Hello and thank you for standing by. Welcome to the Brookfield Infrastructure Partners Second Quarter 2023 Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Chief Financial Officer, David Krant.

Thank you, operator, and good morning, everyone. Welcome to Brookfield Infrastructure Partners second quarter 2023 earnings conference call. As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure. I'm joined today by our Chief Executive Officer, Sam Pollock; and Udhay Mathialagan, Managing Director and CEO of our Global Data Centre platform. Udhay is joining our call from Mexico. So if we encounter any technical difficulties, we also have Ben Vaughan with us in the room today. I'll begin with the discussion of our second quarter financial and operating results as well as our liquidity position and the recent success of our capital recoiling initiatives. I'll then turn the call over to Udhay, who will expand upon one of the 3D driving investment opportunities, digitalization through the lens of our Global Data Centre operations. Finally, Sam, will provide an update on our strategic initiatives and an outlook for our business. At this time, I would like to remind you that in our remarks today, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on our known Risk Factors, I would encourage you to review our Annual Report on Form 20-F, which is available on our website. Beginning with our financial and operating results, we generated funds from operations or FFO of $552 million during the second quarter, an increase of 8% over the comparable period last year. Results were supported by the contribution of approximately $2.1 billion of capital deployed in new acquisitions over the past year, partially offset by the impact of asset sales and borrowing costs associated with financing these new investments. Organic growth was near the high end of our target 6% to 9% range, reflecting the benefit…

Thank you, David, and good morning, everyone. I'm pleased to be joining today's call to discuss the digitalization investment theme and the exponential need for data storage. Digitalization has been a strong tailwind driving our recent investment activity. It refers to large scale capital that is required to support exponential increases in data consumption. We typically invest in several core data focused areas, including fiber, telecom towers, indoor wireless systems and data centers. The data storage and processing industry in particular is benefiting from sector tailwinds, including the rise of generative artificial intelligence, which is transforming industries by automating complex tasks and advanced analytics. We're also experiencing an exponential surge in data storage and processing requirements from enterprises migrating workloads and applications from on-premises to the cloud, as well as the widespread adoption of new use cases such as 5G technology. These trends are amplifying demand for robust, well located and scalable data infrastructure, including data centers. This year, we capitalized on these tailwinds and have significantly expanded our data center operations. We secured the acquisitions of two development platforms, Data4 and Compass, which meaningfully contribute to our operating capacity and expand our presence in Europe and North America, respectively. In fact, following the closing of both transactions, we will own and operate one of the largest global hyperscale data center platforms. Our operating capacity will increase to over 485 megawatts with an additional 775 megawatts of capacity already contracted and reserved that will be built out over the next several years. Combined, we expect to have over 1.25 gigawatts of capacity over the next few years that is highly contracted to provide stable cash flow and is underpinned by major hyperscale customers. These customers are of strong credit quality and represent industry-leading companies that are at the forefront of…

Thank you, Udhay, and good morning, everyone. For my remarks today, I'll provide an update on our strategic initiatives and conclude with an outlook for our business. As we highlighted in our letter to unitholders, we continue to find good opportunities to invest capital above our targeted return thresholds. In that regard, for 2023, we have already exceeded our annual deployment objective securing three new investments totaling nearly $2 billion. Now, beginning with Triton, the Triton privatization, I'm pleased to say that nearly all the required regulatory approvals have been received and a shareholder vote has been set for August 24. We currently expect to close the transaction shortly after receiving confirmation of shareholder supports. As Udhay touched on just now, we recently accelerated our global data center growth strategy through the acquisition of two marquee development platforms in North America and Europe. These investments fill gaps in our existing portfolio, which was primary focus on the South American and Asia-Pacific regions. We now have development capabilities in all our core markets, including North America and Europe, and have become one of the largest developers in the world. Most recently, we entered into an agreement to acquire a co-controlling stake in Compass Datacenters, a leading North American hyperscale data center platform. The business has approximately 170 megawatts of operating capacity with a significantly de-risked capacity backlog of 565 megawatts to be developed on power-ready and owned land across several major campuses. We expect the transaction to close in the fourth quarter. We also recently closed the previously announced acquisition of Data4, our European hyperscale datacenter platform. Since announcing the transaction, the business converted 130 megawatt memorandum of understanding with a leading hyperscale client into firm contracted capacity. This results in over 50% of our business plan growth profile of 400…

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

Thanks very much, and good morning. In terms of the very large scale data center platform that you've now assembled, can you speak to the extent to which you can share best practices and generate synergies across it, just considering that in some cases you have partnerships with other investors?

Hi, Cherilyn, maybe I'll start off and then let Udhay maybe chime in with a few comments from Mexico. But look, our goal is to extract as many synergies as possible from these transactions. And I think for those businesses where we control or co-control in particular the more recent ones I think we'll have lots of opportunities to share best practices. In those businesses where we have partners who are quasi competitors I guess it'll be a little more challenging. But nonetheless, we have a great relationship with our partner particularly in South America and India, and I expect that we will take advantage of those things where it's mutually beneficial and they've been a great partner to-date, and I don't doubt they will continue to be a great partner. And Udhay do you want to add anything to that?

Probably just one more point Sam, which is, I think particularly in co-control situations, our interests are absolutely the same and partners bring very specific inputs, and in some of these arrangements, different parties are contracted to provide particular inputs. So I think we have a very productive collaborative approach to bringing best practices within those JVs that Sam alluded to. And of course, on -- in the other businesses where we have a 100% ownership, there's clearly more opportunity as well to share best practices and lessons from other markets.

Great. That's helpful. And then, as it relates to the plan to self-fund the development pipeline by selling fully operating and contracted data centers, can you give us some color on the pool of buyers out there that would be looking to purchase, I guess, single facilities or perhaps smaller scale clusters of facilities?

Sure. Hi Cherilyn. So today, we've seen a number of industry participants monetize stakes to individual investors both in Europe and in North America, and done so at the cap rates that I think are very attractive. We've also seen some groups set up vehicles where they've dropped down assets and set up kind of private REITs. I think our plan will be to explore a whole range of different capital recycling alternatives, taking advantage of our knowledge of global LPs and their desires to deploy capital in these types of assets. So I think there's very few players who have that same global reach and understanding of LP desires and we will do our best to match those buyers with the assets that we have in a structure that's appealing to them. So that could be retail investors, institutional investors and high net worth individuals. So there's a whole host of cap out there that, that would like these types of assets and we plan on setting up those structures to access them in a very large way.

Thank you. One moment please, for our next question. And our next question comes from the line of Robert Hope with Scotiabank.

Good morning, everyone. I want to stay on the theme of the hyperscale and data business with now that you have platforms on five continents, how does the focus for growth shift? Will you move away from large platform M&A to smaller tuck-ins and focusing on the development pipeline or could we continue to see what will characterize as platform acquisitions in this segment?

Yes. Hi, Robert, I'll start and then maybe again ask Udhay to talk about our organic growth opportunities. I think it's unlikely that we'll pursue any more platform investment opportunities. I think we have operations in all the regions where we want to be. That's not to say there might be not be some small investment somewhere in a region, maybe the Middle East to where we have relatively modest activities today. But I think we have most of the regions where we want to deploy capital well covered. And so I think the focus will be on just organic growth, acquiring land and building more campuses and just executing the business plan that each of our businesses has in front of them. And maybe just with that, I'll turn it over to Udhay to expand on that.

Let me just building on that, Sam, exactly. I think we've got I touched on it a bit earlier that there's a huge pipeline in front of us in terms of customer opportunities, and that's probably, we definitely noticing a bit of a uptick as well with hyperscalers in particular and others looking at applications like AI and probably the -- seeking to secure supply. So I think a lot of the focus will be just building out on the land banks we've got and perhaps some smart sort of extensions into new locations from each of the platform companies that serve some very natural geographies, which could be expanded into. So that's probably will be the main focus for the next little while.

Appreciate that. As a follow-up in the letter, you commented that buyers are having less access to capital. How has this impacting your pipeline of potential M&A opportunities? How much valuation compression have you seen or some sellers balking at pricing and shelving processes?

So Robert, I think all those things are I guess dynamics taking place today. I think capital while becoming less scarce, I do see an improvement in the market and definitely the access to capital is improved. I also think that buyer expect -- seller expectations have moderated. And so I think that's also helped to improve deal activity. But I think it's safe to say that in this market as a whole, and that's not -- I'm always wary of generalizing too much because there are some sectors that are still in high demand, but for the most part, this is a buyer's market. But I do see the shift taking place more capital coming back fundraising for our business remains strong and I think we're seeing a number of our peers go-to-market to raise new funds, and so that will create dry powder for acquisitions. So I think the market is definitely picking up, but I think for the next little while, we still see an opportunity to invest in very high returning situations that particularly with those that tuck-in to our existing operations, I think that's where the real opportunity lies today.

Thank you. One moment please, for our next question. And our next question comes from the line of Robert Kwan with RBC Capital Markets.

Good morning. If I can just continue on -- on in this the statement you made around buyers having less access to capital and the other statement just for you investing in the capital scarce environment. Sam, you touched a little bit on it with the last answer, but can you just talk about what all of this means in terms of the attractiveness both or opportunities for acquisitions and divestitures just across the different asset classes and geographies that you're targeting?

Hi, Robert. So maybe just let me rephrase your question and make sure I understood it. I think you're asking me just to give the investment outlook for lack of a better expression across different regions in the world and different sectors. Is that what the question was?

Yes. Especially just with your comments here around capital scarce -- scarcity and just the moderating valuations.

Yes. So look, I think the investment climate is pretty consistent in all markets I've got today, I don't see any market, which is unusual because usually there's always one place that has no capital and another place that has a lot of capital. Today, it's actually pretty consistent across the globe as far as capital availability. Typically, we would expect that the North American capital markets would come back probably the soonest would usually be my expectation. And I think that's probably still will be the case with the other markets falling behind a little bit. But we're seeing good opportunities. And I guess just to sum up in all markets today, so in each of our regions, we are looking at tuck-in acquisitions that are above our traditional return expectations. As far as sectors go, the digital sector remains very attractive for investors. There's still a lot of people who want to gain exposure to it. There are parts of the data sector that are not as attractive as others. And so people are maybe a little more wary in particular some of the wholesale fiber, enterprise fiber type businesses are a little bit more distressed. But we still see lots of capital for towers and data centers and the demand that from customers is extremely strong supporting those businesses. Similarly, we see a lot of interest from us and from our clients for utilities particularly electric utilities, maybe less so for gas or fossil fuel-related utilities. But electric utilities are very much in demand and I think we'll see that for the long-term. So maybe, from a thematic perspective, the 3Ds that we've talked about for the last year, year and a bit are still very relevant and driving a lot of the capital needs as well as investor desires to get in front of decarbonization digitalization and some of these deglobalization trends that we see.

That's great. If I can just follow-up on a specific sector that you didn't touch on as much just midstream, we've seen M&A valuations moderate there. Does that make it more attractive to you from the perspective of acquiring or is it less attractive just in terms of whether it's how industry dynamics have played out where the market is, and I don't know if there's any comments you can make as a read through to your own assets?

Yes. Look, we are still very enthusiastic about the midstream and our midstream assets. We think today our assets are highly cash generative and generating very robust sustainable cash flow. So any business that you can have that that generates those types of attributes, then we think they're great businesses. I think the only caveat is obviously we're into an environment where there's less buyers for some of those types of assets. And so terminal value is something that everyone's mindful of. And everyone takes a view of the longevity of certain types of assets. And so that requires a lot of diligence. And for us, we will continue to invest in high quality and scarce midstream businesses and ones that provide a relatively quick return of capital. And that's always been our investment focus and thesis for the last number of years. And we'll continue with that approach. But we like the sector. We think valuations are actually okay. We've been on the buy and sell side the last couple years and I think that they're fairly constructive.

Thank you. One moment please, for our next question. And our next question comes from the line of Devin Dodge with BMO Capital Markets.

Thanks. Good morning. So I wanted to start with a question with on a toll road business in Brazil. We haven't seen our tariff do many or been on many new concessions recently. There's been some focus in the Brazilian media that our tariff leverage is too high, which they're attributing is a factor behind that lack of growth and that they're even suggesting that the business may need a capital injection from Brookfield and its partner. So I'm not sure if you want to respond to that directly, but I'm just trying to get a sense for BIP views via tariff business and its capacity for pursuing growth.

Yes. Devin, it's Ben here. I guess our tariffs and our Brazil toll road operations, operating conditions have been a bit challenging over the last several years in Brazil and mostly due to just the broad economic challenges impacting the country overall. And as we always do, we're very focused on evaluating our capital allocation into the business and need to make sure we're earning a proper return. And so that's our main area of strategic focus with our tariffs at this time. And we will weigh all that very carefully as we consider adding further concessions to the platform in the coming years.

Okay. Okay. That's fair. And then I guess sticking in South America, but moving a bit further north here toll road in Peru look, I know this is a smaller investment, but there's been a lot of unrested media coverage on the toll road in Lima. Just can you provide an update on the situation there?

Yes. Of course. So at this stage, Devin, I can't get into too many details. But this is a road in Peru that we bought back in around 2016. And the road has a lot of really attractive characteristics. It's got a good growth profile and an excellent concession contract. And since we've owned it, the operations have gone very well. And what's happened here is earlier this year, the municipality which is the counterparty on our concession contract indicated that they'd like to go in a different direction with the road. And so we're now in discussions with the municipality on that to see if we can accommodate their needs and those discussions are underway.

Thank you. One moment please, for our next question. And our next question comes from the line of Naji Baydoun with iA Capital Markets.

Yes. Good morning. Just wanted to go back to the topic of M&A. You sort of fully funded these acquisitions this year from asset sales and the best issuances. I guess your comment about maybe some capital recycling initiatives taking a bit longer to execute or complete. Does that slow your appetite for acquisitions at all in the meantime in terms of waiting to secure funding?

Hi, Naji, well, look, the -- we always have to invest based on our available liquidity. So that's obviously a consideration. I think what is unique about our business is that we have many sources of capital to fund growth. And we'll evaluate all those different sources and to extent that we can raise capital in accretive manner to fund, high returning opportunities, we'll do so. Obviously, if the sources of capital don't provide for accretive growth, then we will slow down the growth. But our history is that we've been -- always been able to find these levers to continue to take advantage of opportunities, particularly in markets where you can buy for value. So that would be my expectation is that we will continue to be able to grow and find ways to finance that growth.

Okay. Understood. And the comment that you made earlier about the Utility market and the attraction was maybe of certain assets over others. Can you maybe talk about your view on water utilities?

Okay. So water utilities, they -- that they come in different structures in different regions. So to -- I'd have to talk about it based off each region. Probably the most well-known prominent water utility investments are in the UK. And as is I think quite well-known, and particularly now with all the media that's being attributed to it, it's been a very challenging environment. These for the most part because of probably mistakes with capital structures and how people finance those acquisitions as well as difficult operating and regulatory environments, they haven't performed particularly well, and again there's probably a few that have done better than others, so I don't want to smear everyone with that same comment because there are some that have done okay. But for the most part, it's been a challenge sector and it's probably one that we would avoid and not find particularly interesting from a risk/return perspective today. In Europe, there's a few water utilities in Spain and other places, but for the most part have not been actionable. In the U.S., it's -- there really hasn't been an ability to invest in the water utility sector in scale. Most of them have been small roll-ups and so not really well-suited for us. They've also traded at extremely high returns or high valuations, driving lower returns. And again, that didn't really appeal to us. So we haven't done much in the U.S. and I wouldn't expect that the opportunity set would be large there. And then, in South America, there's a few water utility type businesses in Chile and Brazil, and we've generally not focused on those. So it -- I guess you can say, you can get from my remarks that there's not too much for us to do in the water utility space.

That's very clear and comprehensive answer. Thank you for that. And just maybe last question on the two more recent capital recycling initiatives, the U.S. pipeline and OzNet. Any comments on valuations for those two would be helpful? Thanks.

Sorry. What was? It was OzNet and what's the --

NGPL.

And NGPL.

NGPL, yes.

Yes. So NGPL look, we've sold down through two transactions both to the same buyer. One was done a couple years ago prior to the movement in rates and one afterwards. And I think the takeaway is that the valuation for the business increased during that period of time. So I think that says a lot to the quality of the asset and the fact that in spite of movement in rates, you can still achieve values that were present prior to this environment. So I think that's a great example of that. On OzNet, we held it for a relatively short period of time and we sold it effectively at a return consistent to what we bought at. So it would've accreted up in value over the period of time that we held it. But the going in and going out valuations were very consistent.

Thank you. One moment please, for our next question. And our next question comes from the line of Andrew Kuske with Credit Suisse.

Thanks. Good morning. I guess the question's targeted to Sam, and really if you look at BIP's operations and the scale of them. Maybe you could just give us some insight as to how you're managing data effectively if you think of all the information you have hydrocarbon flows, traffic numbers, connections, et cetera, across the whole portfolio. How are you managing that data to effectively generate proprietary insights, really at the top of the house? And then by way of extension, maybe across the broader Brookfield Group to help direct you in allocating capital?

Hi, Andrew. Well, that's a very interesting question because it's topical given all the advances in AI and the ability to scrape and analyze databases that are not organized. That is one of the big uses for AI. And that's something that we are looking at very closely because as you rightly point out, within all our businesses, we have tremendous proprietary data. Historically, it's been done more, I don't know, I'm not sure what the right word is, but maybe haphazardly where we would just get business leaders together and regularly compare notes and try to tie in opportunities. And we've done that successfully, particularly between our renewable group and some of our businesses that are heavy power users. And data being a good example of that and our businesses where we would have the ability to leverage new solar technology and capabilities to replace some fossil fuel type generation. So that, that's where I'd say we've done a really good job in the past. And I think we've done a reasonable job with the real estate group where we've been able to find synergies between many of our metering businesses in particular and district energy businesses and the real estate group. What I think the next level is though, and what you're touching on is where we can take advantage of the 14.5 million customers we have in our demand decarbonization business, and understand the buying patterns that exist within all those markets that they touch. And within our Triton investment being able to take advantage of the movement of boxes and how that's going to be telegraphing trade flows in the future. And so we are working on how we can institute some AI solutions to all that. But I'd say it's early days, but hopefully that's something in the quarters and years ahead we'll be able to brag about and tell you more of what we're doing.

Okay. That's -- I appreciate that color, and that's very helpful. And I guess maybe just building upon that, with that potential informational advantage along with the capital that you've managed to from raise and then also recycle, I'd suggest, and nothing patronizing about it, but your partnership quality is probably the best as ever has been. And when you have these kinds of strategic partners, does that allow you to better tilt and lean into organic growth on a longer-term basis with increased competitive advantages? And I just highlight just some of the activities with Reliance given the fact that Udhay is also on the call.

So yes. The short answer is yes because as I think you were telegraphing and what I would concur with is, we aim to be a partner of choice for strategics and help them invest in their businesses. And we're helpful to provide some of our strategic and operating knowledge. Sometimes we're just providing capital. Other times it's a combination of those two things. And whether or not -- whether it's with the volleys or with the Reliance's with the Intel's, I think we have a -- we cover many different types of strategics and we are able to grow with them. Maybe just on the telecom side, I can turn it over to Udhay and he can provide maybe some additional examples, but I think he would concur that we do see lots of growth investing alongside our partners.

Yes. I'll probably just add one more point, Sam, probably draw the example of the Indian markets where I think we took a view a couple of years ago that the runway in India is quite long in terms of just opportunities for data and the -- just the quality of the infrastructure there. We just -- there's amazing -- the new stuff needed to be built, and as we progressed, building this partnership, so what's now happened is we've got three great partners bringing very, very complementary different skills. And you're right, Andrew, to point out to Reliance, particularly in that market, I mean the large telecom operator, great sort of national infrastructure here combined with our real estate and renewable capability and DLRs global access to customers and data center designs. I think it's just a very, very powerful combination. So that's one example. But I think we're obviously partnering in different places with different counterparties.

Thank you. One moment please, for our next question. And our next question comes from the line of Will Wu [ph] with CIBC.

Hi, just wondering how have the wildfires in Alberta impacted your midstream assets and if there are any impacts to the HPC ramp up that you can talk about?

Yes. Hi Will, it's Ben here. I think the question was how are we impacted from the wildfires in Western Canada and they had a -- we did have to take two facilities in one of our businesses down for a very brief period of time. And it was immaterial from a financial perspective, and they're all back up and running today. And there was no wildfire impact at all on the Heartland facility. So that's -- I guess that's the what happened with the wildfires in Western Canada.

Okay. Thank you. And one more if I could. I guess can you talk about the broad implications of AI on the growth trends and their growth trends on the data center business?

Okay. So that that's a great question just to throw over to Udhay and Udhay, do you want to respond to that?

Yes, happy to, Sam. I thank you -- look, I think I touched on it briefly a bit earlier. AI is just creating some great new opportunities for our data center portfolio, particularly when you look at the way the AI is breaking up data processing for the large learning modules and the way capacity can actually tolerate a bit more latency. And in some cases, we're also noticing that the redundancy requirements for power could potentially be different to general cloud computing. What it means is, I think one, the hyperscalers are accelerating, securing capacity. Two, we're seeing some other new players potentially coming in, and it enables us to really leverage the land banks we have to create much larger campuses, which could be slightly away from the center. So lower land costs and being able to combine our renewable energy capabilities and real estate development. So I think net-net, it is a real an additional tailwind to the data center sector, and it also particularly some of the more recent acquisitions, so very well targeted at benefiting from the AI capacity uptake and changed sort of needs from customers.

Thank you. I would now like to 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 look forward to sharing more details on our outlook and specific growth plans, particularly related to our global data center platform at our upcoming Annual Investor Day event, which will be held in Toronto on September 21. So we look forward to seeing everyone there. If you can make it, please join us and we look forward to again providing an update on our results next quarter. We hope you enjoy the rest of your summer. Thank you.

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