Brookfield Infrastructure Corporation Q1 FY2024 earnings call

Brookfield Infrastructure had an excellent start to 2024. FFO growth reflects organic growth and capital deployed last year. New investments like data centers in North America and Europe show momentum. Utilities had organic growth despite lower FFO due to asset sales. Transport saw significant growth from the Triton acquisition and other transport operations. Midstream benefited from favorable customer activity and North American gas storage. Data segment had acquisitions and booked capacity. The company has a strong financial position with ~90% of cash flows regulated/contracted and inflation protected. Capital recycling initiatives included selling the fiber platform in French Telecom Infrastructure and completing financing at Brazilian regulated gas transmission business. Acquisitions focus on high-risk adjusted returns with selective pursuit of opportunities.

During the first quarter of 2024, Brookfield Infrastructure Partners generated funds from operations (FFO) of $615 million, an 11% increase over the prior year. By segment: Utilities generated FFO of $190 million (down from $208 million in the same period last year), with organic growth of 8% after adjusting for asset sales. Transport FFO was $302 million, a 57% increase over the prior year, largely due to the Triton acquisition, and the balance of transport operations grew 10% from inflationary tariff increases and higher volumes. Midstream FFO was $170 million, comparable to the prior year excluding capital recycling initiatives, with North American gas storage showing strong fundamentals. Data FFO was $68 million, comparable to the same period last year, benefited from full contribution of German telecom tower operation, data center acquisitions, but offset by the sale of a New Zealand integrated data distribution business. The data segment has approximately 670 megawatts of booked but not built capacity expected to come online over the next three years.

Expect data center capacity of ~670 MW booked but not built to come online over the next three years. M&A pipeline is full but selective for high-risk adjusted returns. Continued focus on data and decarbonization sectors in investments. Capital recycling initiatives to continue with expected proceeds from various transactions.

Risks include macroeconomic factors such as central bank interest rate cuts, geopolitical events in Europe and the Middle East, and potential market volatility affecting business performance.

Q: With regard to the leverage that the business has to decarbonization and digitalization, is there a way that you can help us frame how much of the current FFO is lever to those trends? Or more importantly, where you would see that going over the next five years based on the orientation of your CapEx project backlog and the M&A pipeline?

A: Sam Pollock said ~75%-80% of new investment opportunities relate to data and decarbonization sectors, and David Krant added that 30% of current FFO is from residential decarbonization and data, while 80% of capital projects are in those areas Q: The letter also comments that the credit markets have provided a very supportive backdrop to derisk and optimize the capital structure across a variety of your businesses. Just given the relatively long average duration of your debt, are there still opportunities to take advantage of that backdrop? Or do you think you’re largely complete on that front for the year?

A: David Krant said there are still opportunities, like monitoring the Intel project, and looking to derisk maturities beyond 2024 Q: On the transaction environment and being very selective, what’s behind that, is that you are seeing valuations move higher or are you kind of treating yourself a little bit here as capital constrained?

A: Sam Pollock said it's not about valuations or capital constraint, but preserving capital for potential future opportunities as deal activity may slow creating contouring opportunities Q: On Triton, what aspects of the business have outperformed and whether you expect that to be ongoing? And on synergies for the global shipping business?

A: Ben Vaughan said Triton's fleet utilization is north of 98% and rates are solid; Sam Pollock said it's early days on leveraging trade flow information for synergies in the global shipping business Q: On the M&A market and asset monetization goal, how are you looking at your asset monetization goal?

A: Sam Pollock said focused on monetizing smaller, derisked businesses, targeting strategics, and sees improvement in the M&A market but holding capital for potential opportunities Q: On HPC and Triton's impact on investment plans?

A: Sam Pollock said working on a technical solution for the HPC facility to return to nameplate capacity; Triton's management will decide on inventory replenishment and investment based on per diems