Brookfield Corporation · NYSE:BN
Brookfield — Brookfield Asset Management — Investor Day (September 2006)
37 slides from Brookfield's investor day presentation, Sep 28, 2006
Slide 1: Investor Day
Investor Day September 28, 2006 Forward Looking Statement This presentation contains forward-looking information including “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
Slide 2: Agenda
Agenda 1. Overview Bruce Flatt 2. Investment and Fund Strategies Bruce Robertson 3. Power Operations Richard Legault 4. Latin American Opportunities George Myhal 5. Summary and Q&A Bruce Flatt 2 Overview 3 3 2
Slide 3: Vision & Goal; Assets Under Management
Vision & Goal Vision To be a leading infrastructure asset manager Goal Increase cash flow per share by 12%-15% compound rate over the longer term 4 Assets Under Management $55 billion of assets under management Property Power Timber +$20 billion +$10 billion +$2 billion 70 million sq. ft. office 140
Slide 4: Corporate Strategy; Progress on Strategy
Corporate Strategy Build best in class operations to maximize value Expand sources of managed capital to enhance returns Originate fund assets through acquisitions and vend-ins Develop platforms in other sectors 6 Progress on Strategy Added more than $10 billion in assets under management in past ye
Slide 5: New Fund Offerings; Recent Fund Initiatives
New Fund Offerings Canadian Core Office U.S. Core Office Brazil Retail Fund Real Estate Opportunity Public Mortgage REIT Public Timber REIT Latin America Transmission Fixed income mandates Structured products 8 Recent Fund Initiatives U.S. Core Office Fund Fund Type Single Purpose Fund to acquire Tr
Slide 6: Recent Fund Initiatives
Recent Fund Initiatives Brazilian Retail Fund Fund Type Committed fund with seed assets Commitments Over $700 million Investment Focus Retail shopping centers Major markets Select development opportunities BAM Investment $200 million 10 Recent Fund Initiatives Real Estate Opportunity Fund Fund Type
Slide 7: Recent Fund Initiatives
Recent Fund Initiatives Crystal River REIT Fund Type Publicly-listed REIT (NYSE: CRZ) Market Cap $575 million Investment Focus • Residential mortgage-backed securities (RMBS) • Commercial mortgage-backed securities (CMBS) • Mortgages and other real estate debt • Asset-backed securities (ABS) • Alter
Slide 8: Recent Fund Initiatives; Investment and Fund Strategies
Recent Fund Initiatives Chilean Transmission Fund Fund Type Single purpose fund to acquire Transelec, Chile’s leading transmission company Acquisition Size $2.5 billion Acquired Assets 8,000 km of transmission lines 51 power substations Current BAM $320 million Investment 14 Investment and Fund Stra
Slide 9: Infrastructure Focus; Investment Approach
Infrastructure Focus Sustainable and growing long-term cash flows Minimal sustaining capex requirements Value appreciation over time High barriers to entry Opportunities to capture price escalation 16 Investment Approach Focus on high quality assets Invest on a value basis with institutional partner
Slide 10: Benefits; Competitive Advantages
Benefits Leverage our operating platforms Capital for larger transactions Reduces risk Predictable cash flows Enhances shareholder returns 18 Competitive Advantages Industry focus and operating expertise Commitment of own capital alongside investors Broad product offering Transparency 19 10
Slide 11: Sources of Fund Growth; Illustrative Economics
Sources of Fund Growth Private Funds Exchange Listed Funds Seed With Assets Brazilian Retail Acadian Timber Single Purpose Fund Chilean Transmission Adjustable Rate Trust Committed Capital Real Estate Finance Crystal River Capital 20 Illustrative Economics Fund Size BAM Participation Investment Retu
Slide 12: Property Investment Strategy
Property Investment Strategy Core Office assets under management – +$16 billion High quality office properties Central business districts of select, high growth markets in North America and Europe 22 Property Investment Strategy Core Office current portfolio 70 office properties, 55 million square f
Slide 13: Power Investment Strategy
Power Investment Strategy Power assets under management – $10 billion High quality, long life, power generation operations, primarily hydroelectric facilities, in North and South America Select developments, including wind power 24 Power Investment Strategy Current portfolio 140 generating facilitie
Slide 14: Infrastructure Strategy – Timberlands
Infrastructure Strategy – Timberlands Assets under management – $2 Billion High quality, fee simple timberlands in North America Highly productive pine and eucalyptus timber in Brazil 26 Infrastructure Strategy – Timberlands Current portfolio 2 million acres of timberlands British Columbia, Maine, N
Slide 15: Infrastructure Strategy – Transmission
Infrastructure Strategy – Transmission Assets under management – $3 Billion High quality transmission systems in North and South America Regulated rate base; redevelopment and expansion potential 28 Infrastructure Strategy – Transmission Current portfolio Over 8,000 km of transmission lines 1,700 km
Slide 16: Specialty Funds Strategy
Specialty Funds Strategy Restructuring, Bridge and Real Estate Finance Fixed income and real estate securities 30 Specialty Funds Strategy Bridge and Restructuring – Broad mandate with emphasis on core areas Real Estate Finance – $600 million of commitments – Expands range of opportunities to invest
Slide 17: Expansion Opportunities; Power Operations
Expansion Opportunities Complementary operating platforms – Property – Power generation New infrastructure operating platforms – Ports – Pipelines – Toll roads – Rail Geographic expansion – Latin America – Europe 32 Power Operations 33 33 17
Slide 18: Unique, Low-cost Power Operations
Unique, Low-cost Power Operations ` 136 hydro generating stations ` 3,600 MW of installed capacity ` 1 pumped storage facility ` > 12,000 GWh of electricity annually ` 1 wind farm ` Storage capacity of 2,300 GWh ` 2 thermal plants 34 Geographically Diverse Operations North America ` 48 river systems
Slide 19: Strategic Focus on Hydroelectric Power; Strategic Priorities
Strategic Focus on Hydroelectric Power Extreme reliability of technology Operational flexibility Efficient form of generation Minimal capex requirements Low operating costs Clean and environmentally preferred Barriers to entry 36 Strategic Priorities Optimize and enhance our generation portfolio Exp
Slide 20: Competitive Strengths; Significant Growth Opportunities
Competitive Strengths Industry knowledge Operations expertise Asset management capabilities Strong balance sheet 38 Significant Growth Opportunities Acquisitions Select Developments Hydro – U.S., Brazil, Canada Small hydro – Brazil Wind Hydro – North America Other Wind Power – North America 39 20
Slide 21: Power Markets: Electricity Market Trends
Power Markets 40 40 Electricity Market Trends Capacity overbuild gradually dissipating Investment in transmission required to relieve congestion New build continues to be dominated by gas turbines Sustainable price level requires full recovery of capital costs Environmental compliance will increase
Slide 22: Gas Market Trends
Gas Market Trends Marginal cost of continental gas increasing World LNG supply is increasing and becoming an internationally priced commodity Upward pressure on long-term gas price due to: – Higher gas production costs (“non-conventional”) – Oil prices – Supply response to LNG demand 42 Gas Market T
Slide 23: All-in Cost of Gas Combined Cycle; Market Outlook in Ontario
All-in Cost of Gas Combined Cycle (“CCGT”) Gas price (NYMEX) $ 6.50 $ 9.50 Delivery cost 0.50 1.00 $ 7.00 $ 10.50 Heat rate (MMBtu/MWh) 1 7.196 7.196 Fuel cost per MWh $ 50 $ 75 Variable O&M 1 2 2 Total variable costs 52 77 Fixed O&M 2 5 5 Capital cost 2 15 20 Total all-in cost per MWh $ 73 $ 102 1.
Slide 24: Market Outlook in New York and New England
Market Outlook in New York New York (Zone A 7 X24) Power Prices Market Drivers As of September 21, 2006 100 With imports decreasing, 90 New Entrant All-in Cost – $73-$102/MWh prices are increasingly 80 set by gas-fired plants 70 US$/MWh 60 Increased exports to 50 Quebec and Ontario 40 30 Sustainable
Slide 25: Brookfield's Approach to the Electricity Market; Roll-off of Contracted Generation
Brookfield’s Approach to the Electricity Market Assure stability and sustainable value of revenues – Long term bilateral power sale agreements, at new entrant levels – Shorter term financial contracts Capture benefits of operational flexibility – Concentrate generation during peak pricing periods –
Slide 26: Power Virtual Tour; Power Investment Highlights
Power Virtual Tour Go to: www.brookfield.com / Investor Centre / Presentations for the Power Virtual Tour 50 Power Investment Highlights Stable and diversified revenues Low cost and long life assets Significant growth opportunities Strong financial position 51 26
Slide 27: Latin America Summary
Latin America 52 52 Summary Region anchored by Mexico, Brazil and Chile Stable and growing Considerable expertise in the region Strong local management Ideal partner for institutional investors 53 27
Slide 28: Brazil – Economic Highlights
Brazil – Economic Highlights Largest economy in region Record export growth Commodity and agribusiness powerhouse Declining interest rates Inflation under control Politically stable Heading to investment grade 54 Brazil – Economic Highlights Exports (US$ Billion) 129 118 97 73 60 2002 2003 2004 2005
Slide 29: Brazil – Economic Highlights
Brazil – Economic Highlights Inflation and Interest Rates (%) Avg. Interest Rate 23.4 Inflation Rate 19.1 19.1 16.3 15.4 12.5 9.3 7.6 5.7 3.2 2002 2003 2004 2005 2006E Source: Applied Economic Research Institute – Brazil Planning Ministry 56 Brazil – Economic Highlights Sovereign Risk Premium (EMBI
Slide 30: Brazil – Brookfield Advantages; Opportunities
Brazil – Brookfield Advantages Considerable expertise – Invested in Brazil for over 100 years Experienced local management team Reliable partner Strong governance – Publicly listed NYSE company – SOX compliant 58 Brazil – Opportunities Need for infrastructure Agribusiness boom – Sugar cane to produc
Slide 31: Brazil – Properties (Today and Tomorrow)
Brazil – Properties (Today) Residential Retail Rural - Residential homes - Shopping centers - Agricultural land - Land bank - Sugar cane 60 Brazil – Properties (Tomorrow) Residential Retail Rural - Pent-up demand - $700 million dedicated - Land acquisition retail mall fund - Ethanol - Industry conso
Slide 32: Brazil – Power Generation (Today and Tomorrow)
Brazil – Power Generation (Today) Largest portfolio of small hydroelectric power plants 12 plants, 205 MW 4 plants under construction, 112 MW Over 98% of the energy sold through long-term power purchase agreements 62 Brazil – Power Generation (Tomorrow) Need for new generation Power shortages and br
Slide 33: Brazil – Infrastructure (Today and Tomorrow)
Brazil – Infrastructure (Today) Timber – Pine and eucalyptus forest Transmission – 9.9% investment in TBE* – Over 2,100 km of transmission lines * Transmissions Brasileiras De Energia 64 Brazil – Infrastructure (Tomorrow) Transmission Lines – More capacity needed Ports – Congestion and bottlenecks R
Slide 34: Chile – Economic Highlights; Infrastructure (Today)
Chile – Economic Highlights Investment grade country Open and liberalized economy Politically stable Prudent fiscal policy Strong GDP growth 66 Chile – Infrastructure (Today) Transelec is the largest transmission company – 8,000 km of transmission lines – Power delivery to 99% of population – Essent
Slide 35: Chile – Infrastructure (Tomorrow); Summary and Q&A
Chile – Infrastructure (Tomorrow) Transmission growth opportunities next decade Untapped hydro development potential Good regulatory environment Economies of scale 68 Summary and Q&A 69 69 35
Slide 36: Strategic Priorities; Unique Platform
Strategic Priorities Expand operating platforms Seed funds with new and existing assets Continue to position franchise as a leading institutional infrastructure asset manager 70 Unique Platform Substantial capital to invest alongside clients Operating expertise in specialty asset management Historic
Slide 37: Investor Day Q&A
Investor Day September 28, 2006 Q&A Investor Day September 28, 2006 37
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