Brookfield Infrastructure Partners LP

Hello, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners second quarter 2023 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 11 on your telephone. You will then hear an automated message stating that your hand has been raised. To lower your hand, press star 11 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Chief Financial Officer David Krantz.

Thank you, operator, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' second quarter 2023 earnings conference call. As introduced, my name is David Krantz, and I am the Chief Financial Officer of Brookfield Infrastructure. I'm joined today by our Chief Executive Officer, Sam Pollack, and Uday Mathialagan, a Managing Director and CEO of our Global Data Center platform. Uday is joining our call from Mexico, so if we encounter any technical difficulties, we also have Ben Vaughan with us in the room today. I'll begin with the discussion of our second quarter financial and operating results, as well as our liquidity position and the recent success of our capital recycling initiatives. I'll then turn the call over to Uday, who will expand upon one of the three Ds driving investment opportunities, digitalization, through the lens of our global data center operations. Finally, Sam will provide an update on our strategic initiatives and an outlook for our business. At this time, I would like to remind you that in our remarks today, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on our known risk factors, I would encourage you to review our annual report on Form 20F, which is available on our website. Beginning with our financial and operating results, we generated funds from operations, or FFO, of $552 million during the second quarter, an increase of 8% over the comparable period last year. Results were supported by the contribution of approximately $2.1 billion of capital deployed in new acquisitions over the past year, partially offset by the impact of asset sales and borrowing costs associated with financing these new investments. Organic growth was near the high end of our target 6% to 9% range, reflecting the benefit of elevated inflation on tariff increases and the commissioning of approximately $1 billion in new capital projects during the last 12 months. Partially offsetting the strong underlying performance of our business was the normalization of market-sensitive revenues as the prior year benefited from elevated commodity prices. Starting with our segments, in the utility segment we generated FFO of $224 million, an increase of 19% from the same period last year. Organic growth for utilities was 10%, reflecting the continued benefit of elevated inflation indexation and the commissioning of approximately $500 million of capital into our rate base during the last 12 months. Current quarter results also benefited from the expansion of our residential decarbonization infrastructure platform in North America and Europe, following the acquisition of HomeServe in January of this year. FFO for the transport segment was $199 million, an increase of 5% from the prior year, once excluding our U.S. container terminal that was divested in the second quarter of last year. Results continue to benefit from inflation-linked rate increases across our global portfolio. Compared to the prior period last year, our global toll road portfolio increased rates by 10%, and our rail networks passed through increases of 8%. volumes have remained resilient, with traffic levels increasing 2% across our portfolio of roads, and our rail volumes were consistent with the prior year. Partially offsetting the strong operational results of our road and rail assets was a 1% reduction in port volumes and the normalization of commodity prices that provided an outsized contribution at our US LNG export terminal in the prior year. The midstream segment generated FFO of $161 million, a modest decrease compared with the prior year. Strong performance across our base business from increased utilization and higher contracted cash flows was offset by softer results at our Canadian diversified midstream business. Results were impacted by the normalization of market-sensitive revenues and the delay in meaningful contribution from the Heartland Petrochemical Complex, which underwent repairs and was offline for much of the quarter. During July, we successfully completed the restart and ramp-up of the complex, which is currently achieving high operating rates. Heartland is anticipated to partially contribute to results during the third quarter, while the fourth quarter is expected to provide a full contribution. Lastly, FFO for the data segment was $72 million, an increase of 20% from the same period last year. The current quarter reflects the benefit of the acquisition of a European telecom tower operation in February, as well as a contribution from our Australian fibre business acquired in August of last year. In addition to the strong financial and operational results I've described, our business is also well positioned to execute its financing plans with access to capital strong and a very robust liquidity position. We ended the second quarter with $2.3 billion in corporate liquidity, which was supported by the significant progress achieved in our capital recycling initiatives. To date in this calendar year, we have secured $1.9 billion of asset sale proceeds, of which $1.4 billion has already been closed. Most notably during the quarter, we secured and closed the sale of our 50% interest in our New Zealand integrated data distribution business to our existing joint venture partner for net to bid proceeds of approximately $275 million. When combined with the sale of the tower assets last year, We generated a US dollar IRR of 31%, which represented a 2.6 times multiple of our capital over the four-year hold period. We also secured and closed the partial sale of a US gas pipeline to one of our existing partners for approximately $420 million. This implied an 18% IRR and a 2.8 times multiple of our capital since the recapitalization of the business in 2015. Finally, we secured the sale of a portion of our financial asset portfolio and our 8% interest in our Australian regulated utility for total proceeds of approximately $840 million. Approximately $380 million has been received during the year and with the remainder scheduled to close later this month. With our capital recycling objectives largely achieved, our organizational focus has shifted to the integration of our newly acquired businesses and the execution of their respective business plans. This includes the development of our global data center platform, which Uday will discuss next. I would like to thank everyone for their time this morning, and I will now pass the call over to him.

Thank you, David, and good morning, everyone. I'm pleased to be joining today's call to discuss the digitalization investment theme and the exponential need for data storage. Digitalization has been a strong tailwind driving our recent investment activity. It refers to large-scale capital that is required to support exponential increases in data consumption. We typically invest in several core data-focused areas, including fiber, telecom towers, indoor wireless systems, and data centers. The data storage and processing industry in particular is benefiting from sector-tailed wins, including the rise of generative artificial intelligence, which is transforming industries by automating complex tasks and advanced analytics. We're also experiencing an exponential surge in data storage and processing requirements from enterprises migrating workloads and applications from on premises to the cloud, as well as the widespread adoption of new use cases such as 5G technology. These trends are amplifying demand for robust, well-located, and scalable data infrastructure, including data centers. This year, we capitalized on these tailwinds and have significantly expanded our data center operations. We secured the acquisitions of two development platforms, Data4 and Compass, which meaningfully contribute to our operating capacity and expand our presence in Europe and North America, respectively. In fact, following the closing of both transactions, we will own and operate one of the largest global hyperscale data center platforms. Our operating capacity will increase to over 485 megawatts with an additional 775 megawatts of capacity already contracted and reserved that will be built out over the next several years. Combined, we expect to have over 1.25 gigawatts of capacity over the next few years that is highly contracted to provide stable cash flow and is underpinned by major hyperscale customers. These customers are of strong credit quality and represent industry-leading companies that are at the forefront of technological advancement such as artificial intelligence. We believe our size, scale, and global portfolio will prove to be a competitive advantage going forward. Our operating footprint is across five continents, which can give our hyperscale customers a highly flexible and consistent offering in multiple geographies. These relationships will also provide critical and real-time information on the global market that should provide us with a competitive edge. Another differentiator for our data center offering is the ability to leverage Brookfield's ecosystem to provide a turnkey solution that includes renewable power connectivity and adjacent real estate development. Our near term focus is on the execution of a large scale and high growth business plan. The high degree of contracted capacity provides multi-year visibility to secure access to critical equipment, reliable labor and priority procurement with the pricing benefits of development at scale. We also expect to benefit from our modular and repeatable bill design, as well as our permitted power-ready and owned land bank for all of our development plans. Additionally, to further support our customers' growth ambitions, we have an existing land bank in prime markets that has the potential to increase our total capacity to over two gigawatts. That concludes my remarks for this morning, and I will now pass the call over to Sam.