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Brookfield Infrastructure Partners Overcame Headwinds to Continue Growing in Q1

By Matthew DiLallo – May 3, 2019 at 11:16AM

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Asset sales and foreign exchange fluctuations muted the global infrastructure owner’s results.

Brookfield Infrastructure Partners' (BIP -3.56%) financial results continued heading higher during the first quarter. However, two notable headwinds -- asset sales and foreign currency fluctuations -- pushed back against the company's overall results. That muted a strong underlying quarter for the global infrastructure owner.

Brookfield Infrastructure Partners results: The raw numbers

Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Funds from operations (FFO)

$351 million

$333 million

5.4%

FFO per unit

$0.88

$0.85

3.5%

Data source: Brookfield Infrastructure Partners.

What happened with Brookfield Infrastructure Partners this quarter? 

Recent acquisitions and organic growth helped boost results:

  • Brookfield's utilities segment generated $137 million in FFO, 19% below last year's first quarter. The decline is the result of three factors: the sale of its electricity transmission business in Chile, higher interest expenses from financing its Brazilian gas pipeline, and a $9 million hit from foreign exchange fluctuations. Those issues offset solid underlying growth of 5% at its legacy assets, driven by inflationary price increases and another good quarter of growth at its regulated distribution business in the UK.
  • The transportation segment hauled in $139 million in FFO, which matched the year-ago period. The company benefited from 6% organic growth, driven by higher tariffs and traffic on its toll roads, strong volumes at its container terminals, and higher revenues at its Australian rail business. Offsetting these positives were the sale of a 33% stake in its Chilean toll road business, the expiration of a concession to operate a toll road in Brazil, and a $4 million impact from foreign exchange.
  • FFO in the energy segment zoomed 62% from last year's first quarter to $107 million. The company benefited from strong organic growth at its legacy operations, with its North American gas transmission business generating 23% more FFO while earnings at its gas storage operations surged 43%. In addition to that, the company completed two large-scale acquisitions during the quarter, including the first phase of Enbridge's (ENB -2.16%) Western Canadian natural gas gathering and processing business and a stake in residential infrastructure company Enercare.
  • Brookfield's data infrastructure segment delivered $28 million in FFO, up more than 47% year over year. The company benefited from a 13% uptick in FFO at its legacy French telecommunications infrastructure business while recently completed data center acquisitions added $7 million to the bottom line.
A man in a business suit writing a a clipboard with a container port in the background.

Image source: Getty Images.

What management had to say 

CEO Sam Pollock commented on the company's results and strategic initiatives:

Brookfield Infrastructure had a strong start to 2019, delivering 10% organic growth. We also invested $430 million into two previously announced transactions and progressed the integration of recently acquired assets. As we advance a number of asset sales, we will seek to replicate our recent capital recycling success to create further long-term unitholder value.

Brookfield Infrastructure Partners is in the midst of reshaping its portfolio to grow at a faster pace. It's selling slower-growing mature assets and reinvesting the proceeds into businesses that can expand at a higher rate. It raised $1.1 billion from asset sales last year, which it's reinvesting into five deals. It closed two more of those transactions during the first quarter, investing $430 million into a South American data center business and a natural gas pipeline in India. The company expects to complete the last of these deals -- the second phase of its transaction with Enbridge -- in the third quarter. That should boost the company's annual FFO run rate to 22% above where it was when Brookfield sold the Chilean electricity business last year.

Looking forward 

The next phase of Brookfield's capital recycling strategy is already well underway. Not only did it close the sale of a 33% interest in its Chilean toll road operation, it also recently agreed to sell its European bulk port operations. The company expects to complete this sale in June, which will bring in about $130 million in after-tax proceeds that it can reinvest in future deals. That's one of several sales the company has in various stages as it seeks to raise $1.5 billion to $2 billion in cash by the end of next year. That will give it the money to invest in other exciting infrastructure opportunities that should create additional value for investors.

Matthew DiLallo owns shares of Brookfield Infrastructure Partners and Enbridge. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Brookfield Infrastructure Partners L.P. Stock Quote
Brookfield Infrastructure Partners L.P.
BIP
$38.20 (-3.56%) $-1.41
Enbridge Inc. Stock Quote
Enbridge Inc.
ENB
$37.21 (-2.16%) $0.82

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