Brookfield Infrastructure Partners L.P. (BIP) Q4 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Brookfield Infrastructure Partners' Fourth 2019 Conference Call. [Operator Instructions]. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Melissa Low, you may begin.

Thank you, operator, and good morning. Thank you all for joining us for Brookfield Infrastructure Partners' Fourth Quarter Earnings Conference Call for 2019.On the call today is Bahir Manios, our Chief Financial Officer and Sam Pollock, our Chief Executive Officer. We also have Sikander Rashid, Senior Vice-President Investments in Brookfield’s Infrastructure Group joining us as a guest speaker this quarter as well as Ben Vaughan, our Chief Operating Officer. Following their remarks, we look forward to taking your questions and comments.At this time, I'd like to remind you that in responding to questions, and in talking about our growth initiatives and our financial reporting 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'd turn the call over to Bahir.

Thank you, Melissa and good morning everyone. I’m pleased this morning to discuss our results of operations and to also provide a quick update on our balance sheet and funding plan. After my remarks, I’ll hand it off to Sikander who will provide a spotlight on our approach to value creation and explain to you all the various things we are doing at Enercare.Sam will finish off the call with a discussion of our recent strategic initiatives and will provide an outlook for the year ahead. 2019 was a great year for Brookfield Infrastructure. Our financial results and operating performance were strong.Funds from operations or FFO totalled $1.38 billion or $3.40 on a per unit basis and that represented an 11% increase on a comparable basis and 9% increase on a total basis over 2018.Operating conditions during the year were favourable in all regions enabling us to execute on our full cycle investment strategy of acquiring high quality assets, creating value through our active asset management programs and recycling capital on a attractive basis. The capital markets were also strong, allowing us to raise equity to fund growth and to secure debt at historically low interest rates.Before I discuss our results for the various operating segments, I'm pleased to share with you that as a result of our strong, financial and operating performance, robust liquidity position and positive outlook for the business, our Board of Directors approved an increase to our quarterly distribution of 7% to $0.5375 per unit starting in March of 2020 or $2.15 on an annualized basis.This increase is at the midpoint of our 5% to 9% long term target, and represents a 11th consecutive year of distribution increases for our company.Now onto our results. And as I noted earlier in my remarks, results for 2019 reflected solid organic growth and the execution of our asset rotation program. Our FFO benefit is from organic growth of 9% and contributions from new investments.Our utility segment contributed FFO of $577 million in 2019. This is consistent with the prior year, which included the contribution of approximately $25 million from the Chilean electricity transmission business sold in 2018. The segment generated organic growth of 8%, reflecting inflation-indexation and $300 million of capital commissioned into rate base. Results also benefited from the initial contribution of the North American regulated natural gas transmission business acquired in October. These contributions were partially offset by the weakening of foreign currencies, which lowered our results in this segment by $14 million.Our U.K. regulated distribution business delivered exceptional results in 2019, despite the uncertainty surrounding Brexit. Results were driven by the installation of utility connections at approximately 200,000 new homes, the highest level of activity during our 10-year ownership, as well as the sale of 300,000 new connections, a level surpassed only by the record sales achieved last year. These results bring our current order book to an all-time high of $1.15 million connections.Our fiber offering performed well ahead of expectations with a 36% increase in sales, in part due to the successful rollout of our new fiber offering recently created as a result of our partnership with Sky Fiber Broadband. These positive trends combined with Capital Commissioned into rate base contributed to a 10% increase in FFO relative to the prior year.In October, we completed the acquisition of two operating natural gas transmission assets in North America, and our integration efforts are progressing well. These regulated assets operate under take-or-pay arrangement with an investment grade counterparty that extends through 2041.Our transport segment generated FFO of $530 million compared to $518 million in the prior year. Organic growth of 5% was driven by GDP linked volume increases and higher tariffs across most of our operations.The segment benefited from strong agricultural volumes in Australia and Brazil and higher traffic and tariffs of 3% and 4% respectively across our global toll road portfolio. FFO from our port operations exceeded prior year levels by 25%, excluding the contribution from our European port operation which was sold in mid-2019. This increase primarily reflects growth in container volumes at our U.K. operations in addition to higher tariffs at our Australian port.In 2019 our U.K. port operation commissioned approximately £20 million of capital of capital projects for warehouse development, automation initiatives and capacity expansion at our container terminal in response to growing customer needs. The business is on track to increase its EBITDA by over 50% in the next two to three years. This increase is the result of contributions from recently secured contracts, high probability growth from captive customers, and new revenues related to the commissioning of the world's largest biomass power station.FFO from our energy segment was $412 million, an increase of 53% over the prior year. This significant increase is primarily attributable to the $1.2 billion of capital deployed to acquire two North American businesses in late 2018 and a natural gas pipeline in India in the first quarter of 2019.Results also benefited from organic growth of 16%, which was attributable to higher volumes at our North American natural gas pipeline business and new customer connections at our distributed energy businesses in North America.FFO from our data infrastructure segment totaled $136 million in 2019, an increase of over 75% relative to 2018. This step change in FFO was a result of contributions related to capital deployed at our French telecommunications business, as well as four new investments which enabled us to establish our global data infrastructure franchise. These acquisitions include three data storage operations in the U.S., Brazil and Australia, as well as a data distribution business in New Zealand.Our French telecommunication business has been supporting customers with several large-scale organic growth projects. Through it’s built-to-suit tower program, the business has strengthened its relationships with major mobile network operators, by assisting them in meeting their national coverage requirements. We commissioned 245 towers in 2019 and expect to have a total of approximately a 1000 built-to-suit towers operation in the first half of 2020.Additionally, our fibre-to-the-home deployment is ahead of underwriting with almost 35% of the portfolio now built or under construction and the first network scheduled to be completed in the first quarter of 2020.So that concludes our report on financial and operating results for the year. But before I conclude my remarks, I’ll briefly touch on our current balance sheet and funding plans.The most noteworthy acquisition financing completed this quarter was the $2.6 billion of financing and institutional term loan market that we did to fund the acquisition of our North American rail business. This debt issuance was heavily oversubscribed, as credit investors continue to seek high quality names that are financed at prudent levels.We achieved strong pricing and terms that are consistent with high quality investment grade issuers completing a 7-year financing with a coupon of LIBOR plus 200 basis points. We also capitalize on favorable markets to complete several important financings in our existing businesses.First, we raised approximately CAD2 billion at our North American residential energy infrastructure operation to refinance existing higher costs that in that business which Sikander will touch more on in his remarks, in addition to refinancing our debt at our U.K. port operation, which allows for $110 million of capital to be returned to debt, in addition to reducing our average annual financing costs by 3.5%.Despite a year of outsized capital deployment, our balance sheet remains healthy with $3 billion of total liquidity in place at year end, and almost $2 billion of that residing at the corporate level. We're also making good progress on the next phase of our capital recycling program, completing three asset sales that we announced last quarter.First, the sale of our Australian district energy and distribution business that we closed in November, that generated net proceeds to BIP $280 million. Second, we closed the divestment of our regulated distribution operation in Colombia with proceeds of $100 million to BIP. And finally, we completed the sale for further 33% interest in our Chilean thorough business in early February for $170 million.Furthermore, during the fourth quarter we signed the binding agreement to sell our North American Electricity transmission operation for proceeds of approximately $60 million to BIP.We established this business over a decade ago and as part as part of a government led program to support renewable power generation in Texas. Since commissioning the transmission system in 2014, the company has been a best-in-class operator with an extensive track record of stable distributions.Given the de-risk mature state of the business and substantial investor demand for North American regulated assets, we viewed this as an opportune time for us to sell. The transaction is expected to close in mid-2020 and generate an IRR and a multiple of capital of approximately 23% and 3.5 times respectively.So, with that, thank you for your time this morning, and I'll turn the call over to Sikander.

Thank you, Bahir and good morning everyone. My name is Sikander Rashid and I’m pleased to join today’s call to provide a spotlight on our investment strategy and how we create value in our businesses.Our investment strategy consists of three core components. Number one, you buy high quality infrastructure assets at attractive entry points; two, we employ an active asset management approach, and three, we monetize assets that add their full value potential and start over again by investing into higher returning opportunities.Our deep operating expertise is central to the second component of our strategy. During each year of ownership, but particularly in the early years after we acquire a business, we identify and implement initiatives that increase the value of that investment, and this value is created through various means including, revenue growth, margin improvement and capital structure optimization. To bring our investment strategy to life, and to showcase some of the ways we create value in our businesses, we thought it would be interesting to take you through a case study on Enercare, our North American residential energy infrastructure business.Since the acquisition of the business in late 2018, we have been focused on several initiatives that highlight are active approach to asset management. Quick recap; Enercare is a leading provider of essential residential energy infrastructure such as water heaters, furnaces, air conditioning or HVAC systems and other in-home services. The business operates in a sector and region that we understand well and this business shares a number of similar features with our U.K. regulated distribution business.At the time of acquisition, we were attracted to Enercare’s high quality annuity like cash flows, established market position in Canada, and significant growth potential in the U.S. Since acquisition, the business has been performing well and we have been focused on two key value creation levers. Number one, capital structure optimization and two, sales growth in the U.S. market.To elaborate further on the capital structure optimization pool, since we acquired the business, it was your belief that Enercare’s capital structure was not optimal given the long term contracted cash flow profile of the underlying business. Enercare has over one million long term rental contracts with low rates of attrition, consistent real price growth and high customer renewal rates. We examined available financing structures and ultimately concluded that Enercare’s Canadian rental business was uniquely positioned for securitization financing.So in December of last year, we recapitalized the business through the issuance of approximately $2 billion of primarily AAA rated securitized debt. This is a marquee financing as it is the first of its kind for this type of business in the Canadian market.The proceeds were used in part to redeem $1.4 billion of public bonds and term loans. We reduced the cost of debt in the business by over 50 basis points, while substantially improving the credit rating of the assets, from BBB low to primarily AAA.Furthermore, prospectively the securitization facility also provides a mechanism to efficiently fund organic growth and future tuck-in acquisitions, thereby reducing the need to inject capital to fund this growth. Overall, this financing was very accretive to our underwriting and improves the competitiveness of the business.Now moving on to the second value creation lever. To facilitate rental growth in the U.S. we are focused on implementing a dealer adoption model that will complement the tuck-in acquisitions and sales to rental conversion strategies currently underway. While rental conversions are well ahead of plan reaching over 40% in the fourth quarter, we believe we can accelerate this growth further by offering a partnership model to HVAC dealers in markets, where we do not have presence today.In addition to the dealer model, we have various other initiatives underway with Brookfield managed businesses to further enhance growth. Earlier this year, we launched a pilot program with a utility in Texas, to offer residential infrastructure products to a large subset of this utility's clients. The pilot has been well received and we're working on the long-term rollout of the program.Enercare also recently partnered with a Canadian district energy business to provide, to participate in a housing development project representing an opportunity to offer services to a community scale, district energy system.With the Canadian securitization now complete, and additional growth strategies underway, which will be financed in a much more accretive manner, we are well-positioned to expect equity returns in the high teens and potentially higher, exceeding our conservative base case underwriting for this business.And with that, I will now turn the call over to Sam.

Thank you, Sikander. And good morning everyone. From my remarks there, I’ll provide an update on some recent strategic initiatives, and give an outlook for the business. The fourth quarter was very active from an investment perspective. In December, we expanded our data infrastructure segment committing nearly $1 billion in three separate transactions. This includes the previously announced Indian telecom towers business, as well as two new investments, which I'll touch on now.In late December, we agreed to acquire 100% of Cincinnati Bell or what we'll probably refer to as CBB going forward, in a take-private transaction, which could result in an investment of upto $480 million for BIP.CBB is a leading fibre-to-the-home business in the United States serving approximately 1.3 million residential and business customers in greater Cincinnati and Hawaii. This is an attractive business with substantial growth prospects. The transaction is subject to shareholder and regulatory approvals, which, if obtained, would likely result in a closing of this transaction in late 2020.Around the same time, we completed the acquisition of a U.K. based independent wireless infrastructure company investing in $140 million. It is comprised of over two thousand fully contracted operating towers and distributed antenna systems. The is well positioned to capture expected network growth in the U.K. and has significant potential to leverage Brookfield’s real estate holdings to expand into other jurisdictions inside and outside of the U.K.At year-end, we closed the previously announced acquisition of Genesee & Wyoming for $500 million in our net to BIP, and the federally regulated assets for our Western Canadian Natural Gas gathering and processing operation for $250 million.On our call last quarter, I reported on our effort to launch Brookfield Infrastructure Corporation or BIPC. During the quarter, we have made advancements in its formation and subject to receipt of regulatory approvals, BIP expects to complete the special distribution of Class A shares of BIPC to BIP holders in the first half of 2020.As a reminder, BIPC will provide investors with an alternative way to gain exposure to our global infrastructure business. We believe a corporate entity will be attracted to many investors particularly in the United States and Europe, who have historically been adverse to our partnership structure.BIPC’s Class A shares will be structured with the intention of being economically equivalent to BIP LP units including by having the right to receive identical distributions. BIPC's Class A shares will also be exchangeable into LP units or the cash equivalent at BIPC’s discretion at any time as well as provide simplified tax reporting and other tax advantages.So I’ll now change your actions and provide a brief outlook of the year ahead, and the current economic environment. We've entered 2020 with both positive and negative developments in regard to global growth. The signing of the Phase 1 of the trade deal between the United States and China removed some of the impediments to global growth. Unfortunately, the outbreak of the Coronavirus has significantly disrupted economic activity in China, which will have global implications.Trying to be positive about that, if the financial effects from this outbreak are similar to those felt during the SARS's outbreak in 2003, we expect that the slowdown will be short lived.From a BIP perspective, we do not anticipate any material financial impact from the Coronavirus situation. I remain optimistic regarding the business outlook for the regions we operate in. We do not have any operations in China and potential disruption to commodity supply chains should not have any significant impact on our overall activities.Looking beyond these current headlines, our business is well positioned for continued growth and our outlook remains positive. We anticipate delivering another year of organic growth at the high end of our 6% to 9% target range. We're focused on executing the next phase of our capital recycling program, and we are on track to raise a further $1.5 billion. We plan to redeploy this capital into higher yielding new investments, which should provide for another period of outsized FFO growth. While quarter results, this year may be impacted by the timing of new investments and sales, we anticipate that our run rate exit FFO per unit in 2020 will be approximately 12% to 15% higher than current levels.Now this concludes our remarks for today's call, and so I'll pass it back to the operator and we'll be pleased to take some questions.

Thank you. [Operator Instructions] Our first question comes from Cherilyn Radbourne with TD Securities. Your line is now open.

Thanks very much and good morning. I wanted to ask a question on the Indian telecom acquisition. That deal sounds like it has a lot of upside potential based on co-location as well as the tower buildout program. Maybe you can just give us a sense of how quickly that growth might progress?

Hi, Cherilyn. Maybe I'll touch on that and then I know make sure that Ben actually just got back from India, and he can maybe give you some further comments as well as talk about India in general. But, we're very excited by the opportunity. Obviously just the fact that we bought a business of that scale from the dominant provider in that market gives us an incredible position. It's also a brand-new infrastructure. And so, it's highly coveted by the other operators in that market as far as them getting access to it. We've already received inbounds from some of the other operators. There's two other major players in the market. And our expectation is that we could lease up you know 40 upwards of 40% of the tower base in relatively short order.So that's -- that would be exciting, it's not done yet. But the first, if we have even closed yet. So the fact that we already have groups approaching us and looking to come on is fantastic. So, the short answer is, very optimistic about the leasing up the additional capacity. And Ben, you want to add anything and maybe just give a sense of India in general.

Yes, sure Sam. Hi Cherilyn. Yes, I was in India just last week with the team talking a lot about this, and as Sam said, so far, it's going very well, maybe two additional comments. First of all, this is a very modern network of towers. These were all very recently built. And it truly is a national network. So, it's attractive to some of the other M&Os because of the location in rural areas, so as Sam mentioned, we've had good discussions so far with the other M&Os and expect take up. And the only other comment I'll make, which probably is obvious is just the market opportunities tremendous in India. This is a massive market and growing very rapidly. And the penetration rates of cell phone usage definitely provide a lot of sort of wind at the back in the coming years for this modern portfolio to get fully utilized by all the M&Os so we're pretty positive so far.

Great. Well, that's good color. Just moving on to Enercare, the letter indicates that the new securitization facility provides a mechanism that will reduce the need to inject capital to fund the growth going forward. Maybe you can just elaborate on that a little bit more?

Yes, sure Cherilyn. I can -- I can take this one. This is Sikander. Yes look, so previously the financing in place was public bonds and term loans, and the Enercare business is growing fast, both in Canada as well as the U.S. And the challenge previously was -- we would almost have to -- there was a little bit of a time lag between when the contracts were sourced versus when they were financed. But now with the securitization facility in place, we can almost immediately securitize the contracts after they're sourced.So, I think and I think that's the main point.

Yes, the only other thing I’d add to that is previously when we funded the growth through our CapEx lines, it meant that the funding was limited based on the amount of the capital invested, whereas now with a securitization the amount of capital we can obtain from the investment is based off the value of the contract. And so, that allows us to finance much more of the capital growth than previously which is just based off capital invested. Hope that answers your question.

Got it. That's my two. Thank you.

Our next question comes from Robert Kwan with RBC Capital Markets. Your line is now open.

Good morning. If I can just with BIPC. Just wondering if you have any updates on initiatives to stem convergence back to the LP units, and just to promote the uptake of the common shares?

Hey, Robert, it's Bahir. So, its still days on that front. We are exploring a few different alternatives. But the main priority as of today is just dealing with sort of the last pieces of the various regulator and stock exchange sort of queries that we've been getting in. And all is going well I'm not front. Just as an update, expect to have that done and listed by March 31 or shortly thereafter. And then we will sort of explore different options to do what you just said. But at this point, it just early days to talk about that.

Got it. And if you just look at this kind of more than an M&A topic, looking at this quarter's letter, it seems to focused a lot more on executing announced acquisitions, lot of organic growth upside and some of the financial restructuring and optimizing the capital structures with the prior quarters eluding a lot more to M&A. I'm wondering kind of what's that outlook in specifically on Brazil using the currency as a crude measure of country sentiment. Just wondering how you're thinking about any potential acquisitions down there given your prior experience?

Hi, Robert. Maybe I'll tackle that. It's Bahir. I guess just to comment on your -- the first part of your question. I don't think you should read anything into whether or not where the pipeline is less or more. I think the fact of the matter is we have a lot going on right now in the investment side. We'll be closing the large tower deal. We just closed the tower transaction in December, which was a quick close for that transaction. And of course we have CBB under way. So, I'd say, there's actually quite a bit going on and all that is relatively sizable amount of capital. And the conditions have not changed. I think we're seeing lots of good opportunities across various sectors. So I think, I wouldn't want you read anything into the letter, because I think things are very robust.As far as Brazil and you'd commented on the currency being a reflection of the conditions in the market. Some of that currency volatility may be because of what's going on in China today. We've seen that with Australia as well, the currency is off quite a bit. Canada has been as badly hit, but has come up a little bit as well. So, we do expect to rebound. I think the market opportunity in Brazil is very exciting. Most of what we are looking for down there are additions to our existing platforms. We have great activity going on in the sense your data center business, that business has exceeded our expectations.There's a number of toll road opportunities that are coming to market that will be very interesting for our toll road platform. And the only place where maybe we pull back little bit in that market is on the transmission front, electricity transmission. We continue to monitor various auctions that take place. The more recent auctions had been very competitive. And so, we've not -- I wouldn't say today that we're optimistic that we'll find great value on that front. But what it does mean is what we did buy and what we are investing in is incredibly valuable. So I guess its a double-edged sword.

And just to finish on that electricity transmission comment, does that create opportunities, although recognizing its pretty short order, though, to turn those and put those back out to the market?

Yes. I think it's not a 2020 initiative. We have a lot of work to do to complete some developments. I think we'll get better value if we can have majority of the lines constructed. I think by the end of 2020 or mid-2021, we should be 75% to 80% through our development program. At that point that could be a very attractive business to liquidate.

Thank you very much.

Thanks.

Our next question comes from Frederic Bastien with Raymond James. Your line is now open.

Good morning and thanks for taking my call. My first question is on the energy platform. You guys had a very robust 2019 from an organic growth perspective. How do see volume and connections growth unfolding over the next couple of years?

Ben, do you want to take that?

Sure. I can take that. It's Ben speaking. I'm assuming you're referring overall to our energy operations mostly in North American.

Correct. But the lot of the drivers were around U.S. business in the pipeline?

Yes. Look, we have a number of projects underway. The market is strong. And there's a lot of gas that needs to flow to the new LNG terminal both getting built on the West Coast and in the Gulf. So we continue to see strong demand and we have a number of -- I would characterize it as our U.S. business has a number of projects underway to increase compression and basically create very capital efficient extra capacity on the pipe to meet that new demand. And we don't see that -- well, its moderated a little bit. We do still see some growth potential in the coming years. I don't know if that's helpful, but that's how I would characterize it.

Fred, it's Bahir. So, if you're talking just in general about the energy group, we did have a big increase as you noted, at NGPL due to a number of contracts that we were able to win in addition to the projects that we commissioned. So the backlog there is pretty thin right now. But where you'll see a lot of energy growth happening going forward in the next couple years will be and you mentioned connections in your question. So we do expect double-digit type growth in district energy in addition to our North American residential infrastructure business. And that in total will be the key driver for the energy operating group going forward.

That's great. Thanks for that color. Next question for Sam. How confident are you with your ability to further scale up BIP's data infrastructure business? You've been obviously very busy. But you're seeing increased competition right now, you're seen that with CBB, but would appreciate your view on that broadly speaking?

Hi, Frederic. Look, I would say, I'm highly confidence. And what gives me that confidence is the fact that we now data franchise in each part of the world and we're represented in each of the sectors within the data infrastructure world that we want to be in. So we have fantastic presence in towers. We have expanded from towers in to DAS system, which we see lots of growth in. We have a number of fiber-optic systems and we're continuing to pursue fiber-to-home projects around the world.And we obviously have a very large presence in the data storage with our datacenter businesses in Asia, North America and South America. So the fact that we have these footprints given this tremendous capability to leverage and I think I continue to see is lots of that business going forward.

Thank you.

Thanks, Fred.

Our next question comes from Rupert Merer with National Bank Financial. Your line is now open.

Hi, good morning everyone. Sam, Brookfield recently closed the infrastructure fund for $20 billion, I believe is a little larger than what you were targeting. Can you talk about how that impacts the outlook for deal flow at BIP? And for example, could you see any changes in your target return hurdles? Or any changes in BIP's pro rata ownership stake in future deals?

Hi, Rupert. I guess just dealing first with -- are there any changes to our approach or returns or anything like that? No. There won't be any change in our approach. We are still seeking returns in the 12% to 50% range and the sector and geographic targets are all the same. So there's no change in that regard. I think the benefit and this is something we've talked about on previous calls is our ability to leverage this additional institutional capital to build our franchise is incredible. It enables us to pursue large scale more complicated transactions and do it on a basis where we don't necessarily have to club up or team up with others which adds complexity to transaction. We can basically pursue them on our own or alongside the co-investment capital of our institutional partners. And that gives us one of the rarest franchises in the industry. And so, I guess all I would say, in conclusion is the fact that we have this $20 billion of capital plus those relationships with those institutional investors just makes our franchise that much better.

Is your pro rata ownership stake? Is that going to remain constant going forward?

Yes. It's a same. It's still 25%.

Okay. Thanks. And secondly a quick one, Bahir. You talked about some refinancings in the quarter and there's some discussion in the statements about a refinancing at a UK port, a 350-basis point reduction in your interest costs. Are there any other opportunities for refinancing across your asset base?

Hi, Rupert. I think those are the big ones. Although there's a couple of others that we might be pursuing that are smaller in nature and the big question though, and which could be -- the one that's most material could be another potential up financing at our Brazilian transmission business or NTS similar to the one we did a couple of years ago. That would be the big one if we were able to do something on that front though or if it's attractive. But aside from that one, the other ones we're pursuing are smaller in terms of quantum.

Great. Thanks. I'll leave it there.

Thanks.

Our next question comes from the line of Robert Catellier with CIBC Capital Markets. Your line is now open.

Hey, good morning everybody. I just wondered, to start, if you can be a little bit more explicit on what impacts are expecting from the coronavirus and Brexit when you set the 2020 FFO per unit exit rate?

Hi, Robert, it's Sam. Maybe I'll tackle that. So just to be clear today, we're not forecasting any impact from the virus on our operations. So I don't think the number that we've -- that I gave you or that Bahir has given in the past reflects any adjustments because of that. And we've done -- Ben and I canvassing of all our operations very recently to assess any potential impacts on safety of our people or just the operations. And our view today and obviously we'll watch to see how things unfold. Is that the impact from the slowdown in China will be relatively modest.We do expect to see some implications, but most of those should be timing differences. I think there could be some delayed shipments, some ships that don't come as full to some for ports in Australia or the west coast of the U.S. It could be some potential delays in shipments of iron ore or coal or something from some of our Australian operations. But again, those should not be permanent in nature and should be caught up. So today and this is subject to provision of how -- depending on how things unfold obviously. But today we just don't see much of an impact.

And Brexit?

And Brexit, good question. I think as we've reported in the past year, we didn't see much impact on operations. I would say from a high-level there was probably some delays in investments from a number of people in the country. And that might have had some impact on PD ports and our U.K. business. At the end of last year, they're relatively modest. I think today with the uncertainty removed; we think that there'll be renewed investment in the UK. And so the impact could be a bit of a bump in that regard. Longer term, looking at five, 10, 20 years from now, it's hard to say what the impact will be. But in the short run if anything we might see a positive impact of modest though.

Okay. That's helpful color. And then just, I was actually going to ask the same question as Rupert on the financing, but at different angle. I guess, is maybe you can just clarify what the cost savings were on the GW [ph] and refinancing? And then more broadly, it doesn't sound like there's a lot more equity to be harvested from refinancing. But I'm wondering if there's -- if you're going after term by taking advantages of low rates and extending term. And then, just on the competition have you seen any irrational behavior from competition where you suspect they're factoring in or underwriting much lower rates -- interest rates in their approach?

Maybe I'll deal with the last one first and then Bahir can think about your question on the refinancing. But I guess, it's always tough to tell. I mean competition has been stiff for the last number of years. Yes. I'm not privy to what people are underwriting. But I guess as a general comment, Europe remains the most competitive market because of zero to negative rates. And yes, I have to assume that that's low rates is a factor in those higher valuations. But we still are able to find opportunities here and there and I'm sure at some point things will normalize. So, Bahir maybe over to you.

Yes. Hey, Robert. So, on GW, I think, I'm not sure if you're referring to the existing debt of the business had in the past. That one maybe I can get back to you on. But all I would say is that and I made I think this comment at our call last quarter that the financing that we did was about 75% -- sorry, 75 basis points ahead of our underwriting assumptions. So that was a big positive for us. And with respect to terming out our debt, we've been actually doing a lot of that over the past couple of years. If you look at our maturity profile over the next two years it's very, very modest. So, naturally we will be extending term albeit in the grand scheme of things. It may not move the needle all that much just because we've been dealing with the bigger stuff over the last couple of years and what's coming down the next couple of years is smaller in nature. So hopefully that answers.

Yes. Thank you very much.

Our next question comes from Devin Dodge with BMO Capital Markets. Your line is now open.

Good morning. Just wanted to start with the question on FX. Appears that your hedged FX rate should be a positive in the first half. But this benefit may fade away as you get deeper into 2020. Just wondering how you're thinking about FX and its impacts on your results over the next say, 12 to 18 months assuming the REI stays near current levels.

Hey Devin, I'll let attempt that one. It's actually I think the opposite, because in Q1, our Australian dollar hedge rate just due to timing of when we put those contracts in place is actually lower than Q1, 2019. But then it picks up from Q2 to Q4. So, on a holistic basis I do expect Q1 to be lower -- Q1, 2020 to be lower than Q1, 2019. But for the full 2020 year, I think it's -- our hedge rates are about 3% to 4% higher than 2019 as a whole. So for the full year, it's going to be a positive, albeit Q1 is lower, and we're hedged just on the second part of your question if you're looking at ahead for 18 months or so. We're hedged for all those currencies except for the Real and the Rupee up until Q3, 2021. And I think 2021 compared to 2020 is virtually flat.

Okay. That's helpful. U.S. midstream, this has been a targeted sector for a while now. Stock prices for a lot of the remaining MLPs has continued to be under a lot of pressure. Just wondering if you still see this as an attractive sector and if you're optimistic you'll have a chance to deploy capital over the next call it, one or two years?

Hi, Devin. Again, the short answer is yes. Yes. We still -- it's a sector. We think it's critical to the economy. And we do see interesting opportunities particularly relative to past years when the MLP market was much stronger than it is today. We do see lots of companies whether it's taken privates or just structured transactions where public companies need private capital to assistance. So I think that will be interesting opportunities in the years ahead.

All right. Thank you.

Our next question comes from Andrew Kuske with Credit Suisse. Your line is now open.

Thank you. Good morning. First question is probably for Bahir and its just on the capital recycling program. And maybe just a point of clarity, what assets remain on the BIP balance sheet versus the interests that BIP has in BAM funds?

Hey, good morning, Andrew. I think we're left with three assets that are held directly on BIP's balance sheet and that would be our U.K. connections business, our North American gas transmission business or gas pipeline business, NGPL. And the third one being our Western Australia rail business.

Okay. That's great. Thank you for that. And then maybe just a follow-up. Is the interplay between the super core fund that BAM has and that was used for Cove Point and then say, before, and then just BIP itself? How do how do you envision that working together and how is it delineated?

I'll answer that, Andrew. BIP invests in a minimum of 25% of BIP for transactions, which is our, like let's call it our global flagship fund and value-add fund, the one that targets returns in the 12% to 15% range. And I say, 25 plus its obviously minimal 25% plus any co-investments or additional capital wants to do in large transactions. And then the super core fund is an open-ended fund. It's targeting returns in the, let's say, the 8% to 9% range. BIP is not an investor in that fund. And while there's opportunities to invest alongside the fund if there's significant co-investment opportunities given the return threshold, it's highly unlikely that we would do that. You know, that BIP is seeking returns the same as the flagship fund.

That's very helpful. And then maybe just a follow-up. Is there a prospect for certain assets once they reach a certain valuation point or maturity level from stabilization of cash flows to effectively have assets transfer from BIP or one of the BIP funds into the super core on a longer-term basis?

No. I think the -- I think we've decided that, that falls into life is too short camp [ph] and we will sell assets to third parties.

Okay. That's great. Thank you.

Our next question comes from Rob Hope with Scotiabank. Your line is now open.

Good morning. Just a question on the kind of 2020 exit guidance of 12% to 15% higher than current levels. Of what basis that is? Is that a kind of annualized Q1, 2020 base or kind of including Indian Telecoms? And does that foresee additional unsecured investments right now?

Hey, Rob, it's Bahir. Maybe I'll tackle that one. So, yes, what we're eluding to there is that are hopefully by Q4, 2020 our results on a per unit basis will be 12% 15% higher than the $0.68 that we reported in Q4, 2019. And so, what that assumes is obviously the hedge rates I spoke about earlier it assumes that we're flat on the Real to Q4. But at the higher end maybe you get a little bit of a pickup in the Real. And it also assumes that Jio the Indian deal closes pretty much at the end of Q1, 2020 and assumes that CBB closes in Q4.So that's why we felt that Q4 is probably a better run rate to speak about. And also because we have a bunch of asset sales on the go and so we've taken a crack at assuming when those will close at which point in time and so that's why Sam made the comment in his remarks that between Q1 to Q3 you'll have some, maybe some ups and some downs depending on which quarter some investments closed in or some asset sales closed in.. But by Q4 we should have gotten all the pluses and minuses contributing or taking account in our results on a full basis for the quarter.

All right. That's helpful. And then just turning over to Australia. Australia wildfires is kind of have been simmering down now. But any impact on Q4 and lingering impacts into Q1 on the operations and the overall activity in the region?

Hi, Rob, it's Ben here. Look, thankfully the impact of these fires on us has been minimal. All our people are okay and all of our assets are okay. So we really had no direct impact on any assets. We did have some minor impacts like the odd train path here or there that really got deferred because of localized issues. At our port operations, we did have a couple of days of downtime because of just air quality conditions and bringing the labor into the port wasn't available that day. So minor things like that. But overall not a big impact and seems to have subsided at this point.

Thank you for the color.

Our next question comes from Jeremy Rosenfield with Industrial Alliance. Your line is now open.

Thanks. Hi guys. Just one cleanup question related to BIPC and how that may or may not interplay with the CBB transaction. Is there a timing sort of element in the creation of the BIPC or the distribution of BIPC that you sort of may want to wait on that distribution to see how the CBB transaction plays out? Or you go ahead with the BIPC distribution regardless of developments of the CBB. I'm just kind of curious on that?

Hi, Jeremy, it's Sam here. The BIPC transaction isn't impacted at all by the CBB deal. The CBB deal, There's no shares involved in that transaction. It's a pure cash transaction And, that, closing is just dependent on, its own regulatory constraints. And so if we confuse you, the regulatory issues that Bahir spoke about, we had to clear from a SEC OSC [ph] perspective, I have nothing to do with the CBB transaction.

No, I was just curious in terms of whether you wanted to make sure that the BIPC was in place before to provide greater liquidity, you know, for BIP, but I guess that answers that question. Okay. That's it for me. Thank you.

Okay.

Our next question comes from Jonathan Reeder with Wells Fargo Securities. Your line is now open.

Hey good morning, gentlemen, thanks for taking my question. Can you give us a more in-depth update on the CBB opportunity and process as well as the likelihood of the deal getting closed in a year? Anticipating Q4 closed you just mentioned, but obviously there was an unsolicited higher offer made for CBB and just curious what the path forward is both from CBB’s board perspective as well as, Brookfield propensity or willingness to maybe match higher offers without compromising your return hurdles?

Hi, Jonathan. I was wondering if someone was going to ask me about the…

I wasn’t…

And, look, unfortunately, I don't think it's appropriate that I really, get into that in much detail. I can't obviously speculate about the board or what, the competing proposal whether or not it may come to fruition or not. We’re I guess all I will say is, we're monitoring the developments closely. We feel, we've built a good relationship with the company, and we remain enthusiastic about completing the deal. We think it's a good business and we hope we can get it.

Is there any sort of, philosophy at Brookfield towards, matching these higher offers? Or do you typically just kind of let your offer stand as a value investor saying that it's kind of not necessarily the best case scenario, but this is -- this is our offer in order to achieve our returns and going higher with compromising that ability, is that a philosophy there are not necessarily?

Well, we've, you can go through our history, we’ve done many take privates, whether it's Babcock & Brown, Asciano is -- I can probably go through a whole host of them. You know, sometimes, transactions go through smoothly other times they are a bit more complicated. Yes, we look at each situation differently. And we protect our interest and try and do the best deal we can. We're not going to be crazy about it. But obviously, we'll take into account the economics of each situation.

Okay, and then what is kind of the next step at this point, is the CBB board, do they need to respond to the unsolicited offer? Or, what's the next kind of milepost for us to look for?

Well to be fair, those are -- that's probably a question better for the company. But what we know is that proposal was put in, it's still not a firm proposal, and until it becomes a firm proposal, then there's nothing for anyone to respond to. So it may be a nothing, or maybe it turns into something. We don't know.

Okay, thanks. I appreciate the time.

Okay. Thank you.

I'm showing no further questions in queue at this time, I'd like to turn the call back to Sam Pollock for closing remarks.

Okay. Thank you, operator. And thank you everyone. I think that was a record for a number of questions that we received. Is that right, Tracy? Yes, she's nodding. So thank you for your interest. And we appreciate all your support and look forward to talk to you again next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.