Brookfield Infrastructure Partners L.P. (BIP) Q4 2018 Earnings Conference Call Transcript

Brookfield Infrastructure Partners L.P. (BIP 3.01%)
Q4 2018 Earnings Conference Call
Feb. 6, 2019, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants
  
  See all our earnings call transcripts.

Prepared Remarks:

Operator

Good day, ladies and gentlemen and welcome to the Brookfield Infrastructure 4th Quarter 2018 conference call. At this time, all participants are on a listen-only mode. Later we will conduct a question and answer session and if you would like to ask a question at that time, you may press * and then the number 1 key on your touch-tone telephone. If anyone should require operator assistance please press * and then 0 on your touchtone telephone. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Melissa Low. You may begin.

Melissa Low -- Vice President, Investor Relations 

Thank you, operator and good morning. Thank you all for joining for our Brookfield Infrastructure Partners 4th Quarter Earnings Conference Call for 2018. ON the call today is Bahir Manios, our Chief Financial Officer, Sam Pollock, Chief Executive Officer, and Ben Vaughn, Chief Operating Officer, of Brookfield Infrastructure. Following their remarks, we look forward to taking your questions and comments. At this time, I'm reminding you that in responding to questions and in talking about our growth 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 our annual report on Form 20F, which is available on our website.

With that, I'd like to turn the call over to Bahir.

Bahir Manios -- Chief Financial Officer

Great. Thank you, Melissa and good morning, everyone. I'm very pleased this morning to provide you with a quick overview of 2018, discuss our results of operations, and also touch on our liquidity position.

So, first off we've classified 2018 to have been a very active and successful year for our business, where we've completed many key priorities that have enhanced our overall profile.

Over the years, Brookfield Infrastructure's business has evolved greatly. Not just in terms of size but also the maturity profiles of our assets. As such, we've taken strides to reposition our funding model to become much more self-reliant in nature with respect to how we fund our growth growing forward. We've accomplished this by executing well on our asset rotation strategy, which is an integral component of our overall full investment cycle plan. The ability for us to buy and sell assets is important, because it enables us to capture extra value for our unitholders. Our goal is to buy higher growth businesses, where we can apply our operational expertise thus earning higher returns. These investments are funded with proceeds generated from the sale of mature D-risk businesses to investors with lower return hurdles. The value arbitrage between the two can be quite meaningful to our results. This strategy, in addition to being an alternative source of funding, allows us to utilize the capital markets only on an opportunistic basis to fund our growth.

Going forward, we expect the majority of our growth to be funded by the proceeds from asset sales and cash flows retained in the business. This is different than when we started the business 10 years ago. In previous years, we issued equity to fund much of our M and A investment activities and large scale capital projects. Even though our funding model is evolving, we still have excellent access to the capital markets. As a result, we may nonetheless issue equity when we have outside investment opportunities or in circumstances when it makes financial to do so. But we are no longer dependent on this approach.

Now on to our financial results for fiscal 2018. Our business generated funds from operations are FFO of $1.23 billion or $3.11 on a per unit basis. While FFO benefited from solid organic growth of 8% compared to 2017, results were impacted by the loss of income associated with active sales and the time required to redeploy those proceeds. In addition, a stronger U.S. dollar reduced results by approximately $100 million compared to the prior year.

Results in our utility segments were solid. Our operating groups contributed FFO of $576 million compared to $610 million for the prior year, which included approximately $60 million of additional income from the transition business we sold in 2018.

Underlying performance remains strong reflecting the benefits of capital commission into our rate base and inflation indexation, which led to a 5% increase in our FFO. These benefits were partially offset by the loss of income associated with the sale of our electricity transmission operations and higher borrowing costs relating to debt financing at our Brazilian regulated gas transmission business. Both of which were completed in the first half of the year.

Results for our utilities segment were also impacted by foreign exchange, which reduced earnings for the year by over $60 million.

Our U.K. regulated distributions operations achieve another record year across all key performance indicators including new sales and completed connections. At the end of July, our order book exceeded one million connections for the first time and increased further to almost 1.1 million by the end of the year. Momentum in this business has been sustained by robust growth in home completions in the country and a wide acceptance of our multi-utility offering by home builders.

In addition, we recently secured two exciting opportunities for our utilities business at our North American electricity transmission operation. We have obtained the necessary approval to proceed with the construction of a 24-kilometer line connecting our operations to the largest electric utility in Texas. Our share of the project will require an investment of $33 million and should be complete by 2022.

Our transport segment generated FFO of $518 million for the year, which was modestly lower than the prior year. Results on a constant currency basis actually increased by 5% as our operating groups benefited from inflation, tariff increases, and GDP linked volume growth rising from solid economic fundamentals in the majority of the regions in which we operate.

In particular, results reflect strong agricultural volumes at our rail operations and higher traffic at our port access. These positive effects were partially offset by lower mineral volumes at our Australian rail operations, the impact from the hand back of one of our state concessions in our Brazil toll road business, and the impact of foreign exchange which reduced our results in U.S. dollar return by approximately 40 million.

Our port operations delivered strong financial performance for the year with FFO increasing 4% on a constant currency basis. The improvement in results was primarily driven by strong container volumes in most of our core markets around the world. On average volumes were up by 3% and in aggregate, our business currently delivers over 6 million lifts per year, which is 6% higher than the prior year. The growth in our volumes has been driven by new contract winds and increased capacity utilization on existing vessel costs. Additionally, in Australia, our teams successfully secured three new contracts that will add traffic and over $4 million of incremental [inaudible] annually.

Our energy segment generated FFO of $269 million in 2018, 29% of the prior year. Results in this segment benefited from the initial contribution of two sizable investments made in a Canadian mix stream business and a leading North American residential energy infrastructure company. We also benefited from a 16% increase in gas transport volumes at our U.S. gas transmission operations due to the production, growth, and contribution from the first phase of its Gulf Coast Expansion Project commissioned in the fourth quarter.

Our North American district energy business was recently awarded a $10 million grant from the Canadian government through a low-carbon economy fund to finance expansion of its e-plate water cooling system. The expansion will cost approximately $100 million with BIP's share being $20 million and will increase cooling capacity at our [inaudible] by over 25% to support growing demand for our services.

Our data infrastructure segment contributed FFO of $77 million for the year, which was slightly ahead of the prior year. Results for the year were 5% higher in the local currency due to the benefits of inflational indexation and contributions from capital investments made in the prior year. The strong underlying performance was partially offset by the impact of lower average hedge rates compared to the prior year.

Our French telecom business recently secured a contract with one of our largest customers to build a minimum of 1,250 new towers over the next four years. Securing this contract reaffirms our strong build-to-suit power offering, which captures growth driven by the increase in coverage requirements in France. This will require 150 Euro investments with BIP's share being approximately $350 million and is expected to generate leveraged returns in excess of 20%.

Shifting now to our current financial position. There has been a considerable amount of volatility in equity markets recently. The trading price of our units was no exception and sold off in response despite infrastructure access remaining highly sought after by private institutional investors. We were able to take advantage of this by repurchasing units under a normal course issuer bid. Since December we have repurchased approximately 1.6 million units at an average price of $35.00. The markets have enjoyed a very strong January and our units have returned to pre-December pricing levels since.

We currently have a strong financial position with total liquidity of 3.3 billion of which over $2 billion is at the corporate level. This liquidity is expected to be further bolstered in the coming weeks with proceeds generated from the partial sale of our Chilean toll roads that Sam will touch on in his remarks.

And finally, before I hand the call off to Sam, I'm very [inaudible] announce that based on our strong performance this past year, our robust overall liquidity position, and positive outlook for the business in 2019 and beyond our board of directors approved a 7% increase in our quarterly distribution to approximately $0.50 per unit 2019, which marks our 10th consecutive year of distribution increases. This year's distribution increase is at the midpoint of our long term target range. In setting our distribution level, we decided to retain a greater amount of cash in the business to fund our growing backlog of organic growth projects, which we expect will generate very strong risk-adjusted returns. And so, with that thank you for your time and attention this morning. I will now turn the call over to Sam.

 Sam Pollock -- Chief Executive Officer

Thank you, Bahir and good morning, everyone. Before I provide you with an update on our ongoing strategic initiatives, I'm going to reflect on some of our accomplishments in 2018.

I will also then turn the call over to Ben Vaughn, our Chief Operating Officer, to share our views on Brazil's economic recovery, and then I'll conclude the call with an overall outlook for the business.

So, let me begin with 2018. It was an extremely successful year for our business. First, we significantly expanded our presence in North America. We did this through the acquisition of a leading provider of residential energy infrastructure and the largest independent natural gas gathering and processing business in Western Canada. In total, we committed $1.9 billion of capital to new investments in 2018, of which $1.3 billion was deployed in this region.

Next, we invested approximately $800 million dollars in organic growth capital projects. These projects will increase our utilities rate base and expand our transport, energy, and data infrastructure networks. We expect these projects to grow [inaudible] by 10% on a rate basis once fully online in the next two years or so.

We also executed on our capital recycling program. We opportunistically completed the sale of our Chilean electricity transmission operations generating an IRR of 18% and net after-tax proceeds of $1.1 billion.

We also recently signed agreements to sell up to 33% of our stake in Chilean toll roads, and currently, have another five sale processes that are being progressed. In total, we expect to generate net proceeds of $1.5 to $2 billion in the next 12 to 18 months from these sales.

And finally, we strengthened our financial position. We enhanced our corporate liquidity by accessing the capital markets on an opportunistic basis and raised a total of $800 million through a series of debt and preferred share insurances. We also completed over $15 billion of refinancing during the year and with that we have no maturities we need to deal with for the next five years.

So, shifting our focus to our strategic initiatives. The fourth quarter was another active period for Brookfield Infrastructure and we've sustained that momentum into the new year. On December 31st we closed on the previously announced U.S. data center acquisition from AT&T investing $160 million in a high-quality portfolio of retail co-location data centers in several key markets.

In addition, in January, we successfully acquired 100% interest in an Asian-Pacific data center business for $180 million; BIP's share being $50 million. This business consists of two Australian data centers providing services to investment grade hyperscale customers under long-term contract. This is an opportunity for us to establish a presence in the Asian-Pacific region and to pursue meaningful growth opportunities through well-progressed sales and developing pipeline.

Furthermore, working alongside a strategic partner, we've achieved all milestones to acquire Ascenty, the leading hyperscale data center operator in South America and anticipate closing the transaction in February.

We are already actively assessing perspective [inaudible] opportunities in the South American region, which we think will be very complementary to the business. Also, closing is progressing well for our India natural gas pipeline acquisition and we anticipate completing this transaction by the end of the month as well.

We have started to turn our attention to executing our 100-day business plan and integrating these assets into our portfolio. At our Western Canadian midstream business, we are continuing to complete the regulatory process to close on the last group of assets. This process remains on track and is scheduled to close in mid-2019.

In addition to these strategic initiatives, we are also focused on executing capital recycling priorities as part of our full-cycle investment program that Bahir talked about earlier.

The first one I'll mention is the toll road transaction that both Bahir and I mentioned. In January we signed an agreement to sell up to 33% of our stake in the Chilean toll road business. We considered this to be an opportune time to monetize a portion of the investment as the asset had reached the mature phase of its life cycle. Concurrently, we are executing a dividend recapitalization, which will be completed upon closing of the sale, which is expected imminently. After-tax proceeds to Brookfield Infrastructure are estimated to be approximately $365 million. We are very pleased with this outcome and will realize an after-tax annualized return of approximately 17% on this portion of our investments.

In addition, we may sell down a further stake in the business in the next six to nine months adding further liquidity to our balance sheet.

We also have five other sales processes that are well under way. We are optimistic that we can complete these sales in the next 12 to 18 months and generate $1.5 to $2 billion of proceeds. With that, I'll now turn the call over to Ben to discuss the economic outlook for Brazil.

Ben Vaughan -- Chief Operating Officer

Thank you, Sam and good morning, everyone. As Sam mentioned, I'll be providing an update on what we're seeing in Brazil these days, particularly in light of the recent elections and changes in government, which we think are positive and could provide some tailwinds for our businesses in the country for the coming years.

First, a bit of background. As many of you know, Brookfield has had a long-standing presence in Brazil having been an owner and operating of infrastructure businesses in the country since the turn of the last century. We've been attracted to Brazil's good rule of law, functioning democracy, and consistent need to attract foreign capital over time, and build out the infrastructure that the country needs. With a population of over 200 million, a growing middle class, and an abundance of natural resources the country benefits from a large domestic economy, which is actually the 9th largest in the world. And in addition to the large domestic economy, the country has a strong position in exports as a low-cost producer and growing exporter of agricultural natural resource commodities.

After struggling politically and economically for several years, in late 2018 Brazil held national and elections and we're encouraged by the results and the direction that the new government is taking on many fronts. Brazil shifted solidly to the right in the election and voted in new leadership that ran on a platform of fiscal discipline, attracting investment, and driving economic growth. The new administration has made strong appointments for key cabinet positions and outlined an ambitious economic reform agenda including an acceleration of the privatization of critical assets. If the new government is successful in addressing the long-standing constraints of fiscal imbalances, we would expect the medium to long term outlook for the economy to significantly improve. Overall, we'd expect higher growth rates, lower inflation in interest rates, a stronger currency, and just overall more bullish market conditions.

While it is early days for the new administration, we've observed positive indications that support the outlook for our investments in Brazil. First, the financial and capital market conditions in the country have improved. As an example, and as Bahir mentioned, on the back of a meaningful decline in interest rates, we successfully completed a $5 billion real up financing in the first half of 2018 at our Brazilian regulated gas transmission business, which we initially acquired on a fully unleveled basis. So, credit markets have come back. In addition, equity markets have strengthened with the country's up over 100% from its low three years ago and reaching records highs over the past three months.

Secondly, we're seeing increased competition for high-quality assets with more investors bidding high values relative to the last few years. For example, at a recent electricity transmission auction held in this past December, the average winning bid's ascribed values significantly higher than the values we ascribed to our investments during the depths of Brazil's recent economic downturn. This market dynamic reaffirmed our view that these types of assets were trading well below intrinsic values a few years ago, simply because the country was out of favor.

And last, currency matters a lot when investing in Brazil. And we believe that these positive developments should provide some currency stabilization and tailwinds in the coming years compared to the prior five year period. Our investments in the country benefit from inflation-protected cash flow streams and this protection combined with a potentially stable to strengthening currency could position us well for strong returns.

As I mentioned before, it's too early to say with certainty what the new administration will accomplish. The announced desire to accelerate privatization programs and expand investment could provide us with opportunities to grow our existing businesses and enter new segments as the market evolves. We are a well-known and credible investor in the country and have become a partner of choice for many domestic and foreign investors. The new government in Brazil represents something we haven't seen in a long time, a free-market oriented administration that has the potential to energize the country's economic reform, create healthy market competition, and attract investment. And having an established position in the country, we will look for opportunities to invest for value and to potentially harvest capital as their recovery unfolds. And with that, I'll turn the call back over to Sam, who's got our outlook for the business.

Sam Pollock -- Chief Executive Officer

Thank you, Ben. And I guess I'll conclude with some remarks on our outlook. Over the past few quarters, our view has been that the global macroeconomic conditions and political uncertainties would dominate the new cycle. Heading in 2019, it appears that will continue.

Concerns around a potential pullback of the global economy spurred by the threat of a U.S.-China trade war, uncertainties around Brexit, and continued speculation around Federal Reserve policies will continue to persist over the coming months. That said, our businesses are built to withstand varying market conditions and that is due to the well-inflated cash flows generated from regulated and long-term contractual arrangements. And growth in our core regions while it won't be synchronous, we do expect that even in slower growing regions our businesses will continue to perform well as they have been. The overall outlook for our business is very positive. And we believe we will experience meaningful growth in our results in 2019, and some of these drivers will be the fact that we are imminently closing three secure transactions. They represent approximately $700 million of new investment and this will take place in the first half of the year. These new investments should be fully contributing to results by the second half of the year, as a result generating attractive going in yields.

Second, we have strong organic growth. The commissioning of approximately $800 million of capital projects coupled with inflation indexation and higher volumes from our GDP sensitive businesses should result in another year of robust organic growth, which will probably be at the high end of our long term 6% to 9% growth rate target.

And finally, we expect foreign exchange tailwinds. Our hedge rates in 2019 for the Australian dollar and British pound, are on average around 5% higher than in 2018. With over 65% of our FFO currently generate in or hedge back to U.S. dollars, our only material unhedged foreign currency exposure relates to Brazil. And as Ben just went through, we are observing a nice rebound in the country's currency since it dropped last year. We expect this recovery to continue in 2019, and as a result, could meaningfully benefit our results going forward.

...

So, with those comments, I will now pass it over to the operator, and we would be pleased to take Q and A.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press 8 and then the number 1 key on your touchtone telephone. If your question has been answered or you wish to remove from the queue, you may press the pound key. And our first question comes from Devin Dodge of BMO Capital. Your line is now open.

Devin Dodge -- BMO Capital Markets -- Trade Support Analyst

All right. Thank you, good morning. I guess to start with on the new investment front, 2018 was above average in terms of capital deployment and deal flow. Just what are your expectations for 2019? Just wondering if we should be expecting the half-a-billion to billion dollars range, or given what you see in the pipeline do you think it's likely to remain elevated in 2019?

Sam Pollock -- Chief Executive Officer

So, I would say it was above average. I think it was an awesome year, to be frank. We had, I think, seven transactions and so it was a stellar year. In relation to what we see going forward... I think we go into every year expecting to invest in new investments around $500 or sorry, a billion dollars. If it turned out to be 500 that would probably be at the lower end of our current view. But as you've noted some years we have more success than others, just depending on the market environment. But I'd say so far we feel pretty good about our pipeline of opportunities and I think we will hopefully hit our $1 billion target.

Devin Dodge -- BMO Capital Markets -- Trade Support Analyst

That's helpful. And then maybe coming back to some of Ben's comments. I believe he mentioned the new Brazilian government signaled that it could look to do more asset privatization. What sort of assets do you expect to come forward that would be interesting to you? And maybe, just given the greater competition for these investments, how confident are you that BIP can secure these investments and still meet your investment target? Return target?

Ben Vaughan -- Chief Operating Officer

Yeah, I'd say, Devin, the assets that the government has telegraphed are going to come market are really across the board. It's really across the entire spectrum of transportation assets, energy assets, utilities. So, I think it will be -- If they accomplish their plans, it'll be a broad range of opportunities. In terms of our looking at some of those opportunities if they come with meaningful large positions in many of those sectors already, I think we're just really well positioned to look at various tuck unders and growing our current platforms if new assets come to market. With a good position already established, we're just well-positioned as an incumbent rather than someone who's just coming in fresh.

Devin Dodge -- BMO Capital Markets -- Trade Support Analyst

Okay. Understood. And maybe, it was stake sale for the Chilean toll road business. Can you provide some color on the decision to sell a minority interest instead of the entire stake and just I know you referenced may be a potential further sell down in the next six to nine months, but I guess how long do you hold -- I'm not sure if that was for the rest of the business or whether it was just another partial stake. How long do you expect to hold if it's just another partial sell down?

Sam Pollock -- Chief Executive Officer

It was always our plan to sell up to 50% and if someone had come along and maybe offered us a knock-out bid for 100% we may have considered it. I think the way it's unfolding is according to the plan we had set out for ourselves. This is a very large transaction in this market and so our expectation is that we would sell down over time. It's also a great cash flowing business, and we do like it. I think if we can sell another stake that we reduce ourselves down to 50% or depending on the price we might consider going a little bit lower. But it's just all part of a long term exit strategy that set out for this particular business.

Devin Dodge -- BMO Capital Markets -- Trade Support Analyst

And should we be expecting this kind of approach for some other assets that you're coming to market with?

Sam Pollock -- Chief Executive Officer

I think our approach will be multifaceted. I think, the one dynamic that entered into the infrastructure market is something that basically just followed on the real estate market, which is the fact that there is a growing interest from private institutional investors to own minority stakes in businesses. And you will see it become quite common across the infrastructure market. The sale of these 25% or 33% type stakes in businesses and longer term most of them will probably be owned in consortiums of three or four, particularly for large businesses. When we look to sell assets going forward, I think you can see us sell it like we did with AVN. Transelec frankly wasn't much different. We sold a 27% stake, or we could sell in some cases 100% of a business to a strategic buyer, or we could take businesses public. So, it will be probably one of those three exit strategies.

Devin Dodge -- BMO Capital Markets -- Trade Support Analyst

Okay, that's helpful. I'll leave it there. Thank you.

Sam Pollock -- Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Cherilyn Radbourne of TD Securities. Your line is now open.

Cherilyn Radbourne -- TD Securities -- Analyst

Thanks very much and good morning. Sam, I wanted to start by asking you in terms of the M and A pipeline, is there any indication yet that recent equity and credit market volatility could be additive to that pipeline either in general or in specific geographies, or is it still a little bit early for that?

Sam Pollock -- Chief Executive Officer

I would say it's a little bit early. There is no doubt that with the market -- the credit markets that is -- some shutting down later in the fourth quarter that if felt transactions across the board would get repriced and that the avenues for various companies to recapitalize themselves would reduce somewhat. We've had a pretty strong rebound in sentiment and access to the capital markets here in the first quarter. So, it's hard to say if this is just a blip and everything is back in business or if those more challenging conditions that we saw later in 2018 will begin to persist. If you ask for my opinion, I think that the markets will probably get tougher again. And we'll see more of the more challenging conditions and that will play very well to our ability to find great opportunities.

Cherilyn Radbourne -- TD Securities -- Analyst

Great. That's helpful. Separately, in terms of your recent data infrastructure investments, just curious whether there's an opportunity to knit those together into a larger platform or should we think that they're likely to remain more sort of discrete regional platforms.

Sam Pollock -- Chief Executive Officer

That's a great question. We have two different types of businesses. We have the wholesale hyperscale businesses in Asia-Pacific and in South America that very much serve the same client base. Our retail colocation business here in North America I think serves a completely different marketplace and has a different strategy. I think the opportunities if they exist, will likely between with the Australian business, Asia-Pacific business and the South American bus with the only complication being that we have a partner in our South American business. So, we will try to extract as many synergies as we can. I don't see them coming together from a legal perspective, but I do a significant amount of sharing of information between those countries.

Cherilyn Radbourne -- TD Securities -- Analyst

Last one for me. I think that BIP had recently signaled that it might opportunistically hedge a portion of its Brazilian cash flows. And just was hoping for an update on that front.

Bahir Manios -- Chief Financial Officer

Hi, Cherilyn. It's Bahir. So, as we highlighted in this past, or during our Q3 call, I believe what we've seen is just interest rate differentials between Brazil and the U.S. have tightened up a lot over the years. Nothing has changed materially from that analysis and what we're waiting to see is continued recovery in the currency from existing levels. It has rebounded by a lot compared to earlier in 2018s levels and so we're continuing to monitor that situation. But with any significant rebound in the currency, you should expect to see us hedge at least a portion of our FFO for the next, call it, 12 to 24 months.

Cherilyn Radbourne -- TD Securities -- Analyst

Thank you. That's all for me.

Operator

Thank you. Our next question comes from Robert Catellier of CIBC Capital Markets

Robert Catellier -- CIBC Capital Markets -- Energy Infrastructure Analyst

Good morning, everyone. I have similar questions to the previous two questioners. First of all, on the Brazil description, you gave on the one hand very strong economy and privatization but also more competition. But it still sounds like you expect to be a net investor in terms of your new dollars over the next two to three years? Is that correct? So, not a net seller. Putting more money to work in Brazil.

Sam Pollock -- Chief Executive Officer

I think we will be putting more money to work. It may be within the existing businesses. I think today our focus is primarily on expanding the various operations in our rail business, in our data center business, as well as the toll roads, and the transition business. All of them have great opportunities to invest capital. It's a little early to say what new investment opportunities may lie out there that are attractive to us. We'll obviously monitor the market. Over the next -- it's hard to say how many years -- but we do expect that if conditions continue to improve, currencies improve that there will be great opportunities to realize on some of our investments in that region as well. So, I can't predict exactly how the flows will go. You're right it probably is maybe a little bit more in a short run. But in the medium term, I expect there may be more capital being harvested than going in.

Robert Catellier -- CIBC Capital Markets -- Energy Infrastructure Analyst

Okay. Thank you for that. And then with -- it looks like you're a little bit more active near term on the capital recycling. Does the long term target change? I think you gave a bogie of about $5 billion over three to five year at the investor relations days. Is that still generally what we should be expecting?

Sam Pollock -- Chief Executive Officer

Yes.

Robert Catellier -- CIBC Capital Markets -- Energy Infrastructure Analyst

Question for Bahir. You gave some pretty good detail on the impact of currency on the 2018 results. But you've also characterized the environment as a little bit better. Do you have any sense of at today's rates, what positive tailwind currency might have on FFO in 2019? Even if it's just a range.

Bahir Manios -- Chief Financial Officer

Sure. Hi Robert. So, as you know our developed -- our currencies in the developed markets -- so the Australian dollar, the pound sterling, the Canadian dollar, and the Euro have all been hedged for 24 months. So, in 2019 those hedge rates are already locked in, and they are on average 5% higher than in 2018. And in 2020, they're also a bit better than also the 2019 number. So, we should see -- So, those tailwinds, which account for about 65% to 70% of our FFO have already been locked in for those next two years. And then on the Brazilian real, it's hard to guess where that currency can go. Maybe as a data point, if we get back to 2017 levels -- So, there we were translating our results on an average rate of 320 I believe. If we get back to those kinds of levels, just as a data point here -- I'm not actually calling for that move -- but as a data point that would be probably a $0.20 to $0.25 lift from today's levels.

Robert Catellier -- CIBC Capital Markets -- Energy Infrastructure Analyst

So, 20 to 25 in FFO per share or just on the currencies?

Bahir Manios -- Chief Financial Officer

I'm sorry. FFO per unit. $0.25.

Robert Catellier -- CIBC Capital Markets -- Energy Infrastructure Analyst

And did you end up with a better result on the Australian ports than you were indicating in terms of recontracting and getting the [inaudible] run rate back up? Or was that in line with your expectations?

Ben Vaughan -- Chief Operating Officer

It's Ben here, Robert. I would say the Australian ports have been performing really well and volumes have been strong. We've had some good client winds as Bahir referenced in his comments and I would say overall, probably slightly above planned. Probably slightly above our expectations and trending well into 2019.

Robert Catellier -- CIBC Capital Markets -- Energy Infrastructure Analyst

That's it for me. Thank you.

Operator

Our next question comes from Andrew Cosk of Credit Suisse. Your line is now open.

Andrew Cosk -- Credit Suisse -- Analyst

Thank you, good morning. Not sure who this one's for but maybe an easy to start. The situation with Vale and Brazil, it's obviously very difficult. But are you seeing any impact on your logistic assets within the country at this point in time?

Sam Pollock -- Chief Executive Officer

Hi, Andrew. Are you asking are there any impacts because of the tragedy? Of the dam collapse on our businesses?

Andrew Cosk -- Credit Suisse -- Analyst

Yes, exactly. With the dam disaster that just happened a few weeks ago.

Sam Pollock -- Chief Executive Officer

Yeah, no there's been no impact on any of our operations.

Andrew Cosk -- Credit Suisse -- Analyst

Okay. I appreciate the clarification. And then just with the capital recycling. Is there any color you can provide on the five processes you have in place? Are you seeing are some of the process related to past fund maturities? And then the $1.5 to $2 billion of proceeds. Is that effectively to account for the Brookfield commitment in big four or at least part of that commitment?

Sam Pollock -- Chief Executive Officer

Andrew, basically each one of the opportunities where we're looking to sell is based on our view of the state of where the asset is and our view that it's a good time to approach the markets. So, there's no -- We have no impending fund maturities. Our first fund matures in 2022, and we have extensions beyond that. So, there is no pressure from that perspective. I think the way you need to think about asset sales is similar to how we've always approached capital raising initiatives is just being opportunistic with raising capital at a very attractive rates and knowing our businesses when we think we can sell them to people who will pay more for them than what we think they're worth and what they're worth to us today. So, that's the context. Hopefully, they all go ahead, but maybe some don't and we hold on to them for a bit longer.

Andrew Cosk -- Credit Suisse -- Analyst

And then just finally on the unit repurchase, the $1.6 million since December, just north of $50 million U.S. Can you provide some color on would you have done more if there was more liquidity in the market? Did that feel like the right amount? What were your thought processes on the $56 million of purchases?

Sam Pollock -- Chief Executive Officer

Bahir, do you want to tackle this one? Or do you want me to take it?

Bahir Manios -- Chief Financial Officer

I can take it. Hi, Andrew. I think you're exactly right. We were very active, especially in December. But to your point given the liquidity, we do have constraints as to how many units we're able to buy each trading day. So, we pretty much were maxed out in December. And then in January, we had to put forward sort of an automatic purchase plan that had to get approval from the stock exchange. It's based on a whole bunch of parameters. But basically within those parameters we did all we can do and will continue to monitor the situation carefully, or closely, once we're out of blackout in the next couple of days.

Andrew Cosk -- Credit Suisse -- Analyst

That's very helpful thank you.

Operator

Thank you. Our next question comes from Jeremy Rosenfield of Industrial Alliance. Your line is now open.

Jeremy Rosenfield -- Industrial Alliance -- Equity Research Analyst

Thanks. I have several questions. But maybe just to begin with, can you just comment on the relative attractiveness? There's been some large scale regulated electric utilities in the U.S. some distress situations. I'm thinking here of one on the West Coast, one on the East Coast. I'm just curious as to whether these are things that are on your radar. Maybe not specifically ones that have been in the press recently but if that type of investment is on the radar.

Ben Vaughan -- Chief Operating Officer

I'll tackle this one, Jeremy. We think regulated utilities are a great investment asset. We're always out there looking at each of the opportunities. The one challenge though, and why we haven't historically invested in any significant North American utilities is the regulatory difficulties and the time it takes. And more recently some of the trading values that they have achieved with often seeing prices to RAB in excess of two times, which we don't feel is good value.

There's obviously one huge situation that everyone's talking about. It's highly complicated. It had to go through a number of bankruptcy processes to figure out where exactly it's gonna end up. And I think there will have to be some regulatory changes. And I think the only opportunities that will come out of that would be of interest to us will be if it gets broken apart in various pieces. And maybe some of the pieces might make sense. But just to summarize, and I realize this is very general so I don't know useful it is. We like the sector. We will monitor for opportunities, but I just caution you that public and privates in this sector are very challenging

Jeremy Rosenfield -- Industrial Alliance -- Equity Research Analyst

Right. That's very useful. And just back on Brazil for a second. I'm just curious. It sounds like you clearly have a positive outlook on Brazil but then at the same time investments in Brazil, I think, represent relatively a large component of the overall portfolio and I'm just curious whether you're inclined to grow that slice of the pie if you will? And if you are able to start putting currency hedges in Brazil at some point in the future, does that give you more comfort in growing that slice of the pie even further?

Ben Vaughan -- Chief Operating Officer

Our strategy is to have diversified businesses across many geographies. We've made a number of investments more recently in Brazil because we saw great value. And so we're probably at the higher end of what we would typically allocate to that particular country. If great opportunities continue to surface there, we will look at them and take advantage of them. My sense is over time we will likely see opportunities surface in other regions. We're seeing that today, particularly North America. We're deploying a lot of capital and I think as a percentage of our overall business five years from now, likely Brazil will be less than it is today. We're excited by the opportunities, and we're really excited about how our business in the near term is gonna perform if the government does all the things they say they're gonna do.

Jeremy Rosenfield -- Industrial Alliance -- Equity Research Analyst

Okay. I'll leave it there. Thank you.

Operator

And our next question comes from Robert Kwan of RBC Capital Markets. Your line is now open.

Robert Kwan -- RBC Capital Markets -- Managing Director, Global Research

Good morning. Just starting on asset sales. You had a long-standing kind of driver of that being monetizing D-risk mature businesses. But I'm wondering if anything in the five processes or anything else that you're considering driven by changes in your investment thesis around various business lines. Either where you're seeing fewer relative growth opportunities or even just the ability to add value in terms of some of the platforms that you've built?

Sam Pollock -- Chief Executive Officer

Hi Robert. So, I think there are certain situations where we are looking to monetize businesses. Where we feel our ability to grow them on a creative basis isn't as strong as we once thought it was and that's primarily because of new entrants using a much lower cost of capital. That represents a great opportunity as a seller because to the extent that they're prepared to pay for our growth with the low cost of capital -- which is what we saw in Transelec then we can achieve most of the value of the growth pipeline up front without having to do the work. We'll definitely look at those situations and sometimes there are situations where we have to weigh the choices of where we want to put our capital. There are some businesses that even though they have some growth opportunities we may feel the probabilities of being able to achieve success on those are less than if we put our capital elsewhere. Decisions are taken to a multitude of considerations. All with the objective of creating long term value for the company.

Robert Kwan -- RBC Capital Markets -- Managing Director, Global Research

Look at the funding plan and the repositioning of the funding plan and the majority of your growth being funded by asset sales and retained cash flow. Just wondering, especially if you think about the interplay with the new private fund, is that going to take smaller percentages of new transactions, particularly larger ones?

Sam Pollock -- Chief Executive Officer

The short answer is, it will probably be slightly lower, but not meaningfully lower. We will always be the biggest investor in any of our funds. And obviously therefore in each asset. I think what we will do going forward is pick our spot on where we might make an outsized invest. If we had a very large transaction like we had with NTS where we increased the amount we deployed because we saw that was a fantastic opportunity. They may not be as -- occur as often but if they do, those are the type of situations where we will likely go to capital markets then to raise capital. That's why we highlight that as being a situation where the equity markets are perfectly suited to us to tap into.

Robert Kwan -- RBC Capital Markets -- Managing Director, Global Research

Got it. and if I can maybe just finish on -- There was a statement in the letter of the organic growth side expected to be at the higher end of your long term six to nine [inaudible]. Just wanted to confirm that that is just the organic growth as we head into 2019 and then Bahir, you talked about the FX tailwinds. That would be additive as well as the contribution from new acquisitions kind of forming the year.

Bahir Manios -- Chief Financial Officer

Hey Robert. I think that's exactly right. When we reference the organic growth targets, they're generally on a constant currency basis. So, heading into 2019 given that we've got the hedges locked in then yes we will be -- we're forecasting to deliver sort of at the high end of the target range of constant current and then have a currency pickup on top of that relative to 2018.

Robert Kwan -- RBC Capital Markets -- Managing Director, Global Research

Sounds good. Thank you.

Operator

And our next question comes from Rupert Muir of National Bank. Your line is now open.

Rupert Muir -- National Bank -- Analyst

Good morning. Looking at the sale of minority stakes and assets like the Chilean toll road, does this in any way signal intention to hold onto your remaining stake for a longer period? And are you expecting to collect management fee from your new partners for operating the assets?

Sam Pollock -- Chief Executive Officer

Rupert, I would say first off, we don't collect a managing fee from our new partners. And two, I don't think it signals anything. I think we will reevaluate every year our intention to sell or hold the business. We've not made commitments for the long term. In fact, we've signaled to both our shareholders, as well as the other owners that probably we will sell down a further stake. But how long we hold on that remaining stake will be dependent on our views going forward.

Rupert Muir -- National Bank -- Analyst

Thanks. And then secondly, you've had a little bit of time with the acquisition Canadian Midstream and Energy Sources business. May be too early here, but can you give us some feedback on how the integration's progressing? Are you seeing any surprises there? And maybe give an update on the outlook for growth and synergy from the asset?

Sam Pollock -- Chief Executive Officer

Ben, you want to do that or you want me to?

Ben Vaughan -- Chief Operating Officer

As you said, it is in the early days. These transactions did close very recently, but they're both going very well. No surprises on the Enercare business. We're working hard to accelerate the growth of that business. Plugging the leadership team there into various Brookfield entities involved in the home building and condominium servicing and in or around that same markets that business is in. and that's progressing well. So, I think we're in the early stages but we're still looking to accelerate growth in that business. And no surprise. We're still not fully closed, the Midstream business out west, but it's going well. And no surprise. And has a couple of interesting growth projects that were considering. So, all's good.

Rupert Muir -- National Bank -- Analyst

With the dynamics of the Canadian energy market is that at all changing your outlook for organic growth in the long run with the Midstream business?

Ben Vaughan -- Chief Operating Officer

No, at this point I don't think it's changing our outlook. We've got great counterparties in that business and it's a prolific region that we're in. And if anything our clients are calling on us to provide additional services and additional assets to help them help them out. So, we're not seeing any impact at this point.

Sam Pollock -- Chief Executive Officer

The opportunity for us to deploy capital and to buy assets from producers is only increasing and getting better.

Rupert Muir -- National Bank -- Analyst

Very good. Thank you.

Operator

Thank you. And our next question comes from Ryan Levine of Citi. Your line is now open.

Ryan Levine -- Citi -- Analyst

Thank you. Would you be able to comment on the -- if there are any active discussions in the U.S. Midstream business? There were press reports of Brookfield's interest in Tallgrass from a few months ago. Are those reports accurate? Is that the type of business you may be interested in?

Sam Pollock -- Chief Executive Officer

We can't comment on any specific transactions; whether or not we are involved or are looking at it or not. That's just a company policy. We do have an interest in U.S. Midstream. We think that with the pullback in the MLP market and the lack of capital that many Midstream owners in the States have today to capital, their lack of assets, provides great opportunities for us to either joint venture with various partners to help them build out some of their infrastructures. There are opportunities to do carve out much like we did with Enbridge. And then absolutely to the extent that it makes sense from a value perspective, we will look at the public to privates as well. Those are all part of our game plan going forward and we think one of the best opportunities to date is in various parts of the U.S. midstream sector.

Ryan Levine -- Citi -- Analyst

Thanks. And shifting gears to South American. Do you find that there are meaningful opportunities in the Chilean or Peru market?

Sam Pollock -- Chief Executive Officer

We do see opportunities there, and in fact, we have a couple of interesting transactions that we are monitoring. They are smaller economies. These are what I would describe as high active markets, but every year or two very attractive businesses do come to market either through privatizations or through sales from strategics. As that happens we tend to be one of the first calls given our reputation in that market and our ability to get transactions closed. So, I am optimistic about our ability to transact in those markets in the not so distant future.

Ryan Levine -- Citi -- Analyst

Given your history in that region, are there any contractual limitations to acquire assets in those countries?

Sam Pollock -- Chief Executive Officer

Today, we don't. The one issue that we always have to keep an eye out for is any issues related to the activities of our renewable power sister company and what they do in the market. And making sure that to the extent that they have a significant presence that that doesn't preclude us from owning certain sectors like transmission assets. Typically those two, you can't own one and the other. You can either be a transmission owner in the country or a generator. You can't usually do both. So, we watch and monitor those dynamics. Today, I think we're relatively free to own any assets in those markets. But that could change.

Ryan Levine -- Citi -- Analyst

Thank you.

Sam Pollock -- Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Frederick Bastien of Raymond James. Your line is now open.

Frederick Bastien -- Raymond James -- Equity Analyst

You mentioned a while back that you were most excited about the U.K. regulated distribution business when it came down to organic growth potential? Is that still the case today or are there other assets exhibiting equally strong growth prospects?

Sam Pollock -- Chief Executive Officer

Hi, Frederick. Nice to hear from you. I think that was a nice setup question because I always love talking about BUK and the business continues to take off. We see no slowdown in the business. And if I had to say that there's a business that I'm super excited about today, because it has all the same growth potential it has to be our Endercare business. I think Ben described a little bit earlier that we are plugging into all the various related businesses that we have within the Brookfield fold to see how we can supercharge the growth engine. We think the ability to take that company to the next level is at the same potential level that we saw back a number of years ago at the U.K. We just think that the number of customers who would be attracted to the product offering with the lessons that we learned from our BUK business, which is essentially a very similar business. It's a distribution business. We think we can bring a lot of value to bear. And we've also uncovered a number of low hanging fruit [audio cuts out] and ways to optimize a business to generate higher returns. And so today that's probably our most exciting business that we're working on.

Frederick Bastien -- Raymond James -- Equity Analyst

Thanks. That's helpful. Good luck with that. Last one for me. Given your recent investment, the Fracture tailwinds you're anticipating for this year and also the billion dollars plus of asset sales you're contemplating how should we think about FSL per unit growth in 2019? Is 350 attainable or can you do better than that?

Bahir Manios -- Chief Financial Officer

Hi, Frederick. It's Bahir. Maybe I can take that one. At investor day. We sort of walked through the building blocks of how our results will evolve on a run rate basis going forward. Because to your point, we've got all these investments closing at different points in time. We've got a lot on the organics growth front that's also getting commissioned at different points in the year. And then there are obviously the FX tailwinds. So, when it comes to 2019, it's gonna be a year where I think people should analyze us on more of a run rate basis than what the full year will deliver because it's going to be more of a back end story in 2019 versus the front end.

Once all of our investments are contributing fully online, there's a bit of ramp up in some of those as well as we get into Q3 and Q4 of 2019. We've got a number of projects that are going to be coming online. Smart meters, connections in the U.K., some Brazilian transmission projects that are getting commissioned and a few toll road rebalancing as well. And just with respect to our hedge fund tracks a lot of the better rates that I was referring to come into play in the latter half of the year. So, all that to say that the run rate going forward for the business should be at 10% to 15% higher than where we are at today in Q4 of 2018.

Frederick Bastien -- Raymond James -- Equity Analyst

As you contemplate the asset sales, obviously Transelec was a big chunk and it had an, obviously, adverse impact of FFO, because you're contemplating a few of them you don't estimate them to have as big of a drag as Transelec did. Do you?

Bahir Manios -- Chief Financial Officer

So, Frederick, what I would say -- this run rate that I'm speaking about would contemplate the asset sale that we just announced this morning. With respect to the other sale processes that we have on the go, a number of those will close more in the latter end of the year. Maybe one in the middle-end of the year. And to that point, or to your point none of those sales that are contemplated to close in 2019 on an individual basis would have as significant of a drop from an FFO perspective as Transelec did in 2018.

Frederick Bastien -- Raymond James -- Equity Analyst

Okay. Super helpful. Thanks a lot, guys.

Sam Pollock -- Chief Executive Officer

Thank you.

Operator

Thank you, and that concludes our question and answer session for today. I'd like to turn the conference back over to Sam Pollock for closing remarks.

Sam Pollock -- Chief Executive Officer

Okay. Thank you very much, operator and I'd like to thank everyone for joining the call today and for all those questions. We look forward to updating you again on our progress later this year. So, thank you very much and have a nice day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.

...

Operator

That does conclude today's conference. Thank you for your participation.

Duration: 77 minutes

Call participants:

Melissa Low -- Vice President, Investor Relations 

Bahir Manios -- Chief Financial Officer

Sam Pollock -- Chief Executive Officer

Ben Vaughan -- Chief Operating Officer

Devin Dodge -- BMO Capital Markets -- Trade Support Analyst

Cherilyn Radbourne -- TD Securities -- Analyst

Robert Catellier -- CIBC Capital Markets -- Energy Infrastructure Analyst

Andrew Cosk -- Credit Suisse -- Analyst

Jeremy Rosenfield -- Industrial Alliance -- Equity Research Analyst

Robert Kwan -- RBC Capital Markets -- Managing Director, Global Research

Rupert Muir -- National Bank -- Analyst

Ryan Levine -- Citi -- Analyst

Frederick Bastien -- Raymond James -- Equity Analyst

 

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