Hello, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners Q3 2022 Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. It is now my pleasure to introduce Chief Financial Officer, David Krant.

Thank you, Andrew, and good morning, everyone. Welcome to Brookfield Infrastructure Partners Third Quarter 2022 Earnings Conference Call. As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure. I'm also joined today by our Chief Executive Officer, Sam Pollock. I'll begin with a discussion of our third quarter financial and operating results as well as touch on our recent capital markets activity and balance sheet strength. I'll then turn the call over to Sam, who will provide an update on our strategic initiatives and concluding remarks. Following our commentary this morning, we will be joined by Ben Vaughan, our Chief Operating Officer, for our question-and-answer period. At this time, I'd like to remind you that in our remarks today, we 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. Brookfield Infrastructure delivered another strong quarter with funds from operations or FFO per unit of $0.68, a 15% increase compared to the same period last year. Our favorable results were driven by organic growth of 10% and the contribution of nearly $2 billion of capital deployed over the past 12 months. Taking a closer look at our operating results by segment. FFO from our utilities business were 8% above the prior year at $196 million. The base business benefited from inflation indexation and the commissioning of approximately $500 million of capital into the rate base during the last year. Results also benefited from the contribution of two Australian utility acquisitions completed earlier this year. These positive contributions were partially offset by the impact of increased borrowing costs at our Brazilian utilities…

Thank you, David, and good morning, everyone. As you just heard, our business generated strong financial results during the quarter, and we believe we will continue to perform well in all business environments. We've adhered to our financial strategy with a capital structure comprised of long-term debt at fixed rates, eliminating the impact rising interest rates has on our business. Also, a significant portion of our revenue frameworks have embedded inflation indexation, which allows us to expand our margins during periods of higher inflation. These factors, combined with our substantial capital backlog should allow us to continue to grow our FFO at target levels for the foreseeable future. In fact, our capital backlog has been significantly expanded through our recently announced partnership with Intel Corporation to invest in a $30 billion semiconductor foundry in Arizona. Virtu will be providing approximately $15 billion over the construction period for a 49% interest in the facility. Most of our capital commitment has been sourced from nonrecourse debt with our base interest rate exposure fully hedged concurrent with signing. Virtu's approximately $2 billion equity investment, which will include approximately $500 million from BIP is back-end weighted closer to the operational phase of the project. This investment is structured to achieve an attractive risk-adjusted return. We draw parallels to other data investments such as hyperscale data centers that are generally contracted on a long-term basis with high creditworthy counterparties, where we do not assume technological risk. In this instance, we view Intel to be a creditworthy and market-leading partner. The transaction is expected to close by the end of 2022 and an example of the large-scale capital required to support the onshoring of critical supply chains. This macroeconomic trend to e-globalize, combined with other trends to digitalize and decarbonize were coined by us as the…

[Operator Instructions]. And our first question comes from the line of Cherilyn Radbourne with TD Securities.

Thanks very much and good morning. My first question is when you get a downturn in the public markets like this, what in your experience, is the typical lag before that impacts the private market and result in value investing opportunities. And apart from transportation assets, which clearly have more volume sensitivity, are there any other areas where you think you might see opportunities emerge.

Hi, Cherilyn, thanks for your questions. In regard to the lag, I think in our experience, it usually takes a number of quarters before we see the impact of lower liquidity impacting companies that have poor balance sheets and who didn't plan ahead. So, I think we're probably still a couple of quarters away before those companies really feel the effects and need to look for capital. And as far as valuations, that's typically when people are motivated sellers, that's when you might see some impact on values in those sectors. I'd say just as a caveat, infrastructure assets as a whole tend to be pretty resilient. And so I think we likely won't see for the most part, significant declines in the value of infrastructure assets like you might see in other sectors like private equity. So that would be one thing. And I think to your second question about where we might see some distress and you obviously flagged more GDP sensitive sectors, which is a fair comment. I think I wouldn't necessarily draw any lines towards sectors or regions but mostly towards individual companies who, as I mentioned earlier, have a very weak balance sheets where they've taken on too much debt have near-term maturities and the market does a good job of finding those companies and punishing them. And I think that's probably the place to look. And there are always a few that surface every cycle.

Okay. That's very helpful. And then maybe just quickly, do you have any comments on the recent election outcome in Brazil and the impact on your own appetite and the appetite of institutional capital more generally to participate in that country?

Sure. I'll maybe take that one and maybe Ben might add a few comments as he lived down there for a number of years. But I think, obviously, we watch the results very closely. I think the and look, this is evolving day by day, but our first impressions are generally positive in the sense that the transitions appears that it will go relatively smoothly, even though there are some protests going on. Bolsonaro has reaffirmed respect for the constitution, he has positioned themselves as the leader of a strong opposition in Congress. And as I think most people may have seen a couple of weeks ago, Congress generally voted in more center right legislatures. And so I think that will be a good counterbalance to the new government that was bold headed by Lula. And I think the other thing that we take as a positive is that the [indiscernible] has nominated a well-known Centrist [ph] politician often as leader of the transition. And so I think that sends the right signal and we expect that the ministers that get appointed should be reflective of a balanced cabinet. And I think the other thing, as I mentioned, [indiscernible] Chief of Staff has already started the process transitioning the government. So all the things we might have worried about with just noise around the transition does not purely it's going to take place. I think all the main government officials are now planning for change. But I think the big thing also is that any concerns we might have had a big shift to the left, I don't think that's going to take place. And the last thing I might just mention is, I think we're actually relatively positive on the outlook for Brazil in the near term, at least. And part of that is because Brazil actually got ahead of a lot of the inflation issues and move rates up quickly. Already, we're starting to see that it feels like they've got inflation under better control than a lot of other places it in fact may be starting to subside a bit. And as a result, I think there could be stability in their interest rate and FX rate for the foreseeable future. So all in all, we're positive. I think that leads to a good investment environment. We see lots of potential activity with renewed private stations, particularly in the transmission sector in the coming year. And so I think it will attract a lot of capital. And so that's both good for us from a perspective of deploying capital, but the extent that we recycle any capital, I think there'll be lots of interest coming. So I apologize for the long-winded answer, but generally, we're mostly positive on situation.

That was great. That was all for me. Thank you.

Thank you, Cherilyn.

And our next question comes from the line of Robert Kwan with RBC Capital Markets.

Good morning. Just kind of coming back to your letter and you're highlighting the success you've had with the contrarian approach, DDI and Brazil. Just wondering if you can compare the dislocation you're seeing now with the past. You did mention balance sheet leverage Sam but I'm just wondering, can you compare the carve-out potential that you see at this point? And then I know that you didn't want to get too much in the sectors but maybe take it the other side, other than infra as you highlighted, are there factors that you just don't think you're going to see a lot of opportunities in this environment.

Hi, Robert. Maybe dealing with your last question on is there any sectors that we don't see any opportunity I think your answer is no. I think there should be deployment opportunities across all the 3Ds that we've flagged. And what makes them very interesting for us is the fact that the capital required for all 3 of those trends is massive. And we're in an environment where capital is scarce. So I think all the places that we are hunting and see as the main area for us to focus there should be opportunities for us to invest in. In relation to deep value, it's still a little early to make any comparisons to other points in time because we're obviously at the relatively early stages of this, let's call it, correction for lack of a better expression. And so this could go on much longer than everyone today expects. And I think there's maybe I shouldn't say everyone expect because I think there's lots of different views on whether this will be a short period of tightening or whether or not it could be higher rates for longer. And so we'll have to see how this plays out. If rates stay higher for longer and the recession is deep, then this could be a very attractive time for us. And obviously, the one area where things could get a lot worse because of geopolitical issues is Europe. And so clearly, that's a market that we're spending a lot of time evaluating. North America at the moment, feels a little more immune to some of the factors.

Got it. And then can you compare your current deal pipeline versus maybe where you were earlier this year? Is there more on the front burner or is this commentary really just flagging your past success and if this continues to play out, as you mentioned, maybe a couple of quarters or so that you're going to be really well positioned if the opportunities come up.

Well, our pipeline is always pretty deep, Robert. We have a large group of professionals around the world evaluating opportunities and receiving lots of inbounds. And so we're never short of opportunities. I'd say what we are always trying to do is to high grade them and pursue those that we think are the most attractive and take into account the current market conditions. So our pipeline is deep, I think, but we also are prepared to be a little patient, given the amount of capital we've deployed and the fact that we have a number of transactions closing that's providing lots of growth for the business for the next little while. We're looking for some very interesting large transactions that could really move the needle. And so we probably are just, I think, being mindful of that opportunity.

Okay, that's great. Thank you very much.

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

Good morning everyone. First question is on the asset monetization pipeline of $1.5 billion. In your prior remarks, you did mention that in a couple of quarters, you may see some softness in asset pricing. Just want to know if that has creeped into your existing processes and whether or not you've had to alter your monetization plan, not necessarily just for the 1.5%, but the next tranche behind that?

Yes, hi Robert. Look, I think the one I guess part of my comment to Cherilyn was we do operate in a sector that is very attractive for all the investment attributes that we described for many years, the resilience and predictability and the fact that these assets tend to weather environments like this. So for the most part, we know there's a lot of dry powder out there and so investors in this sector will continue to invest. I think businesses where that is portable, will be much less impacted by the current situation than some businesses that might be carve-outs. So to the extent that you're delivering some on the business and then they're stepping into your capital structure for the most part, we don't expect to see too much in the way of declines in values. And so with that in mind, probably our focus on asset sales will be to sell companies where we can deliver balance sheets that are portable. And that, obviously, as a result, we shouldn't expect any decline in values. And as things unfolded, we see the direction of interest rates and as we see them start coming down, then I think to the extent that we have businesses that carve out or things like that, that where people have to put in their own capital structures. We might look at those businesses then. But for the most part, I think, to answer your question, selling businesses with portable debt would be something we would love to do.

Thank you for that. And then maybe a shorter-term question. During the quarter, it looks like you had another strong quarter of volume growth on your more GDP-sensitive businesses. Are you starting to see any softness there or is the outlook for volume still quite good at this point?

Hi Rob, it's David I can start and Ben feel free to layer on anything incremental. Look, I think if you look across our GDP-sensitive businesses, which predominantly are in our transport segment, I'd say we've seen pretty robust performance throughout the portfolio. Roads have been strong in all regions we operate. Our rail networks have done well in the current environment with growth in Australia, Brazil and the U.S. I'd say on the diversified terminals front, that's where you're seeing a bit of a mixed bag. I'd say our U.S. LNG facility is doing extremely well. Our container terminals in Australia are doing well. The one asset that has a bit of softness so far has been our U.K. port in PD ports. However, the one thing I would caveat is that largely, this business is highly contracted and as a landlord port owns a lot of long-term leases, conservancy rights so it's not as volume sensitive as some of the we would own. So I'd say that's the only place where we have seen volumes down in single digits but not significantly, but that's where we've seen a bit of softness so far as a result of what's going on in the economy there.

That's it for me, thank you.

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

Hi. Good morning everyone. You've answered most of my questions, but I'm curious as to how your the macro view that you've discussed at Landair, specifically the availability of capital might impact your approach to the distribution policy, specifically distribution growth given the fact that notwithstanding the macro environment, you have set yourselves up for a pretty strong FFO per unit growth outlook here.

Yes, hi Robert. So I'm not entirely sure the question. I think what you're trying to ask us is, and correct me if I'm wrong, will liquidity in the market impacts the decisions that the Board ultimately takes on growth in our dividend, given that on the surface, we have very strong FFO growth. And would we dial that back because of the conditions that exist in the market. I think that's your…

Yes, that's the question.

Yes. So and I would say the business itself has lots of liquidity. So I think generally, the board takes a longer-term view. I think one of the things that we'll look at is the capital allocation opportunities that we have within the business, mainly some of the organic growth in front of us as well as new investments. And it's possible those could weigh on how much of a dividend increase that we have. But look, I think we have a range, and I'm highly confident that the Board will be somewhere within that range. And in any event, we should be able to comfortably reduce our payout ratio at a minimum with these strong results. So I think we're well positioned from a unitholder perspective either with both strong dividend growth as well as improving our payout ratio, which we have been doing for the last number of years

Okay. That's helpful. And then maybe you can provide just a little bit more color on the North American submetering business and what partnering with the Brookfield real estate business can mean for the growth rate there?

Okay. Well, I love that business, but I'm going to get Ben to talk about it and to give him a chance to talk here.

Yes. So the I guess what we're excited about for that sub-metering business, it really partnering up with Brookfield really allows us to enter the U.S. market and accelerate our growth in the U.S. market. So we made a couple of tuck-under acquisitions in the business in the U.S. and then partnering up with our real estate business, where it makes sense to just further accelerate that growth just adds really a growth wedge and access to buildings that need our service that otherwise, we have to approach it a different way. So I would just say at a high level, it really just helps sort of turbocharge the growth profile of the business in the U.S. market. And right now, we have a good franchise in Canada, and we're relatively smaller in the U.S. and see a tremendous growth opportunity. So that's really where we see an initial growth booster for that business in that market.

Okay. Thank you very much.

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

Thanks. Good morning. I guess the question is targeted at Sam and it's really about just the partnerships. This has been a consistent theme on the Investor Days, I guess, a couple of months ago now and even on this call. Could you maybe just give us a sense of how you think this helps you expand the business on going in and buying certain assets or JV-ing and then also on the disposition of assets in the future.

Hi, Andrew. So when you see partners, you mean joining up with either our LPs or other institutional or other investors in buying assets, is that what you're referring to?

It's more broad than that. It's in the context of whether we look at Intel or the Deutsche deal most recently where you've engaged in a different kind of partnership than you would do in the past?

Okay. Fair enough. Look, I would say partnering with strategics. And so maybe I'll go down this path first and if you want to add another question, feel free. But parting with strategic has always been a key part of our playbook because at the end of the day, those tend to be situations where we can do a bilateral transaction and really structure a deal that meets their objectives at the same time can give us better risk-adjusted returns because often, we can trade certain things that they want and often that's various controls or operating decision-making. And in return for that, they may be prepared to give us some downside protection. So we have done that, whether that was with our transaction with Vale a number of years ago with Reliance Industries in India. These are all bilateral transactions where we were able to come up with really large-scale solutions that help them and gave us really good deals. And I would say the deal we did with Petrobras when we bought NGS was another example of a carve-out. And where we restructured the beginnings of a new industry in Brazil and that's been one of our best transactions ever. So I would say, we've always done it, and we think it could be some of our best transactions so we'll continue to look for those situations. And in fact, on the back of what we've recently done with Intel, it's allowed us, it's because it's so prominent, it's opened many doors for us around the world and I'm hopeful that it will lead to a number of other big transactions.

That's helpful. And then maybe if I could just follow on with those kinds of strategic transactions, their operational expertise and industry knowledge gives you probably better downside risk, but I guess the one question is at the top of the house for Brookfield, could you spread yourselves too thin by having too many balls in the air across too many business groups?

You'll have to help in on that a little bit, Andrew. When you say at the top there's too many falls in the year.

Yes. I guess if you just think of how many businesses you're running right now, it's quite different than it was at inception. You've scaled the business quite dramatically. But do you have any worries about being spread too thinly across all the groups

Well, no. Look, I think we have scaled up the organization as a whole to meet the growth in the business. And you've known us for 20 years, Andrew. So you know, you probably talk to maybe 5 of us 20 years ago, and I covered all the investment team and today, it's 500. And the whole organization is comprised of 2,000 people and that's just at the top of the house. So we've grown our business to be able to deploy capital in scale, but also deal with the complexities of operating in different businesses and in different geographies. So I feel very comfortable with our capabilities. And in fact, I think what's exciting for anyone who's invested across the Brookfield ecosystem is, I think we have an unrivaled unparallel business other than maybe 1 or 2 others around the world. So no, I feel confident in our ability to continue what we're doing.

Okay. That's great. I appreciate the color. Thank you.

Thank you. And our next question comes from the line of Naji Baydoun with Industrial Alliance.

Hi. Good morning. Just wanted to start off with the capital recycling. I think you had sort of a timeline in mind a few months ago about when that $1.5 billion could be announced or closed. Just wondering if that timeline has changed as well.

Hi, no, our expectation is that in the fourth quarter, we should have the transactions buying or at least in the right direction. And so next quarter, hopefully, we can provide more clarity on where we ended up.

Okay. That's great. And just going back to topic of partnerships. I think you noted that you might look to pursue some CCS projects in Canada. Are there any, call it, partnerships, or synergies with some of Brookfield Renewables recent investments in that market? Is that something you might be looking at?

Yes. So and Ben can jump in here as well. We referred to, I think some of the they call it [indiscernible] use the industry jargon, but basically area around the facilities in Alberta, where we can inject carbon and this is in relation to IPL. Yes, I think the short answer is as the technology gets advanced, and we're lucky to have Brookfield renewable investing significantly in those new technologies that we'll be able to leverage that knowledge and expertise to apply to our existing businesses. So we would definitely look to stay close to them as they make those investments and hopefully learn from them. Ben, do you want to add to that?

Yes, I would echo what you said. It's relatively early days on a lot of these strategies, but to secure rights like the ones our businesses just position us well. And like Sam said, the renewable business has a number of initiatives on this front. And over the years, hopefully, we'll be able to partner up in some ways and commercialize these initiatives.

Okay. That's helpful, thank you. And just maybe a cleanup question. I think you mentioned that in the Australian export terminal business, there were some attractive payments that were agreed upon going back almost a year. Were those in Q3 results and if yes, can you quantify them?

Hi Naji, it's David here. The retroactive payments were agreed upon after the quarter, so they're not in our Q3 results. The only thing our future results included the elevated rate for the quarter, which we knew ahead of time, but other than that, the retro payment for backdated prior to them will be in our Q4 results

Okay. And is it too preliminary to maybe quantify what that could be?

Oh, no, happy to. I think the company put out guidance that the total backdated payment was around between AUD 50 million and AUD 60 million, and we own about half of the business. So on a net to bit basis, I think it's between around $15 million to $20 million total.

Thank you. And our next question comes from the line of Devin Dodge with BMO Capital Markets.

Thanks. Good morning. So just a couple of quick questions on the connections business in the U.K. So maybe just to start with, I believe connections were up in the quarter, but are you able to give us a sense if you started to see or you expect to see a bit of softening in construction activity that may slow those connection sales?

Yes. Devin, at this point, we're seeing no slowdown. The business does have fairly normal variations in the pace of both sales and connections but at this point, we're seeing no broad-based slowdown and so there's no trend that we're noting, and the homebuilders continue to build out their portfolios in the country. So we monitor it closely but at this point, we're not noting any trend in any particular direction on that front.

Okay. And then, again, sticking with the U.K. Just can you remind us how the rate adjustments to homeowners work and any kind of restrictions on rate resets that there are any? And then on the connections revenues, are these negotiated with the utilities or construction companies on a project-by-project basis that could give you flexibility to adjust those to compensate you for a higher cost of capital? Just any thoughts you can share there?

Sure. So it's Ben again. I would say, first of all, to answer your second question first, we absolutely can adjust the economics of our offering to the homebuilders based on any economic impacts that we see so we can be flexible within that. And then once those are secured, usually, our economics are locked in and inflation protected over time. And so at this point, we're not really while we track the regulation very closely, I would think of it more as it could set a max rate for us. But generally speaking, we can reprice our product over time in order to accommodate any variations in either supply costs, delivery costs or financing costs generally over time in the business. So I don't know if that answers your question, but at this point, there is no huge exposure to not being able to reprice.

Okay, no it's a good color, thank you for that.

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

Hi, good morning. Only one question for me. Your contrarian approach to investing leads me to believe that Europe would rank pretty high on your priority list right now, especially with the geopolitical uncertainty and the related energy and currency crisis. Do you see opportunities to accelerate your capital deployment in the region or am I barking up the wrong tree?

Hi, Frederic. Well, look, I think you're correct that there's lots of factors which would suggest that opportunities could and should arise in Europe. We have over the last number of years, scaled up our investing capabilities in that market and last year, in fact, I think almost half, maybe slightly less than half the capital that we deployed went into that market. So we have already been seeing lots of opportunities. And I think there could be lots more in front of us. But the only caveat being that, as I mentioned at the outset, distress tends to be company specific more often than not. And so even though there could be more regional distress in Europe the large-scale situations that we look for where distress occur might just be a company somewhere else. And because they might have not managed their affairs properly. So I'd just give you that cautionary thing that just because one region is where there's more problems, it doesn't necessarily mean that's where the opportunity will arise.

Okay. That's helpful, Sam, thank you.

Okay. Thanks, Fred.

Thank you. Now I'm seeing no further questions. So with that, I'll hand the call back over to CEO, Sam Pollock for any closing remarks.

Okay. Thank you, operator, and thank you to everyone who joined the call this morning. We appreciate your support, and we'd like to wish you all Happy Holidays. I know it's a little bit early for that, but we won't be talking for another few months. So Happy Thanksgiving for Americans and Happy Holidays in the upcoming season. Thank you very much.

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