue to perform in line with budget. The stability and sustainability of these results reflect the regulated and capacity-based contractual frameworks of these operations. While a few of our assets in these segments have moderate exposure to market-sensitive revenues, the impact to our overall results is expected to be less than 2% annually, even in a scenario where COVID has a prolonged effect. The only other variable that may affect results is the timing of commissioning of our backlog of secured growth due to construction slowdowns or stoppages. As an example, the pace of construction at our UK regulated distribution business slowed significantly in April as a national construction shutdown was implemented across the UK and home builders suspended operations. While home construction is recommencing in May, activity levels may remain depressed for the balance of the year due to social distancing protocols. The impact on our 2020 results is expected to be less than 3%. More important, though, the potential decrease in FFO would only reflect a delay in the recognition of accounting revenue and not a permanent loss of cash flow's or economic value as this backlog will eventually be added to our rate base. Approximately 30% of our annual FFO comes from our transport segment, which includes rail ports and toll roads. This is the segment where we have the most exposure to GDP-sensitive volumes. Our rail assets would generate approximately 50% of the FFO in our transport segment, has proven very resilient in this current environment and ran on budget in the first quarter. So far in April, rail volumes in aggregate are approximately 3% below planned levels. Our rail networks carry predominantly basic bulk goods, such as iron ore, agricultural and pulp and paper inputs and finished goods. Our exposure to intermodal traffic, which has been more impacted by reduced trade flows, is relatively low. Our port assets are predominantly container terminals. We experienced volume declines of approximately 15% in the first quarter. Our port volumes started to rebound early in the second quarter as production from China came back online, but it's still running approximately 10% blow plan today, due to the general decline in economic activity. Overall, our port volumes have been relatively robust, as our assets are predominantly in the UK, Australia and California, where the goods we move are critical to the basic functioning of these economies. Our toll roads have been the most impacted from a volume perspective, with traffic declines of approximately 40% across our portfolio. These positives here The positive here is that in most jurisdictions where we operate, regulators have acknowledged that the current conditions qualify as a force majeure event, which positions us for the possibility of being kept whole on a value basis via either direct compensation or extension of the duration of our concessions. In conclusion, we believe that the reduction in near-term FFO due to the economic impact of COVID is temporary and that the long-term run rate earnings capacity for overall business is for the most part unaffected. Furthermore, while our distribution payout ratio will likely exceed our target levels for the balance of the year, our distributions remain covered by operating cash flows. We also have ample liquidity and no near-term refinancing requirements of any consequence, providing us the flexibility to pursue new investments. And so with that, I thank you for your time this morning, and I'll turn the call over to Ben.

Thanks, Behir, and good morning, everyone. Today I'll provide a summary of our key operating priorities as we navigate through the current environment. But just before I talk about priorities, I just wanted to highlight that our management team has had experience operating through numerous periods of market dislocation and uncertainty in the past. And while the distinguishing factors of this downturn were the suddenness and the extent of the economic contraction, we know it is important to always be prepared for challenges and therefore all of our businesses maintain robust and detailed business continuity plans. And these plans have served us well as we've maintained 100% asset availability to date through this period. Our key areas of focus during the current environment have been, first, the health and safety of our people, second, maintaining asset availability, third, monitoring counterparties, and fourth, revising our business plans with a focus on maintaining cash flows and strong liquidity. So in terms of health and safety, we focused on ensuring our employees are following appropriate social distancing and where possible working remotely. We've implemented a number of revised business processes to protect frontline employees with a strong focus on protective equipment, including masks, gloves, sanitizer, and implementing additional controls to ensure that all interactions can be done in a safe manner. Given the broad scope of our operations, We have had some incidents of COVID-19 illness across the group, but the numbers have been very modest and we've been able to avoid any larger concentrated outbreaks amongst our operating teams. In terms of asset availability, as I mentioned before, we've maintained 100% availability throughout this period. We quickly mobilized in the January-February timeframe to ensure that all of our businesses were formally qualified as critical infrastructure in the jurisdictions in which we operate, and we were granted this status across all assets. This provides us with the right to maintain operations and labour mobility even under severe lockdown scenarios. We also implemented plans to assess our critical inventories of supplies and supply chains to ensure that we were mitigating risk beyond just our own asset base. While we've had no availability issues to date, as Bahir mentioned a minute ago, we have had delays in certain growth projects due to construction restrictions, mostly at our last mile connections business in the UK and our fiber to the home network build outs in France. But I'm pleased to report that as of very early May, Construction activity in these jurisdictions has slowly begun to methodically restart. In terms of counterparties, we've had no issues across the group to date. Our counterparties largely consist of either strong corporate counterparties that remain financially healthy or our revenues are socialized across diversified rate bases or bases of clients. So receiving payments has not been a major issue so far. And then the last area of focus has been on revising plans for each of our companies to ensure that any impacts from the economic contraction are well understood. In instances where we have experienced some revenue declines, we have reduced costs and revised the timing of certain capital projects where possible to ensure that cash flows remain strong and AFFO levels are maintained to the greatest extent possible. The last comment I'll make is we're very proud that our businesses have risen to the occasion in tough times. In addition to keeping operations up, many of our companies have made important contributions to the local communities in which we operate. We're making a concerted effort across our various offices and portfolio companies to donate funds, time, essential equipment, and supplies to support communities and first responders. For example, in North America, our Western Canadian midstream business is contributing to a number of local causes, including donating equipment such as portable generators to indigenous communities to generate electricity. In the Asia Pacific region, our New Zealand data distribution business has provided mobile connectivity to an isolation center that was used to quarantine people who returned to New Zealand from Asia. We also removed data limits on home broadband while reducing prices for data plans and provided charging stations at local hospitals to benefit frontline health workers. And in emerging markets such as India and Brazil, our businesses have undertaken programs to distribute food and personal protective equipment and have donated funds to support public health initiatives and various community projects. So with that, thank you for your time this morning, and I'll now turn the call over to Sam.