Brookfield Infrastructure Partners Lp Limited Partnership · NYSE:BIP
Brookfield Infrastructure Partners Lp Limited Partnership — Brookfield Infrastructure Partners — Investor Day (September 2020)
67 slides from Brookfield Infrastructure Partners Lp Limited Partnership's investor day presentation, Sep 24, 2020
Slide 1: Brookfield Infrastructure Partners Investor Day
Brookfield Infrastructure Partners INVESTOR DAY SEPTEMBER 24, 2020
Slide 2: Agenda
Agenda Introduction and 2020 Recap 3 Sam Pollock, Chief Executive Officer BIP: Grow-tility 2.0 11 Bahir Manios, Chief Financial Officer Value Creation Through Active Management 26 Jenine Krause, Chief Executive Officer, Enercare Capital Allocation: Poised for an Infrastructure Super-Cycle 40 Sam Pol
Slide 3: Introduction and 2020 Recap
Introduction and 2020 Recap SAM POLLOCK CHIEF EXECUTIVE OFFICER 3
Slide 4: BIP continues to prosper during unprecedented times
BIP continues to prosper during unprecedented times Resilient Strong financial performance financial position Continued execution Broadened of full-cycle investment investor base strategy 4
Slide 5: Global shutdowns highlighted the strength of our business
Global shutdowns highlighted the strength of our business All businesses deemed essential services No counterparty issues H1 2020 results were impacted by <5% Full-year FFO per unit projected to increase YoY 5
Slide 6: We have maintained a strong financial position
We have maintained a strong financial position • $3.5 billion of total liquidity1 • No significant debt maturities in the next five years • BBB+ credit rating • 85% of debt non-recourse • >20x corporate interest coverage 1. As at June 30, 2020, proforma the closing of the Indian telecom tower and U.
Slide 7: Buy, enhance, sell, repeat
Buy, enhance, sell, repeat Top-Line Growth Sell to Stabilize 12-15% Lower-Cost- Buy for 15%+ Capital Target of-Capital Value Returns Structure Return Buyer Compound Cash Flows 7
Slide 8: We are successfully recycling capital
We are successfully recycling capital $500 million $700+ million Generated to-date In progress 18% IRR 2.6x MoC 8
Slide 9: Redeploying proceeds into higher-earning opportunities
…and redeploying proceeds into higher-earning opportunities U.K. Telecom Indian Telecom U.S. LNG Business Towers Export Facility $150M of equity $600M of equity $425M of equity Asset rotation strategy expected to increase FFO per unit by 5% on a run-rate basis 9
Slide 10: Broadened our investor base with BIPC
Broadened our investor base with BIPC Completed re-org/spinoff via a unit split on March 31 Included in Russell 2000 Index Units have traded at a premium to BIP LP units Current trading represents one-third of total traded volumes BIPC has provided more investors with access to our globally diversif
Slide 11: BIP: Grow-tility 2.0
BIP: Grow-tility 2.0 BAHIR MANIOS CHIEF FINANCIAL OFFICER 11
Slide 12: Last year, BIP was introduced as a grow-tility
Last year, BIP was introduced as a “grow-tility” Utility-like Higher growth characteristics profile 12
Slide 13: What has happened since?
What has happened since? Global economy GDP has contracted Extreme volatility in shut down for months by 5%1 capital markets 1. Source: International Monetary Fund. 13
Slide 14: Our performance was virtually unimpacted
Our performance was virtually unimpacted BIP’s cash flows are underpinned by the following critical attributes: High-quality essential assets Long-term contracted cash flow streams Strong counterparties Diversification 14
Slide 15: Understanding the nature of our underlying cash flows
In order to appreciate our resilient performance, it is important to understand the nature of our underlying cash flows 15
Slide 16: 70% of our business well insulated from economic shutdowns
70% of our business well insulated from economic shutdowns UTILITIES, ENERGY AND DATA FFO $U.S. millions 585 540 (30) (15) 45 45 Emerging Shutdown Asset Organic Market related recycling growth FX impacts H1 2019 H1 2020 Segments performed well, growing 8% organically year over year 16
Slide 17: Utilities comprise 35% of our business
Utilities comprise 35% of our business Portfolio spans five High operating margins countries, providing (~75%) and cash geographic and regulatory conversion (95%+) diversification >95% of FFO is contracted or supported by strong regulatory frameworks 17
Slide 18: Energy business has no direct commodity exposure
Energy business has no direct commodity exposure Provides essential infrastructure, with approximately 85% of revenues contracted under long-term take-or-pay arrangements DIVERSIFIED BY GEOGRAPHY DIVERSIFIED AND ASSET CLASS BY COUNTERPARTY India <20%1 from Remainder of top five Midstream across cust
Slide 19: Highly contracted global data portfolio
Highly contracted global data portfolio Cash flows are underpinned by inflation-linked, volume-agnostic contracts with an average term of ~15 years Europe Asia Pacific North America South America 45% 40%1 10% 5% ~10-year term ~25-year term ~10-year term2 ~7-year term 1. Presented using annualized H1
Slide 20: Transport comprises the remaining 30% of cash flows
Transport comprises the remaining 30% of cash flows Critical nature of assets led to resilient performance 20% % OF FFO1 Recoverable 15% losses 10% Economic losses 5% 0% Rail Toll Roads Ports No volume risk Market sensitive but unimpacted by economic shutdown Impact of economic shutdowns FFO only im
Slide 21: Rail business is diversified by geography and commodity
Rail business is diversified by geography and commodity SECTOR EXPOSURE OF RAIL SEGMENT1 Minerals 10% Agriculture Underpin basic industrial 11% and household consumption 39% Steel & Construction 3% 3% Chemicals & Plastics 6% Positive current outlook Lumber & Pulp 28% Freight Other >50% of revenues s
Slide 22: Portfolio of roads essential to local economies
Portfolio of roads that are essential to local economies TOLL ROAD VOLUMES SPOTLIGHT ON BRAZIL 5% • 70% heavy traffic1 10% • Roads handle ~85% 10% of Brazil’s transport volumes • Essential in movement 75% of agriculture, meat/poultry and chemicals Brazil Chile India Peru 1. Based on H1 2020 traffic
Slide 23: A well-diversified global ports business
A well-diversified global ports business PORTS FFO BY JURISDICTION Container 5% Land Australian ports Lease 15% have long-term contracts U.K. ports and favorable underpinned by 40% market dynamics conservancy tariffs and long-term Conservancy property leases 20% + Bulk U.S. container terminal partia
Slide 24: Strong downside protection does not limit upside potential
Strong downside protection does not limit upside potential of our business 24
Slide 25: 2021 has the potential to outperform
2021 has the potential to outperform • Reported results in 2020 would have been up 15%+ in the absence of: • Shutdown-related volume declines • A 25% decline in Brazilian real Organic growth and new investments $3.66 • A delay in regulatory approval for Indian telecom business Delay in closing India
Slide 26: Value Creation Through Active Management
Value Creation Through Active Management JENINE KRAUSE CHIEF EXECUTIVE OFFICER, ENERCARE 26
Slide 27: Enercare is a leading provider of residential energy infrastructure
Enercare is a leading provider of residential energy infrastructure 1.1M WATER HEATER RENTAL CONTRACTS 115K HVAC RENTAL CONTRACTS 1.9M CUSTOMERS IN NORTH AMERICA 27
Slide 28: Who we were and who we are today
Who we were and who we are today Before Now Structure Publicly listed Privately owned Modest, capital Significant, with Growth ambitions constrained ample resources Asset-backed Capital structure Corporate debt securitization Systems Legacy Modernizing 28
Slide 29: What is special about our business?
What is special about our business? Highly predictable annuity-like cash flows Solid market position Scale portfolio with low attrition High margins Strong growth prospects 29
Slide 30: Dedicated management team supported by Brookfield resources
Dedicated management team supported by extensive Brookfield resources Investment Team Asset Optimization (~80 professionals) Resources Enercare Executive Team Strategy Execution Jenine Krause, CEO Asset Management Team Experience (~60 professionals) Financial Advisory 30
Slide 31: The role of a Brookfield operating company executive
The role of a Brookfield operating company executive Execute the Engage and enable business plan our people Provide exceptional Manage regulatory service (win in the affairs market) 31
Slide 32: Agenda at our operating company board meetings
What is the agenda at our operating company board meetings? Drive efficient organizational structures and solid operating margins De-risk Build businesses and strong management implement appropriate teams and incentivize capital structures them properly Commercialize Increase and deliver growth proj
Slide 33: Four examples of how we've worked together to create value
Four examples of how we’ve worked together to create value Low-cost capital structure: Pursued a securitization initiative Strategic realignment: Applied learnings from other businesses to assist in developing strategy Business transformation: Shared resources and expertise Opening up the Brookfield
Slide 34: Adding value through a more efficient capital structure
Adding value through a more efficient capital structure Securitization lowers our financing costs and provides a more efficient source of capital to fund planned growth Before Securitization After Securitization Debt Instruments Public bonds and term loans Securitization facility Rating Methodology
Slide 35: Refining our business strategy
Refining our business strategy Developed multichannel approach to increasing U.S. rental volumes “Dealer model” based Focused on on similar approach at maximizing conversion U.K. regulated of one-time sales to distribution business higher-value recurring rental contacts 35
Slide 36: Sharing of resources and expertise
Sharing of resources and expertise • Specialized expertise: Investment, finance and IT professionals have worked alongside our team on several strategic projects • “Been there, done that” experience: Applied lessons learned to accelerate our U.S. expansion • Long-term secondments: “Borrowed” several
Slide 37: Opened the door to proprietary growth opportunities
Opened the door to proprietary growth opportunities Developing strategies to create multiple growth channels for recurring revenues Multifamily ~3,000 home closings 57,000+ submeter Potential to reach per year prospect units 1.7 million customers 37
Slide 38: Report card thus far
Report card thus far • Added 110,000 new long-term contracts (an increase of 8%) • Achieved record U.S. rental conversion rates (increase from 10% to 55%+) • Improved operating margins by 5% 38
Slide 39: Active asset management delivering results
Active asset management delivering results Base Returns Capital U.S. Rental U.S. Dealer Accretive Returns 12% Structure Penetration Model Tuck-ins 20%+ 39
Slide 40: Capital Allocation: Poised for an Infrastructure Super-Cycle
Capital Allocation: Poised for an Infrastructure Super-Cycle SAM POLLOCK CHIEF EXECUTIVE OFFICER 40
Slide 41: The two pillars of our capital allocation strategy
The two pillars of our capital allocation strategy Capital Deployment Capital Raising 41
Slide 42: Our pace of deployment has accelerated
Our pace of deployment has accelerated $billions 20171 2018 2019 New Investments $ 0.6 $ 1.0 $ 1.7 Growth Capex (Equity Component) 0.4 0.4 0.4 Total Growth Investment $ 1.0 $ 1.5 $ 2.1 1. 2017 new investment activity excludes $1.3 billion investment in Brazilian regulated gas transmission business s
Slide 43: Spread across our four target geographies
…spread across our four target geographies GROWTH INVESTMENT BY GEOGRAPHY 50% 15% NORTH AMERICA ASIA PACIFIC 15% 20% EUROPE SOUTH AMERICA 43
Slide 44: And in each of our target segments
…and in each of our target segments GROWTH INVESTMENT BY SEGMENT 20% 15% DATA UTILITIES 25% 40% TRANSPORT ENERGY 44
Slide 45: 2020 is shaping up to be an active year
2020 is shaping up to be an active year $billions 2020F New Investments Made To Date (9 Months) $ 1.3+ Annualized Growth Capex (Equity Component) 0.4) Total Growth Investment $ 1.7+ INVESTMENT BY GEOGRAPHY1 INVESTMENT BY SEGMENT1 Utilities Europe Transport 5% 10% 5% Data 40% North America 50% 40% As
Slide 46: Tailwinds pointing to infrastructure investment super-cycle
Tailwinds pointing to infrastructure investment super-cycle Secular trend of government and industrial company indebtedness 100-year data infrastructure investment opportunity Midstream sector cycling out of assets Transport sector recapitalizing 46
Slide 47: We are currently seeing good value opportunities
We are currently seeing good value opportunities We expect to invest $2 billion+ annually over the next 3–5 years GROWTH INVESTMENT BY SEGMENT 35% 10% DATA UTILITIES (LAST 3 YEARS: 20%) (LAST 3 YEARS: 15%) 20% 35% TRANSPORT (LAST 3 YEARS: 25%) ENERGY (LAST 3 YEARS: 40%) 47
Slide 48: A 100-year data investment upgrade opportunity
A 100-year data investment upgrade opportunity Aging data Networks being These upgrades are infrastructure replaced by estimated to require struggling to keep up faster and leaner over $1 trillion1 with growing global fiber infrastructure of capital globally over technology demand and preparing to t
Slide 49: Backdrop for Indian telecom tower investment
Backdrop for Indian telecom tower investment Case Study: Reliance Jio Invested $50 billion in build-out of tower and fiber portfolios Continuing to build e-commerce business, requiring tens of billions Required trusted, long-term partner to recycle capital into core businesses 49
Slide 50: Well-positioned to partner with Reliance Jio
Well-positioned to partner with Reliance Jio Seller’s Attractive characteristics ideal partner for Brookfield • Reputable, long-term oriented • High-quality portfolio of ~135,000 recently-constructed towers • Ability to establish management team and operate the asset • Anchor tenant under a 30-year
Slide 51: Midstream assets out of favor
Midstream assets out of favor Energy market Attractive characteristics environment for Brookfield • Volatile energy prices • Significant scarcity value • Current low demand for fossil fuels • Highly contracted revenue profiles • MLP structure out of favor • Large capital requirement • Oil majors sel
Slide 52: Energy markets dislocation: Cheniere Energy Partners
Energy markets dislocation creating value opportunities Case Study: Cheniere Energy Partners Premier asset with 85% EBITDA contracted in USD 18-year weighted average remaining life Globally diversified, investment-grade counterparties LNG is bridge fuel for decarbonization efforts Why were we able t
Slide 53: Contrarian opportunities in transport due to negative sentiment
Contrarian opportunities in transport due to negative sentiment 53
Slide 54: Airport sector severely impacted
Airport sector in particular has been severely impacted Some estimates are not anticipating air traffic to return to pre-shutdown levels until 2025 Revenue Passenger Mile1 (Indexed to 2019 demand) 140 120 100 80 60 40 20 - 1/20 7/20 1/21 7/21 1/22 7/22 1/23 7/23 1/24 7/24 1/25 7/25 100% line Baselin
Slide 55: Capital Deployment Capital Raising
Capital Deployment Capital Raising 55
Slide 56: BIP raises capital from three sources
BIP raises capital from three sources $billions 2017 2018 2019 Capital Markets Activity $ 1.3 $ 0.6 $ 0.9 Proceeds from Capital Recycling -) 1.0 1.1 Retained Operating Cash Flows (~15% of FFO1) 0.2 0.2 0.2 Total Sources $ 1.5 $ 1.8 $ 2.2 60% of external capital has been raised through capital recycl
Slide 57: Current backdrop is very supportive for capital recycling
Current backdrop is very supportive for capital recycling Exit) Relevant IRR Value1 Value Metric (Local Currency /USD) Australian District Energy 280 18x EBITDA N/A2 Chilean Toll Roads 530 18x EBITDA 22% / 16% Colombian Distribution 100 1.8x RAB 25% / 17% U.S. Transmission 60 1.8x RAB 21% Prolonged
Slide 58: Capital recycling will continue to be a meaningful funding source
…and it will continue to be a meaningful funding source ~$4B $7.5B+ By end of 2022 Next five years 60–75% of our growth should be funded with capital recycling 58
Slide 59: Pulling it all together: Why invest in BIP?
Pulling it all together: Why invest in BIP? 59
Slide 60: BIP has utility-like in-place cash flows
BIP has utility-like in-place cash flows 25% • Highly diversified 20% cash flows • Long-life 15% investments • Hard assets with 10% barriers to entry • Regulated and 5% Current contracted AFFO Yield1 revenues (6%) 0% 1 2 3 1. Presented using annualized H1 2020 AFFO pro-forma contributions from recen
Slide 61: Strong track record of operational value add and organic growth
Strong track record of operational value add and organic growth 25% • Inflation protection 20% • Capital backlog 15% • Operational excellence Organic 10% Growth (6-9%) • Leveraged to GDP recovery/growth 5% Current AFFO Yield1 (6%) 0% 1 2 3 1. Presented using annualized H1 2020 AFFO pro-forma contrib
Slide 62: Strong secular tailwinds for M&A growth
Strong secular tailwinds for M&A growth 25% • Highly indebted 20% governments and M&A corporates (+1-5%) 15% • Massive data investment required Organic 10% Growth • Capital market (6-9%) dislocation 5% Current • Proven capital AFFO Yield1 recycling strategy (6%) 0% 1 2 3 1. Presented using annualize
Slide 63: For investors seeking to compound wealth over time
For investors seeking to compound wealth over time In a low interest rate world… BIP is your Grow-tility 20.0% 30-Year U.S. Treasury Yield ~4% DISTRIBUTION YIELD % 10.0% 0.0% 5-9% DISTRIBUTION GROWTH TARGET …with economic uncertainty 10% CAGR 10.0% Global GDP (2000-20) DISTRIBUTION GROWTH SINCE INCE
Slide 64: Thank you
Thank you Brookfield
Slide 65: Q&A
Q&A Brookfield
Slide 66: Notes, Disclosure or Forward-Looking Statements
Notes, Disclosure or Forward-Looking Statements This presentation contains “forward-looking information” assumptions and expectations, the reader should not place complete announced and potential transactions that may be within the meaning of Canadian provincial securities laws undue reliance on for
Slide 67: Brookfield Infrastructure Partners Investor Day
Brookfield Infrastructure Partners INVESTOR DAY SEPTEMBER 24, 2020
Brookfield Infrastructure Partners — Investor Day (September 2020) on 6ix