Ladies and gentlemen, thank you for standing by. And welcome to the Brookfield Infrastructure Partners' L.P. Second Quarter 2020 Results Conference Call [Operator Instructions] At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. [Operator Instructions] It is now my pleasure to introduce Managing Director, Rene Lubianski.

Thank you, operator, and good morning. Thank you all for joining us for Brookfield Infrastructure Partners Second Quarter Earnings Conference Call for 2020. On the call today is Bahir Manios, Chief Financial Officer; Sam Pollock, Chief Executive Officer; and 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 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 Web site. With that I will turn the call over to Bahir.

Thank you, Rene and good morning, everyone. I’m pleased to provide an update this morning on how our business performed this quarter. I'll start off by touching on a few macro level points before going through a review of our financial and operating results for the period, which were on an overall basis better than expected. And then I'll conclude my remarks with an update on our balance sheet and liquidity position. Sam will then take over and go through our strategic initiatives and provide an outlook for the company going forward. The second quarter was obviously a very challenging period as the global economy experienced a sharp retraction due to the economic shutdown imposed by goverment. Over the past month or so, we've been very encouraged by the return of economic activity with the gradual reopening of economies. While many industries have been hard hit, the infrastructure sector has demonstrated one of its most coveted characteristics being as highly resilient cash flows. As we communicated previously, each of our businesses were deemed essential and thus, provided largely uninterrupted service throughout this challenging period. Our results for the quarter reflect certain timing impacts that are expected to be recovered over time. These include delays recognizing earnings associated with the build out of our contracted backlog of projects in our UK connections business and reduced traffic on our toll roads, for which we expect to be fully compensated on under force majeure provision in our concession agreements. Across all our geographies, where we have GDP sensitive revenues, we have seen strong recoveries in volumes once restrictions were lifted, while we are pleased with the faster than expected recovery of many economies around the world that we do business in and number of our operations continue to operate at levels that are…

Thank you, Bahir and good morning, everyone. For my remarks today, I'll provide a brief update on some recent strategic initiatives and I'll follow that with a spotlight on our regulated terminal in Australia and then I'll finish up the call by providing an outlook for the business. It is our belief that one of the biggest economic costs of downturn will be that many industrial companies and all governments will be significantly more indebted. Once the immediate measures to stabilize economies and businesses have been implemented, governments and businesses alike will need to evaluate alternative source of capital to repay excessively high debt levels. We've spoken in the past about the secular trend of government seeking investment from private sector to acquire and build out infrastructure. With the deficits along with the desire to stimulate economic activity, we expect the impetus for this to become even more pronounced. In addition, many corporations will be susceptible to tighter credit markets until need to reduce debt levels throughout the sales. Suffice to say this is an attractive environment for Brookfield Infrastructure to source investment opportunities for the foreseeable future. At the moment, the vast majority of our global investment teams have returned to the office, which has reinvigorated our deal activity and outreach activity. We are currently focused on executing several medium sized tuck in acquisitions for various businesses in our energy, transportation and data operations. As a result of the potential synergies, we believe that these acquisitions should be highly accretive at close. Furthermore, we're evaluating numerous new investment opportunities in all our regions. During the quarter, we made progress on various strategic initiatives. First, the sale of our North American electricity transmission operation closed in July. This resulted in $60 million of proceeds to BIP and an IRR of…

Thank you [Operator Instructions]. Your first question comes from the line of Cherilyn Radbourne with TD Securities.

With regard to the need for industrial businesses and governance to reduce heavy debt loads by monetizing infrastructure. For what time period do you think those opportunities may unfold? And with respect to governments in particular, do you think that activity will extend to regions where historically there's been some resistance to private ownership of infrastructure?

For the first, I guess the first part of your question was just how quickly will we see it unfold. I guess my view there is that’s probably dependent on how long the stimulus will stay outstanding. So I think if the central bank continues to -- and governs themselves specifically, saturate the market liquidities and the debt markets will remain open and people will probably take advantage of debt for a period of time longer. We do know that there will be a limit to that. And my expectation is that we will first see corporations look to recapitalize their businesses as there will be period full of holding too much debt for too long. So I think, I'd be speculating on a specific timetable but I think in 2021, we will see many opportunities arise from corporate. With governments, you touched in your second part of your question the willingness to do that. I think, going into next year, there will be a realization amongst governments that they will have to either increase taxes substantially or take other measures to raise revenues in order to fund these deficits. I think that will start the conversation around selling some infrastructure and/or utilizing new structures, maybe they haven't been devised yet to bring in institutional capital into investing in parts of the economy. So, I think this will evolve. Nothing ever happens quickly with governments. But the magnitude of the deficits and the debt is just so dramatic that our view on this subject is stronger than right now.

Second question is quicker, here I was just hoping you could give us a bit of an update on how volumes are trending on your transport assets to date in Q3?

So we are, as we've telegraphed in the letter, revising our outlook for the balance of Q3 and for the balance of the year, just in response to the quick reopening of the various economies around the world. And so you noted transports in particular. Our North American -- our rail segment, that’s trending positively. So, we would -- the second quarter was relatively strong compared to where we even -- what we initially forecasted coming into the quarter and I would expect Q3 and onwards to be also modestly positive from here. If you look at our toll road business, so we had forecasted for volumes to be down about 40% coming into the quarter. We -- results came in about 20% better than that. And where things are at today, we think our forward volumes in the second half of the year will be about 10%, I’ll call it, normalized levels. So, also considered a bit of an improvement over Q2 levels. And then on the ports as well, coming into the quarter we thought those would be about 10% to 15% off, they landed about 5% off and we would expect that trend to be also positive in the second half of the year.

Thank you. Our next question comes from the line of Robert Kwan with RBC Capital Markets.

I think just dig into your comments on U.S. midstream, and one of the things you mentioned was was looking for assets that complements your existing assets. So just wondering if you can just elaborate on that, whether you're focused on an extension of your existing asset base expansion pretty much on top of what you've got for vertical integration?

Yes, I think we're always looking for opportunities to spend our existing networks and we've reported many expansions of the NGPL pipeline. I think, what we're referring to in our comments there was the fact that our focus today is primarily in the natural gas sector in the U.S. And so midstream assets within for that commodity and assets that have a very attractive contracted profiles. As you know, what it served us really well during this period of time is the fact that virtually all our midstream assets are highly contracted. And as a result, they performed spectacularly during this downturn and we haven't been impacted by reduced drilling, like a lot of other interim operators have been. So, it's really those types of attributes that we're looking for and that type of, that sector that we're focused on.

And just by citing the U.S. specifically. Is there really just you know rates we hear that your lessons is with Canadian midstream and can you just talk about some of the factors as to why U.S. versus in North America and kind of lump in Canada the next?

Again, I wouldn't read too much into that. I think the fact of the matter is the opportunity set in the United States is just much larger. And so, we just tend to see more opportunities there. But as everyone is familiar with, we have a large operation in BC as well and we monitor opportunities that rise in Canada as well and if the right one surface, we would definitely consider it. But the amount of opportunities here in Canada are much smaller and lower scale than what we see in the United States.

And I’ll just finish with a question on asset recycling you highlighted the robust market that you're seeing. Has anything changed versus the pre COVID-19 kind of thoughts you had with respect to the asset typess or the amounts of potential sales, maybe with that you profiled DBCT, and is that an asset that you now like to own longer term, or could that be in the mix coming back to the asset monetization processes?

So, I think there’s are two elements to your question. Just I think the first thing is just on assets that are attracted to the market. I think, today, assets that have proven themselves to be resilient during market downturns are more favorable than ever. So those high quality utility like businesses are the most sought after and particularly in this low interest rate environment and maybe with a growth outlook that looked a little diminished for the near term, those type of businesses clearly are the ones that we think will attract the highest valuation. And DBCT definitely would tick all those boxes. As it relates to how we would choose between which ones we might sell and which ones we might hold on to, I think our view has always been that we bring to market those assets that we believe we have de-risked and execute our business plan and those that we think we can achieve an attractive price and then reinvest those proceeds at higher returns. And so, DBCT is a great asset. We would love to hold it forever. But also if we got the right price, we would consider it for sale as well. So, I think we think about that. We look at all our assets in that manner, nothing is sacred.

Thank you. And our next question comes from the line of Rupert Merer with National Bank.

On capital recycling, you've mentioned target of $700 million of liquidity from two asset sales. So on the investment side, you've talked about a fair amount of activity, looking at some tuck ins. Are you able to quantify a target for the investment run rate over the next year or the coming quarters?

The investment run rate often dependent on market conditions. So, let me start off with that caveat. If there's great opportunities then we will invest heavily and we will find the capital through asset sales or raise new capital. And if the returns aren't there then we'll be patient. But I would say on average we typically looking to invest approximately $1 billion a year of new investments. And these days, we will source the vast majority of that through recycling the capital. So the $700 million plus or minus, it could be a bit more we get from the assets, but I’d say for the most part we see those amounts being roughly the same.

So for today, you have more than $4 billion in liquidity, I believe, and you're not looking to invest at a rate much faster than what you can generate from capital recycling. How much liquidity are you comfortable holding? And when you look at that $4 billion number, do you see that as nice to have in case a very large opportunity comes up for, or is there a minimum level that you'd like to hold?

It will typically fluctuate, but I would say it's very common for us to have company wide liquidity plus or minus $3 billion and corporate liquidity usually in the $1 billion to $2 billion range. So, that's typically what we operate in and we try to manage within those levels.

And secondly, looking over the UK, we have Ofgem proposing lower ROEs for regulated utilities. Can you walk us through the regulatory process over there and what in impact we could have on your operations?

Yes, all those I guess the new wax that are coming out for the companies in the UK were all factored into our business plan. And as those new numbers play through the revenue streams that we earned through our business in the UK, they really have no meaningful impact. So, at this point, they've been factored into our plans and we've been obviously monitoring it closely. But it's all fallen in line with what we foresaw. And so we don't expect any real impact from it going forward.

Thank you. And our next question comes from the line of Frederic Bastien with Raymond James.

You mentioned activating two new indoor wireless systems in buildings across the UK and then exploring the potential to export the model to other Brookfield markets. I found that quite interesting. I was wondering if you could provide a bit more color?

I guess there's two things that we sort of see as trends, one is just the continued evolution of 5G and the need for increased density in wireless and communication networks. And I guess the second trend that we've seen is owners of commercial real estate very much understand the value of having high quality reception in their buildings. And as somebody who's very familiar with the real estate business, we want to work with owners of large real estate portfolios to find opportunities to build out those networks for them. So, we started this business in the UK. And the next market that we are going to target is in North America. So, leveraging Brookfield's overall knowledge in real estate, we hope we can build an interesting business in this space. But those are the two key trends that are driving the thinking behind.

And then just building on the data, there was an article published yesterday suggesting you may be looking at a bid for the fiber unit of Brazilian telecom company. Are you able to comment on it?

We don't typically comment on transactions, so I'd rather not.

Lastly from me, there was, unless I missed it. There was no mention of your container business in your prepared remarks and whether it performed in line with expectations, probably that was maybe a concern heading into the quarter. How did that business actually performed?

So maybe there wasn't much of a spotlight. It is a much smaller business on a relative basis. But we would have thought that would, I think I mentioned 10% to 15% off from a volume basis and we actually came in much better than that and the outlook for the balance of the year is positive. So we're quite pleased with how that business has performed just in light of how that went on.

Thank you. And our next question comes from the line of Robert Catellier with CIBC.

Just a couple follow ups here, you talked about the impact of liquidity in the market might in the short-term reduce government's desire to sell assets, but eventually it will get around to it. I am curious about whether you're seeing any impact of this high level of liquidity on competitive behavior. Are you seeing any irrational competitive behavior and bidding for assets?

Look, there has been and has always been competitive market. We sometimes witness transactions at prices that don't always make sense to us, because different people have different strategies and return threshold. I wouldn't say though that we're seeing any change in buyer behavior of any sorts. So, while I think we could always point to certain transactions that might feel out of ordinary, we can do that at all points in the cycle and have what last five years. So I think the short answer to your question is no, behavior hasn't changed dramatically. But the bid today is that solid as it was pre COVID and so that's what gives us the confidence to come back out into the market with some high quality assets with confidence that we'll get good prices.

And then can you provide a little bit more color on the securitization opportunity in the U.S.? Obviously, that was a success in the Canadian business. So how far along is the process took a while to get it done in Canada, but is the market more developed in the U.S. and ultimately, how much capital do you think you can pull out of that business?

It's fairly progressed, we've been working on it for about six to nine months. The hope would be that it won't take as long as the Canadian one took. It is still a newer asset class in the U.S. The whole rental strategy of the HVAC units is not something that's typically seen today in the U.S. and hence the newer strategy that we're bringing to market. That being said, there are a lot of comparable examples out there that we're hopeful that the rating agencies will drawn. So, I believe and I would expect that this should close in the second half of the year. As to quantum, I'm not ready to give a number out there on the call today. It is a smaller business compared to the Canadian one, it’s less established for an ramp up mode in the U.S. But this program will get much larger just given the success we've had even thus far executing on our rental strategy, so maybe I'll leave it there.

And just my last question here. This is obviously a little bit early but you're still in the midst of recovery but you’re confident on where the payout ratio is relative to your normal levels being influenced, obviously, by the COVID downturn and expected to improve with the closing of Jio. But I guess I'm wondering what you think you need to see between now and the end of the year to maintain your dividend growth strategy?

I'll start by saying that we haven't had those conversations with the Board yet, and that typically will happen after business plan season and see how the end of the year turns out. But the way the process works is we set the dividend base off of the long-term run rate for the business. And we look through generally short-term iterations, because we run the business for a long-term. And, at this stage, the revenue and cash flow generating ability of the businesses has not been impacted by COVID and we would not expect it to be longer term, and that will all be taken to account when we come to the business planning season. And I think the last consideration obviously will be take into account the various businesses we bought and sold during that period of time. And so we'll have some businesses that will no longer be in our -- generating cash flow and the other ones that we will have recently bought and will be so, all that will be taken to account. So, it's a bit premature. I can't give you any sense of what that outlook will look like. But with the main point being that we take a long-term perspective to it and our view today is that COVID has not impacted the long-term cash flow generating ability of the business.

And our next question comes from the line of Asit Sen with Bank of America.

On the Indian telecom deal, the slight delay, is it COVID related or is it normal course of doing business? And then, Jio was successful in raising significant capital recently. How do you see the potential of investing more in India telecom? And broader context if the reshoring trend away from China takes whole, how do you see the data infrastructure trend in that bucket?

Maybe I'll start with that and maybe Ben if you'd like to jump in. Let me deal with questions on the Reliance portfolio first. We do view extremely positively the fact that Reliance Jio raised $20 billion from private equity and technology companies. We think it's tremendous validation of the business plan they have for the company and it provides them tremendous amounts of capital to grow the operations of not only the telecom but the e-commerce side of the business. And we do think that the potential for them to grow a business of the scale of equity -- they have visions of becoming both an Amazon type business, as well as social media type business. And I think the scale of that market has huge potential. And that given the lack of landlines in the country means that the wireless infrastructure will have to be used extensively, and having ownership of those towers means, we think there will have to be even further investments in that infrastructure, which positions us really well. So suffice it to say, yes, we think it's great. And I think your other question in that regard was just the delays. I think it's a mix of a number of factors. Obviously, COVID impacted all regulatory approvals around the world. Things were not as efficient. The Indian market can sometimes be less efficient from a regulatory perspective than others, so that's a factor. So it's a number of factors. But as I mentioned in our remarks, we've had very positive feedback from the regulators. So we think it is all on track. And then your third question was regarding China?

Yes, if there was a reshoring trend that takes place away from China and it’s very early days. How does Indian market in telecom data look in that environment for you guys and many more?

To be honest, I don't know by the view yet. I’ll have to think about that. I don’t know, Ben, if you have a comment on that.

I guess my only thought, I hadn't thought this through either with the China impacted, but just the opportunity in India alone given the scale of the country, the population base, the colocation, the fact that many of these networks haven't even leveraged colocation yet. I just think at this point in my mind would be a bigger driver of growth and reshoring of industry, but it would only add to the positive momentum. But at this point, the opportunity is pretty significant just in and of itself in the current environment.

Thank you. And our next question comes from the line of Rob Hope with Scotiabank.

Just two follow-ups. First-off, when you're talking about your M&A pipeline and corporations looking to move down debt levels. With the liquidity we're seeing in the market, have Board’s been receptive so far or could this be more of a 2021 conversation?

I think the conversations will build as the year goes on. I think the reception at every company is dependent on their own particular situation. So we tend to focus our current ideas on things that we think are actionable in the near-term, and so trying to pick those boards and management teams where their needs are immediate. But as we mentioned earlier in the call, some companies have managed to kick the can down the road a bit with being able to tap the debt markets. But ultimately, don't need to recapitalize and do that either by raising equity or by selling assets. And so we think these discussions will continue to take place over the next six to 18 months. So I think we're going to be extremely busy and we're going to see lots of great opportunities.

And then a follow-up in terms of your public securities portfolio, looks like you're still making some investments there but you have realized some profit there. Can you maybe add some color on kind of the size of your holdings currently and which sectors look most attractive to you?

I can deal with just the first part, we have about a billion of cash and financial assets on our balance sheet and we earmark just over $500 million of that for the Jio transaction. So the balance represents a mixture of equity investments and toe hold, as well as some bond financial asset type investment, debt investments. So we have still quite a sizable exposure. And look, our focus has been on those, probably those sectors that were most impacted by COVID where we saw significant deterioration in share prices. So, I'll leave it at that.

And our next question comes from the line of Andrew Kuske with Credit Suisse.

Since inception you've had an emphasis on inflation protected cash flows, whether it's by way of contract or a regulatory construct. So maybe just in light of the economic environment we're in. Are you having any positive or negative impacts from deflationary pressures really on a near term basis? And then when you think longer term, does it really set you up for better than the inflation expectations you've had historically?

So on your first part of your question, fortunately -- there has been, I think over the years, the odd, weird situation where we have, you know, a deflationary impact on one of our inflationary assets but it's extremely rare. And I can't think of anything at the moment where we're having negative tariff increases. So nothing has popped up in that regard. It's something we do watch carefully. It's kind of like, the same example would be with negative interest rates, always making sure that we don't have a situation where our swaps are mismatched with any types of debt securities. So I don't think -- so there's no issues today. And then I think on how we're set up for the future. I think your question was, and maybe tell me if I got the gist for this right. But you're suggesting that by having the inflation linked cash flows to extent that these monetary policies lead to higher inflation in the future, we should be well positioned to capture that. And if that’s the gist of your question then I think it's a real possibility that we see inflation down the road and I do think we will benefit from that substantially. I think we benefit two ways, one is to accept that there's high inflation. Our inflationary cash flow or tariffs will rise substantially. Also, we do have the GDP exposure, which today has hurt us in some spots. But when the economy recovers that does allow us the opportunity to pass along real rate increases in some of our tariffs and tools. So hopefully we can have higher growth in the future.

And then would that essential benefit that comes in the future over greater inflation environment, does that cause you to really revisit your capital structure at this moment in time with the debt in your capital structure of maybe being opportunistic in the current rate environment and the spreads that we see and locking in debt that further enhances that profitability in the future with rising inflation?

I think our financial strategy or treasury policy has always been to lock away rates to make sure they're fixed and also increase our tenors as much as possible. That has hurt us at times as rates have come down by locking in longer term rates, we've probably penalized ourselves to a certain extent, but we've done it as a risk management policy. I think if we continue it then to the extent that rates move the other way, which would seemingly be the obvious direction given where rates are today that should protect us if rates move-up. So, I think we'll continue with the policy, we’ll continue to push out. We have recently issued here debt numbers thus, we'll continue to push out that tenor.

Thank you. I will now turn the call back over to CEO, Sam Pollock, for closing remarks.

Okay, thank you, operator. And look we appreciate everyone's time today, and thank you for joining the call. We hope you enjoy the rest of the summer. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.