Brookfield Infrastructure Raises Distribution After Key Buys

  • Australian Asciano transaction set to close by end of August
  • Sees significant growth in Brazil despite polical problems

Brookfield Infrastructure Partners LP plans to raise its distribution a further 3.5 percent with several key acquisitions set to close, including its A$9 billion ($6.83 billion) purchase with its partners of Australian port and rail operator, Asciano Ltd.

"We are pleased with our year-to-date financial results, and believe that we are on the cusp of further significant growth," Sam Pollock, chief executive officer of the Toronto-based company, said in a letter to shareholders Wednesday.

The latest distribution boost brings the company’s total increases to 11 percent from a year ago, in line with the target of 11 percent to 13 percent, Pollock said. The increased quarterly distribution, equal to 59 cents a unit, will be paid on Sept. 30. The company also announced a three-for-two unit split to be implemented Sept. 14.

Brookfield Infrastructure units rose 1.6 percent to $47.44 in New York at 10:44 a.m.

In addition to the Asciano deal, which is expected to close at the end of August, Brookfield recently completed the purchase of Houston-based Niska Gas Storage Partners LLC and a stake in a Peruvian toll-road portfolio. The company deployed $660 million of its own equity for the three transactions, it said, and it plans to commit about $700 million to expand its utilities segment.

Brookfield is in exclusive talks to acquire a natural-gas transmission company from Petrobras in Brazil, where it expects to invest a minimum of $700 million into a consortium alongside its institutional partners, it said. Pollock said on a conference call he was fairly confident the talks, which are advanced, would result in a transaction.

Brazil Faith

"Over the past year, we have been evaluating a number of exceptional opportunities across various sectors in Brazil," Pollock said. "While the country is experiencing political turmoil and a severe economic downturn, it is an economy with significant growth potential, solid underlying fundamentals and a strong democratic regime that is well-positioned for a good recovery in the medium term."

The company was also on the look out for "mispriced opportunities" in the fallout from the U.K. Brexit vote in June, and other opportunities in places like India and Mexico, Pollock said.

Brookfield Infrastructure, the publicly traded infrastructure arm of Brookfield Asset Management Inc., has also been a seller in recent years as the competition for real assets heats up. It sold its European gas distribution business in the second quarter and its Ontario transmission business in the second half of 2016.

In total, the company said it expects to raise $1.1 billion from the divestitures.

Asset Sales

"Over the past several years, we have successfully monetized eight investments for proceeds that exceeded $2 billion, generating returns on equity that are greater than 25 percent," Pollock said.

Pollock said he expected a further $500 million to $1 billion in asset sales on an annual basis for at least the next three years either through outright sales or the sale of minority stakes in its various businesses. He said there were not active processes currently.

"There is just a huge market for minority stakes in infrastructure and there’s not a discount when you go to sell these minority stakes," he said. "What these investors want are good strong minority protections but they’re happy to invest alongside people like ourselves."

Brookfield Infrastructure reported Wednesday net income grew eight-fold to $156 million, or 59 cents a unit, in the second quarter from a year ago. Funds from operations grew 11 percent to $230 million, or $1 a unit, sightly missing the average $1.02 estimate of analysts’ compiled by Bloomberg.

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