CIBCThis is a USD target. GLTA
EQUITY RESEARCH
November 2, 2022 Earnings Update
BROOKFIELD INFRASTRUCTURE
PARTNERS L.P.
Q3/22 Results: Performing Well; Outlook Positive
Our Conclusion
Operational performance remains strong, including 10% organic growth
during the quarter with strong inflation tailwinds persisting. We believe
investor concerns about availability of capital and its impact on capital
recycling has weighed on the units recently, creating an attractive
opportunity. We reiterate our Outperformer rating and maintain our DCF-
based price target of $44.
Key Points
Capital Deployment And Recycling: BIP is seemingly of the view that
market dislocations may occur and create unique investment opportunities. Despite a strong financial position, this suggests the potential to accelerate asset sales to prepare for new opportunities. With $2.8B deployed or secured this year, well over the budget of $1.5B, BIP has demonstrated an ability to transact even during market volatility. For the balance of the year, the focus is on closing the remaining two transactions, HomeServe and DFMG (Deutsche Telekom), in Q4/22 and Q1/23, respectively. This investment activity remains fully funded from agreed upon or completed asset sales ($950MM) or underway sales ($1.5B).
Results: Q3/22 FFO/unit of $0.68 was in line with both our estimate and
consensus of $0.68, representing 21.4% Y/Y growth. BIP is also well
positioned for inflation, and is benefitting from volume gains and strong
commodity prices.
Outlook: With inflationary tailwinds, strong commodity prices and GDP-
related volume increases, BIP again achieved organic growth of 10%, above the high end of the previously guided 6%-9% targeted growth range. BIP also has $2.3B of corporate liquidity, rising to $3B upon the closing of the recently signed asset sales.
Segment Performance: We saw strong performance in the Transport
segment, with reported FFO of $203MM compared to our estimate of
$193MM as well as Utilities delivering $196MM of FFO compared to our
estimate of $190MM. Midstream slightly missed with reported FFO of
$172MM compared to our estimate of $184MM. Corporate also slightly
missed at ($106MM) vs. our ($100MM) estimate. Data was in line with
reported FFO of $60MM.
Inter Pipeline: Continued progress is being made on the Heartland
Petrochemical Complex, with the propane dehydrogenation plant beginning production in October. The facility has also begun product sales, selling 18MM pounds so far. Having completed commissioning of the back end of the complex earlier this year, this step completes the integrated start-up and will allow a ramp-up of production gradually over the balance of the year.