This past year has been an excellent one for Brookfield Infrastructure Partners (NYSE:BIP). The company crushed the market's return, fueled in large part by a needle-moving acquisition, which when combined with other deals and organic expansions helped push cash flow per unit up nearly 15% through the third quarter. As a result, the company was able to boost its distribution to shareholders by 11% this year, which was above the top end of its 5% to 9% target range.

But while acquisition-fueled growth was the story last year, the company currently has more visibility on the organic growth side as it heads into 2018. Investors should thus expect those projects to drive growth next year -- though that probably means the company will grow at a slower rate, barring an unexpected needle-moving deal. 

A pipeline heading towards factories at dusk.

Image source: Getty Images.

Less fuel from M&A looks likely

Brookfield laid much of the groundwork for 2017's success in 2016, when it signed agreements to invest more than $2 billion into a variety of acquisitions. Leading the way was a $1.3 billion deal to buy a stake in a large natural gas pipeline utility in Brazil from oil giant Petrobras (NYSE:PBR). That deal closed in the second quarter of this year and provided a significant boost to earnings in both the second and third quarters.

However, the company hasn't made much headway on the acquisition front this year. It had a $200 million deal to buy a portfolio of communications towers in India, but the transaction recently fell through. Other than that, the only acquisitions it announced was a $15 million deal for a water utility in Peru and a $100 million investment in a toll road in India. Those purchases won't move the needle the way 2016's wheeling and dealing did for 2017.

However, just because Brookfield hasn't announced very many deals doesn't mean there aren't any in the pipeline. For example, Reuters recently reported that the company had agreed to buy a 59.1% in a Colombian retail natural gas distribution company for about $570 million and would launch a takeover offer to buy the rest of the company, valuing it at about $1.2 billion. Brookfield probably wouldn't buy the entire business itself but rather invest in a minority stake with other investors. Therefore, this deal wouldn't be quite as needle-moving as the price suggests. In addition, Brookfield is working to revive its India tower deal as well as pursuing other similar acquisition opportunities in that country. It's also actively seeking other water deals, which is an area where it sees signficant potential. 

Workers building a new railway.

Image source: Getty Images.

Replacing buying with building

While Brookfield's acquisition pipeline isn't very clear at the moment, it still should have plenty of fuel to keep growing in 2018, since the company has the largest backlog of expansion projects in its history, at about $2.3 billion. The biggest portion of those investments will be in its utilities segment, where it expects to invest $1.3 billion over the next two to three years. It will spend about $1 billion of that money in its regulated distribution business in the U.K. where it's in the process of deploying 1.5 million smart meters. The company also has about $850 million of projects in its transportation business, including expanding recently acquired toll roads. These projects, when combined with the embedded growth of its legacy businesses, should fuel 6% to 9% annual cash flow growth.

Meanwhile, there's upside to that number, because Brookfield has another $1.5 billion of growth projects under development throughout its portfolio. One of the projects is a potential $300 million investment to expand its natural gas pipeline joint venture in the U.S. with Kinder Morgan (NYSE:KMI). If given the green light, this project would generate about $90 million of incremental earnings per year, which Kinder Morgan and Brookfield would split evenly. In addition, Brookfield's UK distribution business is working on an agreement to deploy another 2 million smart meters. Given its current opportunity set, investors should expect to see the company secure more expansion projects next year, which will improve the visibility of its long-term growth prospects and could enable the company to boost its growth forecast.

Expect tamer growth in 2018

Without a needle-moving acquisition in the pipeline, investors shouldn't expect Brookfield Infrastructure Partners to keep growing cash flow at a mid-teens rate in 2018. The company should, however, still be able to grow at a high-single-digit rate thanks to the expansion projects it has under way. That could enable the company to increase its distribution to investors close to the high end of its annual target in 2018.

Matthew DiLallo owns shares of Brookfield Infrastructure Partners and Kinder Morgan and has the following options: long January 2018 $30 calls on Kinder Morgan, short December 2017 $19 puts on Kinder Morgan, and short March 2018 $17 puts on Kinder Morgan. The Motley Fool owns shares of and recommends Kinder Morgan. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.