Brookfield Infrastructure Partners LP

Good day and welcome to the Brookfield Infrastructure Partners Q3 2024 results conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will 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, 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 your speaker, Mr. David Krantz, Chief Financial Officer. Please go ahead, sir.

Thank you, Cherie, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' third quarter 2024 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 also with us today is Dave Joint, a Managing Partner and Head of Transport Investing across our business for the Q&A portion of the call. I'll begin the call today with a summary of our third quarter 2024 results, followed by a discussion of our capital markets activity and strong financial position. 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 risk factors, I would encourage you to review our latest annual report on Form 20F, which is available on our website. Brookfield Infrastructure is pleased to report strong financial and operating results while advancing many of our strategic initiatives this quarter. Our focus was on advancing our record capital backlog, delivering on our capital recycling objectives, which Sam will speak to next, and executing our capital market strategy. Beginning with our financial operating results, we generated funds from operations or FFO of $599 million during the third quarter, which is 7% above the comparable period. We experienced strong contributions from new investments completed last year and the initial contribution from three accretive tuck-in acquisitions that closed this year. We also benefited from organic growth at the midpoint of our target range, capturing annual rate increases from inflation, stronger transportation volumes, and the commissioning of over $1 billion from our capital backlog. Results were partially offset by the impact of higher borrowing costs and foreign exchange, most notably the depreciation of the Brazilian Rai this period. Taking a closer look at our results by segment, our utility segment generated FFO of $188 million, an increase of 9% on a comparable basis. In total, the amount was higher last year as we sold our interest in an Australian regulated utility business and completed a recapitalization at our Brazilian regulated transmission business in the first quarter. Organic growth for the segment was driven by the continued benefit of inflation indexation and the commissioning of approximately $450 million of capital into our rate base over the last 12 months. Moving to our transport segment, FFO was $308 million representing a 50% increase over the same period in the prior year. The increase is primarily attributable to the acquisition of our global intermodal logistics operation that closed last year and an incremental 10% stake in our Brazilian integrated rail and port logistics operation that was completed earlier this year. The remaining businesses performed well. The strong volumes across our networks and average rate increases of 7% across our rail networks and 5% across our toll road portfolio. Our midstream segment generated FFO of $147 million, compared to $163 million in the same period last year. The decline is primarily attributable to capital recycling activities completed last year at our U.S. gas pipeline and higher interest costs across the portfolio from new financing initiatives. The underlying businesses are performing well in the current environment, following continued demand for long-term services across our critical midstream assets, particularly at our North American gas storage business. Lastly, FFO from our data segment was $85 million, representing a 29% increase over the same period last year. This increase is attributable to strong underlying performance and several new investments completed over the last 12 months. The most impactful this quarter was the tuck-in acquisition of a portfolio of retail co-location data centers completed earlier this year. Our global data center platform continues to execute its development plans to drive growth. with an additional 70 megawatts commissioned during the quarter, bringing our total installed capacity to over 900 megawatts. In July, our European hyperscale data center platform successfully commissioned 10 megawatts in Milan and is progressing on the build-out of an additional 80 megawatts of capacity to be delivered next year across a number of key European markets. In the US, we commissioned 50 megawatts of capacity on scope, schedule, and budget, and leasing activity remains very strong. Stepping back and looking at our operations as a whole, we are excited about the $8 billion backlog of organic growth projects embedded within our business. Our existing platform spans many of the sectors directly benefiting from the tailwinds created by artificial intelligence and associated power demand, including our natural gas and midstream infrastructure to our data center, fiber, and telecom platforms. We have seen this translate into a 20% increase in our backlog in the last 12 months, while providing very attractive project level returns at or above our target range. We additionally have a shadow backlog of over $4 billion in incremental organic growth opportunities that represent projects we are advancing but have not yet reached final investment decision. Now, before turning it over to Sam, I would like to spend a few minutes providing an update on some of our recent capital markets activity. We completed $3 billion of non-recourse financings during the quarter. with the goal of efficiently financing our business, extending maturities, and reducing our cost of capital. To highlight a few examples, first at our North American hyperscale data center platform, we continue to access capital markets as the first AAA-rated data center ABS issuer, raising $370 million in the quarter. The business has raised $1.1 billion of total proceeds this year that enable us to continue to build out our backlog of hyperscale data centers at attractive pricing. At our U.S. retail co-location data center business, we completed an inaugural $900 million ABS issuance in early October, with proceeds used to partially repay our acquisition financing. The financing helped term out nearly half of our acquisition bridge for six years and reduces the company's annual interest expense by approximately $20 million. And the last example I will highlight is at our Western Canadian natural gas gathering and processing operation. where we successfully completed a repricing of an $800 million term loan that reduced credit spreads by 25 basis points. This transaction was the second repricing this year, which allowed us to reduce the cost of the loan by a total of 75 basis points, resulting in $6 million of annual interest savings for the company. We continue to maintain a conservatively capitalized balance sheet with no corporate maturities until 2027 and only 1% of our asset-level debt maturing over the next 12 months. We ended the quarter with $4.6 billion of total liquidity, which includes $1.6 billion at the corporate level and over $1.4 billion of cash across our businesses, which positions us well to pursue both our organic and inorganic growth opportunities. That concludes my remarks for the morning, and I'll now pass the call over to Sam.

Thank you, David, and good morning, everyone. For my remarks today, I'll provide an update on our transaction activity and conclude with a business outlook. Beginning with new investments, please report that we closed the acquisition of 76,000 Indian telecom tower sites in mid-September. We are now the largest telecom tower operator in India and the second largest globally with over 250,000 tower sites. This acquisition increases our tendencies from the country's second and third largest mobile network operators while offering significant operating synergies. The scale and benefits of the combined platform were all achieved at a value-based entry point of below six times EBITDA. Our total equity commitment was approximately $140 million, and we expect the business to generate a strong going-in FFO yield. Concurrent with the acquisition, we completed a rebranding of the business to a name called Altius, which brings together the three acquisitions we've made in Indian telecommunications space. Now during the quarter, we secured approximately $600 million of capital recycling proceeds for a total of approximately $2 billion for the year. As a result, we have successfully achieved our capital recycling target. Most recently, we agreed on terms to sell our Mexican regulated natural gas transmission business for net proceeds of approximately $125 million for BIP, crystallizing an IRR of around 22% and a multiple capital of about 2.2 times. The sale is expected to close in the first quarter of 2025. We also completed the recapitalization of our North American gas storage platform, raising $1.25 billion that enabled a $305 million distribution net to BIP in advance of a sales process. This financing alone returned more capital than we initially invested and increased the investment's realized multiple capital to approximately 2.5 times. This is an extremely attractive result given we still own a business that generates approximately $330 million in annual EBITDA. In terms of our business outlook, the economic backdrop for infrastructure investing has improved significantly, broadly speaking, with short-term interest rates moving lower, inflationary pressures easing, and liquidity steadily returning to institutional investors. These developments bode well for our business strategy, We are confident they will create an even more favorable landscape for both asset sales and new investments. Now, starting first with asset sales, we are seeing elevated demand for high-quality infrastructure assets. In the next two years, we expect to generate $5 to $6 billion of proceeds from capital recycling initiatives to crystallize the value we've created within our mature and de-risk companies. These asset sales are expected to generate returns well above our targets. From a deployment perspective, the outlook for our business is strong. Our growth profile continues to accelerate, focused around the decarbonization and digitalization investment themes. We're also seeing more opportunities for value creation within our existing business and our new investments pipeline, which is as big as it's been in two years, and it continues to grow. With our unparalleled access to scale capital, we expect to put significant capital to work as we seek to expand our partner of choice reputation. Now, this year has been notable for the number of elections, including a very significant one yesterday in the United States. While election outcomes can result in policy changes, we believe that we are largely insulated from volatility due to the quality of the countries we invest in and our focus in areas of the economy that garner broad political support. We often characterize BIP as the investment for all seasons and cycles because independent of these election outcomes or economic cycles or the direction of interest rates, Brickville infrastructure provides investors an attractive mix of downside protection and upside growth potential that outpaces many of our pure play sector peers. We believe this is more relevant today than it's ever been. Our business is resilient due to the high degree of long-term contracted and regulated cash flow with significant protection from inflation. The business is also more diversified than at any point during our history. This combination gives us the confidence to believe that our portfolio can meaningfully increase cash flows in the years ahead. That now concludes my remarks, so I'll pass it over to Sherry to open the line for questions.