Welcome to the Brookfield Infrastructure Partners’ 2016 Second Quarter Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] And at this time, I'd now like to turn the conference over to Melissa Low, Vice President, Investor Relations and Communication. Please go ahead, Ms Low.

Thank you, operator, and good morning. Thank you all for joining us for Brookfield Infrastructure Partners' second quarter earnings conference call for 2016. On the call today is Bahir Manios, Chief Financial Officer, and Sam Pollock, Chief Executive Officer. Following their remarks, we look forward to taking your questions and comments. And at this time, I would 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 known risk factors, I would encourage you to review our Annual Report on Form 20-F, which is available on our website. With that, I would like to turn the call over to Bahir Manios, Bahir?

Thank you, Melisa. And good morning, everyone. In the second quarter we maintained the great momentum that we started the 2016 fiscal year with. We generated funds from operations or FFO of $230 million, or $1 on a per unit basis which is an 11% increase over the prior year. These results were driven by solid performances for most of our businesses in particular our energy operating group. While we are pleased with our financial results to date, we believe that we are on the cuts for further significant growth. One contributed to this growth will come from a large portion of our capital backlog that should be commissioned and online over the next few quarters. In addition, for the past 12 months we've maintained substantial liquidity on our balance sheet in anticipation of executing a number of investment opportunities. We are now deploying that capital into several outstanding investments. We've recently closed two transactions in the transport and energy sectors deploying $310 million. Furthermore, this month along with our partners we are closing on acquisition of Asciano's port business. And lastly, we are in exclusive negotiations to make investments in Brazil's gas and electricity transmission sectors which will meaningfully expand our utilities operating group. We expect all of these initiatives to generate meaningful growth in our FFO per unit. Since we last wrote to you the most significant and unexpected event to take place was the United Kingdom's referendum vote to leave the European Union. While most markets have rebounded quickly from the initial shock, a number of questions remained unanswered. And we anticipate a period of uncertainty over the next three years while the UK and EU sort out their relationship. As long term value investors, we've experienced in managing and prospering during periods of economic uncertainty. Our…

Thanks, Bahir. And good morning, everyone. In my remarks, I'll make a few brief comments on our various strategic initiatives and our corporate finance strategy. And then I'll conclude with an outlook for the business. Let me begin with the two long standing strategic initiatives. Pleased to say that we've recently cleared regulatory hurdles on both Niska Gas Storage and Asciano. We complete the acquisition of Niska in July along with our institutional partners deploying a total of $440 million of capital of which our share was $180 million. Niska is well located storage facilities in key producing and consuming region including the AECO hub in Alberta and the Wild Goose facility in California. With this acquisition, we doubled our gas storage capacity to about 600 billion cubic feet and are now one of the largest independent owners and operators of natural gas storage in North America. We acquired this portfolio of gas storage facilities well below replacement cost which should allow us to earn attractive returns over the longer term. As you may have heard we mentioned on earlier calls and probably many earlier calls, we entered into a partnership agreement with an Australian ports operator, and other institutional investors, to acquire Asciano, a leading Australian port and rail logistics business for A$12 billion. Our Brookfield consortium will own a 50% stake in Asciano’s container terminal business known as Patrick Terminals, and a 100% interest in a ports services operation. Patrick Terminals is one of the leading container terminal operations in Australia with the capacity to handle 3.9 million TEUs annually and has two fully-automated facilities in Brisbane and Sydney that have industry-leading performance. Brookfield Infrastructure will invest approximately $350 million and the transaction is expected to close in August 19. During the quarter we also closed on $130…

[Operator Instructions] The first question comes from Frederic Bastien with Raymond James. Please go ahead.

Good morning. Sam you sound quite comfortable that you can push this Petrobras deal pass to go line. What makes you so comfortable and confident?

Hi, Frederic. Look, obviously I can't comment specifically on the stage where we are at in negotiations but it's pretty common knowledge that we've been in discussion with them for probably six months. And we had exclusive before the past close to three months. So these are fairly advance discussions and I just feel that we've fairly good level of confidence that we can get across the line.

Okay. Now during maybe turning this next question to Bahir. During the first quarter you loosely quantify the impact of both the rate we set and the extended tariff release would have on your Australian operations? Are you still comfortable with these estimates?

Hey, Frederic. Yes, those are still pretty good levels going forward.

Okay. And just another one on the NGPL business. After your additional investments in the compression facilities that you expect to have completed by year end. Would you reckon your FFO run rate will be on NGPL?

So I think this quarter's run rate is a good one ex expansion project that's coming online in the fourth quarter. So if you use that as the base and then add to it probably about $3 million to $4 million relating to that project, I think that would be a good run rate going forward until we bring online a number of other projects that we are working on.

Okay. Understood. And I do have one last one. There have been reports suggesting that Brookfield has been considering new investments in India. Do these involve Brookfield Infrastructure at all?

Frederic, it's Sam here. As I mentioned on sort of low to comment specifically on transactions. I know there was an article on a transaction with the State Bank of India and that one doesn't relate to us. That's a private equity transaction in relation to I think some distress loans. But otherwise there are a number of initiatives that we are looking in the country. And I just can't comment on them right now.

Okay but generally speaking I mean how is -- what's your view on India? You do have very strong views on specific countries and how does India stack within that?

Yes. I actually just got back from India a couple of weeks ago. And with the country that -- we as an organization have been in probably for about six years now. We approach the country quite cautiously for the first couple of years. We thought it was a bit I guess exuberant and the enthusiasm and I guess given it was a new market for us we want to be cautious. So I think our approach at that time was wise. And then going back probably about two or three years ago our real estate group made a couple investments and we got to know the market better and we formulate a strategy of investing in the country as operators and generally as 100% owners of asset, which is probably quite different than how lot of other people would have done in the past. We think it is a much better way to run businesses in that country and not be depended on local promoters. And so last year I guess we secured a transaction with government which we closed on earlier this year. It's a relatively modest investment in toll road. But that was a factor that we like because of a regulator that was very welcoming to foreign capital and their asset we think require capital and people are appreciative of the quality of roads that private operators provide in the country. So it has lot of same dynamics as what we've seen in South America. And I'd say generally I think the country is slowly improving. And I think with the new government that's in place, they are very welcoming of foreign capital and have market oriented policies. I guess that generally I realize it probably not be expected but I generally say it's a positive place to do business these days.

The next question comes from Cherilyn Radbourne with TD Securities. Please go ahead.

Thanks very much and good morning. I wanted to ask a question on NGPL first. And you got very impressive existing backlog of projects in that business. But you also mentioned some opportunities at connectivity into Mexico. So I was just hoping you could give us a bit more color on the scale of those potential projects and just confirm those who are not in the current backlog?

Hi, Cherilyn, it is Sam here. And maybe I'll start and Bahir can jump in if he wants to add anything. So to answer your second question first there are no projects in our backlog today that relate to initiatives going into Mexico. But it is a region where and I think we might have mentioned this on earlier call that the amount of gas going into Mexico continues to increase. And I think we are expecting anywhere between increased demand of 2 bcf to 3 bcf per day going in there probably in a next couple of years by 2020. So I think we see substantial growth. There has been a number of projects that both CSE and Tamex have started to build infrastructure to facilitate that demand growth into Mexico and so our business through NGPL. And also through our gas storage facility we have in Texas as well, are looking for connections from the various headers that we have to see if we can take advantage of new projects to deliver gas in that market. So it's a little bit of early days. I'd say this is one of the new developments that are underway. There is definitely -- it's not one that I think it's a matter of it but just a matter when and we are just encouraging our teams to make sure that they are closely following it and taking advantage of the opportunities.

Great. And then just in terms of brexit, the markets have rebounded pretty nicely from the initial shock as you noted. What's your sense of how investors are reacting? Like do you expect them to pull back for a while or the level of appetite pretty much the same as it was before?

So it's probably little early to make a definitive call on the direction of people's views. What we have seen is that a number of transactions that people were preparing for prior to brexit and that they were just waiting for the vote to take place before they launch them have been deferred or shelved for the time being. So there is a probably fewer transactions in the market today than what we would have expected six months ago. And so because of the limited supply that that's probably help balance the investment market a bit. In my discussions with a number of institutional investors, I think some of them are looking to get feedback from their investment committees as to whether or not their investments stances have changed. So I'd say that will probably take for those large institutional investors probably six months to year before they formulate their views. But having said that, I think generally most of them still see the UK as a good place to do business for all the reasons that Bahir announced here earlier. So I guess our view and I think where most people will end up is that the UK will find a way through this in a reasonable manner with EU and that investment activity on long term basis will probably maintain in that part of the world.

The next question comes from Rupert Merer with National Bank. Please go ahead.

Hi. Good morning, everyone. You mentioned that the returns from your recent investments or investments that are coming up are at the high end of your return targets 12% to 15%. If I look at Niska, Asciano and the Peruvian toll roads, are the returns on those investments all in that range? Can you give us a little more color on the FFO impact we can anticipate in the near term from those investments?

Hey, Rupert. It is Bahir. I'll start and maybe Sam jumps into. I would say from an IRR perspective the three investments that you noted would all be in the target of the 12% to 15% range biased to the upper end of that range. And then as far as the going in FFO yield, we would expect Niska and Rutas at least to be at the higher end -- sorry would be high single digits FFO yield going in and then ramping up over the short to medium term to get into that range that I noted. And as far as the Patrick Terminals or the ports business of Asciano, we would expected to be low double digit going in from an FFO yield and then ramping up over time as well.

Okay, excellent, thank you. And you also mentioned your deal flow is very strong right now and of course we have a strong liquidity position and Brookfield recently closed its private equity fund. Can you give more color on the importance and the advantages to the public entity Brookfield Infrastructure have co-investing with these private equity funds and of other potential say differences between the returns that you might see versus your private equity partners?

Thanks, Rupert. Look, it's I think it's a critical element of our strategy and our capabilities. What is it allows us to do is particularly for larger transactions be able to very quickly and confidently pull together the capital to close on these deals and that the two I guess great examples from our business would be both Asciano and this Petrobras transaction which we hoped to get done. These are our transactions that face modest amount of competition. And if it wasn't for the fact that we had this additional fire powers if you want call it from our partners to move quickly and take advantage of them. We probably couldn't get them done. And we think as a result we are getting unbelievably high quality assets and we are getting them at attractive returns. And it allows us to kind of avoid some of those what we describe as those mid market cost to capital shoot out which you read lot about in the papers particularly in Europe where you just don't see attractive returns. And so I think that's just a great advantage and I think there is a cycling I'd say the fact that we are able to secure all that committed capital from institutional investors in a very short timeframe of about nine months and for the broad mandate that we were looking for. Just reinforces the fact that we've got a great track record and lot of sophisticated investors who support the investment strategy. So, all-in-all I'd say we are really pleased with how that went.

Great. And in the past you talked about the difference between valuation in public and private market and infrastructure. Is there a different hurdle rate between your private equity funds and the public funds?

No. It's same investment. So we don't -- there is no difference in the investments that we are pursuing. What we -- as I think you know we look to acquire assets in Brookfield Infrastructure participate in those purchases so they are effectively the same return. I think maybe the question you were alluding to is just that differentiation between valuations of public traded companies versus the private market. And I would say that discrepancy still does exit. They are particularly in European and some North American sectors, not all North American sectors but some, where you will - you have the private market bidding at a much higher levels than what we think we can privatize some public companies at. So we continue to monitor the public landscape for opportunities. They are not easy transactions to execute. But that's still part of our investment strategy.

The next question comes from Robert Kwan with RBC Capital Markets. Please go ahead.

Good morning. If I can just maybe start on follow on the private funds line of questioning. Is the plan with new fund the same with respect 40% participation and kind of we are call normal deals and then larger deals maybe open to different structures?

Hi, Robert. Sam here. It's exact same structure although this time it's approximately 30% not 40% just given the scale of fund. But similar to prior funds to extent there is larger transaction than the public company will participate and co-invest and take up additional portion of the deal.

Okay. And just with capital commitments from or just kind of the make up of the group, obviously I am sure you don't want to get on your specific investors but are there a number of capital commitments from investors from previous funds? I guess what I am getting at is how comfortable are you with the willingness of the parties and the new fund to write additional direct co-invest checks that have been held following some of the acquisitions that you have done to date.

I'd say very, very comfortable because that's exact what they are looking for. In fact, many of these groups and we have probably some of the largest, most sophisticated investors that are out there in infrastructure and they are looking to participate in transactions along side of this and want that additional co-investment. So that definitely is not a concern at all.

Okay. And then just turn it to capital recycling and future asset sales and some of the guidance you've given those processes tend to take time. Are there any new processes that are underway and with respect to kind of your contemplated structure, are you thinking about selling assets outright or should we also think about the potential of selling down a percentage interest in some of your assets you may still retain control but maybe just sell down percentage ownership?

It's a good question. To answer your first question, the answer is no. There is no process that I could comment today that has been started. But we are internally preparing for a number of them. And I think our strategy as far as recycling assets could entail both approaches that you mentioned. Some of them could be businesses that we might outright sell. Others could just be sale down of a percentage of the business where we would just maintain control. So I think it'll be balanced, the one thing that's again I'll turn out I gone too long but since you sort of got me going here, the one part of the market that's very interesting which I am quite excited about is the fact that there is just a huge market today for minority stakes in infrastructure. And there is no discount when you go to sell these minority stakes. What these investors want is good, strong minority protections but they are happy to invest alongside, people like ourselves so they have a lot of comfort in operating the assets. And so that dynamic has just given us so many opportunities to consider in how we recycle capital. So it's a great dynamic and I think one that will help us mature we get highest value for assets but also maintain our presence in businesses to extent that what we are trying to chase.

Understood. And if maybe I can just on NGPL. Bahir you had mention around the run rate for the quarter being a good one with the addition of the compression expansion. Has the way of contracted the pipeline taking the seasonality then out of the system?

I don't know Robert, maybe I can follow up offline because maybe I am thinking about the annual to your point, annual run rate so let me follow up offline how the seasonally will work going forward with the context.

Okay. And then just the last thing compression expansion typically have quite high returns and it sounds like based on what you have Bahir that seems to be the case here. I just wanted to confirm with the new amount of contracting looks like or at higher rates plus these higher return expansions, are there any issues as you calculate your earned ROE or are you good given you had a pretty recent section 5?

Yes. I'll touch on that one. I think that given what happened a number of years ago, it's obviously an issue that we watch very closely with kinder. And I think that with the amount of capital that we are deploying and the run rate EBITDA that we will be generating in 2017, 2022 I think we feel about we are into a comfortable level and that today there is no requirement for us to do any more section 4 I think it's called application. So I think we are in good shape. Obviously, we are always at the whim of the review of the regulators and their views but I think we feel that we are in good shape.

The next question comes from Bert Powell with BMO. Please go ahead.

Thanks. Sorry I am jumping on the call little here so hope I am not tilling ground that's already been tilled. There is couple of questions. One, Sam or Bahir, the relief for iron ore in Australia that was a bit of headwind in the quarter. Was that really because we had a different iron ore at the beginning and it kind of went down below 50s now come back up -- my understanding from the way that works is you kind of get close to 60, there is no relief below you do because -- is that -- my understanding how that working correctly?

Yes. Bert it's tiered structure and just simplistically here is that you are absolutely right. There was a dip and that caused us to accrue an amount for the quarter. We've seen iron ore prices since than recover a little bit, so if they hold at these rates that relief will be hopefully smaller in the third or fourth quarter, but again it's all depended on the price. But your point it was the dip that created that release amount.

I'd just add one thing to what Bahir said is that there is also an exchange rate component so our release is calculated in Australian dollars and so it also depends on what happens with the US, Australian FX rate.

Okay, that's great. Thanks. And the volumes that drove VLI in the quarter, can you just give a little color in terms of what was going on there?

Yes. VLI, Bert we hear again, VLI had a great quarter. We saw revenues they are probably I think if I recall correctly about 15% and driven again same seen by agree volume increases that we saw as well as tariff increases. So nice mix of both that created for strong revenue growth year-over-year. And with some good cost containment as well we have our EBITDA saw big increase year-over-year.

There are no more questions at this time. I'd now hand the call back over to Mr. Pollock for closing comments.

Great. Thank you, operator. And thank you to everyone who joined us for today's call. We look forward to reporting our progress to you next quarter.

This concludes today's conference call. You may disconnect your line. Thank you for your participation. And have a pleasant day.