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spk01: Good day, and thank you for sitting by. Welcome to the Brookfield Infrastructure Partners LP fourth quarter 2021 results conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, David Krant, Chief Financial Officer, please go ahead.
spk05: Thank you, Shannon, and good morning, everyone. Thank you all for joining us for Brookfield Infrastructure Partners' fourth quarter earnings conference call for 2021. As introduced, my name is David Krant, and I'm the Chief Financial Officer at Brookfield Infrastructure Partners. Joining me today is Sam Pollack, our Chief Executive Officer, and Ben Vaughn, our Chief Operating Officer. Following our remarks, we look forward to taking your questions. At this time, I'd like to remind you that in responding to risks, and future results may differ materially. For further information on known risk factors, I would encourage you to review our annual report on Form 20F, which is available on our website. Furthermore, the monetization of several mature businesses at strong valuations has generated significant liquidity to fund our growth initiatives at a low cost of capital. Consequently, Brookfield Infrastructure is well positioned to continue its growth trajectory in the years ahead. We are pleased to announce that as a result of our strong financial In addition to this distribution increase, our business achieved many other milestones over the past year, including solid performance across all of our operating segments, resulting in organic growth of 9%, deploying over $3 billion into growth initiatives, including the acquisition of InterPipeline, or IPL, and a $13 billion privatization, securing half of 2022's capital deployment through the two Australian utility acquisitions, generating $2 billion in proceeds from the completion of four sale processes, and finally raising almost $3 billion in capital markets, ensuring strong liquidity levels. Now switching from accomplishments to our results for the year. We reported FFO, or funds from operations, of $1.7 billion, or $3.64 per unit, a notable annual increase of 19% and 15% on a total FFO and per unit basis, respectively. We ended the year on a very strong note, generating fourth quarter FFO per unit of 97 cents, which exceeded the prior year by 13% and reflects a payout ratio of 68%. Results were supported by strong growth from our base business, the full recovery from shutdown-related effects experienced in 2020, and the significant contribution from over $3 billion deployed in growth initiatives. Organic growth for the year has been taking a closer look at our operating performance by segment. In addition to acquiring a leading German residential infrastructure business earlier in the year, in December we acquired a 60% interest in the second largest independent residential heating installer in the UK. At our existing operation in North America, we completed three follow-on acquisitions in the fourth quarter. Most notable is the acquisition of a residential solar installation and battery storage solutions provider with operations in seven of the U.S. states. This strategic transaction strengthened At our Brazilian electricity transmission lines, we recently exercised an option to acquire our drug manager's 50% interest in 900 kilometers of operational lines. This increases the portfolio of lines that we own to approximately 2,400 kilometers. With construction of the initial set of lines now complete, the scalable platform has been significantly de-risked, leading us to launch a sales process Moving on to our transport segments, FFO was 700 across most product groups. Due to the essential nature of the business, we've been able to protect our margins across each of our operations by reflecting inflationary cost pressures in our tariffs. At our diversified terminal operations, performance in the current environment continues to be robust, including record FFO during the fourth quarter. Results have benefited from a number of positive tailwinds, including improved volumes, higher tariffs and congestion surcharges, as well as inflation pass-through reflected in rates. Specifically, at our U.S. LNG export terminal, we continue to benefit from strong global demand and high LNG prices due to increasing exports to China and low storage levels, particularly in Europe. This favorable backdrop has facilitated the contracting of excess capacity under multi-year agreements at attractive rates. Additionally, construction of a sixth liquefaction train is progressing ahead of schedule, and substantial completion is expected to be achieved in the first quarter of 2022. FFO for the in 2021. In October, we successfully completed the privatization of IPL, a high-quality Canadian midstream platform providing critical long-term infrastructure. As a reminder, approximately 80% of the business is contracted, with the majority of our activities secured under long-term cost-of-service arrangements with investment-grade counterparties, where we take no commodity or volume exposure. The balance of the business has benefited from strong commodity price mid-2022 startup. The data segment recorded FFO of $238 million in 2021, an increase of 21%. Results reflect the demand for the country's major MNOs. Furthermore, the business connected fiber to almost 50,000 new homes, the strongest quarter on record. We continued to gain momentum with the expansion of our global data storage platform and reached several important milestones during the quarter. First, we In India and Europe, we have been successful in the early stages of our land bank strategy to drive organic data center developments. As central banks now turn to policy normalization to combat rising rates, our corporate and asset-level balance sheets are significantly de-risked. We have only modest maturities over the next several years. In fact, it's less than 10% over the next 24 months, once removing normal course amortization. Additionally, approximately 90% of our term debt, excluding local currency debt in Brazil, is fixed rate, with a remaining term across our business of 8%. alone, we raise your secured commitment. first quarter. Now, these activities resulted in us ending the year with total liquidity in excess of $5 billion, of which $3.7 billion resides at the corporate level. Following the completion of the two secured Australian utility investments, which Sam will discuss momentarily, pro forma liquidity at the corporate level is approximately $3 billion. This provides us with significant capacity to fund incremental new investment opportunities and their securities. Thank you all for your time this morning. I'll now pass the call over to Sam.
spk02: Okay, thank you, David. And good morning, everyone. On today's call, I'm going to begin with a few comments on the current macroeconomic environment and its impact on our business. I'll then discuss some of the strategic initiatives we have underway and then conclude the call with our outlook for the year ahead. Now, central banks around the world are signaling a transition to tightening monetary policy to control rising prices. we thought it was a good opportunity to outline how inflation and rising interest rates may impact our business. All else equal, this economic environment is generally favorable for stable infrastructure businesses like ours. Before exploring the tailwinds and potential risks associated with elevated inflation and higher interest rates, we thought we should first caveat the underlying assumptions that frame that outlook. The prevailing inflationary environment, we think, is a product of many factors, including pandemic-induced supply chain disruptions, fiscal stimulus, and labor shortages. In addition, though, the influences of deglobalization and what some refer to as green inflation are expected to contribute to longer-term inflation. Given all these factors, we do not expect current inflation levels to be transitory, i.e., just to last this one year. as a number of factors will likely lead to a period of persistent inflation. However, we also don't anticipate a return to the excessive and long-lasting inflation that occurred back in the 1970s. Accordingly, this current period of elevated inflation should ultimately stabilize in the next few years as the Federal Reserve and other central banks raise interest rates and shrink their balance sheets. Assuming our time horizon for inflation stabilization is not significantly off, this will result in a gradual but hopefully not dramatic rise in interest rates over the next few years. We think this view is consistent with many forecasts that show U.S. 10-year treasuries reaching about 3% over this period. Although higher than the last few years, these expected levels are low in the historical context and can provide an accommodating market environment for highly contracted and well-capitalized businesses like ours. Now, with this forecast in mind, we foresee elevated short-term inflation acting as a tailwind for our business, as a significant portion of our business has inflation indexation. Now, while we may not be fully inflated from rising costs, our inflation-linked revenues in high-margin businesses should largely inflate the impact. Today, Approximately 70% of our revenues are adjusted by local inflation indices. This benefit will largely impact our utilities, transport, and data investments, where between 80% to 90% of revenues are contractually indexed inflation. Together with a largely fixed cost structure and prudent cost management strategies, the compounding impact of inflationary revenue increases should drive operating leverage across our high-margin critical infrastructure. The economic impact from inflation is not without its consequences, namely higher interest rates. Fortunately, our direct interest rate exposure to near-term movements is minimal and effectively mitigated, as David talked about. We've always employed a conservative approach to financing our business through long-dated maturities and mostly fixed-rate pricing. In addition, we have actively extended maturities and optionistically secured long-term fixed-rate debt to take advantage of of the low interest rate environment we just went through. In summary, our expectations for continued high levels of inflation for the next few years to be countered with modest increased interest rates, which will result in a net-net positive environment for our business. Now, shifting to the investment activity for the quarter, pleased to report that we've secured two attractive utility investments, representing, as David mentioned earlier, approximately 50% of our deployment target for this year, up to 2022. This includes AusNet, which is a portfolio of high-quality utility businesses in Victoria, Australia, that provides electricity and gas transmission and distribution services across various critical networks. The closing of our investment is on track after having received shareholder approval last week, and is expected to occur in mid-February. We are excited to own a highly coveted, perpetual regulated utility franchise that is well positioned to participate in the decarbonization of Victoria's economy to meet its legislated 2050 net zero target. VIP expects to invest approximately $500 million. Then in December, we agreed to acquire a 50% interest in TeleHub, a leading provider of electricity smart meters in Australia and New Zealand. Total equity for the investment is approximately $870 million, with BIP's share being approximately $215 million. The business has 1.2 million meters, leased and contractual relationships with energy retailers that cover 99% of the consumer market. This is an asset class that we are familiar with, as we held a smart meter portfolio within our UK regulated distribution business for many years. we believe that point of consumption metering will continue to be an essential component of the electricity network with digitalization and decarbonization goals accelerating the deployment of smart meters in the region. We expect to complete this transaction in late Q1. Now I'll conclude my remarks with a few comments regarding our outlook for the market and for Brookfield infrastructure. Notwithstanding the tailwinds for our business, As we've seen in recent weeks, expectations of quantitative tightening and a rising interest rate environment have caused significant stock market volatility. This volatility has been most pronounced as it relates to the technology sector, where we've seen a large pullback in valuations to start the year. Now, although our unit price will undoubtedly move with broader market sentiment, we believe the underlying value of our privately owned infrastructure assets will be much less impacted. Private buyers of infrastructure assets, especially those for high-quality de-risk essential infrastructure, take a longer-term view and are less influenced by short-term economic conditions or sentiment. Like most, the last two years posed many challenges both for our people and our businesses. Although we are proud of the accomplishments of the last year, we are feeling equally optimistic about the year ahead. We are pursuing opportunities to execute our full cycle investment strategy, having identified several mature businesses that can be monetized at strong valuations. We've already secured half of our $1.5 billion annual deployment target, and these transactions are expected to close in the coming weeks. So we have a high degree of confidence regarding achieving the balance of our deployment target based on the pipeline of advanced opportunities our global teams are pursuing. and we have strong liquidity that provides us the ability to pursue and fund these new investments and meet our target returns. Now, that concludes my remarks. I'll now pass it back to the operator to open the line for Q&A.
spk01: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the button key. Please stand by while we compile the Q&A roster. Our first question comes from Sherilyn Radborn with PE Securities. Your line is open.
spk06: Thanks very much and good morning. In terms of the expected net tailwind from inflation, I was hoping you can give us a feel for the level of local inflation that you're experiencing around the world in early 2022 and where you think that will ultimately settle out, which I take it based on your letter may be at a higher level than what we've become used to.
spk02: Hi, Cheryl. Maybe I'll start, and Dave or Ben, maybe you can jump in to add more color. Look, there's varying levels of inflation around the world. The highest levels have been in South America, and we've seen the benefit of those come through our gas transmission business and toll roads, and those are in the high single digits. And in the case of our gas transmission business, we actually had double-digit inflation run through that business because it also reflected the effects of currency. In other parts of the world, Europe, North America, the impacts aren't quite as pronounced. They tend to be sort of anywhere between three to seven percent, let's say. But I think one of the things you should take into account is that there is a bit of a lag to when we receive the full impact of these indexations. A lot of the contracts have basically a year delay before we see the impact. So I think a lot of the benefits of the indexation are actually still in the future. We've seen some roll in this year. They tend to happen at different points in time, but I think the full benefit actually will probably come later this year or next year, in fact. As far as Asia, I can't really say what the numbers would be there, but I don't really have anything to add, Dave. Yeah, I think if you look at Asia, because
spk05: all of us.
spk06: Perfect. That's helpful color. And then it sounds like you've got a good head start on your 2022 capital deployment target, but maybe you can give us a bit more color on your deal pipeline, just including the areas of emphasis by segment and geography.
spk02: Sure. I'll tackle that one, Charlotte. The I'd say the pipeline is actually quite robust at the moment with opportunities in all regions and in all sectors. And I'd say that's been the case for the past year or so. We've seen sort of a broad-based recovery. And so, you know, there's The usual, it's called secular movements from data where there's just a huge capital deployment going on, so we are seeing opportunities across towers and fiber optic systems. Transportation is probably the one area where we've seen increase in activity over the last year, both as relates to airports as well as roads and then as it relates to midstream there remains we think some interesting opportunities we have seen a recovery in some of the valuations of midstream assets with the rising commodity prices but I think we'll see a number of opportunities surface there as this sector becomes underinvested due to ESG winds. And then we continue to look for opportunities in the utility sector that can benefit from the decarbonization and electrification of the grid around the world. And as far as If I had to say, probably most of our deal pipeline is in North America and Europe, but we do have a couple of opportunities in other markets, such as South America as well as the Middle East.
spk06: Very helpful.
spk01: Thank you for the time.
spk02: Thank you.
spk01: Our next question comes from with RVC Capital Markets. Your line is open.
spk03: Good morning. Thinking about your outlook for the business, the results, and expectation for M&A activity, can you just frame all of that against the decision to increase the distribution by 6%?
spk05: We are operating in a good period with strong macroeconomic tailwinds. So that's certainly favorable. The other things that we consider, obviously, are the capital needs within our business. We do have the largest backlog in our history today. We have a number of exciting projects that we're funding as well. And that factors in, obviously, to our liquidity levels, which is the second main consideration. And thirdly is the payout ratio. I think having that return to the high end of our target range is an important consideration.
spk03: And just in terms of, you know, framing that against prior years, you know, by all accounts, it certainly sounds like you're very, you know, optimistic and at the more optimistic end is where you've been in prior years. Is there a concerted effort then to be a little bit more conservative, you know, to pay out ratio and liquidity? Was that kind of starting to be a little bit more conservative than you would have been previously?
spk02: No, I think maybe you're trying to read too much into the increase. I think we take a longer term approach when we look at dividend increases. So some years we might be higher than people expect because the outlook's maybe not as robust and other years maybe it's not as high given the enthusiasm we have for the business. I think And what we came up with was, as David mentioned, sort of a balance, taking a longer-term approach of where we see the world, our capital needs, as well as where we want to be from a payout ratio perspective. And we were probably a little higher on the payout ratio the last couple of years, and we want to get back to the level where we've generally operated throughout our inception, since inception. I think we're now back in that zone. We feel good about that. And in the coming years, if we continue to overperform, then maybe we'll come out with higher dividend increases.
spk03: Got it. If I can just finish these questions on Interpipeline. Just now that you've had some more time with the assets, just some overall thoughts on what you've got, anything that's surprised you positively or negatively, and then anything you can give us on – what you might like to do with the commodity-exposed NGL assets, including Heartland?
spk02: Maybe I'll start with just some general impressions, and then I'll turn it over to Ben, maybe just give an update on the business and how we see the commissioning of Heartland going. First off, I think as far as the investment, we feel very good today where we sit with both the investment thesis and timing around the transaction. We are benefiting currently by a very strong commodity environment that's helping our customers and helping us with some of the... merchant-related component of our revenue streams. So those are all great components or initial results from the acquisition. We went into this knowing that we would have to execute very quickly a re-energization, I'll say, of the operations, both from We're well on our way in achieving that. We've done this before, and we're confident we can put in place the right culture in the business. There are lots of good people within the company that we think will embrace it, and we're optimistic about the business going forward. I'll pause there and maybe ask Ben just to talk a little bit about you know, Heartland and other parts of the business.
spk04: Yeah. Hi, Robert. It's Ben here. You know, on Heartland, I think as we outlined in the note, you know, the central utility hub is now complete and commissioned. So, you know, on-site, all of the mechanical works are complete, and we're into a commissioning phase. Organical risks are behind us. On commissioning, we have very detailed plans to commission the assets and demobilize on the site over time in line with our plans. We had our own expectations when we underwrote the asset. for Heartland.
spk03: That's great. And just quickly on Heartland, just wondering what not significant means to you. I don't know if that's percentage-wise in terms of the capital cost statement that you just put out with respect to Heartland CapEx.
spk04: Sorry, Robert. I don't know exactly what you're referring to. But as I said, for the plans that we had on underwriting, we've had no material surprises either in terms of time or budget, or bring the plant online in the timeframe that we had planned, which, as I said, was towards the end of Q2, early Q3. So just no surprise.
spk03: Okay, got it. Yeah, it's just a statement that Interpipeline had in a press release. Presumably you would have blessed that. But, okay, that's great. Thanks for the call.
spk04: All right, thanks.
spk01: Next question comes from Robert Cattelier with CIVC. It's open.
spk09: Hi, good morning. I just want to start with the inflation. You've been very clear about your views on inflation, including in today's release and your comments, but perhaps there's less consensus in the marketplace. So I'm curious about the businesses where you don't have inflationary increases embedded in your contracts or indexed. How successful have you been in securing price increases?
spk05: If we look at our segments, and as we highlight in ours, generally in our midstream businesses where you don't have that contractual escalation, but I'd say the benefit of what we've seen in our business today is that these pipelines or gathering and processing facilities are all pretty much fully utilized come up in those other businesses.
spk09: Okay, thanks for that. And my second question has to do with Entercare. It looks like you've accomplished a lot so far, adding a number of new product lines and geographies. So just curious about future growth. How much more room is there to increase the product lines in that portfolio versus geographic expansion? And what type of other product lines do you envision adding maybe one way to address the, uh, the growth of that vehicle is, you know, what level of capital, uh, are you expecting to deploy on talking acquisitions and as you continue to build platform value there?
spk02: Uh, so maybe I'll, uh, I'll take that one. Um, so, you know, just to, to, to recap, you know, we, um, When we bought Enercare, effectively the business was primarily a Canadian business. They had bought a business in the U.S. and started expansion. So geographically it was largely Canadian, small position in the U.S., selling a lot of years and getting into HVAC, so two products. What we've done and our playbook that we've been executing and copying as much as we can from BUK and other businesses that we have is taking what we've been successful at here in Ontario and in Canada and applying that to other regions. So we've now expanded to Europe and we now operate in in the UK and Germany, and our goal would be to have businesses all across Europe. In addition to that, our market share in the U.S. is single-digit, and so the ability to expand across different states and to grow in that market is quite substantial. It's a highly fragmented market environment. And so the geographic opportunity is substantial still. We're nowhere near a level that we'd say is saturated. And then we've increased the breadth of products now by adding both solar product as well as the generators. And so that takes advantage of the distribution capabilities that we have. So we've got the four products. I'd say today we don't have another product that's in the R&D stage yet, but I think we will hopefully find another one. Geographically, we're looking to expand within both Europe and the U.S. We are looking at taking the model to our utility business down in South America in Columbia. So that's a further expansion of the business model. And as far as what that means in capital, I would say we've done it on both a capital light and capital heavy basis. Most of the investments so far have been quite modest from a dollar perspective, but they do require capital. When we expand using the dealer model, that's a capital light approach where we've entered into relationships with other parties where we can buy their rental streams based on a predefined criteria. And we'll look to execute that in all the different regions. And to the extent that there is a large business opportunity to tack on to this, given the success we've had and what we think is a much larger opportunity, we'll look at that as well. So today, all the different investments in our pipeline are relatively small from a BIP perspective, but we are looking for some large tuck-ins that could really step change this business as well.
spk09: Yeah, that's very helpful, Connor. Thank you very much.
spk01: Our next question comes from Frederick Bastien with Raymond James. Your line is open.
spk10: Good morning, guys. You've done a good job deploying capital into high-return assets over time, and you've been generally agnostic about the end markets that these assets fall under. But I recall you targeting a long-term FFO mix that was sort of evenly distributed across your four operating platforms. At least that's what you're you're shooting for. That leaves data as the one business that seems to be still subscale despite the nice growth we've seen in recent years. Can you comment on your ambitions for that particular segment and whether those long-term goals are still valid?
spk02: Hi, Fred. Thanks for the question. Look, I think the... Our expectation would be that given the amount of deal flow that we see in the data sector that over time its scale within our business will get to a spot where it's at least on par and maybe down the road, who knows, maybe exceed some other segments within our business. I think part of the fact is we have been in the other segments for a long time and so have a lot of historical investments within the midstream and transportation and utility sectors. It just will take some time before we see that shift that reflects the emergence of data as an infrastructure sector. As we look at our pipeline for the last couple of years, data has always been sort of a significant component of it, and it's an area we're focused on. The only caveat that limits our ability to grow it quicker is the fact that there is a fair amount of competition for these assets. And we are value investors, so we need to pick our spots where we can earn the right risk-adjusted returns. So we will look to summarize. We are looking to grow it. We will grow it. But we're not going to do it in a way that damages our overall returns in the business.
spk10: No, understood. And just as a follow-up, does this platform offer – similarly attractive organic growth opportunities than the other ones, or is this growth going to be achieved predominantly through acquisition?
spk02: Well, we're doing it both ways. As you know, we've set up various development platforms as relates to data centers pretty much around the world. We have it in South America, Europe now, Asia as well as India. So we have four distinct development businesses as it relates to data centers. That's a big focus for us. But I think equally important will be an M&A strategy to buy some additional cash-flowing businesses ever optic business where we can execute an overbuilt strategy and upgrade a network.
spk10: Great. Thanks, Sam. Appreciate it.
spk02: Thank you very much.
spk01: Our next question comes from Devin Dodge with BMO Capital Markets. Your line is open.
spk12: All right. Thanks. So I wanted to get your thoughts on capital deployment in Latin America. You know, we've seen no political shift in some countries. I think Brazil has elections later this year. And if the polls are right, I think we could see a change there as well. Just how do these situations, you know, influence your decision making around capital deployment in the region? And have you seen any noticeable shift in the willingness of, say, others to invest in those countries?
spk02: Look, that's a very timely question because there has been a lot of changes from a political perspective just in the last year in the region. There's been a pretty dramatic shift to the left and that has caused some uncertainty and obviously where there exists uncertainty that tends to reduce investor appetite. I would say from our own perspective, we have taken a probably more cautious approach to the region over the last couple of years. Our businesses, having said that, our businesses for the most part have operated without any significant issues from a political perspective. and they're operating pretty well. So even though there has been change in governments, we haven't seen any real negative impact on our operations. So that's a positive. And so that gives us a confidence to consider new opportunities in the region. But having said that, I think how we've changed our approach is we are looking for businesses where we can reduce the FX exposure. Some of our businesses, even though they've operated really well, have been negatively impacted by volatility FX. So to the extent that we can buy more USD denominated businesses in the region, that's definitely a focus for us. And I think we're also focused on more B2B businesses where, you know, risk of, you know, populous actions because you're selling a service or a good to a consumer is taken out of the equation. That tends to be, in these moments of time, you know, your biggest risk in those regions. So I'd say that's our focus of our strategy. We still have a few things that we're looking at in the region, so hopefully we'll add to our businesses. We are recycling other businesses in the region as well, so on a net-net basis I doubt it will grow, but we still remain relatively positive.
spk12: Okay, thanks for that. My next question is on your NatGas storage business. 2021, we can all agree, is a pretty atypical year. I think Rock Point was a big beneficiary of some supply disruptions. And then I think the pattern of gas prices for the year is a bit different than typical seasonal patterns. It seems like there could be a tough setup for Rock Point from an earnings growth perspective, but can you frame what you expect this, do you expect this to be like a small headwind in 2022 or maybe something a bit more meaningful?
spk02: Maybe I'll add to that is, as David said, there was a great result earlier in the year and being able to replicate that may be difficult. But having said that, I think the thesis around the assets and the services it provides has probably not looked better in the last 8 to 10 years. I think, you know, what we're going into is a period of significant commodity price volatility and this business, you know, captures intrinsic and extrinsic spreads and, you know, many of those when, you know, Gas was flowing, you know, very strong in the U.S. and investment in the upstream sector was very robust. It took away a lot of those spreads. But today, you know, there is a – and we think it will continue to be sort of a reduction in investment in production. And as a result, we are going to see more periods where you have scarcity and higher prices. And that's great for this business because our customers need to remember that they should buy insurance and protect themselves against the volatility in prices. And this business provides that type of service.
spk12: Thanks. That's helpful context. I'll turn it over. Thank you.
spk01: Thank you. Our next question comes from with IA Capital Markets. Your line is open.
spk11: Good morning. Just had one question. You've successfully deployed $3 billion of equity capital last year. You already have for three years 2022 targets. You sort of raised equity at the end of last year to pre-fund new growth in what sounds like a very healthy M&A pipeline. I guess in this context, how do you position yourself or what would need to happen for you to exceed your 1.5 billion a year equity capital deployment objective?
spk02: So look, today, for us to exceed that target, we need to be successful in converting Our pipeline last year, we were very successful in one large transaction. I think as we mentioned at the outset, our pipeline is very strong. 1.5 is an amount that we have been able to deploy on a regular basis, so it's really a... not an absolute number. We don't set out to hit that number per se. It's just our sense of what we think is a regular run rate growth deployment level. And today, if the capital markets stay constructive and if, in fact, if there's a little bit of a pullback in certain sectors that help us get more comfortable from a valuation perspective, then you know, it's very possible we could, again, have another outsized year from a deployment perspective. But at this stage, other than the fact that we have already secured half of our deployment, which positions us well, you know, we're just early in the new year, that would be the only factor today that would give us confidence for sure that we can do better. But I think at this stage we're still – signaling that our annual deployment target is 1.5, and we haven't moved off of that yet.
spk11: Okay. Thanks for that. That's all from me.
spk01: Our next question comes from Hope with Scotiabank. Your line is open.
spk13: Morning, everyone. Rob Hope from Scotiabank. Just a follow-up question. Just regarding the opportunities you're seeing on the data side, we have seen public market valuations pull back a little bit here over the last month. you know, is that providing you some opportunities there, or has that not been quite enough, or it's been too little amount of time, or are the data opportunities you're seeing more on targets and kind of things where you've seen more of the opportunities historically?
spk02: Yeah, hi, Rob. I'd say it's – the pullback has been, you know, too short, you know, At this stage, to draw any views from a market perspective of what we could do, I think most of what we're focused on today is related to carve-outs. To the extent that the market stays lower for longer, then I think that does open up some take-private opportunities, but it needs to stay down for longer. at least some period of time before people's views are reset from an expectation of value.
spk04: Thank you.
spk01: Our next question comes from Pat Kinney with National Bank Financial. Your line is open.
spk08: Thank you. Good morning, guys. Just to circle back on the IPL business, any update on discussions with TC Energy and Pemina to participate in the Alberta Carbon Grid Initiative? I'm just curious when we might get a little bit more color on potentially joining this partnership or if you decide not to, perhaps moving forward with any other sequestration or decarbonization opportunities within the IPL portfolio.
spk04: Yeah, Patrick, it's Ben here. You know, we have a number of, you know, initiatives that we're in the early stages of looking at on the topic of carbon across all of our midstream assets, but I don't really have any specific comments on specific commercial or other discussions with direct counterparties at this point, but it is a topic that, you know, is a focus for the group right now.
spk08: Okay, so just in terms of timeframe, you know, first half of year decision or, you know, could this leak into 2023 and still be assessing the Alberta carbon grid?
spk04: It's very hard to pick a top line, Patrick. I,
spk08: things at this point fair enough and then we saw a small Alberta gas storage transaction in the quarter so I'm just curious to get an update on how your Alberta hub is performing right now relative to say recent years and I guess also if you view these assets as a long-term strategic fit and within your midstream portfolio or maybe more as a candidate for asset recycling, similar to, say, the European storage business?
spk02: Patrick, maybe I'll tackle that one. As far as the operations of the businesses, we've not seen, I'd say, As much strength in the Canadian operations as we have in the U.S. operations, we have definitely seen much more stronger contractual pricing and interest in our California business, for instance. But we do think that the Canadian business is an exceptional business, and we'll see improved pricing going forward. As far as where it fits, look, at some point in the future, it is probably a business that we will sell. It's not because we don't like it, but at some point we will have done all we can to improve and de-risk the business, and it will make sense to monetize. But we haven't picked a time frame for when we would do that.
spk08: Okay, that's great. I appreciate the color. Thanks.
spk00: Okay, thank you.
spk01: Our last question comes from Andrew Key with Credit Police. Your line is open.
spk07: Thanks. I guess a big picture question on your thematic investing, and you guys have historically been very long-term investors in how you think about things and try to pick your spots. But maybe if we could just sort of address some of the big themes around maybe water stress on a global scale. I mean, you've dabbled in the space a little bit, but nothing overly significant. Is that a function of government control, the returns, or just opportunities lacking? And then maybe that morphs into a broader question on just social infrastructure, whether it be health care, education, all that kind of stuff.
spk02: Sorry, Andrew. Can you just sort of restate that question? I didn't quite grasp it.
spk07: yet so i can you just on on the thematic investing you know what to what degree are you really trying to poke around on some of the bigger things around whether it's water stress or social infrastructure are they of interest to you because they're big capital opportunities in certain parts of the world or is it an area that's not of interest is too much government control or returns or or insufficient for you relative to other things yeah uh...
spk02: I understand the question. I would say today we are spending a lot of time on those areas, whether it's healthcare or social infrastructure. The challenge is framing an actionable opportunity is difficult and time-consuming, and we just don't have them in front of us. I think where we are spending a lot of time is really around the data telecom complex and finding new ways to help that sector recapitalize and fund the huge amount of capital that they have in front of them. We're also looking, I'd say, another sector that we are also thinking about is the air product sector, which today has been quite concentrated with a few large players, but there's opportunities around the world where they don't have quite as, you know, the strong market presence and where we may find a way to get into the business because we see it as an interesting opportunity. industry to explore. But as far as the social and healthcare, today we don't have initiatives underway.
spk07: Okay, that's very helpful. And then maybe just in the context of your broader portfolio allocation, does the model that you've got with the flagship funds and then the core, super core, core plus, whatever we want to call them, Is that sort of helpful in your ability to be maybe more creative on actually securing transactions into the future?
spk02: Look, absolutely. So the fact that we can go into any conversation with a counterparty and be able to discuss transactions credit or low-cost income structured equity investments or just a full control transaction gives us the full playbook. It's very powerful. The fact that each one of our capital pools is large scale and with lots of buyer power, I think It gives us one of the most unique franchises out there. So, yes, it is helpful.
spk07: Okay. That's great. Thank you very much.
spk01: Thank you. We are out of time for questions. I would now like to turn the call over to CEO Sam Pollack for closing remarks.
spk02: Okay. Thank you, Operator. And, look, we appreciate all the interest we had today on the call. We had a lot of questions. and we appreciate everyone who joined us to listen in. We hope you enjoy the rest of the winter and look forward to speaking to you again next quarter. Thank you very much.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
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