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Brookfield Infrastructure Partners LP (NYSE:BIP)
Q4 2019 Earnings Call
Feb 10, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to Brookfield Infrastructure Partner's Fourth Quarter 2019 Conference Call. [Operator Instructions]. 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 us for Brookfield Infrastructure Partners' fourth quarter earnings conference call for 2019. On the call today is Bahir Manios, our Chief Financial Officer and Sam Pollock, our Chief Executive Officer.

We also have Sikander Rashid, Senior Vice President, Investments in Brookfield Infrastructure Group joining us as the guest speaker this quarter as well as Ben Vaughan, our Chief Operating Officer. Following their remarks, we look forward to taking your questions and comments.

At this time, I would like to remind 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 20-F, which is available on our website.

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

Bahir Manios -- Managing Partner, Infrastructure

Thank you, Melissa and good morning everyone. I'm pleased this morning to discuss our results of operations and to also provide a quick update on our balance sheet and funding plan. After my remarks, I'll hand it off to Sikander who will provide a spotlight on our approach to value creation and explain to you all the various things we are doing at Enercare. Sam will finish off the call with a discussion of our recent strategic initiatives, and will provide an outlook for the year ahead.

2019 was a great year for Brookfield Infrastructure. Our financial results and operating performance were strong. Funds from operations or FFO totaled $1.38 billion or $3.40 on a per unit basis and that represented an 11% increase on a comparable basis and 9% increase on a total basis over 2018.

Operating conditions during the year were favorable in all regions, enabling us to execute on our full cycle investment strategy of acquiring high quality assets, creating value through our active asset management programs and recycling capital on an attractive basis. The capital markets were also strong, allowing us to raise equity to fund growth and to secure debt at historically low interest rates.

Before I discuss our results for the various operating segments, I'm pleased to share with you that as a result of our strong financial and operating performance, robust liquidity position and positive outlook for the business, our Board of Directors approved an increase to our quarterly distribution of 7% to $0.5375 per unit starting in March of 2020 or $2.15 on an annualized basis.

This increase is at the midpoint of our 5% to 9% long-term target and represents the eleventh consecutive year of distribution increases for our Company. Now on to our results. And as I noted earlier in my remarks, results for 2019 reflected solid organic growth and the execution of our asset rotation program. Our FFO benefited from organic growth of 9% and contributions from new investments.

Our utilities segment contributed FFO of $577 million in 2019. This is consistent with the prior year, which included the contribution of approximately $25 million from Chilean electricity transmission business sold in 2018. The segment generated organic growth of 8%, reflecting inflation-indexation and $300 million of capital commissioned into our rate base. Results also benefited from the initial contribution of the North American regulated natural gas transmission business acquired in October. These contributions were partially offset by the weakening of foreign currencies, which lowered our results in the segment by $14 million.

Our UK regulated distribution business delivered exceptional results in 2019, despite the uncertainties surrounding Brexit. Results were driven by the installation of utility connections at approximately 200,000 new homes, the highest level of activity during our 10-year ownership as well as the sale of 300,000 new connections, a level surpassed only by the record sales achieved last year.

These results bring our current order book to an all-time high of 1.15 million connections. Our fiber offering performed well ahead of expectations, with a 36% increase in sales, in part due to the successful rollout of our new fiber offering recently created as a result of our partnership with Sky Fiber Broadband.

These positive trends, combined with capital commission into rate base, contributed to a 10% increase in FFO relative to the prior year. In October, we completed the acquisition of two operating natural gas transmission assets in North America and our integration efforts are progressing well. These regulated assets operate under a take-or-pay arrangement with an investment grade counterparty that extends through 2041.

Our transport segment generated FFO of $530 million compared to $518 million in the prior year. Organic growth of 5% was driven by GDP linked volume increases and higher tariffs across most of our operations. The segment benefited from strong agricultural volumes in Australia and Brazil and higher traffic and tariffs of 3% and 4% respectively, across our global toll road portfolio.

FFO from our port operations exceeded prior year levels by approximately 25%, excluding the contribution from our European port operation which was sold in mid-2019. This increase primarily reflects growth in container volumes at our UK operations in addition to higher tariffs at our Australian port.

In 2019, our UK port operation commissioned approximately GBP20 million of capital projects for warehouse development, automation initiatives and capacity expansion at our container terminal in response to growing customer needs. The business is on-track to increase its EBITDA by over 50% in the next two to three years.

This increase is the result of contributions from recently secured contracts, high probability growth from captive customers and new revenues related to the commissioning of the world's largest biomass power station. FFO from our energy segment was $412 million, an increase of 53% over the prior year. This significant increase is primarily attributable to the $1.2 billion of capital deployed to acquire two North American businesses in late 2018 and a natural gas pipeline in India in the first quarter of 2019. Results also benefited from organic growth of 16%, which was attributable to higher volumes at our North American natural gas pipeline business and new customer connections at our distributed energy businesses in North America.

FFO from our data infrastructure segment totaled $136 million in 2019, an increase of over 75% relative to 2018. This step change in FFO was a result of contributions related to capital deployed at our French telecommunications business, as well as four new investments which enabled us to establish our global data infrastructure franchise. These acquisitions include three data storage operations in the U.S., Brazil and Australia, as well as a data distribution business in New Zealand.

Our French telecommunication business has been supporting customers with several large scale organic growth projects. Through its build-to-suit tower program, the business has strengthened its relationships with major mobile network operators by assisting them in meeting their national coverage requirements.

We commissioned 245 towers in 2019 and expect to have a total of approximately 1,000 build-to-suit towers operational in the first half of 2020. Additionally, our fiber-to-the-home deployment is ahead of underwriting, with almost 35% of the portfolio now built or under construction and the first network scheduled to be completed in the first quarter of 2020.

So that concludes our report on financial and operating results for the year, but before I conclude my remarks, I'll briefly touch on our current balance sheet and funding plans. The most noteworthy acquisition financing completed this quarter was a $2.6 billion of financing in the institutional term loan market that we did to fund the acquisition of our North American rail business.

This debt issuance was heavily oversubscribed as credit investors continue to seek high quality names that are financed at prudent levels. We achieved strong pricing and terms that are consistent with high-quality investment grade issuers completing a seven-year financing with a coupon of LIBOR plus 200 basis points. We also capitalized on favorable markets to complete several important financings in our existing businesses.

First, we raised approximately CAD2 billion at our North American residential energy infrastructure operation to refinance existing higher cost debt in that business, which Sikander will touch more on in his remarks, in addition to refinancing our debt at our UK port operation, which allows for a $110 million of capital to be returned to BIP in addition to reducing our average annual financing costs by 3.5%.

Despite a year of outsized capital deployment, our balance sheet remains healthy with $3 billion of total liquidity in place at year-end and almost $2 billion -- with $2 billion of that residing at the corporate level. We're also making good progress on the next phase of our capital recycling program completing three asset sales that we announced last quarter.

First, the sale of our Australian district energy and distribution business that we closed in November that generated net proceeds to BIP of $280 million. Second, we closed the divestment of our regulated distribution operation in Colombia with proceeds of $100 million to BIP, and finally, we completed the sale of a further 33% interest in our Chilean toll road business in early February for $170 million.

Furthermore, during the fourth quarter, we signed the binding agreement to sell our North American electricity transmission operation for proceeds of approximately $60 million to BIP. We established this business over a decade ago, and as part -- as part of a government led program to support renewable power generation in Texas. Since commissioning the transmission system in 2014, the Company has been a best-in-class operator with an extensive track record of stable distributions.

Given the de-risked, mature state of the business and substantial investor demand for North American regulated assets, we viewed this as an opportune time for us to sell. The transaction is expected to close in mid 2020 and generate an IRR and a multiple of capital of approximately 23% and 3.5 times, respectively.

So with that, thank you for your time this morning. And I'll turn the call over to Sikander.

Sikander Rashid -- Senior Vice President, Investments

Thank you, Bahir and good morning everyone. My name is Sikander Rashid and I'm pleased to join today's call to provide a spotlight on our investment strategy and how we create value in our businesses. Our investment strategy consists of three core components. Number one, we buy high quality infrastructure assets at attractive entry points. Two, we employ an active asset management approach and three, we monetize assets at their full value potential and start over again by investing into higher returning opportunities.

Our deep operating expertise is central to the second component of our strategy. During each year of ownership, but particularly in the early years after we acquire a business, we identify and implement initiatives that increase the value of that investment. And this value is created through various means, including revenue growth, margin improvement, and capital structure optimization.

To bring our investment strategy to life and to showcase some of the ways we create value in our businesses, we thought it would be interesting to take you through a case study on Enercare, our North American Residential Energy infrastructure business. Since the acquisition of the business in late 2018, we have been focused on several initiatives that highlight our active approach to asset management.

Quick recap, Enercare is a leading provider of essential residential energy infrastructure such as water heaters, furnaces, air conditioning or HVAC systems and other in-home services. The business operates in a sector and region that we understand well and this business shares a number of similar features with our UK regulated distribution business. At the time of acquisition, we were attracted to Enercare's high-quality annuity-like cash flows, established market position in Canada and significant growth potential in the US.

Since acquisition, the business has been performing well and we have been focused on two key value creation levers. Number one, capital structure optimization and two, sales growth in the US market. To elaborate further on the capital structure optimization point, since we acquired the business, it was a belief that Enercare's capital structure was not optimal given the long-term contracted cash flow profile of the underlying business.

Enercare has over 1 million long-term rental contracts with low rates of attrition, consistent real price growth and high customer renewal rates. We examined available financing structures and ultimately concluded that Enercare's Canadian rental business was uniquely positioned for a securitization financing. So in December of last year, we recapitalized the business through the issuance of approximately CAD2 billion of primarily AAA-rated securitized debt. This is a marquee financing, as it is the first of its kind for this type of business in the Canadian market.

The proceeds were used, in part, to redeem CAD1.4 billion of public bonds and term loans. We reduced the cost of debt in the business by over 50 basis points while substantially improving the credit rating of the assets, from BBB low to primarily AAA. Further more, prospectively, the securitization facility also provides a mechanism to efficiently fund organic growth and future tuck-in acquisitions, thereby reducing the need to inject capital to fund this growth. Overall, this financing was very accretive to our underwriting and improves the competitiveness of the business.

Now, moving on to the second value creation lever. To facilitate rental growth in the U.S., we are focused on implementing a dealer adoption model that will complement the tuck-in acquisition and sales to rental conversion strategies currently under way. While rental conversions are well ahead of plan, reaching over 40% in the fourth quarter, we believe we can accelerate this growth further by offering a partnership model to HVAC dealers in markets where we do not have presence today.

In addition, to the dealer model, we have various other initiatives under way with Brookfield-managed businesses to further enhance growth. Earlier this year, we launched a pilot program with a utility in Texas to offer residential infrastructure products to a large subset of this utility's clients. The pilot has been well received and we are working on the long-term rollout of the program.

Enercare also recently partnered with our Canadian district energy business to provide -- to participate in a housing development project, representing an opportunity to offer services to a community-scale district energy system. With the Canadian securitization now complete and additional growth strategies under way, which will be financed in a much more accretive manner, we are well-positioned to expect equity returns in the high teens and potentially higher, exceeding our conservative base case underwriting for this business.

And with that, I will now turn the call over to Sam.

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Thank you, Sikander, and good morning everyone. For my remarks today, I'll provide an update on some recent strategic initiatives and give an outlook for the business. The fourth quarter was very active from an investment perspective. In December, we expanded our data infrastructure segment committing nearly $1 billion in three separate transactions.

This includes the previously announced Indian Telecom Towers business, as well as two new investments which I will touch on now. In late December, we agreed to acquire 100% of Cincinnati Bell, or what we will probably refer to as CBB going forward in a take-private transaction which could result in an investment of up to $480 million for BIP.

CBB is a leading fiber-to-the-home business in the United States., serving approximately 1.3 million residential and business customers in greater Cincinnati and Hawaii. This is an attractive business with substantial growth prospects. The transaction is subject to shareholder and regulatory approvals, which, if obtained, would likely result in a closing of this transaction in late 2020. Around the same time, we completed the acquisition of a UK based independent wireless infrastructure Company investing $140 million. It is comprised of over 2,000 fully contracted operating towers and distributed antenna systems. The business is well-positioned to capture expected network growth in the UK and has significant potential to leverage Brookfield's real estate holdings to expand into other jurisdictions inside and outside of the UK.

At year end, we closed the previously announced acquisition of Genesee & Wyoming for $500 million, net to BIP and the federally regulated assets of our Western Canadian natural gas gathering and processing operation for $250 million. On our call last quarter, I reported on our effort to launch Brookfield Infrastructure Corporation or BIPC. During the quarter, we've made advancements in its formation and subject to receipt of regulatory approvals, BIP expects to complete the special distribution of Class A shares of BIPC to BIP unitholders in the first half of 2020.

As a reminder, BIPC will provide investors with an alternative way to gain exposure to our global infrastructure business. We believe that corporate entity will be attractive to many investors, particularly in the United States and Europe, who have historically been averse to our partnership structure. BIPC's class A shares will be structured with the intention of being economically equivalent to BIP LP units, including by having the right to receive identical distributions. BIPC's class A shares will also be exchangeable into LP units or the cash equivalent, at BIPC's discretion at any time, as well as provide simplified tax reporting and other tax advantages.

So I'll now change directions and provide a brief outlook of the year ahead and the current economic environment. We have entered 2020 with both positive and negative developments in regard to global growth. The signing of the Phase-one of the trade deal between the United States and China removed some of the impediments to global growth. Unfortunately, the outbreak of the coronavirus has significantly disrupted economic activity in China which will have global implications.

Trying to be positive about that, if the financial effects from this outbreak are similar to those felt during the SARS outbreak in 2003, we expect that the slowdown will be short-lived. From a BIP perspective, we do not anticipate any material financial impact from the coronavirus situation and remain optimistic regarding the business outlook for the regions we operate in. We do not have any operations in China and potential disruption to commodity supply chains should not have any significant impact on our overall activities.

Looking beyond these current headlines, our business is well positioned for continued growth and our outlook remains positive. We anticipate delivering another year of organic growth at the high end of our 6% to 9% target range. We are focused on executing the next phase of our capital recycling program and we are on track to raise a further $1.5 billion. We plan to redeploy this capital into higher yielding new investments which should provide for another period of outsized FFO growth.

While quarterly results this year may be impacted by the timing of new investments and sales, we anticipate that our run-rate exit FFO per unit in 2020 will be approximately 12% to 15% higher than current levels. Now this concludes our remarks for today's call, and so, I'll pass it back to the operator and we'll be pleased to take some questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. Our first question comes from Cherilyn Radbourne with TD Securities. Your line is now open.

Cherilyn Radbourne -- TD Securities -- Analyst

Thanks very much and good morning. I wanted to ask a question on the Indian telecom acquisition. That deal sounds like it has a lot of upside potential based on co-location as well as the tower build-out program. Maybe you can just give us a sense of how quickly that growth might progress.

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Hi, Cherilyn, maybe I'll touch on that, and then, I don't know -- I might turn over to Ben. Ben actually just got back from India and he can maybe give you some further comments as well as talk about it to you in general. But we're very excited by the opportunity, obviously just the fact that we bought a business of that scale from the dominant provider in that market gives us an incredible position. It's also a brand new infrastructure. And so, it's highly coveted by the other operators in that market as far as them getting access to it.

We've already received inbounds [Phonetic] from some of the other operators. There's two other major players in the market. And our expectation is that, we could lease up 40%, upwards of 40% of the Tower base in relatively short order. So that's -- that would be exciting, it's not done yet, but the first -- we haven't even closed yet. So the fact that we already have groups approaching us and looking to come on is fantastic. So the -- the short answer is, very optimistic about the -- leasing up the additional capacity. I don't know if Ben, do you want to add anything? And maybe just give a sense of India in general.

Ben Vaughan -- Managing Partner and Chief Operating Officer

Yeah. Sure, Sam. Hi, Cherilyn. Yeah. So I was in India just last week with the team talking a lot about this. And as Sam said, so far it's going very well, maybe two additional comments. First of all, this is a very modern network of towers. These were all very recently built and it truly is a national network. So it's attractive to some of the other MNOs because of the location in rural areas.

So as Sam mentioned, we've had good discussion so far with the other MNOs and expect take up, and the only other comment I'll make which probably is obvious is just the market opportunity is tremendous in India. This is a massive market and growing very rapidly and the penetration rates of cellphone usage definitely provides a lot of sort of wind at the back in the coming years for this modern portfolio to get fully utilized by all the MNOs. So we're pretty positive so far.

Cherilyn Radbourne -- TD Securities -- Analyst

Great. Well, that's good color. Just moving on to EnerCare, the letter indicates that the new securitization facility provides a mechanism that will reduce the need to inject capital to fund growth going forward. Maybe you can just elaborate on that a little bit more.

Sikander Rashid -- Senior Vice President, Investments

Yes, sure Cherilyn. I can -- I can take this one. This is Sikander. Yeah, look, so previously, the financing in place was public bonds and term loans, and the Enercare business is -- is growing fast, both in Canada as well as the US and the challenge previously was, we would almost have to -- there was a little bit of a time lag between when the contracts were sourced versus when they were financed. But now, with the securitization facility in place, we can almost immediately securitize the contracts after they are sourced.

So I think that's the main point.

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Yeah, the only thing I'd add to that is, previously when we funded the growth through our capex lines, it meant that the funding was limited based on the amount of the capital invested, whereas now with a securitization, the amount of capital we can obtain from the investment is based off the value of the contract, and so that allows us to finance much more of the capital growth than previously, which is just based off capital invested. Hope that answers.

Cherilyn Radbourne -- TD Securities -- Analyst

Got it, got it. That's my two. Thank you.

Operator

Our next question comes from Robert Kwan with RBC Capital Markets. Your line is now open.

Robert Kwan -- RBC Capital Markets -- Analyst

Great. Good morning. If I can just start with BIPC. Just wondering if you have any updates on initiatives to stem conversions back to the LP units, and just kind of promote the uptake of the common shares?

Bahir Manios -- Managing Partner, Infrastructure

Hey, Robert, it's Bahir. So, it's still early days on that front. We are exploring a few different alternatives, but the main priority as of today is just dealing with sort of the last pieces of the various regulator and stock exchange, sort of queries that we've been getting in and all is going well on that front. Just as an update, expect to have that done and listed by March, 31st or shortly thereafter.

And then we will sort of explore different options to do what you just said. But at this point, it's just early days to talk about that.

Robert Kwan -- RBC Capital Markets -- Analyst

Got it. And if you just look at -- and this is kind of more of an M&A topic. Looking at this quarter's letter, it seems to be focused a lot more on executing the announced acquisitions, a lot of organic growth upside and some of the financial restructuring and optimizing the capital structures. With prior quarters alluding a lot more to M&A, I'm just wondering kind of what's that outlook and specifically on Brazil, using the currency as a crude measure of country sentiment, I'm just wondering how you're thinking about any potential acquisitions down there, given your prior experience?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Hi, Robert. Maybe I'll tackle that, Sam here. I guess just to comment on your -- the first part of your question, I don't think you should read anything into whether or not we're -- the pipeline is less or more. I think the fact of the matter is we have a lot going on right now on the investment side. We will be closing the large tower deal, we just closed the tower transaction in December, which was a quick close for that transaction, and of course we have CBB under way. So I'd say there was actually quite a bit going on and all of that is relatively sizable amount of capital, and the conditions have not changed. I think we're seeing lots of good opportunities across the various sectors.

So I think, I wouldn't want you to read anything into the letter, because I think things are very robust. As far as Brazil and you commented on the currency being a reflection of the conditions in the market, some of that currency volatility maybe because of what's going on in China today. We've seen that with Australia as well. The currency is off quite a bit. Canada has been as badly hit, but it has come up a little bit as well.

So we do expect a rebound. I think the market opportunity in Brazil is very exciting. Most of what we are looking for down there are additions to our existing platforms. We have great activity going on in Ascenty, our data center business, that business has exceeded our expectations. There is a number of toll road opportunities that are coming to market that will be very interesting for our toll road platform. And, the only place where maybe we've pulled back a little bit in that market is on the transmission front, electricity transmission.

We continue to monitor various auctions that take place. The more recent auctions had been very competitive and so we've not -- I wouldn't say today that we're optimistic that we'll find great value on that front, but what it does mean is what we did buy and what we are investing in is incredibly valuable.

So I guess it is a -- it's a double-edged sword.

Robert Kwan -- RBC Capital Markets -- Analyst

And just to finish on that electricity transmission comment, does that create opportunities although recognizing it's pretty short order though to turn those and put those back out to the market?

Sikander Rashid -- Senior Vice President, Investments

Yeah, I think it's not a 2020 initiative. We have a lot of work to do to complete some of the developments. I think we'll get better value if we can have a majority of the lines constructed. I think by the end of 2020 or mid 2021, we should be 75% to 80% through our development program and at that point, that could be a very attractive business to liquidate.

Robert Kwan -- RBC Capital Markets -- Analyst

Perfect. Thank you very much.

Sikander Rashid -- Senior Vice President, Investments

Thanks.

Operator

Our next question comes from Frederic Bastien with Raymond James. Your line is now open.

Frederic Bastien -- Raymond James -- Analyst

Good morning, and thanks for my -- taking my call. My first question is on the energy platform. You guys had a very robust 2019 from an organic growth perspective. How do you see volume and connections growth unfolding over the next couple of years?

Bahir Manios -- Managing Partner, Infrastructure

Ben, you want to --

Ben Vaughan -- Managing Partner and Chief Operating Officer

Sure, I can -- I can take that. It's Ben speaking, I'm assuming you're referring overall to our energy operations, mostly in North America?

Frederic Bastien -- Raymond James -- Analyst

Correct. But a lot of the drivers were around the US business and the pipeline.

Ben Vaughan -- Managing Partner and Chief Operating Officer

Yeah, look, we have a number of projects under way. The market is strong and there's a lot of gas that needs to flow to the new LNG terminals both getting built on the West Coast and in the Gulf. So we continue to see strong demand. We have a number of -- I would characterize it as our US business has a number of projects under way to increase compression, and basically create very capital efficient extra capacity on the pipe to meet that new demand and we don't see that while it's moderated a little bit we do still see some growth potential in the coming years.

I don't know if that's helpful, but that's how I would characterize it.

Bahir Manios -- Managing Partner, Infrastructure

Yeah. Fred, it's Bahir. So if you're talking just in general about the energy group, we did have a big increase as you noted at NGPL due to a number of contracts that we were able to win in addition to a couple of projects that we commissioned. So the backlog there is pretty thin right now, but where you'll see a lot of energy growth happening going forward in the next couple of years will be -- and you mentioned connections in your -- in your question. So we do expect double-digit type growth in district energy, in addition to our North American residential infrastructure business. And that in total will be the key driver for the energy operating group going forward.

Frederic Bastien -- Raymond James -- Analyst

That's great. Thanks for that color. Next question for Sam. How confident are you with your ability to further scale up BIP's data infrastructure business. You've been obviously very busy. But you're seeing increased competition right now you're seeing that with CBB, but would appreciate your view on that broadly speaking.

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Hi, Frederic. Look, I would say, I'm highly confident. And what gives me that confidence is the fact that we now have data franchise in each part of the world, and we're represented in each of the sectors within the data infrastructure world that we want to be in. So we have fantastic presence in towers. We have expanded from towers into DAS systems, which we see lots of growth in.

We have a number of fiber optic systems and we are continuing to pursue fiber to the home projects around the world. And we obviously have a very large presence in data storage with our data center businesses in Asia, North America and South America. So the fact that we have these footprints gives us tremendous capabilities to leverage and I think I continue to see is lots of that business going forward.

Frederic Bastien -- Raymond James -- Analyst

Thank you.

Bahir Manios -- Managing Partner, Infrastructure

Thanks Fred.

Operator

Our next question comes from Rupert Merer with National Bank Financial. Your line is now open.

Rupert M. Merer -- National Bank Financial -- Analyst

Hi, good morning everyone. Sam, Brookfield recently closed the infrastructure fund for $20 billion, I believe, is a little larger than what you were targeting. Can you talk about how that impacts the outlook for deal flow at BIP and for example could you see any changes in your target return hurdles or any changes in BIP's pro rata ownership stake in future deals?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Hi, Rupert. I guess just dealing first with -- are there any changes to our approach or returns or anything like that. No, there won't be any change in our approach. We are still seeking returns in the 12% to 15% range and the sector and geographic targets are all the same. So there is no change in that regard. I think the -- the benefit and this is something we've talked about on previous calls is, our ability to leverage this additional institutional capital to build our franchise is incredible, it enables us to pursue large scale, more complicated transactions and do it on a basis where we don't necessarily have to club up or team up with others which adds complexity to transaction. We can basically pursue them on our own or alongside the co-investment capital of our institutional partners. And that gives us one of the rarest franchises in the industry.

And so, I guess all I would say in conclusion is the fact that we have this $20 billion of capital plus those relationships with those institutional investors just makes our franchise that much better.

Rupert M. Merer -- National Bank Financial -- Analyst

Is your pro rata ownership stake, is that going to remain constant going forward?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Yes, the same. It's still 25%.

Rupert M. Merer -- National Bank Financial -- Analyst

Okay, thanks. And secondly, a quick one Bahir, you talked about some refinancings in the quarter and there is some discussion in the statements about the refinancing at a UK port, 350 basis point reduction in your interest costs. Are there any other opportunities for refinancing across your asset base?

Bahir Manios -- Managing Partner, Infrastructure

Hi, Rupert. I think those are the big ones, although there is a couple of others that we might be pursuing that are smaller in nature and the big question though, and which could be -- the one that's most material could be another potential up financing at our Brazilian transmission business, or NTS similar to the one we did a couple of years ago. That would be the big one if we were able to do something on that front, or if it's attractive, but aside from that one, the other ones we're pursuing are smaller in terms of quantum.

Rupert M. Merer -- National Bank Financial -- Analyst

Great, thanks. So I'll leave it there.

Bahir Manios -- Managing Partner, Infrastructure

Thanks.

Operator

Our next question comes from the line of Robert Catellier with CIBC Capital Markets. Your line is now open.

Robert Catellier -- CIBC Capital Markets -- Analyst

Hi, good morning everybody. I just wondered -- to start, if you can be a little bit more explicit on what impacts are you expecting from the coronavirus and Brexit when you set the 2020 FFO per unit exit rate?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Hi, Robert. This is Sam. Maybe I'll tackle that. So, just to be clear, today we're not forecasting any impact from the virus on our operations. So I don't think that the number that we've -- that I gave you, or that Bahir has given in the past reflects any adjustments because of that. And, you know, we've done -- Ben and I are canvassing of all our operations, very recently to assess any potential impacts on safety for people or just the operations and our view today and obviously we will watch and see how things unfold, is that the impact from the slowdown in China will be relatively modest.

We do expect to see some implications, but most of those should be timing differences. I think there could be some delayed shipments, some ships that don't come as full to some of our ports in Australia or the West Coast of the US. There could be some potential delays in shipments of iron ore or coal or something from some of our Australian operations, but again, those should not be permanent in nature and should be caught up.

So today, and this is subject to revision of how -- depending on how things unfold, obviously. But today we just don't see much of an impact.

Robert Catellier -- CIBC Capital Markets -- Analyst

And Brexit?

Bahir Manios -- Managing Partner, Infrastructure

And Brexit -- good question. Yeah, I think as we've reported in the past, we didn't see much impact on operations. I would say from a high level, there was probably some delays in investments from a number of people in the country. And that might have had some impact on PD ports and our UK business at the end of last year, they're relatively modest. I think today with the uncertainty removed, we think that there'll be renewed investments in the UK. And so there in fact could be a bit of a bump in that regard.

Longer term, looking out 5, 10, 20 years from now, it's hard to say what the impact will be. But in the short run, if anything we might see a positive impact, modest though.

Robert Catellier -- CIBC Capital Markets -- Analyst

Okay. That's helpful color. And then, just -- I was actually going to ask the same question as Rupert on the financing. But a different angle, I guess is, maybe you can just clarify what the cost savings were on the GWR refinancing. And then more broadly, it doesn't sound like there's a lot more equity to be harvested from refinancing, but I'm wondering if there is -- if you're going after term by taking advantages of low rates and extending term, and then just on the competition, have you seen any irrational behavior from competition where you suspect they're factoring in or underwriting much lower rates of interest rates in their approach?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Well, maybe I'll do the last one first and then Bahir can think about your question on the refinancings. But, I guess it's always tough to tell. I mean competition has been stiff for the last number of years. You know, I'm not privy to what people are underwriting. But I guess as a general comment, Europe remains the most competitive market because of zero to negative rates. And yes, I have to assume that that's -- low rates is a factor in those higher valuations. But we still are able to find opportunities here and there, and I'm sure at some point, things will normalize. So Bahir, maybe over to you.

Bahir Manios -- Managing Partner, Infrastructure

Yeah. Hey, Robert. So on G&W [Phonetic], I think I'm not sure if you're referring to the existing debt that the business had in the past, that one, maybe I can get back to you on. But all I would say is that and I made -- I think this comment at our call last quarter that the financing that we did was about 75% -- sorry 75 basis points ahead of our underwriting assumptions.

So that was a big positive for us. And with respect to terming out our debt, we've been actually doing a lot of that over the past couple of years. If you look at our maturity profile over the next two years, it's very, very modest. So naturally, we will be extending term albeit in the grand scheme of things, it may not move the needle all that much, just because we've been dealing with the bigger stuff over the last couple of years and what's coming down the next couple of years is smaller in nature. So hopefully that answers.

Robert Catellier -- CIBC Capital Markets -- Analyst

Yeah. Thank you very much.

Operator

Our next question comes from Devin Dodge with BMO Capital Markets. Your line is now open.

Devin Dodge -- BMO Capital Markets -- Analyst

Good morning. Just wanted to start with a question on FX. It appears that your hedged FX rates should be a positive in the first half, but this benefit may fade away as you get into -- deeper into 2020. Just wondering how you're thinking about FX and its impact on your results over the next, say, 12 to 18 months, assuming the reais stays near current levels?

Bahir Manios -- Managing Partner, Infrastructure

Hey, Devin, I'll attempt that one. It's actually I think the opposite, because in Q1, our Australian dollar hedge rate just due to timing of when we put those contracts in place, is actually lower than Q1 2019, but then it picks up from Q2 to Q4. So on a holistic basis, I do expect Q1 to be lower, Q1 2020 to be lower than Q1 '19, but for the full 2020 year, I think it's -- our hedge rates are about 3% to 4% higher than 2019 as a whole.

So for the full year, it's going to be a positive, albeit Q1 is lower and we're hedged just on the second part of your question, if you're looking ahead for 18 months or so, we're hedged for all those currencies, except for the Real and the Rupee up until Q3 2021 and I think 2021 compared to 2020 is virtually flat.

Devin Dodge -- BMO Capital Markets -- Analyst

Okay. That's helpful. US midstream, this has been a targeted sector for a while now. Stock prices for a lot of the remaining MLPs continue to be under a lot of pressure. Just wondering if you still see this as an attractive sector and if you're optimistic, you'll have a chance to deploy capital over the next, call it, one to two years?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Yeah. Hi Devin. Again the short answer is yes and yes, we still -- it's a sector, we think it's critical to the economy and we do see interesting opportunities, particularly relative to past years when the MLP market was much stronger than it is today. We do see lots of companies whether it's take-privates or just structured transactions where public companies need private capital to assist them. So I think there will be interesting opportunities in the year ahead.

Devin Dodge -- BMO Capital Markets -- Analyst

All right. Thank you.

Operator

Our next question comes from Andrew Kuske with Credit Suisse. Your line is now open.

Andrew Kuske -- Credit Suisse -- Analyst

Thank you. Good morning. First question is probably for Bahir and its just on the capital recycling program. And maybe just a point of clarity, what assets remain on the BIP balance sheet versus the interests that BIP has in BAM funds?

Bahir Manios -- Managing Partner, Infrastructure

Hey, good morning, Andrew. I think we're left with three assets that are held directly on BIP's balance sheet and that would be our UK connections business, our North American gas transmission business or gas pipeline business, NGPL. And the third one being our Western Australia rail business.

Andrew Kuske -- Credit Suisse -- Analyst

Okay. That's great. Thank you for that. And then maybe just a follow-up. Is the interplay between the super core fund that BAM has and that was used for Cove Point and then say, BIF IV and then just BIP itself, how do -- how do you envision that working together and how is it delineated?

Bahir Manios -- Managing Partner, Infrastructure

I'll answer that, Andrew. BIP invests in a minimum of 25% of BIF IV transactions, which is our -- like, it's called our global flagship fund and value-add fund, the one that targets returns in the 12% to 15% range. And I say, 25%-plus its obviously minimum 25%-plus any co-investments or additional capital wants to do in large transactions. And then the super core fund is an open-ended fund. It's targeting returns in the -- let's say, the 8% to 9% range. BIP is not an investor in that fund. And while there's opportunities to invest alongside the fund, if there's significant co-investment opportunities given the return threshold, it's highly unlikely that we would do that. You know, the -- BIP is seeking returns the same as the flagship fund.

Andrew Kuske -- Credit Suisse -- Analyst

That's very helpful. And then maybe just a follow-up. Is there a prospect for certain assets once they reach a certain valuation point or maturity level from stabilization of cash flows to effectively have assets transfer from BIP or one of the BIF funds into the super core on a longer-term basis?

Bahir Manios -- Managing Partner, Infrastructure

No. I think the -- I think we decided that -- that falls into life-is-too-short camp and we will sell assets to third parties.

Andrew Kuske -- Credit Suisse -- Analyst

Okay. That's great. Thank you.

Operator

Our next question comes from Rob Hope with Scotiabank. Your line is now open.

Robert Hope -- Scotiabank -- Analyst

Good morning. Just a question on the kind of 2020 exit guidance of 12% to 15% higher than current levels. Off of what base is that? Is that a kind of annualized Q1 2020 base or kind of including Indian telecom? And does that foresee additional unsecured investments right now?

Bahir Manios -- Managing Partner, Infrastructure

Hey, Rob, it's Bahir. Maybe I'll tackle that one. So, yeah, what we're eluding to there is that our -- hopefully by Q4, 2020, our results on a per unit basis will be 12% to 15% higher than the $0.86 that we reported in Q4, 2019. And so, what that assumes is obviously the hedge rates I spoke about earlier, it assumes that we're flat on the Real to Q4. But at the higher end, maybe you get a little bit of a pickup in the Real. And it also assumes that, Jio, the Indian deal closes pretty much at the end of Q1, 2020 and assumes that CBB closes in Q4.

So that's why we felt that Q4 is probably a better run rate to speak about. And also because we have a bunch of asset sales on the go and so we've taken a crack at assuming when those will close, at which point in time, and so that's why Sam made the comment in his remarks that between Q1 to Q3 you'll have some, maybe some ups and some downs depending on which quarter some investments closed in or some asset sales closed in.

But by Q4 we should have gotten all the pluses and minuses contributing or taking account in our results on a full basis for the quarter.

Robert Hope -- Scotiabank -- Analyst

All right. That's helpful. And then just turning kind of over to Australia. Australia wildfires kind of have been simmering down now, but any impact on Q4 and lingering impacts into Q1 on the operations and the overall activity in the region?

Ben Vaughan -- Managing Partner and Chief Operating Officer

Hi, Rob, it's Ben here. Look, thankfully the impact of these fires on us has been minimal. All our people are OK and all of our assets are OK. So we really had no direct impact on any assets. We did have some minor impacts like the odd train path here or there that really got deferred because of localized issues.

At our port operations, we did have a couple of days of downtime because of just air quality conditions and bringing the labor into the port wasn't available that day. So minor things like that. But overall, not a big impact and it seems to have subsided at this point.

Robert Hope -- Scotiabank -- Analyst

Thank you for the color.

Operator

Our next question comes from Jeremy Rosenfield with Industrial Alliance. Your line is now open.

Jeremy Rosenfield -- Industrial Alliance Securities -- Analyst

Thanks. Hi guys. Just one cleanup question related to BIPC and how that may or may not interplay with the CBB transaction. Is there a timing sort of element in the creation of the BIPC or the distribution of BIPC that you sort of may want to wait on that distribution to see how the CBB transaction plays out? Or you go ahead with the BIPC distribution regardless of developments of the CBB. I'm just kind of curious on that?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Hi, Jeremy, it's Sam here. The BIPC transaction isn't impacted at all by the CBB deal. The CBB deal, there's no shares involved in that transaction. It's a pure cash transaction. And that closing is just dependent on, its own regulatory constraints. And so -- and if we confused you, the regulatory issues that Bahir spoke about we had to clear from a SEC, LSE [Phonetic] perspective have nothing to do with the CBB transaction.

Jeremy Rosenfield -- Industrial Alliance Securities -- Analyst

No, I was just curious in terms of whether you wanted to make sure that the BIPC was in place before to provide greater liquidity, you know, for BIP, but I guess that answers that question. Okay. That's it from me. Thank you.

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Okay.

Operator

Our next question comes from Jonathan Reeder with Wells Fargo Securities. Your line is now open.

Jonathan Reeder -- Wells Fargo Securities, LLC -- Analyst

Hey, good morning, gentlemen, thanks for taking my question. Can you give us a more in-depth update on the CBB opportunity and process as well as the likelihood of the deal getting closed? I know you're anticipating a Q4 close, you just mentioned, but obviously there was an unsolicited higher offer made for CBB. I'm just curious what the path forward is both from CBB's Board perspective as well as, Brookfield's propensity or willingness to maybe match higher offers without compromising your return hurdles?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Hi, Jonathan. I was wondering if someone was going to ask me about the CBB impacts --

Jonathan Reeder -- Wells Fargo Securities, LLC -- Analyst

I was too.

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

And, look, unfortunately, I don't think it's appropriate that I really get into that in much detail. I can't obviously speculate about the Board or what, the competing proposal whether or not it may come to fruition or not. We're -- I guess all I will say is, we're monitoring the developments closely. We feel, we've built a good relationship with the Company, and we remain enthusiastic about completing the deal. We think it's a good business and we hope we can get it.

Jonathan Reeder -- Wells Fargo Securities, LLC -- Analyst

Is there any sort of, you know, philosophy at Brookfield toward, matching these higher offers? Or do you typically just kind of let your offer stand as a value investor saying that it's kind of not necessarily the best case scenario, but this is -- this is our offer in order to achieve our returns and going higher would compromise that ability, is that a philosophy there are not necessarily?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Well, we've -- you can go through our history, we've done many take-privates, whether it's Babcock & Brown, Asciano, Niska, I can probably go through a whole host of them. You know, sometimes, transactions go through smoothly, other times they are a bit more complicated. We look at each situation differently, and we protect our interest and try and do the best deal we can. We're not going to be crazy about it. But obviously, we'll take into account the economics of each situation.

Jonathan Reeder -- Wells Fargo Securities, LLC -- Analyst

Okay, and then what is kind of the next step at this point? Is the -- the CBB Board, do they need to respond to the unsolicited offer? Or, what's the next kind of milepost for us to look for?

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Well, to be fair, those are -- that's probably a question better for the Company. But what we know is that proposal was put in, it's still not a firm proposal, and until it becomes a firm proposal, then there's nothing for anyone to respond to. So it may be a nothing, or maybe it turns into something, we don't know.

Jonathan Reeder -- Wells Fargo Securities, LLC -- Analyst

Okay, thanks. I appreciate the time.

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Okay. Thank you.

Operator

I'm showing no further questions in queue at this time, I'd like to turn the call back to Sam Pollock for closing remarks.

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Okay. Thank you, operator. And thank you everyone. I think that was a record for a number of questions that we received. Is that right, Tracy? Yeah, she's nodding. So, thank you for your interest. And we appreciate all your support and look forward to talking to you again next quarter.

Operator

[Operator Closing Remarks].

Duration: 62 minutes

Call participants:

Melissa Low -- Vice President, Investor Relations

Bahir Manios -- Managing Partner, Infrastructure

Sikander Rashid -- Senior Vice President, Investments

Sam Pollock -- Managing Partner, Chief Executive Officer Infrastructure

Ben Vaughan -- Managing Partner and Chief Operating Officer

Cherilyn Radbourne -- TD Securities -- Analyst

Robert Kwan -- RBC Capital Markets -- Analyst

Frederic Bastien -- Raymond James -- Analyst

Rupert M. Merer -- National Bank Financial -- Analyst

Robert Catellier -- CIBC Capital Markets -- Analyst

Devin Dodge -- BMO Capital Markets -- Analyst

Andrew Kuske -- Credit Suisse -- Analyst

Robert Hope -- Scotiabank -- Analyst

Jeremy Rosenfield -- Industrial Alliance Securities -- Analyst

Jonathan Reeder -- Wells Fargo Securities, LLC -- Analyst

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