Brookfield Infrastructure – Brings Data and Utility Together

Brookfield Infrastructure Partners is a leading global infrastructure company. It is one of the largest owners and operators of diverse global infrastructure networks facilitating the movement and storage of energy, water, freight, passengers, and data. 

Brookfield Infrastructure is the flagship infrastructure company of Brookfield Asset Management, a global alternative asset manager with ~$600 billion of assets under management. Brookfield Infrastructure owns assets across the utilities, transport, energy, and data infrastructure sectors.

The company has a large global presence in North America (30%), South America (25%), Europe (20%), and Asia-Pacific (25%). It operates through utilities (38% of 2020 FFO), transport (34%), midstream (~17%), and data (~11%) segments. 

As one of the best utility company for investors, its utility business is highly contracted and earns a return on asset base spanning five countries - Australia, the U.S., Colombia, Brazil and the U.K.

Its transport business is involved in the movement of freight, bulk commodities and passengers with operations in Australia and South America, toll roads in South America and India and ports across North America, Asia Pacific and the U.K.

Brookfield’s midstream business provide energy transmission, distribution, and storage services to customers in Canada, the U.S., India, and Australia, while its data infrastructure business provides critical infrastructure and services to transmit and store data globally.

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Investment Data
 

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Revenue Growth & Market Exposure

Brookfield Infrastructure’s portfolio provides diversified exposure to quality businesses with significant entry barriers. It invests in infrastructure assets that deliver essential goods and services. Brookfield Infrastructure has assets worth $91 billion under management. 

Brookfield Infrastructure operates 19,200 km of natural gas pipelines, 2,000 km electricity transmission lines, and 6.6 million electricity and gas connections.

In addition, Brookfield Infrastructure also operates 13 ports, rail (32,300 km), and toll road (4,000 km) assets moving freight, bulk commodities, and passengers across five continents. It has 20,000 km of fiber backbone and 52 data centers through 9,100 multi-purpose towers and active rooftop sites.

It successfully continues to undertake key investment initiatives for future growth and expansion.

Brookfield Infrastructure Partners stands in a good position to benefit from huge global investments in the infrastructure sector. The company engages in acquiring good quality businesses, restructuring its operations, and subsequent sale of the asset at the right time.

It focuses on the ownership of stable cash flow generating assets operating under regulated frameworks. Regulatory frameworks and high capital commitments act as strong entry barriers for newcomers. 

Brookfield Infrastructure’s annual net income benefited from organic growth across its regulated and contracted operations, contributions from acquisitions, and gains from the partial disposition of its Australian export terminal.

The company also invested in high-quality assets that were immediately accretive to FY2020 results. Brookfield Infrastructure deployed $2.5 billion in new investments and organic capital projects, expanding its presence in India’s rapidly expanding data infrastructure sector.

The company is partnered with leading national industry players like Reliance Jio in India and Cheniere Energy Partners in the U.S.

Dividends

Brookfield Infrastructure has successfully paid dividends since its inception in 2008 and has consistently increased them at a CAGR of 9%+ in the last three- and five-year period.

As a Dividend Achiever and Canadian Dividend Aristocrat, the company has a solid track record of annual per unit distribution growth and last raised its distribution by 5%, representing the 12th consecutive year of distribution increases. It currently sports a current annual dividend yield of 3.3%.

Brookfield Infrastructure has a solid performance record, delivering compounded annual total returns of 24% (TSX) since its inception in 2008. Its utility portfolio benefits from steady, inflation-linked cash flows and energy businesses also generate stable revenues through long-term contracts with large-scale customers.

Brookfield’s cash flows are also underpinned by a highly contracted global data portfolio having contracts with an average term of ~15 years. Moreover, the company is highly diversified by customer type, regulatory environment, and geographies. About 95% of FFO is contracted or supported by strong regulatory frameworks. 

Brookfield Infrastructure is making good progress on its capital recycling program and generated $700 million of proceeds in the latest quarter. The company estimates that about 60%-75% of its growth should be funded with capital recycling. Its objective is to generate total returns of 12%-15% over the long term and to grow annual distribution by 5%-9%. It does not have any significant debt maturities in the next five years.

The FFO also increased by 5% YoY, driven by organic growth and regulated and contracted cash flows which remained uninterrupted by the economic shutdowns.

The company is targeting to deploy over $2 billion in 2021 and should benefit from access to low-cost capital. As proof of their acquisition approach, the company has made an offer to purchase Inter Pipeline Ltd at a discount.

Competition

Brookfield Infrastructure competes with the likes of Fortis, Emera, Atco, Canadian Utilities, Algonquin Power & Utilities.

Both Fortis and Emera engage in the generation, transmission, and distribution of electricity and gas to its customers and have assets worth billions of dollars, while ATCO is a diversified global corporation providing services and business solutions in structures & logistics, electricity, pipelines & liquids, commercial real estate and retail energy.

Canadian Utilities is a subsidiary of ATCO and one of the biggest utilities in Canada.

Bottom Line

Brookfield’s Infrastructure businesses are relatively resilient to changes in the world economy.

As one of the largest globally diversified owners and operators of infrastructure assets, Brookfield Infrastructure is well-positioned to address the growing demands for energy and data globally. Countries across the world are supporting infrastructural development.

The company should benefit from capital deployment, an attractive pipeline, and organic growth within its utilities, midstream, and data segments. Its asset rotation strategy is further expected to increase FFO per unit by 5% on a run-rate basis.

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DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.