Brookfield Infrastructure Partners, L.P. (BIP) 1Q13 Firing on All Cylinders

This is an excellent report.  Brookfield Infrastructure Partners, L.P. reported results [Source] for the quarter ended March 31, 2013 with funds from operations (FFO) totaling $160 million ($0.80 per unit) compared to FFO of $108 million ($0.58 per unit) in the first quarter of 2012 for a 48% increase in year-over-year FFO. The increase in FFO was primarily from organic expansion projects and recent acquisitions.

BIP Collage

Last quarter we reported FFO was flat due to the lag time between construction project expenditures and start of cash flows on completion. Capital intensive projects take time to complete and for the patient investor we now see the results of BIP’s hard work over the past few years kicking in. In the 1Q13 Letter to Unit holders [Source]; CEO Sam Pollock sums it up well: “In the first quarter of 2013, we posted strong results that began to fully reflect the investments that we made over the last two years. Our funds from operations (“FFO”) increased by 48% to $160 million, driven by our Australian railroad expansion project that was commissioned during the past year and acquisitions in our utilities and transport platforms that closed in the fourth quarter of 2012. Our FFO per unit was $0.80, a 38% increase over the prior year, as all of the investments funded by our August 2012 unit offering meaningfully contributed to cash flow. Including a 15% increase in our distribution in February 2013, our payout ratio was 59%, which is below our target range of 60%-70%.”

Financial Summary:

BIP 1Q13 Financial

BIP reported a net loss of $28 million or $0.17/unit for 1Q13 compared to net income of $14 million $0.05/unit 1Q12. Net income was impacted primarily from Australian Railroad long term financing costs to capture historically low interest rates. This is a short term costs that will more than be recovered to the benefits to unit holders through lower interest rates. Excluding these discretionary finance charges net income was $55 million a significant increase in FFO. Net income was also impacted by a higher depreciation and amortization expense due to an increase in the valuation of the asset base at year end.

Below are the highlights and performance by segment from Brookfield Infrastructure’s Supplemental Information[Source] You are encouraged to review the information provided in the source document. Brookfield does an outstanding job keeping unit holders informed through these and other disclosures.

Operational Highlights:

  • Australian railroad volumes ramped up substantially over past year with final KML expansion task reaching full take-or-pay operating levels in March 2013
  • Continue to progress integration plan at UK regulated distribution business after merger with Inexus
  • Toll road traffic volumes increased nearly 10% year-over-year
  • North American Gas Transmission operations continue to be impacted by weak market fundamentals
  • Executed long-term contract with data center at North American district energy business
  • Progressing construction of Texas transmission system, with completion expected in third quarter
  • Awarded ~$50 million of new mandates in utilities business

Financing and Liquidity Highlights:

  • Since year end, very focused on enhancing liquidity and addressing upcoming debt maturities
  • Completed over $2 billion of debt financings at our Australian railroad and UK regulated distribution operations with attractive terms
  • Extended average maturity of debt portfolio to eight years
  • Improved maturity profile with less than 15% of debt maturing over the next three years
  • Repatriated ~$350 million used to repay corporate credit facility
  • Divested non-core social infrastructure asset for $40 million
  • Overall group-wide liquidity is ~$1.2 billion

Segment Performance:

BIP 1Q13 Segment Performance Table

Utilities Platform:

BIP 1Q13 Utility Platform

Transport Platform:

BIP 1Q13 Transport Platform

Energy Platform:

BIP 1Q13 Energy Platform

Timber Platform:

BIP 1Q13 Timber Platform

Corporate and Other:

BIP 1Q13 Corporate and Other

The hard work and prudent investments over the past few years are generating increasing returns for the benefit of unit holders with patience and a long term investing perspective. Let’s now sit back and enjoy the ride.

Disclosure: Long BIP, BAM, BEP, BPY

Resources:

  • Brookfield Infrastructure Partners Website [Source]
  • Brookfield Infrastructure Partners 1Q13 Earnings Release [Source]
  • Brookfield Infrastructure Partners 1Q13 Letter to Unit Holders [Source]
  • Brookfield Infrastructure Partners Supplemental Information [Source]

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