Brookfield Infrastructure Partners INVESTOR DAY SEPTEMBER 27, 2017 - - PowerPoint PPT Presentation
Brookfield Infrastructure Partners INVESTOR DAY SEPTEMBER 27, 2017 Agenda for Today A Decade of Growth Sam Pollock, Chief Executive Officer Review of Performance Bahir Manios, Chief Financial Officer Looking Ahead Sam Pollock, Chief
INVESTOR DAY SEPTEMBER 27, 2017
Agenda for Today
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A Decade of Growth
Sam Pollock, Chief Executive Officer
Review of Performance
Bahir Manios, Chief Financial Officer
Looking Ahead
Sam Pollock, Chief Executive Officer
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Starting with the past 12 months… Increased FFO/unit by 20% Over $2 billion of capital deployment Increased capital backlog to $2.4 billion Recapitalized North American gas transmission business Telecom infrastructure sector momentum
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Polling Question #1
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Over the past decade, we’ve delivered on four key objectives Scale and diversification Solid financial foundation Track record of investment discipline Profitable growth
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We’ve scaled our global business We’ve become a leading infrastructure investor in five continents
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We’ve diversified our operations significantly We own and operate 35 high-quality businesses across five sectors
TIMBER WATER Desalination Irrigation Distribution
COMMS INFRA Towers Fiber Backbone ENERGY Natural Gas Distribution Gas Storage District Energy TRANSPORT Railroads Toll Roads Ports UTILITIES Electricity Transmission UTILITIES Regulated Distribution Regulated Transmission Regulated Terminal
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We’ve built up a strong financial foundation Total liquidity today: $2.8 billion
DUAL-LISTING
INDEX INCLUSION
INVESTMENT GRADE CREDIT RATING
LONG-DEBT MATURITY PROFILE
LINES OF CREDIT
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BBI TAKE- PRIVATE $1.1B
December 2010
$1.2 $17.2
We’ve demonstrated an ability to make large value-based investments…
NTS ACQUISITION $1.3B
April 2017
UK REGULATED DISTRIBUTION MERGER $525M
November 2012
RAIL EXPANSION $600M
October 2011
TDF ACQUISITION $415M
March 2015 MARKET CAP ($B)
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…and to monetize our mature assets We seek to profitably re-deploy capital Sold 10 businesses in the past eight years Generated over $2 billion of gross proceeds; average IRR >25% Launched next phase of capital recycling plan
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As a result, we’ve profitably grown the business…
$- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 2009 2010 2011 2012 2013 2014 2015 2016 2017
FFO/unit Distribution/unit
1) Annualized based on Q2’17 results
CAGR 20%
FFO AND DISTRIBUTIONS PER UNIT
CAGR 12%
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
BIP (NYSE) S&P 500 Index DJBGI Total Return Index S&P Utilities Index Alerian MLP Total Return Index
…and created meaningful value for unitholders
TOTAL ANNUALIZED RETURN SINCE INCEPTION
20% 8% 7% 6% 6%
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EBITDA margins Balance sheet strength Financial risk management
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Improving EBITDA Margins High margins & low maintenance capex = strong cash conversion ratios
1) Annualized Q2’17 YTD results for a full year contribution of our Brazilian regulated gas transmission business
Our margin improvement stems from:
transmission business
57% 60%
2016 2017 1
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Our balance sheet and credit profile are in great shape…
Recourse debt
Corporate liquidity
Debt maturing in next five years
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…and we continue to actively manage our financial risks
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This year’s discussion
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Polling Question #2
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Return on Invested Capital (ROIC) is a popular metric with investors However…it is only helpful if measured and analyzed correctly
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How is it calculated?
Issues with the above: Two of the metrics above utilize a return on assets calculation All of above calculations use accounting-related measures
CALCULATION OF ROIC BIP ROIC
(FY2016)
Bloomberg Consolidated EBIT/ Consolidated Equity + Debt + Deferred Taxes
2%
CapIQ Net income attributable to LP’s/ Partnership Capital attributable to LP’s
7%
Factset Net income attributable to LP’s/ Consolidated Equity + Debt
2%
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How should it be calculated?
1) Adjusted for returns of capital
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Numerator: AFFO vs. Net Income AFFO is a more meaningful measurement of sustainable cash generated
CUMULATIVE 2010-2016 Net income attributable to partnership $ 1,621 Add back or deduct the following: Depreciation and amortization 2,631 Deferred income taxes 52 Mark-to-market gains and losses (95) FFO 4,209 Maintenance capital expenditures (817) AFFO 3,392 Less: Return of Capital (163) Adjusted AFFO $ 3,229
(in US$ millions, net to BIP)
Insignificant
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Denominator: Invested Capital vs. Partnership Capital Invested capital is more reflective of the capital we have been allocated
1) Cumulative opening balance difference of $73 million due to comprehensive income less distributions to unitholders since inception of the partnership
For the year ended December 31, 2016
PARTNERSHIP CAPITAL INVESTED CAPITAL Opening balance1 $5,379 $5,452 Items which impact partnership capital: Net income 474
511
(615)
Preferred unit issuances
Items which both metrics: Unit issuances 749 749 Ending balance $6,498 $6,387
(in US$ millions, unless otherwise noted)
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BIP’s ROIC Profile Average ROIC of ~13%
1) Reflects annualized Q2’17 YTD results pro forma for a full year contribution of our Brazilian regulated gas transmission business 2) Weighted average invested capital for the relevant period
Actual Pro forma
(in US$ millions, unless otherwise noted)
2012 2013 2014 2015 2016 20171 FFO $ 462 $ 682 $ 724 $ 808 $ 944 $1,256 Maintenance Capital (107) (129) (131) (136) (173) (206) Return of Capital (3) (35) (36) (41) (48) (124) Adjusted AFFO 352 518 557 631 723 926 Invested Capital2 $3,725 $4,255 $4,397 $5,101 $5,530 $6,503 ROIC 10% 12% 13% 13% 13% 14%
Track record of prior years returns and current year profile
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So what do these results mean?
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Returns over past 5+ years This is an accurate reflection of ROIC as it reflects the embedded
$2.8 billion
$574 million
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Embedded organic growth is built up as follows… Inflation and GDP growth alone are expected to generate ~4-6% FFO/unit growth
Volume Upside from GDP Growth (1-2%) Cash Flows Reinvested (2-3%) Inflationary Price Increases (3-4%) FFO/unit Growth (6-9%)
4-6%
75% of EBITDA indexed to inflation 35-50% of EBITDA benefits from GDP-linked revenue growth
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…and is reflected by our same-store EBITDA growth This trend should continue for the next five years
1) On a constant currency and ownership basis and adjusting for the impact of new equity injections in the business since inception
2012 2013 2014 2015 2016 2017 SAME-STORE1 EBITDA CAGR
UTILITIES
TRANSPORT
ENERGY
COMM INFRA
5%
CAGR
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BIP has provided investors with compelling risk-adjusted returns on invested capital
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Polling Question #3
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Trends we believe will shape future opportunities Low-carbon, thermal energy Unprecedented data usage Economic growth in Asia Urbanization Water Scarcity Smart cities 5G Technologies Private investment in infrastructure Self-driving and electric cars Aging public infrastructure
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We’ve grouped these trends into four opportunity sets Water infrastructure Municipal infrastructure Data infrastructure Investment in Asia
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Data is the fastest growing major commodity
80% 130% 180% 230% 280% 2016 2017 2018 2019 2020 2021
Index (%)
Data Oil & Gas Electricity Shipping Containers Freight Wheat Soybeans Steel
DEMAND GROWTH IN SELECTED COMMODITIES (2016 – 2021)1
See endnotes on page 48
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Exponential global growth in data usage creating opportunities Massive global investment in data infrastructure required to keep pace
OPPORTUNITY SET
DRIVERS
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Smart Safety & Security Smart Infrastructure Smart Homes
US $226B cumulative safe city market by 2021E US $712B smart ICT infrastructure market by 2020E US $405B smart home market by 2030E
Smart Energy Smart Buildings Smart Mobility
US $137B cumulative smart energy market by 2024E US $101B smart building market by 2021E US $1.5T future mobility market by 2030E
There is an increasing level of investment in municipal infrastructure Potential US$3 trillion+ market by mid-2020
Source: Bank of America Merrill Lynch Equity Research March 2017
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Focus on ‘smart cities’ to maximize efficiency of critical infrastructure
OPPORTUNITY SET
DRIVERS
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Global water consumption double the rate of population growth
By 2050:
U.S. government funding for water and wastewater infrastructure down 22% between 2009 and 20144
See endnotes on page 48
OPPORTUNITY SET
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Building a foundation for Asia’s fast-growing economies
5.7% GDP growth per capita5 $26 trillion to be invested in infrastructure by 20306 In the next 30 years, 34% of the world’s population growth will occur in Asia7
Brookfield office locations
OPPORTUNITY SET
See endnotes on page 48
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Our business strategy for the next decade… no change PATIENCE Be selective INNOVATE Creative deal structuring DO THE SMALL THINGS WELL Focus on organic growth and tuck-ins BE DECISIVE Pursue the right opportunities with conviction EXECUTE DISPOSITIONS WELL Recycle mature assets at attractive valuations
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We believe the next 10 years should be as successful as the first 10 Strong foundation in place ‒ Global presence and reach ‒ Access to capital ‒ Established investment engine Outlook for supply of opportunities is stronger
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Looking out 10 years
25% 25% 10% 10%
GEOGRAPHIES SECTORS
Asia Data Water Municipal
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Pulling it all together
BIP – 10 YEARS AHEAD
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Endnotes
1. Data compiled from Cisco, EIA, Markets & Markets, DOT, OECD, Statistica 2. Mountford, Helen. “Water: The Environmental Outlook to 2050.” OECD, 2011. 3. Gurría, Angel. “Financing Infrastructure for a Water Secure World.” High-Level Panel on Infrastructure Financing for a Water Secure World . Paris, France. 4. “2017 Infrastructure Report Card.” American Society of Civil Engineers, 2017. 5. Asian Development Outlook: Asia's Potential Growth. Asian Development Bank, 2016. 6. Bank, Asian Development. “Meeting Asia's Infrastructure Needs: Highlights.” Meeting Asia's Infrastructure Needs: Highlights, 2017. 7. World Population Prospects. United Nations, 2017.
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Important Cautionary Notes
All amounts are in U.S. dollars unless
financial data in this presentation is presented as of June 30, 2017. CAUTIONARY STATEMENT REGARDING FORWARD- LOOKING STATEMENTS AND INFORMATION This presentation contains “forward-looking information” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and in any applicable Canadian securities regulations. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events
conditions, and include statements regarding
and
subsidiaries’
business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include, but are not limited to, statements regarding our asset management. In some cases, forward-looking statements can be identified by terms such as “expects,” “anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and
such as “may,” “will,” “should,” “would” and “could.” Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward- looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, which may cause
achievements to differ materially from anticipated future results, performance
achievements expressed
implied by such forward-looking statements and information. Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business; the fact that our success depends on market demand for
fluctuations in interest rates and foreign exchanges rates; changes in inflation rates in North America and international markets; the performance of global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; strategic actions including dispositions; the competitive market for acquisitions and other growth opportunities; our ability to satisfy conditions precedent required to complete such acquisitions; our ability to effectively integrate acquisitions into existing operations and attain expected benefits; the
and timing of various regulatory, legal and contractual issues; changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates); the effect of applying future accounting changes; business competition; operational and reputational risks; technological change; changes in government regulation and legislation within the countries in which we operate; changes in tax laws; catastrophic events, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments including terrorist acts and cyberterrorism; and other risks and factors detailed from time to time in our documents filed with the securities regulators in Canada and the United States. We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying
should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements or information in this presentation, whether as a result of new information, future events or otherwise. CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS MEASURES This presentation contains references to financial metrics that are not calculated in accordance with, and do not have any standardized meaning prescribed by, International Financial Reporting Standards (“IFRS”). We believe such non-IFRS measures including, but not limited to, funds from operations (“”FFO”) and invested capital, are useful supplemental measures that may assist investors and
in assessing
financial performance and the financial performance
subsidiaries. As these non-IFRS measures are not generally accepted accounting measures under IFRS, references to FFO and invested capital, as examples, are therefore unlikely to be comparable to similar measures presented by other issuers and entities. These non-IFRS measures have limitations as analytical tools. They should not be considered as the sole measure of
from, or as a substitute for, analysis of our financial statements prepared in accordance with IFRS. For a more fulsome discussion regarding
use
non-IFRS measures and their reconciliation to the most directly comparable IFRS measures refer to our documents filed with the securities regulators in Canada and the United States.