Brookfield Infrastructure Corporation (BIPC) Earnings Call Transcript & Summary

Thank you, Stephen. I declare the nominations closed. Management has received proxies representing a majority of the corporation's Class A shares and 100% of the Class B shares. These proxies direct management to vote a majority of the Class A shares and all of the Class B shares in favor of the resolution. I now declare that those nominated have been duly elected as Directors of the corporation. The third item of business today is the appointment of the corporation's external auditor and authorizing the Directors to set its remuneration. As stated in the management information circular, the Audit Committee of our Board of Directors has recommended that Deloitte LLP, excuse me, be elected.

Madam Chair, I move that Deloitte, LLP be reappointed as the external auditor of the corporation to serve until the next Annual Meeting of Shareholders and that the Directors be authorized to set its remuneration.

Thank you. Since there is no other business, this concludes our meeting. Now that the meeting has concluded, Sam Pollock and David Krant will make a presentation on behalf of the management team. At the end of the presentation, they will both be available to respond to any questions or comments that you may have submitted. Please note that in responding to questions and in talking about our new initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on known risk factors, I would encourage you to review the Risk Factors section of our annual report on Form 20-F for the year ended December 31, 2023. Finally, we would like to ensure that all shareholders who are interested in asking a question have the opportunity to do so. We will make every effort to address questions during the allotted question-and-answer period. David Krant will now proceed with a presentation on behalf of the management team.

Thank you, Madam Chair, and good morning, everyone. As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure Corporation, or BIPC. On behalf of the management team, we would like to thank all of our shareholders for their ongoing support. The contents of today's presentation will focus on our recent accomplishments and financial performance as well as the tailwinds behind the growth of the infrastructure sector and the outlook for our business specifically. We intend on providing a more comprehensive business update at our upcoming Investor Day to be held on Tuesday, September 24, and I encourage all shareholders to listen in. After my prepared remarks, I'll be joined by our CEO, Sam, for a brief question-and-answer period. As we have done for several years, I will begin the presentation with a brief overview of Brookfield Infrastructure and the strategic rationale behind the creation of BIPC. Brookfield Infrastructure Partners L.P. or BIP, was spun off in 2008 as Brookfield's flagship listed infrastructure company. Since then, we have established a track record of long-term value creation, increasing both FFO and distributions per unit by compound annual growth rates of 15% and 10%, respectively. Although BIP did perform well, we believe there was a large pool of capital that would not or could not invest because of its limited partnership structure or the Bermuda domicile. To appeal to the broadest investor universe possible, we created BIPC in 2019 to offer investors an economically equivalent security that provides access to BIP's globally diversified portfolio, but in the form of the Canadian corporation. BIPC is exchangeable into BIP units on a one-for-one basis and maintains an identical dividend to the distribution declared by and paid by BIP. We believe that the eligible or qualified dividends paid by BIPC in Canada and the U.S., respectively, provide advantageous tax outcomes to certain types of shareholders. Moving on to our accomplishments. 2023 was another marquee year for Brookfield Infrastructure. We executed many of our strategic priorities in all areas of our business. Most notably, we reported strong financial results with overall FFO per unit increasing 9% year-over-year. This performance led to a dividend increase of 6% to $1.62 per share annually. On capital deployment, we exceeded our annual target, investing over $2 billion in the transport and data segments, which was substantially self-funded through $1.9 billion of capital recycling proceeds. Throughout the year, we remained focused on maintaining our balance sheet strength and secured a second investment-grade credit rating of BBB+ from Fitch with a stable outlook. Now despite delivering solid organic growth and executing our strategic priorities, the price of securities have been impacted by broader macroeconomic factors. Since our spin-off in 2020, BIPC has provided a total return to shareholders of over 65%. We're committed to delivering strong cash flow and income growth to our shareholders, which we believe will contribute positively to the valuation of our shares over the long term. Our confidence in the ability to provide cash flow growth is centered around Brookfield Infrastructure's core investment highlights as a highly contracted, inflation protected and well-capitalized infrastructure company that should perform well throughout market cycles. The key highlights of our cash flow streams include roughly 90% of our FFO is contracted or regulated. Approximately 85% of our FFO is protected from or indexed to inflation. Approximately 90% of our debt is fixed rate with an average maturity of 7 years. And finally, we continue to benefit from broader macroeconomic challenge, namely the 3 Ds that we have talked about at length prior to this call. To elaborate on this concept briefly, the 3 Ds, digitalization, decarbonization and deglobalization, are 3 thematic trends creating significant investment opportunities for our business. Digitalization refers to investment opportunities that arise from significant growth in data usage. Substantial financial resources are required for building and upgrading existing digital infrastructure. For us, these investments are concentrated in the telecom tower, data center and fiber network sectors. Decarbonization investment opportunities relate to investments in utilities or transportation businesses that reduce or eliminate emissions from the expansion of the networks or the installation of new energy-efficient products. And finally, deglobalization, which supports the reshoring of essential and strategic manufacturing processes as well as the redefinition of supply chains, which have been underinvested for many decades. Moving on to a brief update for 2024. We have secured over $500 million of new investments, all of which are considered follow-on or tuck-in opportunities. Given these investments are incremental to existing platforms we have already established, they often provide the best risk-adjusted returns. The investments made today include a 10% incremental stake in our Brazilian integrated rail and logistics business. The purchase increased our ownership in a high-performing business with strong fundamentals at an over 20% discount to our view of fair value. Earlier this year, we closed the acquisition of 40 data centers out of bankruptcy. These sites were combined with 10 of our existing sites in the U.S. to create a retail colocation platform called Centersquare, which is headquartered in Dallas. The acquisition had an enterprise value of over $3 billion, and no new equity from Brookfield Infrastructure was required. Lastly, we secured a follow-on acquisition of a portfolio of telecom towers in India, which is expected to close in the fourth quarter. The total equity consideration for the business is about $1 billion, with our share expected to be approximately $150 million. Our investment pipeline remains quite full, and we look to actively progress this in the second half of the year. Finally, I want to conclude my remarks today with Brookfield Infrastructure's outlook. We expect 2024 will be another solid year for the business. In addition to strong underlying base business performance that continues to capture elevated inflation, results will also be benefited by recently completed acquisitions. We continue to anticipate solid growth going forward driven by the 3 Ds and our ability to grow the business through accretive new investments. Furthermore, our balance sheet is well capitalized. We have $2 billion of available liquidity to fund future investment opportunities, and we've made significant progress towards achieving our stated $2 billion capital recycling target for the year. As I mentioned in the introduction, if you're interested in further updates on our broader business, we encourage you to participate in Brookfield Infrastructure's Annual Investor Day, which will take place on Tuesday, September 24. More information on this event will be made available on our website throughout the summer. That concludes our prepared remarks, and we would now like to answer any questions that have been received. Michael, could you please advise us if you see any questions? Michael, you are on mute.

Madam Chair, there are no further questions to be addressed.

Ladies and gentlemen, as there are no further questions or comments, I would like to thank you for taking the time to join us today.