Brookfield Infrastructure (BIPC -1.46%) (BIP -1.62%) sees an enormous investment opportunity in data infrastructure. The digital economy is driving the need for more infrastructure to support surging data usage, which is on track to grow at a 30% annual clip through 2025. Overall, the company believes data infrastructure represents a 100-year investment opportunity.
That's leading the company to pour capital into expanding the world's data infrastructure. It recently unveiled one of its biggest splashes, partnering with chip giant Intel (INTC -1.73%) to help finance the construction of two semiconductor fabrication facilities in Arizona.
Writing a new scrip to drive growth
Brookfield Infrastructure's initial data investments have been to acquire critical backbone infrastructure supporting data usage, like cell towers, fiber optic networks, and data centers. The company leases capacity on this infrastructure to technology, telecom, and other customers under long-term contracts, enabling it to generate predictable cash flow to support its 3%-yielding dividend. It also invests in expanding its capacity by building additional towers, fiber capacity, and data centers to support growing data usage. Those investments help grow its cash flow, supporting its ability to continue increasing its dividend.
Its partnership with Intel is quite different. Brookfield and its institutional partners are investing up to $15 billion for a 49% stake in two semiconductor fabrication facilities the tech giant is building in Arizona. In exchange, it will get half the revenue produced from these facilities.
Meanwhile, Intel gets the first funding partner for its semiconductor co-investment program (SCIP). The partnership structure will enable Intel to maintain a strong financial profile as it invests to significantly expand its fabrication capacity. The deal is accretive to its adjusted free cash flow and earnings per share while allowing the company to protect its cash and debt capacity for future investments and to continue growing its dividend. Intel hopes to sign other SCIP deals to help it build additional factories elsewhere.
Leveraging its expertise and flexibility
Brookfield has a long history of working with companies to support their expansion. Its partnership with Intel will leverage its financial flexibility and ability to secure capital to help the company build out critical semiconductor manufacturing capacity in the U.S. and support the digital economy's continued expansion.
Brookfield has already lined up financing for most of its capital commitment. As a result, the company expects to invest between $500 million and $750 million of equity capital to finance the construction. It will be a phased investment during the building period, with the majority funded closer to the plant's commissioning in 2024. Brookfield can easily handle that remaining equity commitment with retained operating cash flows after paying its dividend and the proceeds of its capital recycling program. That strategy entails selling mature assets and reinvesting the proceeds into more attractive opportunities.
This investment will help replenish the company's capital project backlog, which is nearing completion. It's currently working on finishing its Heartland Petrochemical Complex in Canada and the second phase of its electricity transmission line buildout in Brazil. With the Intel partnership, it has secured a potentially significant long-term growth driver. Semiconductor sales are on track to surge in the coming years, potentially doubling by the end of the decade to more than $1 trillion.
That should enable Brookfield to continue organically expanding its cash flows at a healthy rate in the coming years. It targets annual organic growth of 6% to 9% per share from inflationary price increases, volume growth as the global economy expands, and capital projects funded with retained cash flows. That growth rate supports its plan to grow its dividend by 5% to 9% per year. With another sizable capital project lined up, it provides greater visibility into Brookfield's ability to continue delivering attractive organic growth in the coming years.
Brookfield believes data is one of the biggest investment opportunities of our lifetime. That's leading the company to continue investing more capital into the sector by partnering with Intel to help build two more semiconductor plants. This investment will replenish the company's capital backlog while providing it with upside to the future growth of semiconductor sales. That will help drive continued strong organic growth for the company, helping support its ability to keep raising its dividend.