Brookfield Infrastructure Partners LP BIP

RBC

[retiredcf]

August 3, 2023

Brookfield Infrastructure Quick Take: In-line FFO for Q2/23

NYSE: BIP | USD 33.46 | Outperform | Price Target USD 47.00

Sentiment: Neutral

Our take

With FFO/unit coming in very close to our estimate and consensus, we do not expect the results to materially impact the unit price.

Details

FFO/unit was in line with our estimate and consensus. In Q2/23, Brookfield Infrastructure's FFO/unit was $0.72 versus our forecast of $0.73 and consensus of $0.73 (eight estimates; range of $0.72-0.73). From a segment perspective, FFO was as follows:

• Utilities: FFO for the quarter was $224 million versus our forecast of $223 million.

• Transport: During the quarter FFO was $199 million compared to our estimate of $202 million.

• Midstream: In Q2/23, FFO was $161 million compared to our forecast of $174 million, with BIP noting that the Heartland Petrochemical Complex (HPC) was offline for much of the quarter, but the partnership expects the facility to partially contribute to results in Q3/23 and to deliver a full run-rate contribution in Q4/23.

• Data: Quarterly FFO was $72 million versus our estimate of $77 million.

• Corporate: FFO was ($104) million compared to our forecast of ($114) million.

  Progressing its previously-announced acquisitions. BIP noted that it continues to find "good opportunities to invest capital above [its] targeted return threshold", while highlighting the progress it is making to close its previously-announced acquisitions of Compass Datacenters (targeted close in Q4/23) and Triton (shareholder vote on August 24 and BIP expects to close the purchase shortly thereafter).

  Asset sale processes going well, although new divestiture processes are taking longer. BIP has secured $1.9 billion of asset sale proceeds of which $1.4 billion has already closed; however, the partnership noted that transactions are taking longer to complete and potential buyers have less access to capital. Nevertheless, BIP stated that it is focused on preparing for the next round of capital recycling initiatives in 2024.

  Highlighting significant growth within its data platform. BIP noted that it expects to initially earn single-digit going-in yields for its recent data center investments, but that it expects significant growth based on the "highly visible" and "large-scale" investment pipeline. Specifically, BIP plans on developing almost one gigawatt of capacity over the next three years, which it expects will result in adjusted EBITDA increasing by over five times from the $42 million (BIP share) that was booked in 2022. To finance the growth, BIP expects to create a self-funded structure where it will look to monetize fully operating and contracted data centers to fund its capital backlog.

  Conference Call: Today at 9:00 AM (ET)

2