Thank you for standing by and welcome to Brookfield Infrastructure Partners Third Quarter 2023 Results Conference Call and Webcast. At this time all participants are in listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program. David Krant, Chief Financial Officer. Please go ahead, sir.

Thank you, operator and good morning, everyone. Welcome to Brookfield Infrastructure Partners' third quarter 2023 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. For the call this morning, I'll begin with a discussion of our strong financial and operating results. I will then touch on our balance sheet strength and the success we've had in our asset sale program this year. I'll then turn the call over to Sam, who will provide an update on our strategic initiatives and capital allocation. Following our commentary, we will be joined by Ben Vaughan, our Chief Operating Officer for question-and-answer period. At this time, I'd 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 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're pleased to report another quarter of excellent financial results due to good operating performance and the successful execution of our asset recycling strategy. Funds from operations or FFO for the quarter was $560 million, an increase of 7% compared to the same period in 2022. Results benefited from our businesses unique ability to capture current inflation levels, combined with the commissioning of nearly 1 billion of capital projects over the last 12 months. Looking ahead, we are well positioned for a strong end of the year, considering that our European hyperscale data center platform was the only new investment to contribute this quarter, with the remaining $1.6 billion of new investments having closed at…

Thank you, David, and good morning, everyone. From my remarks today, I'm going to provide an update on our strategic initiatives and conclude with a brief discussion on the operating environment and our favorable outlook. The market environment we've been operating in has created a strong environment for capital deployment. We've surpassed our annual new investment objective for the third year in a row, closing the acquisitions of two marquee data center platforms, as well as the leading global logistics business, Trade international. The risk adjusted returns we expect to generate and these investments are well in excess of our targets and are represented of the value entry points that can be achieved in this market. The take-private of Triton closed on September 28. We invested approximately $1.2 billion for a 28% interest that was funded primarily using new BIPC shares as transaction consideration. We expect to generate a base case IRR above our targets thrive largely from the in-place cash yield. The leading market position and highly cash generative nature of the business provides strong operational flexibility to invest in fleet replacements and growth during favorable markets or to harvest cash in less attractive markets. We're also very excited about the opportunities across our data center platform, which has grown significantly following the acquisitions of Data4 and Compass, which closed in August and October respectively. Overnight, we signed an agreement to acquire portfolio data centers out of bankruptcy from Cyxtera. We believe we will generate strategic value by combining Cyxtera with Evoque to create a leading retail colocation data center provider with over 330 megawatts of capacity deployed in high demand areas across North America. The combined platform will have the scale, assets and capabilities required to provide critical infrastructure reports over 2500 customers to support the exponential increase…

Certainly. [Operator Instructions] Our first question comes from line of Cherilyn Radbourne from TD Cowen. Your question please.

Thanks very much, and good morning. I was wondering if you could start by expanding on your comments in the letter on the investment landscape in terms of where you're seeing the most attractive opportunities by geography and by sector, and also how you think about pacing your investments in an environment where the stress associated with higher interest rates, arguably hasn't been fully absorbed yet?

Hi, Cherylin. Thank you for those questions. I think there's two of them in there. I think the first is just where we see value and just the tone of the market. And then the second one, just on our own pacing of investments. On the first portion of your question, we do see attractive opportunities in most regions that we operate in. Frankly, we've probably focused our attention in North America and Europe in the past year or two. And obviously, given our base currency being U.S. dollars, it's always favorable for us to invest in U.S. dollar businesses. So that we don't have to deal with FX issues. And so we tend to focus in this market when we see great opportunities, but we are seeing interesting opportunities. coming our way in Asia at the moment. We do have a new team and a focus in South Korea in particular. We've also have had done generally very well, in Australia and because of the team we have down there. Have hit above our weight, I guess in terms of the amount of capital we've been able to deploy in that market. So I think, in the next little while, I'm optimistic that we will find some very interesting opportunities in those two markets. But I'd say as a general comment, we do see good opportunities pretty much everywhere. As far as sectors, as I probably said, on the previous call, and maybe the couple of calls before that, the best value tends to be in those businesses that need capital for growth, a lot of companies are starved for growth capital and sectors particularly the telecom sector, have tremendous capital projects in front of them. And so they need capital and that's, frankly, where we can invest for value today. But we are seeing interesting opportunities across transportation and utilities as well. So I realized I've covered up almost the whole universe of the infrastructure sector, but I do think there's value to be had pretty much across the board. And as far as our own pacing, as we mentioned in our letter, we have been very successful in recycling capital and using our liquidity to invest boldly when we've seen good opportunities in the last couple years. I think we're going to benefit from that for the foreseeable future. And as far as, what we will do in the future, I think it will be similar, if we see some amazing opportunities, we will find the capital to take advantage of them. But at the same time, we don't feel any pressure to invest and reduce our liquidity, except in those circumstances where we see exceptional opportunity. So I think you'll see us being patient, but also investing boldly if we see a great opportunity.

Great. That's a great overview. I'll keep my second one short since that one had a few inside it. With respect to your pipeline of assets sales for 2024, would Some of that pipeline have debt that is portable to the prospective buyers, which is presumably an advantage in this market?

Yes. Hi, Cherilyn. I would say the vast majority of the ones that we're selling have portable debt. And yes, that's one of the characteristics that we do look for at the moment in order to be selling businesses, because I think that is embedded value in those capital structures and allows us to continue to create value in this market environment.

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

Great. Good morning. If I can just touch on or ask you just around the capital allocation, specifically how you are approaching buybacks? Just do you think about buybacks, especially if this unit price as being an investment in your own assets, and the return you would get based on buying back the stock at these levels versus what you think intrinsic value is? And then, more broadly, are there any other tangible options that you see is on the table to support the share price?

Hi, Robert. So on the first question on the buyback, I think you've done a better job of describing how we think about it, and I probably could. Yes, we do consider it as buying back, businesses we know and understand well, and have a good view on their future prospects. And so we weigh that against, making investments in new assets and the type of returns we can get on that. So, that is the decision we weigh. And, obviously, what attract with a fine your own assets is, they're very much derisk because what you're getting and you understand them well. And so you're in some respects, you have a slightly lower return threshold than you would for new investments. But we do weigh those two things, and obviously, take a long-term perspective on it. We're not just looking for an initial hit, it's about, are we investing our capital for good long-term value. So that definitely is how we look at the buybacks. As far as things we can do in the short-term, I think it's hard to do anything in particular, other than, continuing to describe the strength of the business and the prospects and the long-term value creation of the franchise. I think we've always tried to convey to our unitholders that Brookfield Infrastructure is a long-term compounder of wealth. And that people should buy because they want to know that putting aside where volatility might take place in the market, because of what the capital markets do. We'll continue to deliver them with high assurance, that dividend that they have today plus that 5% to 9% growth. And we have a long track record of doing that. And when we look at our business, for the long term, we feel as comfortable or more comfortable in our ability to do that. And I think that's the story we just need to reinforce with investors.

Great. Thanks. And just for my second question, just to ask around [indiscernible]. I guess, first, can you talk about your take on the housing market there, housing starts? And then, just more broadly, this is one of the assets that you've owned, the longest, although it's not in a limited life fund. So but can you talk about your long-term perspective on the business? How you think about the growth and valuation and even just a little bit of the evolution from where you started with this business, to where you are today and where do you think that businesses is going to go in the future?

Okay. Thanks, Robert. For shareholders and analysts who have been with us for a long time, they know this is one of mine and our company's favorite businesses. We have owned it since we bought Babcock & Brown's business back in 2009. And then, we've done a number of tuck-in acquisitions and organic growth projects to build the company up to where it is today. But let me just do your first part of your question on housing starts. This is a business, for those of you who are less familiar with it, that really participates in the housing growth -- the increase in the stock of housing in the whole United Kingdom. What the business does is, it basically works with developers to install all the last mile connections. And over time, what's special about this business is the fact that, when we first bought, we used to install just gas connections today, we provide five different connections into the home, including water, electricity, fiber, and different heating pumps, as well and so it's unique business. Today, the housing market has pulled back quite a bit, I think it's somewhere in the range of 20% pullback from the prior year. So I'd say housing is definitely weaker in the U.K. What's great about this business is the fact that even though housing has pulled back pretty dramatically, this is one year, our connection sales being stalled will in fact, be higher than what they were last year, we'll have another record year of installations. And we have a backlog of housing connections that represents about 70 years of our annual connections. So we have a big, big backlog. And I think the only other thing I'd mentioned, but the housing is, even though it's been down this year, the…

And our next question comes from the line of Devin Dodge from BMO Capital Markets. Your question, please.

Yes. Good morning. So we've been getting questions from investors on your ability to recycle capital in this type of market? I know you talked about it in the Investor Day, as well as in the prepared remarks earlier. But should we expect a bit of a low on monetization into long-term interest rate stabilize? And then, maybe in the general sense, where are you seeing the most interest from potential buyers?

Hi, there. So, obviously, it's hard to predict exactly what the market will look like. But what I would say, though, is that, we are bringing, we will bring to market those businesses that we think will be highly sought after, what I can say is that on the businesses that we've already launched processes, at the moment, and it's obvious, early days, the number of interested parties looking at it is substantial. So there is lots of investors out there looking for high-quality businesses, that that's not stopped, and even over the last while has been relatively robust. And we still see large transactions, in fact, been done. I think, in this market environment, if I had to say where the sweet spot is probably more mid-market transactions and large-scale transactions. There's a lot more players in that segment. I think given the uncertainty around growth, highly contracted businesses tend to be have less divergence in views as far as valuations than, say, businesses with growth wedges. So that again, that's something to keep in mind. But then you also have the dynamics that, some regions are in a different spot than others. I mentioned South America and Brazil, they got ahead of the curve, as far as tackling inflation and increasing interest rates and rates there now are expected to drop pretty meaningfully over the next couple of months. And I'd say the market has improved significantly, and the enthusiasm in that market is actually quite high, compared to some markets where people are a little more skittish. So, I think one of the big benefits and this is where we highlight in our letter, and we said in the past, is having a business that's very diversified across many regions. We can bring assets to sale and regions where people are more constructive, and there's lots of access to capital, and then in those regions where things are less constructive, we tend to be looking for opportunities there to buy.

Okay. No, I appreciate that. That's good color. Okay. I'll switch over to the deal announced this morning, was in a general sense, but I think it's fair to say that your initial investment in a retail colocation data center business has been at least a bit of a challenge. Can you talk about the improvements that have been made at Evoque over the last couple of years and how the addition of the Cyxtera assets will further those efforts?

Okay. So, maybe I'll start and I will turn over to Ben here to talk about the things that we've done. And yes, I think it's fair comment that the first couple years have been challenging as we work through our tenant base there. But it has been a business that over the last I'd say year and a bit, we've seen a real turnaround in its leasing profile and leasing success. So maybe Ben will touch on that. But as far as this Cyxtera, the real opportunity here is, the ability to not only buy for value but also execute a multifaceted transaction where we can reunite some of the underlying land leases that are associated with the Cyxtera assets, combined some of those, as well as the data centers in Cyxtera. And then take that set of assets, combine it with our business, which is largely data centers with real estate that's owned, take advantage of significant synergies from a sales and cost perspective where we can really reduce the overhead as a percentage of revenue quite dramatically, because of the combination of the two businesses. And then, especially finance the businesses, because now you have much more scale, as well as mostly owned real estate. And so it really is a very, very different business than what the two were separately. And so we're very excited by that. And obviously, I think the real wins can be the fact that we're buying at a time when the tailwinds are really just starting for the edge type centers that we have. I know, Ben, if you want to add a little bit more what we've done with Evoque.

Yes. Maybe as we've talked about on a few calls in the past, what we've been up to at Evoque is, when we bought the business, it was in a moment when some enterprise clients, there was a significant migration towards the cloud. So what we did is, we worked to improve our data centers, and position them both to be attractive to hyperscalers, as they need to move to the edge, continue to be attractive to enterprise clients. And also, today we're seeing large demand from smaller companies engaged in AI businesses. And so with the underroof upgrades that we undertook over the last many years, the business today has a tremendous call on its capacity utilization is going up tremendously. We've had record sales quarters, like I said, enterprises coming back into retail, colo, hyperscalers are looking for edge applications and AI clients have tremendous demand. And I think as Sam mentioned in his opening comments, as part of our underroof upgrades, we also identified an ability to bring on a fairly significant amount of additional capacity at a very low cost per megawatt. So going forward, we are executing that now that the centers will reach full utilization, and we're going to add capacity in the coming years to meet the demand that we see in the market. So it's been a real turnaround in the business.

And our next question comes from the line of Robert Hope from Scotiabank. Your question, please.

HI. Good morning. Just given the markets focus on funding liquidity across a variety of sectors, how do you think about your existing liquidity position? And could you accelerate asset sales to further bolster the balance sheet or look for other levers like marketable security sales?

Hey, Robert, it's David here. Look I think, first and foremost, we feel very good about our current liquidity position, as you'll see it. It's over $2 billion at the corporate level, and a lot of the existing liquidity in each of our businesses so that they can fund a lot of the organic growth that we talked about as you've seen throughout our materials. I think from a liquidity perspective, I think the $2 billion of asset sales that we have earmarked for next year, is a very actionable plans you heard from Sam. We also have many pockets in the business where we think we can find additional liquidity if we need to accelerate our new investment opportunity. But when you pro forma that with 4 billion of total liquidity, we think that's a significant amount to be operating at in this environment and going forward.

Thanks for that. And then, maybe just going back to the commentary on pacing, like when we take a look at the environment, which could be full of opportunities, how is that balanced with a market where it could be more difficult to sell assets or your unit price implies a higher cost of capital. How do you balance the potential for significant accretive acquisitions versus what we call your higher cost of capital as well as a little bit higher cost of capital?

Rob, I guess all I can say is that we just closely monitor our liquidity. So we know what we have to live with as far as our capacity. And once we have visibility on our capital recycling program that will gauge our aggressiveness in pursuing big opportunities. In the meantime, we'll continue to look at the tuck-in acquisitions or the businesses, the opportunities like this Cyxtera opportunity, which didn't really require any capital. And we'll take advantage of those. That there's lots of things we can do to create value in our businesses that doesn't require a lot of capital. And those larger ones, as we said, will match up with the cash that comes in from rest of sales.

And our next question comes from the line of Robert Catellier from CIBC Capital Markets. Your question, please.

Hey, good morning, and thank you for your comments. So far, I do want to get back to the capital allocation subject, it looks like you've become considerably more active under the NCIB, following quarter end. I'm just wondering if there's something more substantial that you can do there over time. And you've touched on this versus comparing repurchases versus investments, but I'm wondering how you're looking at this capital allocation in terms of some of your other options, like perhaps the deleveraging, to skip, and that seems to be what the market is focused on in general.

Hi, Robert. So you had a couple of different elements to your question there. I think just to repeat from the buyback of shares, we will do that on a periodic basis with the existing programs that we have in place, and to the extent that once we've done some capital recycling, we may do something larger, as opposed to making investments in new transactions. So I think that's all we're telling people is, it's part of our investment decision framework today, given where we're trading. In relation to delevering, we feel very comfortable with our balance sheet today, which has been strong and our maturities are as well laddered, as they probably have ever been, we really don't have any maturities at the corporate level for many years. And at the asset level, it's not only extremely manageable, but very comfortable what we have. So there's nothing that we're looking to deliver in any particular case. I think the other thing which we did flag in our is, even as interest rates go up, the inflation compounding within our business exceeds the amount of any increase in interest rates. So, from that perspective, we are always delevering just because the businesses are growing. So I think that leaves at that. [Indiscernible].

No. I think that covers it well. Okay, thanks for that. I just want to clarify something. In recent years, you've been talking about the value of your platform investments. And if I understand your comments correctly this morning, you said that in terms of monetizing assets, the sweet spot is more middle market -- mid market rather than large scale. And given that you're looking to pace your new investments for the recycling, can we expect more in the next year or so in terms of tuck-ins rather than large acquisitions in the current environment?

No. I wouldn't say that. And I hope I didn't give people the wrong impression. I think all we want to just flag was what was in the letter, namely that we've made lots of investments. There's no there's no pressure that we feel to deploy capital, we will be optimistic. And as our liquidity increases with capital recycling, we will be on the lookout for great opportunities, whether it's buying our shares or making a big investment, we'll continue to do that. The tuck-ins are things that I would say that is a constant thing we're always doing. Those generally don't require any capital, we can usually do them on our lines of credit and each of the businesses, those are just part of the regular business plans of creating value and will continue to do particularly in this market where we're seeing good opportunities.

And our next question comes from the line of Frederic Bastien from Raymond James. Your question, please.

Hey, good morning. Just wanted to close the loop on this latest Cyxtera investment, can you reconcile the total purchase price of 1.3 billion you highlighted in your head remarks and the $775 million has been quoted in press? And what is BIPs actual commitment to this 1.3 billion?

Yes. Sorry. The 1.3 includes all the purchases of the land leases, in addition to the 750 going to Cyxtera. So as I mentioned earlier, it's really a multifaceted transaction with many, many different parties. Think of it as a true recapitalization of that business before we combine it with ours. And the funding is in place from a group of lenders to complete all the acquisitions, it's not requiring any capital from us and closing is expected in the first quarter of 2024.

Okay. Thanks for that color, Sam. Just couple more questions quickly. In prior periods of market volatility, we've seen you make toehold investments and depress public stocks. Obviously, you have been buying your own stock. But have you made such investment recently in other companies?

We can't really comment too much on specifics. But we do periodically make investments in companies that that trade down and to monitor them. And it's safe to say that at any given point in time, we probably have one or two that we've done that with, but I'd rather not comment more than that.

Okay, fair enough. Lastly, where do you see the best opportunities for organic and inorganic growth in the midstream segment right now? A - Sam Pollock Sorry. Say it, again, Fred. The question was, where do we see --

The best opportunities for growth in midstream whether it's organic or inorganic?

Okay. Yes, I'd say most of what we're focused on in the midstream sector is on the organic side, maybe Ben, you want to touch upon a little bit of what we're doing in IPL and North River in relation to some of the customer-related projects.

Mostly what we're focusing on in those businesses are, what I would consider, fairly smaller scale, but important projects for our clients to just help them with additional capacity needs, we're seeing utilization rates increase and reach pretty high levels across our midstream fleet. And so most of what we're engaged in is, I call them bite sized capital projects to allow our customers to bring either more barrels or gas through our facilities, and they're very smaller scale and relatively lower risk CapEx projects that are highly accretive for us. So that's our main area of focus.

I would say on a total dollar basis, though, Ben, it's probably the next couple of years, we've been investing $400 million of capital with relatively low EBIT to the CapEx ratios. So they are very accretive. They represent a diversified number of clients. And we've been doing this both at IPL as well as -- at North River.

And our next question comes from the line of Patrick Kenny from NBF. Your question, please.

Thank you. Good morning. Just coming back to the balance sheet, you reference [Technical Difficulty] over the next 12 months. Could you maybe [Technical Difficulty]? Just wanted to confirm whether or not there may be any businesses [Technical Difficulty] might be in sub-liquidity support over the next 12 months?

I didn't catch much of that, admittedly, Pat. It's David here. I think what I did catch and feel free to jump in. What I think you're asking about was upcoming refinancings that we referenced in our materials, and then the need for liquidity or support from the business or from Brookfield Infrastructure. And I think, we highlighted the well laddered maturity profile in our materials. We have no concerns around the leverage in each -- any of our businesses that we have, or the need for financial support for them. As we've alluded too, in the past, these are structured predominantly to investment grade levels, very sustainable amounts of leverage of the underlying businesses. And the reason we do that is for the ability to operate through cycles. And we've seen that come to fruition this year. So, I'd say, from a maturity standpoint, we have about 5% in the next 12 months. When we think through the cost of that financing, depending on when that debt was raised, if it was in the last five years, it was probably, somewhere in the 150 to 200 basis points, more expensive on base rates, spreads for the sector have remained relatively constructive, because of over -- the market has been very open for high-quality infrastructure businesses like ours. So we're not feeling any concerns at the portfolio company or upcoming refinancing.

Okay. No, that's great, David. Thanks. And then, you guys provided a quick recap of your Investor Day highlights. And I apologize if I missed it, but just wanted to confirm on the back of the Cyxtera transaction here that you continue to expect that 12% plus FFO per unit growth over the next one to three years.

Yes. Nothing has changed in the environment from last month when we provided that.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Sam Pollock for any further remarks.

Okay. Thank you, operator. And thank you to everyone for joining the call this morning. We'd like to wish everyone a very happy upcoming holiday season. And we look forward to providing you our fourth quarter and year end results over the New Year. All the best. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.