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New Additions Drive Brookfield Infrastructure Partners L.P.'s Earnings Higher

By Matthew DiLallo – Feb 3, 2016 at 12:45PM

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The infrastructure owner sees a lot of acquisition opportunities on the horizon.

Brookfield Infrastructure Partners' (BIP -3.11%) growth is fueled by its ability to make acquisitions and organically grow assets within its portfolio. Both sources of growth were on display in the company's fourth-quarter report, which was released before the market opened on Wednesday.

Brookfield Infrastructure Partners results: The raw numbers


Funds From Operations



4Q15 Actuals

4Q14 Actuals

Growth (YOY)


$100 million

$93 million



$95 million

$101 million



$20 million

$16 million



$20 million



Data source: Brookfield Infrastructure Partners.

What happened with Brookfield Infrastructure Partners this quarter? 
New additions offset foreign currency issues:

  • The utilities segment delivered solid growth thanks to the contributions from capital projects that were completed in 2015.
  • The transportation segment's underlying results were very solid, with the segment benefiting from tariff growth across most of its operations, higher volumes on its rail business in Brazil, as well as cost savings at its Australian rail assets. This strength, however, was offset by the strong U.S. dollar.
  • The energy segment was driven by organic growth initiatives as well as improved volumes at the company's North American natural gas transmission business and a larger contribution from its district energy business.
  • The communications segment continues to deliver solid results since being acquired in March, and is performing slightly above expectations.
  • Overall, Brookfield's funds from operations edged up from $0.86 per unit in the fourth quarter of 2014 to $0.89 per unit in the fourth quarter of 2015. That growth, combined with growth it sees in the pipeline, enabled the company to boost its distribution by 7.5% compared to last year.

What management had to say 
Commenting on the results, CEO Sam Pollock said:

After a good year in 2015, our business is well positioned to prosper in 2016. Our operations are performing well, our balance sheet is strong and we have almost $3 billion of liquidity... With our unique internally generated organic growth and ability to recycle capital, we will continue to generate steady, predictable growth. We are also enthusiastic about the potential for value based transactions in Brazil and North American energy infrastructure in the years ahead that would be highly profitable for the business.

Pollock pointed out that the company sees a bright future for both acquired and organic growth. One of the near-term drivers of both is the company's recently closed transaction to solidify its ownership interest in the Natural Gas Pipeline Company of America (NGPL) with its partner, Kinder Morgan (KMI -4.56%). Brookfield paid $106 million to boost its stake in the company to 50% and was joined by Kinder Morgan in the transaction, which also invested to boost its stake up to 50%. In doing so, the partners now have control over that company's future, which Brookfield sees as one of its main organic growth drivers. It expects EBITDA at NGPL to grow 20% in 2016, with a further step-up in 2017 and 2019.

Looking forward 
Aside from the near-term organic growth from NGPL, Brookfield sees further opportunities to invest in North American energy infrastructure on a value basis given how deeply the sector has been affected by the downturn in the oil market. This could be through acquisitions as well as providing funding for new projects being developed by others.

In addition to North American Energy Infrastructure, Brookfield is currently evaluating a number of "once in a lifetime" opportunities in Brazil that have emerged due to the weakness in that economy. In particular, the company is "enthusiastic" about gas and electricity transmission acquisition opportunities in the country.

Finally, the company is continuing to work through its proposed investment as part of a consortium to acquire Australian port and rail operator Asciano. However, that transaction has come under the scrutiny of regulators that are worried about competition in the Australian rail sector. In addition to that, a competing bid has emerged. Because of this, Brookfield is uncertain how this transaction will play out, and it could result in the company reducing its involvement. Having said that, even if this deal falls through, Brookfield's growth opportunities around the world remain very compelling.

Matt DiLallo owns shares of Brookfield Infrastructure Partners and Kinder Morgan and has the following options: short Jan. 2018 $30 puts on Kinder Morgan and long Jan. 2018 $30 calls on Kinder Morgan. The Motley Fool owns shares of and recommends Kinder Morgan. The Motley Fool recommends Brookfield Infrastructure Partners. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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.
$39.61 (-3.11%) $-1.27
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