Brookfield Infrastructure
Quick Take: In line Q3/24; asset monetization target for 2024 achieved
NYSE: BIP | USD 34.47 | Outperform | Price Target USD 40.00
Sentiment: Neutral
Our take
With the quarterly results being in-line with our estimates and consensus, and with BIP delivering its 2024 asset monetization target (with good momentum towards generating $5-6 billion of proceeds in the next two years), we expect BIP's announcement to have a neutral to slightly positive impact on the partnership's unit price.
Details
Q3/24 results were in line with our estimate and consensus. In Q3/24, Brookfield Infrastructures's FFO/unit was $0.76 versus our forecast of $0.75 and consensus of $0.77 (eight estimates; range of $0.75-0.81). From a segment perspective:
• Utilities: FFO for the quarter was $188 million versus our estimate of $186 million.
• Transport: During the quarter, FFO was $308 million compared to our estimate of $306 million.
• Midstream: In Q3/24, FFO was $147 million compared to our forecast of $163 million.
• Data: Quarterly FFO was $85 million versus our estimate of $81 million.
• Corporate: FFO was ($129) million compared to our forecast of ($139) million.
Asset monetization: 2024 target achieved. During the quarter, BIP delivered approximately $600 million of capital recycling proceeds, which brings the total to roughly its $2 billion target for the year. Of note, BIP agreed to sell its Mexican regulated natural gas transmission business for net proceeds of $500 million ($125 million net to BIP), with this transaction delivering a 22% IRR and a 2.2x multiple of capital to BIP, and scheduled to close in Q1/25. Also, BIP recapitalized its North American gas storage platform, raising $1.25 billion that enabled a $770 million distribution ($305 million net to BIP) in advance of a sale process. The remaining sale proceeds secured during the quarter were generated from the sale of several financial assets, with BIP adding that it remains on track to close the sale of its fiber platform within its French Telecom Infrastructure business in Q4/24, generating $100 million in proceeds and an IRR of 17%. Beyond 2024, BIP reiterated that it expects to generate $5-6 billion of proceeds from capital recycling initiatives in the next two years, with these asset sales potentially generating returns "well in excess" of its targets.
Backlog remains solid, with a growth profile that is focused around decarbonization and digitalization themes. BIP continues to hold a record organic capital backlog of roughly $8 billion, with an incremental "shadow backlog" of over $4 billion, which consists of projects/spending that is just outside of its 3-year timeframe and/or is pending a final investment decision. BIP noted that this is the highest level of investment activity seen within its businesses, and it expects it to "accelerate", with industry trends being "better than ever".
Conference Call: Today at 9:00 AM (ET)