Brookfield Infrastructure Partners LP

Good day and thank you for standing by. Welcome to the Brookfield Infrastructure Partners second quarter 2024 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to David Krant, Chief Financial Officer. Please go ahead.

Thank you, Liz, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' second quarter 2024 earnings conference call. As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure. I'm joined today by our Chief Executive Officer, Sam Pollack, and our Chief Operating Officer, Ben Vaughn. I'll begin the call today with a summary of our second quarter 2024 financial and operating results, followed by a discussion of our recent capital markets activities. I'll then turn the call over to Sam, who will provide an update on our strategic initiatives before concluding with an outlook for the business. At this time, I would like to remind you that in our remarks today, we may make forward-looking statements. These statements are subject to known and unknown risks and future results may differ materially. For further information on known and known risk factors, I would encourage you to review our annual report on Form 20F, which is available on our website. During the second quarter, Brookfield infrastructure generates strong financial and operating results, while also advancing our strategic initiatives. For the three months ended June 30th, 2024, we generated funds from operations or FFO of $608 million, an increase of 10% over the prior year period. The current quarter benefited from organic growth that was at the midpoint of our target range, as well as recent acquisitions that significantly contributed to results. This included a continuation of the strong performance at our global intermodal logistics operation, higher contributions from our increased stake in a Brazilian integrated rail and logistics provider, and three data center platform investments. These positive drivers were partially offset by the impact of capital recycling, higher interest costs, and the impact of foreign exchange. Looking at our results by operating segment, starting with utilities, we generated FFO of $180 million compared to $224 million in the same period last year. The decline is due to capital recycling activity, including the sale of our interest in an Australian regulated utility business and additional interest costs associated with the financing completed at our Brazilian regulated gas transmission business during the first quarter. After removing these impacts, the base business grew organically as a result of inflation indexation and the contribution associated with $450 million of capital commissioned into the rate base over the last 12 months. Moving to our transport segment, FFO was $319 million, representing a 60% increase over the same period in the prior year. The increase is primarily attributable to our acquisition of a global intermodal logistics operation, which continues to perform ahead of expectations. as well as the incremental stake in our Brazilian integrated rail and logistics operation that delivered strong performance this quarter as tariffs increased by more than 15%. The remaining businesses also performed well, achieving organic growth of 9%, which was primarily driven by inflationary tariff increases across the portfolio. Our midstream segment generated FFO of $143 million, which is ahead of the prior year after excluding the impact of capital recycling. Strong demand and customer activity levels continue to benefit results, most prevalent at our North American gas storage business, where we continue to add contract duration at higher rates compared to prior years. The unprecedented growth in North American power demand has created further opportunities for our critical midstream assets. During the quarter, our business has capitalized on this favorable market environment by securing several accretive commercial agreements and bolt-on capital projects to meet growing customer demand. Lastly, FFO from our data segment was $78 million, representing an 8% increase over the same period last year. This result reflects the contribution from recently completed acquisitions, including the purchase of 40 retail co-location sites and two marquee hyperscale data center platforms. Across our global data center platform overall, we continue to see strong momentum in leasing activity on the tail of artificial intelligent investment and our customers' need for more processing and storage capacity. Moving on from our financial and operating performance, I would now like to highlight some of our recent capital markets activity. In addition to replenishing our investment pipeline and progressing our asset sale plans, which Sam will speak to soon, our primary focus this quarter was capitalizing on very attractive debt capital markets to further de-risk our asset level balance sheets. Within our businesses, we completed approximately $5 billion of non-recourse financings during the quarter, and our activity can be broadly bucketed into three categories. The first category is right-sizing capital structures. As our businesses grow their underlying cash flows, we can raise additional debt while preserving the existing capital structure. In the last nine months, we have generated approximately $1.4 billion of proceeds, of which $1.1 billion reflects capital recycling activity. This is in specific instances where we are within 24 months of an expected sale, and the new capital structure allows us to reduce the equity required by a future buyer and pull forward future sale proceeds. The second category is maturity extensions. We have proactively refinanced $3.4 billion in maturities occurring over the next several years. Across these transactions, the combined average rate increase was only 50 basis points. The benefit of pushing out maturities greatly outweighs the modest increase in financing costs, which is also more than offset by the inflationary revenue increases we've experienced over the last several years. A great example of where we were able to achieve a term extension at an attractive price was at our Western Canadian natural gas gathering and processing operation. In July, we completed a $720 million eight-year bond issuance with the proceeds used to repay a 2026 maturity. The newly issued bonds allowed us to fully de-risk the maturity profile and extend the average duration of debt outstanding by two years. In addition, the new bonds were priced very competitively at a coupon in line with the debt being refinanced. The third and final category is opportunistic repricing. We took advantage of the strong spread environment and completed approximately $1 billion of loan repricings across three of our businesses during the second quarter. These activities reduce our cost of financing by over $7 million annually net to BIP. These repricing transactions are a unique feature of the floating rate loan market and allow the issuer to reduce the credit spread of a previously issued loan while keeping the existing capital structure in place. Our balance sheet position was strong to begin the year and has been further bolstered by this activity. Over the next 12 months, only 1% of our asset level debt is maturing and we have no corporate maturities until 2027. In addition, we maintain significant corporate liquidity of $1.9 billion and remain well positioned to support growth initiatives. That concludes my remarks for this morning. I'll now turn the call over to Sam.

Thank you, David, and good morning, everyone. For my remarks today, I'm going to provide an update on our strategic initiatives, and then I'll conclude with a business outlook. In relation to our strategic initiatives, both public and private infrastructure deal flow has been a little slower to start the year. However, one of the benefits of our business is that we have many avenues to deploy capital. In periods where large scale M&A activity is lower, we focus heavily on tuck-in and organic growth opportunities embedded in our portfolio. In 2024 alone, we secured or completed seven follow-on acquisitions comprising nearly $4 billion of enterprise value. Most significantly, We were able to complete the acquisition of 40 data center sites due to previous owners mismanaging their capital structure and ending up in bankruptcy. The quarter also included the fall on acquisition of a 10% stake in our Brazilian integrated rail and port logistic business. And earlier in the year, we signed the bolt-on acquisition of a tower portfolio in India, which remains on track to close early in the fourth quarter or sooner. We also maintain a large project backlog. which has increased by 15% from this time last year to approximately $7.7 billion. In the midstream sector, we are supporting increased producer activity through contracted facility and pipeline expansions. In total, these projects represent almost $800 million in capital, which will generate over $140 million in EBITDA and will fully contribute to results over the next two years. In our data segment, we are commercializing our existing land bank and investing over $1 billion in near-term growth capital to build data centers for our hyperscale customers. In addition, we are supporting their growth ambitions through strategic land acquisitions in Athens, Chicago, Frankfurt, Milan, and Phoenix. With respect to new investments, market conditions are trending positively. As a result, we expect the back half of 2024 to be active for M&A. Much of this is driven by the improved interest rate environment as the Bank of Canada and the European Central Bank are leading the way with the loosening of their monetary policies. Additionally, the large industry tailwinds such as AI are creating opportunities for well-capitalized businesses like ours, where we're an obvious partner of choice for technology companies that are seeking alternative access to private capital. Our novel transaction with Intel from several years ago is providing the blueprint for similar large-scale opportunities which are gaining momentum. In relation to capital recycling, we are extremely active and have three advanced processes in a number of areas. We have six further asset sales progressing that are expected to generate almost $2.5 billion in proceeds when combined with our three advanced processes. This quarter, we monetized assets totaling approximately $210 million, bringing our total capital recycling for the year to about $1.4 billion. In terms of our business outlook, recent market developments have provided an encouraging backdrop. Equity indices have reached historic highs. As I previously mentioned, G7 nations have initiated monetary easing measures that should reinvigorate large-scale M&A activity. Our strong alignment with the global megatrends offers an exciting and underappreciated growth opportunity for our business. Several years ago, we coined the term 3Ds, which namely digitalization, decarbonization, and deglobalization to describe these themes. While our business spans all three, we are particularly significantly levered towards digitalization and decarbonization. We're in active discussions with several blue chip technology companies that are interested in leveraging Brickville infrastructure's market leading scale and expertise. The tailwinds created from AI adoption supports exponential growth in our global data center platforms that service the large hyperscalers, as well as our electric utilities and natural gas infrastructure. Although we've been very active pursuing growth through both on acquisitions and organic capital projects during the past few quarters, We are experiencing significant improvement in our business to achieve our 2024 capital recycling and deployment targets. Strict adherence to our financial guardrails has resulted in a strong balance sheet and liquidity position with tremendous access to large-scale capital. This combined with our connectivity into global transaction activity and our ability to move quickly should continue to create attractive investment opportunities for our business. This concludes my remarks and I'll pass it over to Liz for some Q&A.