Brookfield Infrastructure (NYSE:BIP)(TSX:BIP.UN) today announced a number of
strategic initiatives, comprised of:
-- an agreement, together with its institutional partners, to acquire the
remaining 45% of the Autopista Vespucio Norte ("AVN") toll road, a key
artery in the ring road network surrounding Santiago, Chile;
-- an agreement to acquire an 85% interest in Inexus Group ("Inexus"), a
regulated distribution utility in the UK;
-- the issuance of 9,680,000 L.P. units in the U.S. and Canada and the
concurrent private placement of 3,860,000 redeemable partnership units
to Brookfield Asset Management Inc. ("Brookfield") (NYSE/TSX/Euronext:
BAM) for aggregate gross proceeds of $445,071,200; and
-- plans to explore strategic alternatives to divest some of its timber and
certain non-core assets.
"With these transactions, we will significantly increase the scale of our
transportation and utilities platforms. We will consolidate our ownership in one
of the leading toll roads in Chile, and we will more than double the size of our
regulated distribution business in the UK," said Sam Pollock, Chief Executive
Officer of Brookfield Infrastructure Group. "Consistent with our stated targets,
we expect to earn long-term returns of 12-15% on these new investments. As part
of our funding plan, we will explore strategic alternatives to monetize some of
our assets at favourable valuations."
In connection with these announcements, Brookfield Infrastructure is also
providing summary preliminary results for the quarter ended June 30, 2012.
Overview of Investment Initiatives
Consolidating Ownership in Chilean Toll Road
Brookfield Infrastructure and its institutional partners have executed
definitive documents to acquire the remaining 45% of the AVN toll road that they
do not currently own for approximately $590 million, comprised of $290 million
in cash and the assumption of $300 million of debt. Brookfield Infrastructure
will participate by investing approximately $165 million, which will result in
an aggregate ownership interest in AVN of 51% upon completion. This Chilean toll
road is a key artery in the ring road network surrounding Santiago, and it
benefits from an attractive revenue framework whereby tolls escalate annually at
inflation plus 3.5%. Furthermore, tolls may also increase from congestion
pricing once traffic exceeds threshold levels. AVN's traffic has increased at a
compounded annual growth rate of 8% for the past three years and 12% for the six
months year-to-date over the prior year period. The transaction, which is
subject to customary closing conditions, is expected to close in October of
2012.
Following the close of this transaction, Brookfield Infrastructure and its
institutional partners will own 100% of one of the leading toll roads in Chile.
In addition to expected benefits from projected traffic growth and tariff
increases, Brookfield Infrastructure will be well-positioned to invest
additional capital to upgrade and expand this road in order to mitigate
bottlenecks and improve its connectivity. Brookfield Infrastructure expects that
it will be able to earn attractive returns on these additional capital
expenditures.
Expansion of Utilities Platform
Brookfield Infrastructure has executed definitive agreements to acquire 85% of
Inexus, one of the largest owners and operators of gas and electricity
connections in the UK, from Challenger Infrastructure Fund ("Challenger") for
GBP 10 million (approximately $15 million), plus a contingent payment of GBP 26
million (approximately $40 million) if certain milestones are reached. The
initial payment is conditioned upon, among other things, approval of the
transaction by Challenger's unitholders on August 15, 2012 and waiver of
pre-emptive rights by the minority owners of Inexus. The contingent payment is
subject to the successful negotiation and completion of a proposed
recapitalization of Inexus and the clearance of the transaction by UK
competition authorities.
Brookfield Infrastructure's current UK regulated distribution business generates
stable cash flows that are underpinned by regulated tariffs, which adjust
annually by an inflation factor. Pursuant to the recapitalization, if completed,
Brookfield Infrastructure intends to merge Inexus into its existing UK regulated
distribution business and invest approximately $450 million, including the
contingent payment, to reduce leverage of this entity to investment grade
levels. Following the close of the transaction, Brookfield Infrastructure would
more than double its installed base of gas and electricity connections to over 1
million connections. Furthermore, this transaction, if completed, would extend
Brookfield Infrastructure's capability into high margin fibre and district
heating projects. Assuming all the conditions precedent are satisfied, the
acquisition and the recapitalization are expected to close in the fourth quarter
of 2012.
If the AVN and Inexus transactions are both completed, Brookfield Infrastructure
anticipates that it will invest a total of approximately $630 million in these
two investments.
Potential Acquisitions
Brookfield Infrastructure is currently considering a number of acquisitions in
its key sectors - utilities and transport and energy - that are consistent with
its strategy. Recently, Brookfield Infrastructure and its institutional partners
entered into discussions with Abertis Infraestructuras, S.A. ("Abertis"), one of
the leading owners and operators of toll roads in the world, to create a joint
venture to acquire a 60% interest in Obrascon Huarte Lain Brasil S.A. ("OHL
Brasil") for approximately $1.7 billion, comprised of $1.1 billion of equity and
$600 million of assumed liabilities. Brookfield Infrastructure and its
institutional partners would own 49% of the joint venture and Abertis would own
the remaining 51%. If the parties are able to execute definitive agreements to
acquire the 60% interest in OHL Brazil, the joint venture would, if required,
undertake to launch a tender offer to acquire the remaining 40% of OHL Brasil
that is publicly traded, resulting in a final ownership interest of between 60%
and 100% depending upon the outcome of the tender offer. If successful with the
potential transaction, Brookfield Infrastructure expects to initially invest
approximately $250 million, with the possibility of follow-on investment
pursuant to the tender offer.
OHL Brasil is one of the largest owners and operators of toll road concessions
in Brazil, with over 3,200 km of roads in states that account for approximately
65% of Brazil's GDP and that are home to nearly two-thirds of the country's
approximately 70 million vehicles. OHL Brasil's toll road concessions are
expected to benefit from projected increases in traffic and rates that are
indexed to inflation. With a combination of established assets and toll roads in
an expansionary phase, Brookfield Infrastructure expects the OHL Brasil
portfolio to generate stable cashflow with growth. However, there can be no
assurance of when or if a definitive agreement will be executed in respect of
this opportunity.
Funding Plan
In order to finance these investments, Brookfield Infrastructure has agreed to
issue units for $445,071,200 in gross proceeds and will explore strategic
alternatives to sell some of its assets. If any of these investments are not
completed, the net proceeds will be used for other organic and strategic growth
initiatives or for general corporate purposes. Brookfield Infrastructure intends
to draw on its corporate credit facilities for any additional funds that may be
required.
Asset Divestitures
Brookfield Infrastructure is exploring strategic alternatives to divest some of
its timber and certain non-core assets. In the current low interest rate
environment and given strong interest in infrastructure assets from
institutional and strategic buyers, Brookfield Infrastructure believes that
there could be opportunities to monetize these assets and reinvest capital in
assets that offer superior returns. No assurances can be given that Brookfield
Infrastructure will be able to sell these assets at an acceptable price or
within the time periods contemplated.
Equity Offering
Today, Brookfield Infrastructure announced that it has agreed to issue 9,680,000
L.P. units, on a bought deal basis, to a syndicate of underwriters at a price of
$33.25 per L.P. unit (the "Offering Price") for gross proceeds of $321,860,000
(the "Offering"). In addition, Brookfield will purchase, directly or indirectly,
3,860,000 million redeemable partnership units of Brookfield Infrastructure's
holding limited partnership ("RPUs") at the Offering Price (net of underwriting
commissions) concurrent with the proposed public offering in order to maintain
its approximate 30% interest in Brookfield Infrastructure on a fully exchanged
basis. The gross proceeds of the Offering and the placement of RPUs to
Brookfield will be $445,071,200. The Offering and issuance of RPUs to Brookfield
are expected to close on or about August 3, 2012.
Brookfield Infrastructure has also granted the underwriters an over-allotment
option, exercisable in whole or in part for a period of 30 days following
closing of the Offering, to purchase up to an additional 1,452,000 L.P. units at
the Offering Price. Brookfield will also have the option to subscribe for
additional RPUs in order to maintain its approximate 30% interest on a fully
exchanged basis. If both of these options are exercised, the gross offering size
would increase to $493,350,200.
Earnings Update
In connection with these announcements, Brookfield Infrastructure is providing
summary preliminary quarterly results. For the quarter ended June 30, 2012, net
income and FFO(1) compared to the quarter ended June 30, 2011 are as indicated
in the following table.
Three months ended June 30
---------------------------
US$ millions (except per unit amounts) 2012 2011
----------------------------------------------------------------------------
FFO $ 111 $ 102
- per unit $ 0.60 $ 0.65
Net income $ (26) $ 26
- per unit $ (0.14) $ 0.17
----------------------------------------------------------------------------
The following table reconciles FFO with net income:
Three months ended June 30
---------------------------
US$ millions 2012 2011
----------------------------------------------------------------------------
Net Income $ (26) $ 26
Add back or deduct the following:
Depreciation and amortization 70 53
Fair value adjustments 3 6
Deferred taxes and other items 64 17
----------------------------------------------------------------------------
FFO $ 111 $ 102
----------------------------------------------------------------------------
On August 8, 2012 Brookfield Infrastructure expects to release its results for
the quarter ended June 30, 2012. Brookfield Infrastructure's FFO, its key
measure of operating performance, totaled $111 million ($0.60 per unit) compared
to FFO of $102 million ($0.65 per unit) in the second quarter of 2011. Results
reflect a significant increase in FFO from Brookfield Infrastructure's transport
and energy segment and a strong performance from its utilities segment, which
was partially offset by a decreased contribution from its timber business.
Brookfield Infrastructure also expects to record a net loss of $26 million (loss
of $0.14 per unit) for the quarter ended June 30, 2012, compared to net income
of $26 million ($0.17 per unit) in the second quarter of 2011 as a result of
certain non-cash charges that totaled approximately $40 million during the
current period, primarily attributable to the recent refinancing completed at
its North American gas transmission business and an impairment charge relating
to a restructuring at one of Brookfield Infrastructure's European ports, which
offset the increase in FFO. These non-cash charges are non-recurring in nature
and do not materially impact Brookfield Infrastructure's operations.
The estimates above are unaudited and represent the most current information
available to management. Since management has not completed its closing
procedures for the quarter ended June 30, 2012, these estimates are preliminary,
are based on management's internal estimates and are subject to further internal
review by management and approval by Brookfield Infrastructure's audit
committee. Brookfield Infrastructure's actual financial results could be
different from the results shown above and those differences could be material.
Accordingly, readers should not place undue reliance on these estimates. See
"Forward-Looking Statements" below. The preliminary financial data included in
this news release has been prepared by, and is the responsibility of, Brookfield
Infrastructure's management and has not been reviewed or audited or subject to
any other procedures by Brookfield Infrastructure's independent registered
public accounting firm. Accordingly, Brookfield Infrastructure's independent
registered public accounting firm does not express an opinion or any other form
of assurance with respect to this preliminary data.
Offer Documents
Brookfield Infrastructure has filed a registration statement (including a
prospectus) with the SEC in respect of the Offering. Before you invest, you
should read the prospectus in that registration statement and other documents
Brookfield Infrastructure has filed with the SEC for more complete information
about Brookfield Infrastructure and the Offering. Brookfield Infrastructure has
also filed the prospectus relating to the Offering with certain provincial
securities regulatory authorities in Canada. You may get any of these documents
for free by visiting EDGAR on the SEC website at www.sec.gov or via SEDAR at
www.sedar.com. Also, a copy of the U.S. preliminary prospectus supplement may be
obtained through this hyperlink:
http://www.brookfieldinfrastructure.com/_Global/22/img/content/file/US_Prospectus_Supplement_2012.pdf.
Alternatively, Brookfield Infrastructure, any underwriter or any dealer
participating in the offering will arrange to send you the prospectus or you may
request it in the U.S. from RBC Capital Markets, LLC, Attention: Prospectus
Department, Three World Financial Center, 200 Vesey Street, 8th Floor, New York,
New York, toll-free: 877-822-4089, Credit Suisse Securities (USA) LLC,
Attention: Prospectus Department, One Madison Avenue, New York, New York, 10010,
toll-free: 800-221-1037, email: newyork.prospectus@credit-suisse.com, Citigroup,
Brooklyn Army Terminal, 140 58th Street, 8th Floor, Brooklyn, New York 11220,
toll-free: 800-831-9146, email: batprospectusdept@citi.com or HSBC Securities
(USA) Inc., Attention: Prospectus Department, 425 Fifth Avenue, New York, New
York 10018, toll-free: 866-811-8049, email: ny.equity.syndicate@us.hsbc.com, or
in Canada from RBC Capital Markets, Attention: Distribution Centre, 277 Front
St. W., 5th Floor, Toronto, Ontario M5V 2X4 (fax: 416-313-6066).
Brookfield Infrastructure operates high quality, long-life assets that generate
stable cash flows, require relatively minimal maintenance capital expenditures
and, by virtue of barriers to entry and other characteristics, tend to
appreciate in value over time. Its current business consists of the ownership
and operation of premier utilities, transport and energy, and timber assets in
North and South America, Australasia, and Europe. Units trade on the New York
and Toronto Stock Exchanges under the symbols BIP and BIP.UN, respectively. For
more information, please visit Brookfield Infrastructure's website at
www.brookfieldinfrastructure.com.
Forward-Looking Statements
This news release 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. The words, "will",
"could", "estimate", "tend to", "continue", "believe", "expect", "target",
"anticipate", "plan", "intend" and other expressions which are predictions of or
indicate future events, trends or prospects and which do not relate to
historical matters identify the above mentioned and other forward-looking
statements. Forward-looking statements in this news release include statements
regarding the expansion of Brookfield Infrastructure's business and funds from
operations through growth opportunities within its operations and acquisitions
of new businesses and the level of distribution growth over the next several
years, projected increases in traffic and toll road tariffs, projected returns
on invested capital, merger and investment plans in connection with Brookfield
Infrastructure's UK regulated distribution business, the outcome of negotiations
on potential acquisitions as well as its ability to access corporate debt at a
low cost.
Although Brookfield Infrastructure believes that these forward-looking
statements and information are based upon reasonable assumptions and
expectations, the reader should not place undue reliance on them, or any other
forward looking statements or information in this news release. The future
performance and prospects of Brookfield Infrastructure are subject to a number
of known and unknown risks and uncertainties. Factors that could cause actual
results of the Partnership and Brookfield Infrastructure to differ materially
from those contemplated or implied by the statements in this news release
include general economic conditions in Australia, Chile, Canada, the United
States and other jurisdictions in which it operates and elsewhere which may
impact the markets for its products; the ability to effectively negotiate and
complete new acquisitions in the competitive infrastructure space (including the
acquisitions described in this news release) and to integrate acquisitions into
existing operations; the ability to achieve growth within Brookfield
Infrastructure's businesses and in particular completion on time and on budget
of various large capital projects within certain of its businesses; Brookfield
Infrastructure's ability to divest certain of its assets; foreign currency risk,
including, without limitation, foreign exchange risk as a result of Brookfield
Infrastructure's participation in transactions (including the acquisitions
described in this news release) in currencies other than the U.S. dollar; the
high level of government regulation, both economic and non-economic, affecting
the business of Brookfield Infrastructure (including in respect of the
acquisitions described in this news release) and the resulting risk that changes
in legislation, regulations, government policy or the interpretation of any of
these by a regulator (including any change in the regulated Chilean toll road
and UK distribution tariffs) can have a significant impact on the performance of
our business; the fact that success of Brookfield Infrastructure is dependent on
market demand for an infrastructure company, which is unknown; the availability
of equity and debt financing for Brookfield Infrastructure (including the
Offering described in this news release); traffic volumes on the Chilean toll
road discussed in this news release; and other risks and factors described in
the documents filed by Brookfield Infrastructure with the securities regulators
in Canada and the United States including under "Risk Factors" in Brookfield
Infrastructure's most recent Annual Report on Form 20-F and other risks and
factors that are described therein. Except as required by law, Brookfield
Infrastructure undertakes no obligation to publicly update or revise any
forward-looking statements or information, whether as a result of new
information, future events or otherwise.
References to Brookfield Infrastructure are to the Partnership together with its
subsidiary and operating entities.
References to the Partnership are to Brookfield Infrastructure Partners L.P.
(1) Funds from operations (FFO) is equal to net income, plus depreciation and
amortization, deferred taxes and certain other items.
Brookfield Infrastructur... (TSX:BIP.UN)
Historical Stock Chart
From Oct 2024 to Nov 2024
Brookfield Infrastructur... (TSX:BIP.UN)
Historical Stock Chart
From Nov 2023 to Nov 2024
